David Zipper is a Visiting Fellow at the Harvard Kennedy School's Taubman Center for State and Local Government. He writes frequently about the future of urban mobility and technology.
Vultures are circling around shared micromobility.
E-scooter operators like Bird, Lime, Jump, and Spin were confronting financial headwinds even before Covid-19 drastically reduced urban trips worldwide. Faced with plummeting usage, the companies have yanked their fleets off the street and retreated from entire continents. Their financial outlook is bleak: Bird recently laid off nearly 40 percent of its staff, while Lime is reportedly seeking an emergency round of financing at a sharply reduced valuation.
Dockless micromobility’s biggest uncertainty is no longer the extent to which cities will accommodate a new form factor, but whether shared scooters will still be available when we emerge from the current pandemic. The time has come for local officials to consider an idea that would have seemed anathema two months ago: Should they stop imposing fees on e-scooter operators and start — gulp — subsidizing them?
Such a question may initially sound absurd. After all, we’re in the midst of a near-global lockdown, with urban residents worldwide instructed to stay home unless a trip is essential. Local transportation officials are scrambling to keep their employees safe, expand street space available for social distancing, and ensure essential workers can get to their jobs. Should a micromobility mode that’s famous for amusing tourists and angering sidewalk users really be a priority right now?
A number of signs say yes. Virtually all scooter and bike riders will maintain the six feet of distance from others recommended by the CDC, one of the reasons why Citi Bike in New York City trips rose 67% when the virus emerged. Like bikeshare, shared e-scooters can fill gaps where bus and train service has been cut in response to the virus. Cities including Denver, Tampa, and San Francisco have classified e-scooter businesses as essential. E-scooters aren’t yet legal in Pennsylvania, but Pittsburgh Department of Mobility and Infrastructure Director Karina Ricks hopes that changes soon, because they could fill gaps created by restricted bus service: “I think they could be a missing link right now between essential workers and the places they need to reach.”
Officials in Portland, Oregon, have provided financial incentives to keep e-scooter service available. On April 6, the city announced a partnership with Spin in which the city will temporarily waive e-scooter daily fees of up to $0.20 per scooter and $0.25 per trip in exchange for Spin reducing the cost of a ride by around 50 percent. Providing a net subsidy — a step we are not aware of any city taking to date — would go still further.
If cities want to keep e-scooters available during the current pandemic, they may need to consider flexible steps like Portland’s to bolster operators’ bottom line. With dwindling cash reserves, e-scooter operators are exiting markets around the world, and there is no timetable for their return. In Minneapolis, Department of Public Works Director Robin Hutcheson says she is “watching carefully and with some hopefulness” that Bird and Lyft will deploy 2,500 e-scooters as planned in her city this spring, but she has received no guarantees.
The rapid rise of e-scooter services was fueled by huge investments from venture capital, with Bird alone raising over $500 million from firms including Sequoia, Accel, and Index Ventures. Investors were already pushing the operators to show profitability before the coronavirus struck, and it’s not at all clear that venture capital firms will double down on their shared micromobility investments to keep companies afloat during the coming months. After all, they have plenty of other things to worry about.
To be fair, city leaders could shrug off the potential collapse of e-scooter operators with an offhand “sorry your VC investments didn’t work out.” Indeed, no one should conflate the interests of venture capitalists with those of the general public. (Disclosure: One of us used to work at Bird and at LA Metro; the other is a partner in a VC fund that has made no micromobility investments.) The assets of a bankrupted micromobility operator could be reorganized into a new operator, wiping out investors but — one might hope — having a negligible impact on the availability of micromobility devices after we emerge from the virus.
We doubt such an optimistic scenario is realistic. It’s unclear that the historical regulatory approach toward shared scooters was going to be sustainable, even without the coronavirus. Operating e-scooter service is expensive, especially in places that are less densely populated. Before Covid-19 struck, operators had already abandoned cities like Charlottesville, San Diego and Raleigh, where executives claimed they could not make money under the existing regulatory regime. (Note: Cities could alter scooter economics by taking steps like relaxing equity requirements or expanding maximum fleet size, but these options may be unappealing.) If current operators go bankrupt, it’s likely that their successors will be less flush with investment cash, leading them to avoid many of the cities that had previously had plenty of devices.
While scooter foes may cheer, cities will be worse off if these vehicles do disappear for good. “Scooters have been effective at making short trips that used to be made by car,” Hutcheson says. “That’s worth a lot to Minneapolis.” Indeed, cities including Santa Monica, Chicago, Portland, and Arlington have found that 30 to 55 percent of e-scooter trips would have otherwise been taken by automobile. Further, dockless e-scooters can provide a first-last mile solution for public transportation, enabling riders to reach a transit stop that lies beyond the typical quarter-mile walking radius as they restart service after the virus.
In fact, the societal benefits of shared e-scooters bring to mind another familiar form factor: docked bikeshare. Like e-scooters, docked bikeshare can replace car trips (research suggests bikeshare ridership is inversely correlated with gas prices), and also serve as a first-mile, last-mile connector for transit. Twelve years after Capital Bikeshare launched in the Washington, D.C. region, bikeshare is widely beloved nationwide; Curbed’s Alyssa Walker dubbed it the transportation success of the decade.
But bikeshare wouldn’t exist without generous operating subsidies from marketing partners like Blue Cross Blue Shield in Chicago and Citigroup in New York City as well as from local governments. For instance, Los Angeles’ Metro Bike Share receives more than $15 million in funding per year from the city and the LA Metro transportation agency. Pittsburgh’s Ricks sees little logic behind the divergent governmental approaches toward bikeshare and e-scooters. “Public bikeshare has been this homegrown thing,” she says. “The only difference with scooters is that they’re provided by private companies.”
While we believe that waiving e-scooter fees and offering public funding may be necessary, we harbor no illusions that it would be easy to do so in the current fiscal environment. With the collapse of transit ridership, agencies have lost most of their farebox revenue. A $25 billion allocation in federal emergency funds provides an immediate lifeline, but may not be enough to keep agencies afloat until ridership fully returns. And local governments are facing their own financial reckoning due to falling tax revenues and emergency health spending.
It will be difficult to end fees or subsidize shared micromobility service, that doesn’t mean it is impossible — or that doing so would break public budgets. For example, Washington, DC, charges each of its four operators an upfront fee of $325, plus an additional annual $60 per vehicle for a fleet of up to 2,500. That equates to a little over $600,000 in total revenue flowing to the city, or roughly 0.4 percent of the city’s annual transportation budget for operations. If waiving fees isn’t enough, a subsidy need not be astronomical; for context, Dayton’s transit agency contributes around $200,000 annually to the city’s Link bikeshare system. A little help can make a big difference in the micromobility world.
It shouldn’t surprise us if the initial, privately funded model of e-scooter operations ultimately fails; a history of subsidized transit systems, limited taxi medallions, and loss-making ride-hail operators show how difficult it is to make money in urban mobility. “It’s been 100 years since transportation has been a for-profit business,” Ricks says. “Why do we all of a sudden think that’s changed?” Venture capital firms investing in shared e-scooters may have thought they could change history, but it seems increasingly likely they won’t.
The coming months will be very challenging ones for urban America. Cities and transit systems will need time to recover from a virus that has left sorrow, joblessness, and anxiety in its wake. Electric scooters — those funny little devices that seemed like silly distractions before becoming a serious mobility option for millions of people — could make that recovery a little easier, and a little faster.
If, that is, we’re willing to do what’s necessary to keep them around.