Micro Mobility companies have the potential to revolutionize urban transportation.
However, their current business models are unsustainable, which is why they need to figure out how to make a profit before they run out of money. Even the biggest players in the industry, such as Lime, Bird, and Bolt, are struggling with this conundrum.
So why do Micro Mobility companies keep losing money despite the increasing popularity of innovations like electronic scooters and electronic bikes?
#1 Growth-Oriented Business Model
Start-ups funded by venture capital tend to focus on growth above anything else. This initial focus on growth at the expense of profitability leads to business practices that are unsustainable in the long run but help to establish market dominance in the short run.
Once a company decides to move away from a growth-oriented model and towards a profit-oriented model, they need to completely change how they do things. It seems that Micro Mobility companies are now at that point where they have started focusing on profitability but have yet find a way to do so.
It’s probably safe to say that they’ll get there, but how remains to be seen.
#2 Equipment Cost
Equipment costs are the biggest challenge that Micro Mobility companies face in their quest for profitability. According to McKinsey, an electronic scooter that costs $400 becomes economical after 114 days, or just under four months (assuming five rides per day).
Meanwhile, according to Calcalist, Boston Consulting Group (BCG), the average electronic scooter only lasts three months.
Obviously, this is not sustainable, which is why Micro Mobility companies are in a rush to create electronic scooters that have a longer life span.
#3 City Regulations
It’s no secret that the relationship between Micro Mobility companies and city governments have been fraught with tension from the start.
According to Calcalist, BCG, companies spend an astonishing 7% of their revenue on regulatory expenses. It’s clear that Micro Mobility providers and city officials need to learn to work together if they want to create a more sustainable future.
It’s true that even the most established Micro Mobility companies are still struggling to make a profit. The three key reasons for that are growth-oriented business models, unsustainable equipment costs, and burdensome regulations. Solving these three problems will take time, but they are solvable if all parties are willing to work together to make it a win-win across the board.