Electric scooter sharing start-ups, including Bird and Lime, are “not sustainable” businesses, said a top executive at the world’s biggest manufacturer of the two-wheeled vehicles.
“The standalone business model, I think it is questionable whether it’s self-sustainable,” Tony Ho, vice-president of global business development at Segway-Ninebot, said in a recent interview with the Financial Times.
Bird and Lime, as well as competitors including Uber and Lyft, have relied on China-based Segway-Ninebot for many of the e-scooters they have deployed in dozens of cities around the world. Scooter sharing has been one of the biggest tech crazes of 2018, with venture capitalists pouring more than $1bn into the start-ups in recent months.
Segway-Ninebot, which is backed by Xiaomi, Sequoia Capital and Intel, has also profited from that growth. The company was formed in 2015 when Ninebot bought US “personal transporter” pioneer Segway.
Mr Ho said that scooter sales had jumped from 200,000 in 2017 to more than 1m this year, with consumers making up about half of its sales. Mr Ho predicted “significant growth” again in 2019.
“It’s amazing how these companies, especially Bird, managed to really educate the market in such a short period of time,” he said.
For early adopters like Bird and Lime, the financials, the gross margins are not that appealing
But while Bird and Lime have raised hundreds of millions of dollars at valuations in excess of $1bn, investors have grown increasingly worried about their prospects amid increased regulation and competition.
Both start-ups have held buyout talks with Uber, said people familiar with the discussions, though it is unclear whether the companies are still keen to strike deals.
Mr Ho said he believed that such a takeover was vital if scooter sharing were to become a viable business, saying it was “just a matter of time” before scooter start-ups hit the same kind of cash flow problems as Chinese dockless bike-sharing company ofo. The founder of ofo warned earlier this month that the company could have to file for bankruptcy protection.
Ford, the carmaker, recently bought Bird and Lime’s smaller rival, Spin, which Mr Ho said was a “good idea”.
“If you combine this with a larger network, it makes more financial sense,” he said. “For early adopters like Bird and Lime, the financials, the gross margins are not that appealing.”
As well as having to recoup the cost of buying vehicles, scooter operators must recruit contractors to collect and charge the scooters every day. But scooter investors argue that Bird and Lime’s month-on-month revenue growth is unparalleled.
Both Bird and Lime have sought to diversify their suppliers away from Segway-Ninebot, tapping rivals such as China’s Okai to design sturdier scooters that are more resistant to vandalism and inclement weather.
Mr Ho nevertheless remains bullish on the vehicles, which he described as having an “iPhone moment”.
“One thing I can very confidently say is that the form factor of the electric kick scooter is here to stay,” he said. “It’s something that consumers choose to use.”
As a Chinese company, Segway-Ninebot has been affected by US President Donald Trump’s tariffs on Chinese goods imported to the US, and is looking into moving its manufacturing or supply chain to other territories, including Mexico, Mr Ho added.
He said that while moving production to the US was unlikely given a lack of skills and local suppliers, “anything is possible”.
In addition to scooter start-ups, the company has signed deals with retailers, hotel operators and delivery services, and is also rolling out a range of other products to generate further growth, including electric go-karts and motorised roller skates.
But Segway-Ninebot has no plans to begin renting out scooters in competition with the likes of Bird.
“In this whole scooter war, we might be the only company making money at this point,” Mr Ho said, adding that the group had generated a positive cash flow for multiple years. “We would like to be the arms dealer, rather than fighting the war ourselves.”
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