How COVID Affected the Micromobility Industry

COVID is accelerating the worldwide adoption of micromobility.

This is the second part of a three-part analysis on micromobility. The first part explained why micromobility is so appealing as an alternative to public transportation. The second part of the analysis will focus on how COVID has affected the industry. Lastly, the third and final part of the analysis will focus on the future of the industry.

COVID has transformed the way individuals think about transportation. For one, safety and health have become top considerations for passengers and as a consequence, the sales of bicycles and other single-seater, open-air transportation methods (deemed safer in a pandemic) have surged. In fact, bicycle sales are up 120% and bike shortages are expected through 2022.

Beyond changing consumer habits, government lockdowns also affected all sorts of transport, from cars and public transport in cities, to buses, trains and planes nationally and internationally. Global road transport was almost 50% below the 2019 average by March 2020, commercial flight activity was down 75%, and the London underground saw a 95% decrease in ridership. Overall, the number of passenger-kilometers is estimated to have declined by 50 to 60% during the pandemic.

In this analysis, we aim to understand how the COVID-related drops in ridership and changes in consumer preferences have affected the micromobility industry. The goal of our analysis is to gain an understanding of both the short-term and long-term impacts of the pandemic on the industry.

Table of Contents:

The Short-Term Impact

  • Industry Consolidation

  • New City Policies

  • Changing Consumer Use Cases

The Long-Term Impact

  • Increased Adoption of Micromobility

  • Moving to the Suburbs

The Short-Term Impact

Industry Consolidation

In the short-term, the pandemic has pushed the industry towards consolidation. As the pandemic caused ridership to plummet, so did companies' valuations. According to research by McKinsey, the valuation of one company operating a global network of e-bikes and e-scooters reportedly dropped by 79%, while others halted operations, laid off workers and cut working hours.

Low valuations led the way for cheap acquisitions by capital-rich companies looking to expand geographically. Since the beginning of the pandemic in the U.S. (approx. March 2020), there have been 5 important acquisitions within the space. 3 out of 5 of these acquisitions were established micromobility companies acquiring another micromobility company in order to expand their geographical footprint. The acquisitions were vertical integrations.

Because the industry is currently highly fragmented, consolidation would help it lower costs and increase margins (more on that in the 3rd part). In turn, lowering costs will entice more individuals to use these services and companies will be more profitable as a result. The subsequent increase in ridership will also force cities to start building more infrastructure to accommodate this growing industry, a trend which can already be observed independent of industry consolidation.

New City Policies

For a number of cities, city-wide lockdowns have shown its citizens how enjoyable a city can be when it has less cars. Combined with a pandemic-induced surge in bicycle usage, cities have pushed a number of new citywide policies focused on the creation of bike lanes. To name just a few examples, Paris will convert 50km of car lanes to bicycle lanes and plans to invest $325M to update its bicycle network (France24). Similarly, Montreal announced it would create over 320km of new pedestrian and bicycle paths across the city (Montreal Gazette).

One of the limiting factors of the micromobility industry is infrastructure. While the industry can have an initial surge as it expands to a new city, it will always be throttled by the city’s infrastructure and/or policies (more on that in pt.3). Only city-wide policies to make biking a sustainable replacement to cars like those above will help create the basic, micromobility-friendly infrastructure that is required for the industry to develop.

Changing Consumer Use Cases

On an individual level, the pandemic has also changed consumers' use cases. According to a McKinsey study, a US micromobility company that rents e-scooters saw a sharp increase in the usage of e-scooters to go to pharmacies and restaurants to pick up food. Additionally, the company's average trip distance increased by 26% during the pandemic, with some cities, such as Detroit, seeing an increase of nearly 60%.

Similarly, an academic study by two researchers at the University of Porto found that the average trip distance of Citibikes, NYC's bike-share program, have increased during the pandemic.

But what do these changing consumer use cases tell us?

Longer Citi Bike trips and longer e-scooter trips signify that consumers are not simply using micromobility services for neighborhood errands, but are also using them as an alternative method of transportation to what would otherwise have been some form of public transit (bus, subway, train or other).

As consumers begin to use these services over longer distances, I suspect that consumers will be increasingly likely to accept micromobility services as a replacement or an addition to their current methods of transportation. That is, I suspect usage will go up in the long-run. Let us dive deeper into this long-term impact of COVID.

The Long-Term Impact

The long-term impact of COVID on micromobility is two-fold. For one, the pandemic helped introduce micromobility to individuals who may otherwise not have given it a try, boosting adoption of the blossoming industry. However, the adoption of remote work has pushed a lot of individuals to move out of cities and into the suburbs. While seemingly a negative, it also created new opportunities for micromobility retailers.

Increased Adoption of Micromobility

As individuals looked for open-air, single-seater and more-hygienic alternatives to public transit, a number of people gave biking and scooters a try. In fact, according to the NPD Group there was a 190% growth in e-bike sales YOY, the most of any bike category. NIU Technologies, an electric-vehicle manufacturing company, saw a 61.2% jump in e-scooter sales.

Additionally, a McKinsey consumer survey found that consumers are more willing to regularly use micromobility in the future, having given it a try it during the pandemic.

Similarly, an academic study by two researchers at the University of Porto found compelling evidence of a possible modal transfer from subway users to Citibike — that is, the pandemic seems to have caused previous subway-riders to switch to Citibike. Whether they stay with Citibike remains to be seen, nonetheless, it continues to reinforce the notion that the pandemic helped with the initial adoption of micromobility services.

Having ridden e-bikes, Citibikes, e-scooters and e-mopeds myself, I am a firm believer that those who give micromobility a try will find value in this sustainable, noise-reducing and fun method of transportation. As such, I expect that some percentage of those who tried it out during the pandemic will stick to it, helping to fuel growth within the industry.

Moving to the Suburbs

The pandemic has showed the world that remote work can be effective, and people have reacted accordingly. According to an NPR study, Manhattan home sales are down 56% year-over-year while sales in suburban counties around the city are up 44% year-over-year. While Manhattan may be an extreme outlier, I believe there is a general US-wide trend of people moving away from the cities and into the suburbs.

However, even though companies may offer work-from-home capabilities, only 5% of employers want to be fully remote. Realistically, people will still be going in to the office, if only for a couple days per week. The problem now becomes about getting people from their homes in the suburbs into offices in the cities.

So what does this shift entail for micromobility services?

Individual e-scooter/e-bike retailers will have an new market opportunity while shared-micromobility platforms will be unaffected.

Because of the sheer size and spread of U.S. suburbs, it will be difficult for a company to setup a docked or dockless shared micromobility platform. As such, the suburbs will likely be dominated by the private-owned e-scooter and/or e-bike.

The use case in the suburbs is simple: instead of driving to the public transit and/or driving to work, one could simply take an e-bike or an e-scooter to get there. Not only would the person benefit from the aforementioned fuel savings, but when adding the cost of parking at public transit, the switch to micromobility becomes a no-brainer. To make this process even easier, train stations could also replace a couple of parking spots to bike scooter/parking.

As for the micromobility services themselves, it's important to remember that although people who can afford to do so may have chosen to leave the hustle and bustle of cities, plenty of people still remain. While hundreds of thousands may have left NYC, there are still over 8M people living in the city. The same holds true for San Francisco, Boston, and other big U.S. cities.

Micromobility service providers will have no problem growing their business.

As the pandemic raged across the globe, the world shut down. People stayed at home and road usage, public transport ridership, and airline traffic all plummeted to record-breaking levels. For those who dared to venture outside, public transportation was out of the question. Instead, city-dwellers looked for the single-seater, open-air and more hygienic transportation methods found with micromobility services.

As a result of the pandemic, cities have begun building additional infrastructure for these fun, environmentally-friendly transportation methods. Customers have also begun to adopt them as genuine replacements to cars and public transport. While not without its own set of challenges, I fully expected the micromobility industry to grow.