E-bike and e-scooter groups jostle for profits in rapidly expanding market

Aaron Orman spends his days monitoring green dots on an on-screen map of London. Orman, UK and Ireland head of operations for e-scooter and e-bike hire operator Tier, scrutinises the dots — which show the locations of the company’s vehicles — for signs they are wrongly parked, their batteries are flat or they need repair. He assigns staff to resolve any problems.

Tier, based in Berlin, says its expertise at tracking vehicles and keeping them charged, well-maintained and in designated parking spaces is a key advantage in the crowded “micromobility” market to provide bike, scooter and other lightweight personal transport services.

The operator hopes that its knowhow, developed through operating in more than 560 cities in 33 countries, will ensure it survives in a fast-growing sector scrambling to achieve reliable profitability.

Yet Tier faces competition that has rapidly intensified as improved electric motors and batteries, better mobile phone technology and, in recent years, venture-capital financing have spawned micromobility start-ups across the industrialised world.

Its rivals are other multinational companies, including San Francisco-based Lime and Sweden’s Voi, and local, single-city operators. In London, one of its strongest competitors is the e-bike hire company HumanForest, which operates only in the British capital.

Alongside “dockless” systems such as Tier’s, where users leave a vehicle on the street after use, many cities also offer longer-established bike-hire using docks. Another group of companies provides long-term rentals of bicycles for a monthly subscription.

However, Will Norman, the London mayor’s cycling and walking commissioner, said the sector remained “immature”.

The industry has already experienced one wave of start-ups that arrived then disappeared into insolvency. Beijing-based ofo started offering its dockless bikes in London in 2018, but halted operations when its parent collapsed a year later.

The vulnerability of some of the current generation of companies was exposed earlier this month when Bird, a Miami-based operator of e-scooters, warned it might not be able to stay in business unless it could raise new capital.

“Clearly, their business models need to be standalone, independent of additional capital in the long run, for this to be a sustainable solution for the city,” Norman said.

Experience had nevertheless demonstrated Londoners’ enthusiasm for micromobility, Norman added. Trips by bicycles of all kinds were 24 per cent higher between March and mid-June this year than in the same period of pre-pandemic 2019, according to Transport for London, the mayor’s transport organisation.

Users made an average of 45,000 trips a week in London on hired e-scooters in June and July this year. The vehicles, which are otherwise banned on UK roads, are available under a trial involving three operators, including Tier.

The picture is similar elsewhere. Daily use of New York’s docked bike-share system more than doubled from 22,000 to 56,000 between its introduction in 2013 and 2019.

Figures from data provider Fluctuo this year showed that in 22 European cities micromobility trips — including shared car and electric moped use as well as e-scooters and cycling — were up 48 per cent in the second quarter of 2022 against a year earlier.

“They’re obviously popular — they’re being well used,” Norman said of micromobility systems.

The range of options was clear one weekday morning near the picturesque St George the Martyr church in Borough, south London. Four Tier e-scooters were lined up under the church’s red-brick walls, along with three from Lime and nine from Dott, an Amsterdam-based operator.

There were also seven HumanForest e-bikes and one from Dott. The neighbouring public bike parking contained an e-bike on long-term hire from Swapfiets, a Dutch bike subscription service.

Wayne Ting, Lime’s chief executive, said his company stood out for its superior vehicles. Lime claims to be the industry’s “number one player” by revenue and riders. Uber, the ride-hailing company, is a significant investor in the company, having led a funding round that raised $170mn in 2018.

Lime developed its own vehicle designs, rather than buying off-the-peg bikes and scooters, Ting said.

“We designed them for longevity,” he said. “We want them to break as seldom as possible.”

HumanForest claims to have captured about 40 per cent of London’s e-bike hire market through offering users 10 free minutes each day and subsidising its hire rates by selling advertising space on its app. Advertising provides about 20 per cent of HumanForest’s revenue.

Caroline Seton, HumanForest’s co-founder, called the operation “by far the most affordable solution” among e-bike providers in London. Fluctuo has calculated HumanForest bikes are used four times as frequently daily as those of Dott and Tier.

According to Seton, HumanForest competes with both its e-bike peers and the cheaper Santander bike-hire system, which mainly uses physically pedalled bikes hired from docks.

“They are competition, but we do have a very unique proposition that’s created a very loyal cohort of users,” Seton said.

Meanwhile, the steady flow of customers into the first UK store of Swapfiets in Shoreditch, east London, illustrated the growth of services offering longer-term micromobility. Swapfiets, like other bike subscription services, charges customers a monthly fee for use of a reliably working bike or e-bike.

Swapfiets, which operates in the Netherlands, Belgium, Germany, France, Austria and Italy as well as the UK, guarantees to repair faults with customers’ bikes within 48 hours. Another operator, Buzzbike, offers a similar service, as does Brompton, the UK-based folding-bike manufacturer.

Kat Hlavata, Swapfiets’ UK company manager, said the service by September this year had 3,000 subscribers in London, after launching in December 2020. All four pedal and e-bike models have a distinctive, light blue front tyre, a tribute to the blue glaze of porcelain from Delft, the Dutch city where three university students founded the company in 2014.

“The three students saw a gap in the market where there was nothing in between owning a bike and the bike sharing that was already available,” Hlavata said. “They wanted to launch a model where people didn’t have to worry if their bike broke.”

Yet an announcement in August by Tier of a “change of focus” highlighted the sector’s profitability challenge. Tier, citing the “tightening of the funding market”, said it was seeking an “increased return on investment” instead of growth. It announced a 16 per cent reduction in its workforce.

Fred Jones, Tier’s regional general manager for northern Europe, insisted the company’s expertise would help it to cope.

“I think we’re one of just a handful of companies that has the toolkit to be able to serve cities like London, Paris and Dubai that have such high regulatory requirements,” Jones said.

Other operators said they were approaching profitability.

Agustin Guilisasti, co-founder with Seton of HumanForest, predicted the company would achieve positive earnings before interest, tax, depreciation and amortisation in the first quarter of 2023. The company has raised £10mn in funding, partly from executives of Cabify, a Spanish ride-hailing service where Guilisasti previously worked.

Swapfiets was “not far” from profitability, Hlavata said. The company’s investors are led by Ponooc, the venture capital arm of the Netherlands’ Pon Holdings.

Ting, meanwhile, said Lime had taken “real strides”.

“We have a real shot at being ebitda profitable for the full year,” he said.

But Norman was concerned that funding issues could affect efforts to shift trips away from private cars. He expressed relief that, for the moment, most market participants continued to be well funded by their investor owners. Growing demand for micromobility should make profitability possible in London, he said.

But he added: “What we don’t want is people becoming dependent on a model and then suddenly the venture capital runs out and it’s no longer there.”