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RideMovi: How to make micromobility profitable from day one
September 17, 2024
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Commercial Life Span of Shared E-scooters and E-bikes: How long do escooters and ebikes really last?
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When off-the-shelf e-scooters like the Xiaomi M365 and Ninebot Segway ES4 were first introduced, they helped operators scale quickly. However, some lasted 3-4 weeks and others just up to six months due to poor build quality. Operators, flush with VC-cash to burn, spent millions of dollars on procuring new vehicles to replace old and on unprofitable maintenance costs to keep these fleets on the street. This sparked uproar in the media and among stakeholders, raising doubts about the business model and sustainability claims, even among supporters.
The emergence of models like the Okai ES400 and Segway Ninebot Max marked a turning point, enabling profitable operations as vehicles were built for longevity. The industry is now at a place where we see indications that the lifespans of the first durable vehicles are about to end commercially. For some of the vehicles this signals a realistic lifespan of three-four years, that were estimated to last five years in operator bids and the media. Adding to this, it's still uncertain if these older vehicles are profitable on the street when counting maintenance costs and transport costs, given that some operators using these vehicles are still unprofitable.
This highlights the need for a deeper understanding of what truly impacts vehicle lifespan. We have chosen to call this Commercial Lifespan.
Recent article from Movability:
Six Key Factors Influencing Commercial Life Span
1. Revenue Reduction: As vehicles age, their appeal diminishes. During the first 1-2 years, users may not notice much difference, but between years 2-4, the visible wear and declining performance become apparent, negatively impacting user experience and reducing revenue.
2. Maintenance Cost Appreciation: Maintenance costs increase as vehicles age. Initially, operators replace minor components, but over time, more significant repairs like motors and batteries become necessary, substantially driving up operational costs.
3. Depreciation Boost: Industry-standard depreciation for shared vehicles is 2-3 years. While profitability can remain attractive in the early years, the combination of reduced revenue and rising maintenance expenses quickly erodes financial performance, emphasizing the commercial limitations of these vehicles.
4. Competition Risk: Older fleets face growing competition from operators deploying newer models. Fresh vehicles often outperform older ones, making it challenging for operators to maintain market share and revenue with aging fleets.
5. Build Quality Risk: Not all vehicles are built equally. Models with superior build quality tend to age better, maintaining user satisfaction and requiring fewer repairs. Conversely, lower-quality vehicles degrade faster, increasing maintenance costs and reducing their commercial viability.
6. Market specific risk: In colder regions, winters are harsh on vehicles. While in other markets vandalism is more common. Both risk factors can severely impact profitability and serve to amplify the above-mentioned factors.
Movability has conducted testing on several older fleets, which combined with interviews with former operators, revealing the following data points:
Preferred Model declining: A model from a leading OEM, now four years after its launch, has begun requiring constant maintenance. Users have noticed a decline in reliability, frequently encountering broken or malfunctioning vehicles.
Other Preferred OEM Model has even shorter lifespan: Another model from a different preferred OEM started showing significant maintenance issues after just 2-3 years in operation. The vehicle's maintenance requirements have worsened considerably, and it has become unpopular with users who find it unreliable and frustrating to use.
Some E-bikes have significantly poorer lifespan than others: An e-bike widely used by various operators, manufactured by a tier-1 OEM, seemingly has a commercial lifespan of only one year before needing extensive maintenance, including replacing critical components like the motor, highlighting severe longevity issues.
Our findings indicate that the commercial lifespan of a 2021 produced vehicle could be two-five years, but this would need confirmation using internal operator data and can vary between markets.
One caveat that needs to be considered is that vehicle build quality has improved the past years. One expert explained to us that the frame has become more robust, and the joints are tighter - leaving less space for water to enter and destroy electronics.
Several operators have also been very vocal in the media that they have attempted to design their own escooters and ebikes, and history has then showed that they have failed to produce vehicles ready for the market. This exemplifies the complexity of supply chain and vehicle design. This indicates that certain 2023-2024 models actually may last for 6-8 years, which is around what operators submit in tenders, while there is also risk that newer models may have new weaknesses caused by changes in the design.
Movability’s observations
Movability has conducted testing on several older fleets, which combined with interviews with former operators, revealing the following data points:
Preferred Model declining: A model from a leading OEM, now four years after its launch, has begun requiring constant maintenance. Users have noticed a decline in reliability, frequently encountering broken or malfunctioning vehicles.
Other Preferred OEM Model has even shorter lifespan: Another model from a different preferred OEM started showing significant maintenance issues after just 2-3 years in operation. The vehicle's maintenance requirements have worsened considerably, and it has become unpopular with users who find it unreliable and frustrating to use.
Some E-bikes have significantly poorer lifespan than others: An e-bike widely used by various operators, manufactured by a tier-1 OEM, seemingly has a commercial lifespan of only one year before needing extensive maintenance, including replacing critical components like the motor, highlighting severe longevity issues.
Our findings indicate that the commercial lifespan of a 2021 produced vehicle could be two-five years, but this would need confirmation using internal operator data and can vary between markets.
One caveat that needs to be considered is that vehicle build quality has improved the past years. One expert explained to us that the frame has become more robust, and the joints are tighter - leaving less space for water to enter and destroy electronics.
Several operators have also been very vocal in the media that they have attempted to design their own escooters and ebikes, and history has then showed that they have failed to produce vehicles ready for the market. This exemplifies the complexity of supply chain and vehicle design. This indicates that certain 2023-2024 models actually may last for 6-8 years, which is around what operators submit in tenders, while there is also risk that newer models may have new weaknesses caused by changes in the design.
Read more about Movability and our services:
Regulatory Development
Modern mobility regulation is challenging when companies and special-interest organizations give varying advice. Our consultants and industry experts help public clients understand incentives and dynamics in new mobility to effectively meet transport goals. We have assisted several clients on the development of RFI, RFP and RFQs.
Regulatory Development
Operational Optimization
Utilizing Movability’s experts and top-tier consultant network we provide operational strategy and insights, regardless of what stage the organization is in.
Operational Optimization
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Consequences of Commercial Life Span
Tenders: A huge driver for procuring new vehicles is top-tier tenders, such as Oslo. Tenders drive operators to constantly collaborate with OEMs to innovate and build new vehicles and technology to win.
Relocating Older Vehicles: Many operators move 2-3-year-old vehicles to less competitive markets, such as shifting fleets from Western Europe to Eastern Europe. This can extend vehicle utility but also creates opportunities for well-funded competitors with new vehicles to dominate these secondary markets.
Valuation Impacts for Operators: For mergers and acquisitions, operators are often valued based largely on the quality of their assets. Low build quality on vehicles translates into lower valuations, as they are more expensive to maintain and attract less revenue.
Advantages for OEMs with Proven Build Quality: Operators are increasingly turning to OEMs with a track record of high-quality builds due to complexity and risks associated with vehicle design. Conversely, successful in-house development can lead to lower maintenance costs and control over the supply chain, bypassing the high spare part margins of third-party OEMs.
Proposed Implications for Stakeholders
Rigorous Commercial Lifespan Evaluation in Tenders: Municipalities should require detailed reporting on commercial vehicle lifespans during tender processes, showing commercial details such as repairs per vehicle per month and ride per vehicle per month over a longer time frame to augment LCAs. Without this transparency, assessing the commercial lifespan of a vehicle will be difficult.
Commercial Lifespan in Due Diligence: When evaluating operators, investors should factor in the true commercial lifespan of vehicle fleets. Operators relying on older, higher-maintenance vehicles could see steeper declines in valuation compared to those investing in longer-lasting, reliable models.
Low-Cost Strategies for Older Vehicles: There may be residual value in older vehicles for certain market segments, similar to how companies like Ryanair and car rental operators exploit depreciated assets. Offering lower prices or shifting vehicles to new markets could increase utilization rates, even with older fleets.
Monopoly Risk Among OEMs: A dominant OEM with lower build quality risk could become monopolistic if they continue offering the best-performing vehicles without competition. Operators often prefer proven, slightly higher-cost models over untested or lower-quality alternatives, which could stifle innovation in the OEM market.
Conclusion
Understanding the commercial life span of shared e-scooters and e-bikes is critical for all stakeholders in the shared mobility industry. By acknowledging the operational realities of shared micromobility vehicles, operators can make better strategic decisions, cities can set higher standards for services, and investors can more accurately assess long-term value. As the market evolves, those who align their strategies with the true commercial viability of their vehicles will stand out as industry leaders.
About Movability
Movability is a mobility consultancy helping clients with strategy, business development and policy, providing subject-matter-expertise along with top-tier consulting backgrounds.
