This ABI Insight identifies the impact of the macroeconomic and geopolitical environment on the shared micro-mobility industry and provides strategies to navigate the market successfully.
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How Is the Macro Environment Affecting Shared Micro-Mobility Operators?
The bottleneck in logistics centers, congestion in ports, low capacity, and shortage in components have resulted in a high lead time for shared micro-mobility vehicle orders in late 2021. The COVID-19 lockdowns in China have since exacerbated the problem because most leading operators, including Dott, Tier, Lime, Voi, Bird, and Spin, rely on the Chinese manufacturers Okai and Segway-Ninebot, which are facing major supply chain and shipping disruptions.
Additionally, recession fears and spiking inflation in nearly all countries will result in a scarcity of capital and funding in the upcoming quarters, which is worrying, given that only a handful of companies have achieved profitability so far. On the positive side, higher gas prices will likely increase shared micro-mobility ridership demand.
Shared micro-mobility operators have a tough road ahead, including the need to downsize/restructure, consolidations, and slower growth rates. However, those that are quick to understand and prepare for the impact of the challenges ahead will be able to navigate the market successfully and unleash the potential of a market worth US$9 billion in ride revenue in 2030 (see ABI Research’s Improving Efficiency and Profitability of Shared Micro-Mobility Operators report (AN-5544) for more details).
Implications of the Shared Micro-Mobility Industry
- High Lead Times/Insufficient Vehicle Production: Insufficient vehicle production will significantly affect the shared micro-mobility industry growth in 2022. While large operators increased vehicle inventory by late 2021, small players that could not place 2022 vehicle orders in advance due to low cash flow and market uncertainties are facing high lead times and will struggle to meet their fleet expansion targets. The shortage and high lead times will also affect current operations. Large operators with aging fleets may not be able to replace old vehicles, resulting in increased operational costs with vehicle maintenance and charging—as batteries degrade and become less effective over time—and inferior customer experiences. The COVID-19 lockdowns are causing an even greater impact on the industry because of the dependency on Chinese vehicle manufacturers, including Okai and Segway-Ninebot.
- Higher Costs: Increasing inflation and shortage of components will result in even higher operational costs and may force operators to increase ride prices, which will likely affect ridership rates.
- Capital Scarcity: The COVID-19 pandemic was challenging for shared micro-mobility players, with ridership halting in nearly all markets. Since then, many players have been struggling to remain solvent, and the expected scarcity of capital and funding due to recession fears will propel market consolidation in 2022.
- Higher Fuel Prices: The higher fuel prices and expectations of volatile prices in the future due to high inflation, supply shortage, and the war in Ukraine will boost demand for alternative transportation modes, particularly shared micro-mobility.
How to Successfully Navigate the Shared Micro-Mobility Market?
- Maximize Ridership: Shared micro-mobility operators must take advantage of the spiking fuel prices and summer weather to maximize ridership as much as possible. This can be achieved using data analytics platforms to match supply with up-to-date demand to optimally relocate existing operations to areas with high demand potential and fleet management platforms that automate vehicle rebalancing and charging tasks. Recognizing the importance of such data tools, South Korean micro-mobility operator Gbike recently acquired Hyundai Motor's shared micro-mobility platform ZET aiming to benefit from ZET's fleet management system.
- Implement Profitability-Centric Goals: Due to years of rapid, but disorderly expansion, restructuring and reassessment of strategic goals are paramount. Companies must move away from growth above all costs strategies to a profitability-centric goal, which means disinvestment in regions and segments with low profitability and layoffs when necessary.
- Diversification: To survive the COVID-19 pandemic, smaller players and those struggling with their financial health diversified their business models to increase the utilization of their idle fleets. Some companies diverted their fleets from end-consumer mobility to last-mile delivery, while others ventured into manufacturing vehicles for Business-to-Business (B2B) and the consumer market. The former became a significant new revenue stream for companies like Yulu, which now dedicates two-thirds of its fleet to last-mile delivery.
- Optimize Operational Costs: Telematics, including vehicle tracking, preventive maintenance, and geofencing, significantly improve asset protection and preservation, minimizing vehicle downtime and maintenance costs. Moreover, operational costs can be significantly reduced by outsourcing field operations. Bird increased average trip margins from -77% to 16% after implementing the Fleet Manager operating model that fully outsources charging, deployment, rebalancing, storage, and repair to Third-Party Logistics (3PL) providers.
- Vehicle Redesign: Quick redesign and re-contenting have helped mitigate production shortages and shutdowns in the traditional automotive industry.
- Parts Redesign: When possible, operators and Original Equipment Manufacturers (OEMs) must require their suppliers to redesign parts, switching to materials that can be acquired from a second source to prevent dependency on a single supplier. Nevertheless, the redesign must not jeopardize the product quality and should have minimal impact on the user experience; this requires flexibility, openness, and pragmatism by the suppliers.
- Software Rewrite: Operators are significantly increasing the number of semiconductors in their vehicle design to improve safety (e.g., Superpedestrian e-scooters have five microprocessors). Thus, another strategy is to replace hardware with software functionalities, integrating more functionality into fewer chips.
- Pivot to Battery Swap: Vehicle charging accounts for 50% of the operating costs per vehicle. Swappable batteries reduce recharge costs by 30% to 60% because vehicles do not need to be transported to the warehouse to be charged. They also minimize vehicle downtime by decreasing charging time from 4 hours to 15 minutes.
- Optimize Supply Chain Management: Operators and vehicle OEMs must monitor the supply chain process more actively and increase their visibility beyond direct suppliers to anticipate future shortages. Moreover, operators must reduce dependency on the same suppliers (e.g., Okai and Segway-Ninebot) and have at least one alternative supplier in a different region to minimize exposure to shocks occurring in any particular region. When financially possible, operators and manufacturers must increase inventory.