April 15, 2020

Micromobility: Leading players leverage scale to offer additional services

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Micromobility has experienced rapid growth in the past three years. Shared biking has blossomed in China with over 50 million riders each day.

As micromobility players reach scale, they are offering additional services and tapping other revenue streams to improve profitability and customer service. In February of 2020, Mitsubishi UFG highlighted the size of the opportunity for these added services by investing $706M in Grab as part of an initiative to offer targeted financial services to Grab customers. This article charts the growth of micromobility and offers a perspective on future industry developments.

A brief history of micromobility

The earliest bike share program launched in 1965 in Amsterdam. Lack of an asset tracking system meant that the bikes were quickly stolen, resulting in the program lasting just one month. Copenhagen and Portsmouth launched fledgling bike share programs in the 1990s with some asset tracking capability, but they too were short-lived.

The roots of modern micromobility began in 2010, with cities contracting shared bike operators to operate docked biking systems and offering subsidies to ensure low-cost rides for residents and tourists. New York is the most successful docked bike share program in the United States, accounting for almost half of all bike share rides in the United States by 2017.

Shared bikes started in northern Europe, where commuting by bike has a long tradition. Bike commuting has also been popular in China, where bike paths are established along many city streets. Bike sharing blossomed in China in 2016, with ridership reaching an estimated 50 million rides per day. This was more than 500 times the 26 million annual shared bike rides in the United States at that time.

Recent entrants have expanded beyond bike sharing, offering a wider selection of vehicles, including shared electric bikes, scooters and mopeds. Dockless vehicles have reduced capital costs, allowing for higher vehicle density. Consumers enjoy more convenience in pick up and drop off, which results in increased ridership. New entrants have deployed rapidly by offering free services to cities.

Cities have used different micromobility strategies. Some cities, including New York, Seattle, and London (until recently) offer shared bikes, but do not allow scooters.

In those cities that allow scooters, consumers prefer scooters for short commutes, often in conjunction with buses and subways, as an inexpensive multi-modal public transport alternative for long-distance commutes. Shared mopeds allow for longer commutes, typically ranging from three to eight miles in less dense cities. Electric bikes are preferred for medium-distance rides, typically ranging from one to three miles. The optimal mix depends on population density and how the strategies complement existing public transport options.

Micromobility: A platform for local services, once it’s at scale

China is on its second generation of shared bike companies. Initial entrants Mobike and Ofo got tangled in an unsustainable price war. Meituan-Dianping acquired Mobike for $2.7 billion in 2018. Ofo closed most of its operations in 2018 and dissolved.

Meituan offers local lifestyle services, including take-out meal delivery, as well as reviews of and recommendations for food, shopping, and entertainment. Meituan acquired Mobike to cross-sell its services to Mobike customers, leveraging Mobike’s knowledge of user locations through its bike share location tracking technology.

Tencent and Alibaba have entered the micromobility market in China based on Meituan’s initial success with Mobike. Alibaba has partnered with and invested in Hellobike. The partnership brings as many as 20 million daily mobile payment transactions to Alipay, and has become one of the core strategic partners of Ant Financial. A Meituan shareholder, Tencent has partnered with Mobike and has integrated its rapidly growing WeChat Pay into the bike share app.

In Southeast Asia, Grab has grown rapidly. Starting from a multi-modal transportation platform, it has expanded into lifestyle services by leveraging user traffic from its transportation services. Grab has become the leading mobile platform in the region, providing take-out meal delivery, mobile payment, ticketing, financial services, and transportation. In Feb 2020, Mitsubishi UFG invested $706M in Grab to expand its financial service business.

Go-Jek, a competitor of Grab, also partners with small personal loan companies to provide financial services in Indonesia, Thailand, and Singapore. Recently Go-Jek announced a $1.2 billion investment from Tencent, Visa, and Google as it attempts to become a broader payments platform.

In Europe, JCDecaux is the global leader in transport advertising, serving more than 160 airports and 270 different metros, buses, trains, and tramways, accounting for nearly 380,000 advertising panels. In 2019, €1.6B or 43% of its revenue came from transport advertising. JCDecaux views bike sharing as an extension of its transport advertising business. The company has signed contracts with Lyon and Brussels to provide shared bike services in conjunction with its outdoor advertising services.

In the US, Motivate, acquired by Lyft in 2018, has partnered with national brands like Ford, Nike, Citi, Blue Cross Blue Shield, Alaska Airlines, Hulu, and Santander to offer naming rights in the cities in which it operates. Sponsors promote their brands on the bikes, paying branding fees that subsidize the operating costs for cities.

New entrants Bird and Lime are trialing similar opportunities. Bird recently tested Bird Pay in Los Angeles and Santa Monica in February of 2020. Google invested in Lime for the potential strategic benefits of its advertising and payment platforms.

The current focus in profitability is prompting micromobility players to tap ad tech and financial services to expand revenue opportunities and improve customer service. As micromobility players extend new services, the drive to scale will continue and may lead to further consolidation in the years ahead.

Subscribe to NGP Capital's Road Ahead newsletter to get monthly updates on the Smart Commute and Smart Logistics spaces. In March, we sent our readers an update on micromobility (text above), summarized recent COVID-19 responses in the mobility and logistics industries, and shared our funding and exits tracker.