I spent the July 4 weekend in San Diego. My public service announcement is that if you go to San Diego, the first thing you should do is buy a week pass to all the museums in Balboa Park, and add on a discount admission to the zoo if you plan to see it. Even if you are only interested in a few of the two dozen or so museums there, it is still cheaper than buying individual tickets. But that's not what this blog post is about.

Scooters

While we were in San Diego, we used those scooters that you see around in many cities, notably San Francisco. I already use Lyft for ride shareing, mainly for a weird personal reason that a friend's daughter, who I persuaded to major in computer science at Berkeley, works there. Lyft acquired Motivate late last year and entered the bike and scooter rental business. If you have the Lyft app on your phone for ride share, then you already have the app for scooter rental since it is the same. However, you can only rent one at a time, and I wanted to compare anyway, so I downloaded the app for Lime. If you already have ApplePay set up on your phone, then it is pretty painless to get started. As far as I can tell, the procedure for renting a scooter and for riding it is pretty much the same.

I believe there are ways you can find out where there is a nearby scooter and reserve it, but most people seem to find a scooter and then rent it. To do so, you open the app, direct the camera on your phone at the barcode on the scooter, and the system activates the scooter. You are charged $1 to unlock the scooter and then 15¢ per minute. Lime is the same. The scooters are battery powered. The only slightly non-intuitive thing about using them is that you can't just stand on the scooter and rotate the accelerator knob, you have to push off and get the scooter moving first, then you can apply power and accelerate. I assume this is for some sort of safety reason—electric motors have a lot of torque (have you ridden in a Tesla?) and I'm guessing that people risk being thrown off the scooter if they simply went from 0mph to max power to get going. When you are finished with the scooter, you use the app to indicate this, and you have to take a photograph of the scooter to show that you left it in a safe place.

Chinese Bike Rental

When I was in China last year, I wrote about the bike rental situation there in my post China Bike Rental. This is the dock-less bike rental that is like scooter rental: you find a bike, use your smartphone to unlock it, and then just leave it somewhere afterward. One of the big issues was that there were so many bikes that they were blocking sidewalks and footpaths.

Earlier this year I was at SEMICON China and, at least on the streets near the convention center, they had special areas for leaving and picking up bikes. That's one on the left. The most notable feature, of course, is the lack of bikes, just one in the whole photograph. In fact, in the three days I was in Shanghai for SEMICON China, I think I only saw one person riding a rental bike.

Here's an article that tells the story, The Rise and Fall of China’s Cycling Empires. A key summary paragraph:

Bike-sharing apps seemed poised to be the solution—and millions of bikes were poured into China’s streets by the private sector in the last three years. But today, as the companies fail, unused units pile up in bicycle graveyards, and queues of angry users demand their deposits back, it’s obvious just how doomed the idea was from the start. The rise and fall of the China bike craze played out like a sped-up version of every tech bubble, an unprofitable idea sustained by fantasy, false predictions, and the power of bigger firms.

But the fundamental problem was how to make money:

It was always unclear how the firms were ever supposed to be profitable. According to analysis published by Xinhua, each bike costs just over $200 to manufacture and $10 for each tuneup by a technician, and they made a profit of just 1 yuan, about 15 cents, per 2-hour ride, following a deposit of between $15 and $45. 

The basic problem of going for growth and acquiring users and worrying about profitability later doesn't really scale when physical objects like bikes are involved.

Economics of Scooters

So my big question is whether scooters in the US (and elsewhere) have economics that will let them make money. Scooters are worse than bikes in one important way: they have batteries that need to be charged up, which requires people to visit every scooter regularly. Bikes have a dynamo on them and so the batteries get charged each time someone rents the bike.

As it happens, pitch decks from Bird have been seen by various people who have reported some of what they contain:

• Bird had around 10,500 “active” scooters in early May. Each “active” scooter was used five times per day.
• Each scooter cost $551 (price includes a GPS device, shipping, assembly, and Bird branding). Bird aimed to lower scooter cost to $360.
• A scooter generated $3.65 in revenue per ride.
• Bird spent $1.72 per ride on charging costs.
• It spent another $0.51 per ride, on average, on repairs.
• Credit card fees cost $0.41 per ride.
• Fees to city permits are $0.20 per ride.
• Customer support adds $0.06 per ride.
• Insurance is $0.05 per ride.

• That leaves about $0.70 per ride, or a 19% gross profit margin.

But there are some big unknowns, mostly how long a scooter lasts, and how many go missing (stolen, thrown in the lake, driven over by a car). Here's one datapoint:

Investors and industry executives told The Information that today’s electric scooters tend to last one to two months before they need to be replaced, which sounds about right. At $551 a device, Bird earlier this year was paying on the high end for its Xiaomi scooters, which retail for about $500 on Amazon but $320 (1,999 yuan) in China. Pulling it all together: If a Bird scooter that cost $551 was earning $0.70 per ride at five rides a day, that’s $3.50 a day. At that rate, it would take 157 days or 5.25 months for Bird to recoup the scooter’s initial cost, which, apparently, is much longer than that scooter was expected to last.

All that put together means that it is unclear whether this is a sustainable business, and whether the scooters will follow the Chinese bikes into oblivion or to the sunny hilltops of a profitable long-term business.

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