Economics of the e-scooter sharing business
Posted on May 22, 2019 By Vishal Virani
The sharing of the e-scooters has been around since 2012. In 2012, a company named Scoot deployed the fleet of e-scooters and launched the first-ever e-scooter app in the city of San Francisco. That time, economists from all over the world highly criticized the Scoot’s ambition to change urban mobility. They were thinking that the e-scooter sharing business holds a very narrow profit margin and not impacting the lives of people. But soon, urbanites proved them wrong. In fact, e-scooter sharing became so popular amidst the urban population that so many entrepreneurs have started e-scooter sharing companies and intensified the e-scooter sharing economy. A very well-known business columnist Kevin Roose wrote in New York Times that he wanted to hate e-scooter sharing business, but it is actually pretty great.
In this blog, we will become acquainted with the detailed business model of top e-scooter sharing companies, resources need to start an e-scooter sharing business and few important business terms which actually need your attention if you are planning to jump into micro mobility industry.
The detailed profit calculation of the major e-scooter sharing companies.
Bird and Lime are the top e-scooter sharing companies. Talking about the Bird, it is the fastest growing company which hits the valuation of $1 billion in just 2 years. Moreover, one year after its initial launch, it celebrated its 10 million rides. Currently, Bird is providing its services in 100 cities. In 2018, it was listed in Top 50 Genius Company by the Time Magazine. Linkedin also named it one of the most sought-after startups in the USA.
Lime is another e-scooter sharing service provider company which offers various dockless electric vehicles to ride. Lime was founded in 2017 and after six months of its launch, Lime raised $12 million in its first round of the funding. Currently, the valuation of the Lime is $1.1 billion. Last year, Lime signed a contract with Uber to provide e-scooters for Uber bike service.
The reason behind Lime and Bird’s impressive success is learning for us. Unlike any other online sharing business, they have engineered their business model based on the major resource they use to operate the e-scooter sharing business. They count the profit and the revenue per scooter. They use the simple formula to determine how much profit they are making per day.
Profit Per Day Per Scooter = Revenue Per Day Per Scooter- Expenses Per Day Per Scooter
Here, Revenue Per Day Per Scooter = Rides Per Day Per scooter * Average Price Per Ride Per Scooter.
If we talk specifically about the Bird, then it is successfully generating $3.65 revenue per ride. But that’s not what we are looking for. We want to know the profit of the Bird. To know how much profit Bird makes per ride, we need to consider the cost of revenue. Cost of revenue is nothing but the total cost to keep an electric scooter running. The bird is spending 47% of the revenue in the charging, 14% of the revenue in repair, 11% in credit card processing, 5% in regulatory processing, 3% in customer support and insurance. That means Bird’s gross profit per ride is only 19%. If we put all these numbers in the formula, we will get the profit Bird is making per scooter and per ride which is $0.7. It is, of course, a small number. But keep in the mind that Bird is making $0.7 per ride, per scooter. Each available-scooter of the Bird makes 5 to 6 rides per day. That means, if Bird’s 1000 scooters are utilized, the per day profit of the bird would be between $3500 to $3700.
However, it is worth to note that in order to make a good profit, you should have an e-scooter app which runs parallelly to your business model. We, at Coruscate Solutions, will not only help you in e-scooter app development, but we will also define the suitable business model which avails you to earn more than your competitors.
The number of resources you should need to run an e-scooter sharing business.
A profitable business always urges for the heap of resources. You can only call yourself an owner of the profitable business if you synchronize the resources with the business model in a most efficient way. Many startups have vanished from the market because they couldn’t establish a connection between resources needed to run a business and a suitable business model which makes sure the constant flow of the money to pay for that resources. This is why it is always essential to consider resources while making a business model for your e-scooter business.
An e-scooter is obviously the most important resource in the e-scooter sharing business. You need to acquire a number of e-scooters in order to build up a complete business infrastructure. Omni and the Segway are the major e-scooter providers available in the market. If you don’t know much about the market, leave it for Coruscate Solutions. We will provide you the best suitable hardware for your e-scooter business. e-scooters generally cost around $800. But if you want e-scooters equipped with high battery power and more security features, then the price would increase to $1000. As a top e-scooter app development company, we encourage you to always go for high powered scooters with extra security features to provide the ultimate user experience.
To run an e-scooter sharing business, you can either adopt the dockless e-scooter model or docked e-scooter model. In the dockless e-scooter model, riders can end the ride by parking the e-scooter at anywhere they want. While in docked e-scooter model, riders can only park in the designated stations. Both models have their own advantages. But we prefer you to start an e-scooter sharing business based on the docked e-scooter model as it reduces the need for redistribution. Having a medium to a large station near the crowded area and small to medium stations around the neighborhood is recommended.
The mobile app is another crucial resource of the e-scooter sharing business. The mobile app of the e-scooter sharing contains a lot of modules and so, the cost to develop the e-scooter sharing mobile app is very high. However, Coruscate Solutions provides you the customized pricing option to make sure that you pay only for your selected modules. IoT integration is another reason why e-scooter app development is a costly choice. A rider books the e-scooter only from the mobile app. So whenever, he books the e-scooter from the mobile app, the connection between e-scooter and the mobile app is established. To establish this connection they use IoT technology. An IoT integrated app is able to provide features like Geo-fencing, remote lock-unlock, and live-tracking.
Maintenance and the redistribution team
Maintenance and the redistribution team is responsible to keep all e-scooters running. They are also responsible for charging the batteries of the e-scooters. You can either hire dedicated staff for it or just let anybody to sign up as the independent contractors who are paid based on the number of e-scooter they charge in a certain time.
Once you know the resources you need to start an e-scooter sharing business, you can go ahead and make the business model of it. But before that, please make sure that you know a few important business terms.
The various cost structure of the e-scooter sharing business economics
It is certainly a rational choice to know business terms and different cost structure before starting a business. It becomes more crucial to understand it when you are diving in the sea which has a shallow surface!
Capital cost is nothing but the total money you need to spend to bring your e-scooter business to the commercially operable status. You can get the estimation of the capital cost by multiplying the number of e-scooters, docks, stations and IT system components against its average cost.
Operating cost is nothing but the money required to keep the e-scooter business running. It varies from system to system and city to city as each city has different labor charges and different accounting practices. In China, the annual operating cost of the e-scooter is $191 while in western countries, it is around $2000.
We recommend you to pay more heed to the operating cost as it has a direct connection with the revenue of your e-scooter sharing business. You need to get an estimate of what percentages of the operating cost can be covered by the membership. If you do so, you will come to know that the membership business model doesn’t help you much to cover the operating cost as you always charge low to the subscribers. To cover almost all operating cost, our business experts have apprehended a very strategic way. Their discovery states that by bringing more and more casual users into the revenue stream, you can cover most of the operating cost as in all systems, casual users are charged more.
You can calculate the operating cost per e-scooter. But it is not a preferable idea as the number of e-scooters varies on day to day basis.
We, at the Coruscate, works on industry defined technology to accommodate IoT features in the e-scooter app. We, of course, know e-scooter app development. But We also know the ways to generate business from e-scooters. So, if you looking to develop an e-scooter sharing app which helps you to make more money, feel free to contact our business experts and developers for a free consultation.
Click below to get Free E scooter app demo to start your own e scooter rental business today!
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