Impact of COVID-19 on micro-mobility

Like everything else, the pandemic has shifted travel and commute priorities worldwide. These have caused no small loss to related businesses. Intermittent lockdowns are compelling people to hunker down, slowing the growth of the transportation industry. Within the micro-mobility sector, the first quarter saw companies taking some difficult decisions like suspending services and resizing workforces to survive the crisis.

However, as restrictions gradually relax this sector is expected to pick up momentum given the need for social distancing. It is estimated that micro-mobility equipment sales, currently at 3.5 million units, will peak at 9 million by 2025. A surge in eco-friendly and economically feasible commuting options is catalyzing the demand further. For businesses to understand the pandemic-induced emerging realities within this market, here’s a quick round-up of its short and long-term impacts.

Short-term impact

Workforce resizing

Downsizing was a prevalent trend noticed during the start of the outbreak, as governments across countries restricted commute. This pushed players like Lime, a top e-scooter player, to lay off about 13% of their employees in March as it saw a drop in 79% of its valuation.

Bird, another micro-mobility major, was forced to take a similar decision to trim down by around 30%. This was after both companies suspended their services in many regions. Singapore-based Beam, which recently started services in Western Australia, also laid-off a sizable number of its employees.

Realigning business strategies

To sustain amid this new normal, some transport providers are re-steering their business strategies, while others are drawing the shutters on certain operations. In 2018, Uber acquired the micro-mobility player Jump for USD 200 million, hoping to double down on the investment by 2020. With the crisis rendering low demands, this May the cab-hailing firm pivoted its investment into Lime, a US-based micro-mobility company, and transferred the Jump division onto them.

In another instance, Bird was forced to shut down its operations in the Middle-East. This operation was managed by Circ, which the firm acquired in January 2020. The decision affected operations in Bahrain, Qatar, and the UAE. However, the company hopes to resume routine operations in the region by fall. Similarly, Lime and Bird too have halted their operations in many European and US cities in the wake of the pandemic and lockdown measures.

Decline in investments

With no respite from the crisis, the industry has witnessed a dramatic decline in investments in 2020. Venture capitalists funneled in an all-time high USD 5.4 billion into this sector in 2018. That amount declined to just USD 1.9 billion in 2019. This year, VCs have contributed USD 226 million from March to May 2020, which was 26% lower than that of last year during the same period.

Reforms across cities pave the way for increased adoption

On the brighter side, many cities around the world are encouraging social-distancing-friendly commute options. New policies for biking have been rolled out, one of which prioritizes bicycle lanes.

The ambitious Strade Aperte (Open Streets) plan in Milan will convert 22 miles of city streets to be accessible for pedestrians and for biking. It aims to reallocate street space from cars to pedestrians and cyclists. Paris and Brussels have taken similar steps to promote biking in their cities by converting miles of streets and lanes to bicycle lanes. Paris also plans to invest over EU 300 million to update its bicycle network.

In North America, Seattle and Montreal have joined hands to promote more eco-friendly modes of transportation. Seattle plans to transform 30 kilometers of streets to provide more space for people to walk and bike post the lockdown, while Montreal announced their plans to create 320 kilometers of new pedestrian and bicycle paths across the city.

The long-term impact

Rising investments into micro-mobility’s post-COVID-19 future

As lockdown measures gradually wane, people now want to resume their daily activities. However, safety concerns coupled with the pandemic-induced financial crunch are pushing them to opt for alternative budgeted solutions. The growing demand is expected to revive sales and help the micro-mobility market get back on track.

In four years since its inception, this sector has achieved immense scale and adoption, translating intangible investments. Ride-hailing businesses pose a case in point. They have faced declines of up to 70% amid growing infections. Many cities like London have restricted car-usage in some localities. This could push a slew of ride-hailing players to explore the micro-mobility space tore-buff their finances. Some firms are already capitalizing on this new reality. Estonia’s Bolt raised USD 111 million in the final week of May, to develop its e-scooter division.

Higher industry consolidation

Low ridership and decreased revenue are likely to force micro-mobility majors to achieve greater consolidation and improve profitability. By buying large volumes of vehicles, processing more payment transactions, and capturing greater back-office opportunity, will together help them optimize scale-efficiency synergies.

Moreover, many cities are likely to reduce their permit fees to boost micro-mobility as a suitable alternative to car-ownership in the post-COVID-19 reality. According to McKinsey, the profitability of shared e-scooters could increase by up to five percentage points in the next normal. 

Navigating through these unprecedented times, monitoring emerging market trends, and commute patterns to make strategic decisions can often be daunting. To learn more about the current dynamics of this space download our sample report – Micro-mobility: A market landscape analysis.

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