As scooters become more ubiquitous and noticeable in many cities, we wondered how “scooternomics” fit in with profitability for Uber and Lyft. Are Uber and Lyft making more with scooters? How do other scooter companies play a role? RSG contributor Sergio Avedian dug in to see how Uber/Lyft profit from short rides, how scooter rides have cut into that profitability and what that means for rideshare and scooter companies.
As per recent Uber and Lyft data, most Uber and Lyft rides are around 6 miles, but the most profitable are the short ones (2-3 miles). For drivers, those minimum fare rides can be rough and sometimes the distance driven to the pick-up location is longer than the actual ride itself.
The reason why drivers usually despise shorties is because Uber and Lyft keeps the majority of the fare, up to 60% on these rides. In Los Angeles, Uber & Lyft charge $2.30 as a service fee per ride and whatever is left over, 75% is paid to the driver. The above rides would net the driver a whopping $2.62! These rides are an absolute money loser for the driver unless they are chasing some juicy quest, but those quests are disappearing quickly since the IPO, as well as consecutive streak bonuses.
It makes sense then that Uber and Lyft like shorter rides – they make more money (than the driver) and get drivers quickly back on the road again.
Enter: Micro-mobility (E-scooters, E-bikes)
In 2018, Los Angeles City Council approved dockless scooters and bikes to operate within the city, albeit with some limitations. Eventually, each company (Lime, Bird, Jump, Wheels) will be allowed to deploy up to 10,500 dockless scooters and bikes to litter our roads and sidewalks.
The city council bought the arguments of these micro-mobility companies such as Bird, Lime, Wheels, Jump and countless others by issuing a statement, “The future is here”. Uber and Lyft couldn’t pass the opportunity to join the trend by either investing in existing companies (Uber in Lime) or buying them (Uber bought Jump and Lyft bought Motivate).
As they did with their money losing rideshare business, Uber and Lyft flooded the market with dockless scooters and standalone electric bikes.
I was curious about why they would be willing to kill the goose that lays the golden egg (minimum fare rides) for them daily. I dug a little deeper into the economics of the scooter/bike business and found out that Uber and Lyft are merely continuing to execute the same play book as their rideshare business, which is lose money.
Ubiquity of Micro-mobility
Drum Roll Please, from left to right!
Uber Passenger App
First screenshot (from the left) is from the Uber passenger app since they integrated scooters and bikes in it. As you can see the red dots (Jump bikes and scooters), Lime are the green dots, and yellow dots are drop off points. This is around Santa Monica. Second screenshot from the left is around West Hollywood.
Third screenshot (from the left) is Bird, they had to condense the map into 20+ to 30+ in order to accommodate the sheer numbers of scooters on its network. Again just in Santa Monica.
Lagging behind big brother Uber as usual, Lyft (fourth screenshot from the left) is under-represented at this point, according to this map. I am sure they’re not happy about it, but it may be a smart decision after all when you look at the economics of this trend. Again just in Santa Monica.
I didn’t have a chance to download the Wheels app and see how they size up but imagine superimposing those four screenshots above, and you might have more scooters and bikes than humans in a six square mile area. This picture repeats itself all over the city.
“But they’re cheap” people say – are they really? They are convenient and fun, but often used illegally. California state law prohibits riding scooters on pavements and most roads, you’re supposed to ride them in bike lanes but there aren’t enough bike lanes to accomodate all of this.
Imagine being blind sided by one of these things while you’re negotiating a right turn. As a rideshare driver, I encounter them on a daily basis, and these riders think they own the road, whizzing through stop signs and flying on the curb.
There are increased numbers of accident reports involving scooters and undoubtedly they will increase in the upcoming summer months.
Economics of Scooters and the Effects on Rideshare Drivers
The screenshots below are for a typical minimum fare ride on UberX and regular Lyft, and what it costs to ride one of these scooters. I picked a 1.8 mile ride from my location of Lincoln & Broadway in Santa Monica to Wilshire & 26th St. The cost on both Uber and Lyft for the passenger was $5.80, with the driver getting life changing $2.62 out of that fare, and Uber/Lyft’s hold on this ride was $3.18, a whopping 55%. The average wait for the passenger for a car was around six minutes, so add to that the trip duration of 5-6 minutes, the Uber “Partner” did a minimum of 10-12 minutes of driving for a measly $2.62.
As far as taking a bike or scooter to the same location, it would cost the rider from $2 on Jump bikes, scooters and Lime (Uber has a special on them for $2 up to 30 minutes) to $4.50-$5.00 on Bird and Lyft scooters. The rates are $1 to unlock and 23 cents a minute, and prices have been recently increased. FYI, 23 cents a minute is more than what an Uber X driver gets paid in Los Angeles. Which would you take? Pay $5.80 for a car or up to $4.00-$5.00 for a scooter?
This clearly shows how ridiculously low driver pay is for minimum fare rides on both the Uber and Lyft platforms. So why are Uber and Lyft willing to cannibalize their very profitable minimum fare businesses by dumping scooters and bikes all over the place? One would think Uber and Lyft cost analysis on their prospective scooter business is very positive.
Not so fast – if we take a look under the hood of the economics of the scooter business in general, I think it’s another business model in which rides are being priced well below what they’re worth.
Are Scooters/Bikes Another Money Loser for Uber and Lyft?
Unlike Uber & Lyft rideshare business, part of the agreement between dockless scooter/bike companies and City of Los Angeles included an open data policy. Companies like Bird and Lime are also supposed to share data on scooter trips they provide in order for the city to evaluate if they are a net positive or a public nuisance.
Analyzing the data, an average scooter’s lifespan was 32.8 days. The average vehicle went 168.8 miles over 115 trips during its lifetime. Scooter lifespan is a major factor in Scooternomics. The more trips and miles a scooter can cover, the higher the likelihood of these companies to recoup the cost of each vehicle before they can make money. Bird is spending about $600-700 to purchase each scooter with a goal of reducing that cost to $400.
An average trip lasted 18 minutes and the average scooter did 3.5 rides a day. Take a look at the screenshots above – with an oversaturated market, those numbers are surely to go lower unless everyone decides to switch from using Uber/Lyft cars for short trips to scooters. If that is going to be the case, Uber and Lyft are clearly cannibalizing their rideshare business.
Operating Costs & Profits of Scooters
Bird charges $1 to unlock a scooter and 23 cents a minute, recently raised from 15 cents. This is more than UberX at 21 cents a minute and Lyft at 12 cents. At 18 minutes, the average trip generated $5.14. At 3.5 rides per day, the average scooter generated $17.99 of revenue daily.
Here is the breakdown on how much it costs to run a micro-mobility business:
- Bird spent $1.72 per ride on charging costs
- 51 cents per ride on repairs
- 41 cents per ride on credit card fees
- 6 cents for CSR
- 10 cents for insurance
Totaling all of the above, we arrive at an operating cost for each scooter of $2.80. The City of Los Angeles will charge major licensing fees for operators and annual fees for each scooter, but at the moment, those are unknown and will have to weigh heavily as additional costs. In summary, $5.14-$2.80=$2.34 profit per ride per scooter! $2.34×3.5 average rides per dayx32.8 (average lifespan of a scooter)=$268.63. (Hat tip to readers Benjamin and Doug for catching our initial math error!) These numbers are pretty much valid for all the micro-mobility companies mentioned in this article. Let’s be generous and assume the cost of acquiring these scooters is $500, net loss per scooter is over $200.
Something has to give – either the cost of minimum fare car rides need to go much higher in combination with the price of the scooters going much lower, or scooters stay in service a minimum of 215 days on average. I hope they do last a lot longer than now.
Are e-scooters and bikes are another money losing endeavor for Uber and Lyft? Time will tell, but following the rideshare playbook will not guarantee profits. First to market in the field was Bird, losing money hand over fist, but its valuation is in the unicorn phase ($1 billion). As we all know, valuation of a company is all in the eye of the beholder (VC-Venture Capitalist). As long as the top line (revenue) is growing, they keep pouring money in. Uber and Lyft’s rideshare business comes to mind – it has been over seven years, they both have not made a red cent yet.
Readers, what do you think about to micro-mobility trend? Do you see it being a benefit or loss of earnings drivers?
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-Sergio @ RSG