Is Micromobility Dead?
A reflection on what’s happening in the market of light (electric) vehicles
The premise and purpose of this analysis
It started with an investor conversation I had in October last year. Avocargo wasn’t doing well, and it’s the first time I truly felt that the fate of one company or startup can have a detrimental effect on the investment climate on any mildly related startup in the same industry. Even though NOCA has little to do with vehicle sharing, simply because the focus is and was on cargo bikes, investors showed reservations and doubts.
Fast forward to today, and the situation has gotten considerably worse. For one reason or another, we’ve seen micromobility startups and scale-ups struggling to find investment, amongst them Sigo, Gleam, VanMoof, and Ampler. This is quite bicycle specific – the examples of controversy also span, for example, shared scooter providers like Bird or Tier where valuations dropped considerably. Some say it’s because of their business and operations model, others claim financial mismanagement. I leave the analysis to experts and company insiders.
But as a result of changing market conditions – Corona aftermath, drying up of external funding, economic contraction – I have now heard the claim that “Micromobility is dead”. When I heard it, it seemed almost laughable to me, but if professional investors with insights and experience make that claim, there must be something there. I believe it might be a warped view of what micromobility is, what the trends and business models are, and how the market is developing. So what better to do than sharing my own perspective and giving it up for discussion.
What actually is micromobility?
While I have a strong bias to talk about bicycles when it comes to micromobility, I have come to realise that most people from “outside” the industry see shared scooters as the spearhead of this new field defined by Horace Dedui around 2016 (if I am not mistaken). There’s also a few new terms I have learned from mobility insiders, which span the net a bit wider (or differently) including new mobility, minimobility and electric mobility. Roughly speaking, we are looking at individual and commercial mobility solutions for mainly urban areas that are smaller than, or not including, cars, trucks and other generally regarded “unsustainable” transport vehicles. I tried to narrow down the vehicle types in a previous LinkedIn post.
When looking at urban mobility as a whole, there are three categories: ground, water, air:
It’s up for discussion whether ferries and air taxis belong to micro/minimobility, but I’d say there is room to categorise it as “New mobility”. The market data shown is rooted in a quick Google Search and taking numbers from general market reports (that I am never sure we can rely on). The numbers might not be exactly correct, but they give a ballpark. Based on these estimations, you can see that mobility on the ground and road seems to make up the largest chunk of New Mobility, so let’s focus on that.
Within the realm of New Mobility, you have different categories based on business and operational models and how vehicles are used. Disclaimer #1: this is not my original idea, I am using the framework a very wise expert shared with me recently. Disclaimer #2: I am only using bicycle companies as an example because that’s my bias.
Each of these categories have their own growth drivers, numbers and levers. For example, as disposable income diminishes, consumers cannot or do not want to own their vehicles and are increasingly opting for subscription, sharing, or leasing. In the end, these are the categories that are coming together to make up – in my opinion – micro/minimobility.
What’s the point of this? It shows that micromobility is so much more than shared cargo bikes or scooters, D2C bike brands, or leasing. And this only focuses on vehicles themselves – there is a whole nother sphere surrounding these categories such as fleet management software, insurance, and spare part management that’s not even included yet. So whatever you or I think micromobility is, it’s probably bigger.
What are the macro-trends in micromobility?
Piece of evidence #1: the megatrend map of the Zukunftsinstitut
“Avalanches captured in slow motion” – that’s how the Zukunftsinstitut describes megatrends; meaning that they move slowly but with enormous strength and influence all spheres of society including companies, institutions and individuals. They go on to identify twelve megatrends, such as gender shift, health, and globalisation. Of course, mobility is one of them. And diving a bit deeper, the following shift is specifically mentioned:
“In the context of the networked (knowledge) society, a new mobility paradigm is emerging that is increasingly robbing the car of its importance as a status object: In the future, it will only be one integrated component among many others in a seamless system – and more and more often post-fossil, networked and (partially) autonomous . (…) This road diet trend – the slimming down of urban streets in favour of cyclists and pedestrians as well as public transport.”
Other interesting frameworks in the space of megatrends would be looking at the SDGs and transportation/mobility, and the EU Green Deal. But that’s for another time. Point is, micromobility, and alternatives to the car in the city are coming. Slowly but surely. So let’s look at some numbers.
Piece of evidence #2: Surveys on user behaviour by McKinsey
So let’s look at what the macro-consumer trends are. Uncomfortable truth first: the pole position of the car will not be challenged until 2030. McKinsey predicts that the car remains the most popular mobility mode. However, let’s keep in mind that the mobility game is never an “OR” but an “AND”. It’s not about cars vs. bikes vs. scooters (except on the cycling lane – it’s a jungle out there!). The mobility game is about finding the right mix of options at the time you need them. Sometimes that’s a car, sometimes a bike, often the tram.
So, even though the car might continue to dominate the street for a while, a McKinsey consumer survey also found that “almost one-third of respondents (30 percent) plan to increase their use of micromobility (for instance, e-bikes and e-scooters) or shared mobility over the next decade” and “nearly one-half of respondents (46 percent) are open to replacing their private vehicles with other modes of transport in the coming decade.”
I know it’s not waterproof evidence, but it’s an indication and a data point in the triangulation I am proposing. So how does changing user behaviour translate into actual market size and growth numbers?
Piece of evidence #3: Market growth data
Let’s stick with McKinsey and see what they have to say about unit sales. Careful though, we need to enjoy this with a grain of salt as the money value assigned to a unit of micromobility is generally speaking considerably less than that of a car. Nonetheless, the growth numbers, especially for Europe emerging as a leader of global micromobility developments, are significant and mainly driven my infrastructure expansion, regulation and changing consumer behaviour:
Another great market analysis to look at is by PWC and focuses on the bicycle market, suggesting that the entire market is worth $160B in 2023.
So the question that remains would be – is this market big enough for business and/or VC cases. I guess that depends on your business model and target group size. But I think it’s fair to argue that there are some strong numbers flying around (I also have to admit that I barely believe markets that are sized in the trillion dollar segment – then you haven’t defined it clearly enough, similar to me claiming the market is “Mobility”).
And to better understand what potential business opportunities exist, we need to understand micro-trends next.
What are the micro-trends in micromobility and specifically cycling?
Before getting into this, I want to re-iterate by bias regarding the industry focus of my analysis. I have a solid understanding of the cycling industry and gained some insights into other micromobility strands such as scooters. But because I feel most comfortable in the area of cycling, most of my analysis focuses on this category. In addition, I also mainly look at supply chain and procurement – again, due to the nature of the focus I have. But I have also learned that many insights can indeed be extrapolated to other categories in the light (electric) vehicle segment. Based on the research I have done and been involved in both actively and passively, I have selected three dominating trends for a quick deep dive. Two trends I am not doing a deep dive for, but that are important to mention are cargobikes and electrification (IoT, batteries, motors). Here I am assuming that things like “the ebike and cargobike are the main growth drivers of the industry” are a given and general knowledge.
Corona aftermath and the bullwhip effect
What happened in Corona needs to be both understood and ignored. Confusing, I know, so let me explain. The vulnerabilities that the supply chain breakdown lay wide open for anyone who dared to look to see needs to be understood. On the one hand, it helps companies understand how to become more resilient. On the other hand, it’s a great way for entrepreneurs and investors to understand what kind of solutions are needed in the market.
The growth numbers during that time, however, need to be (somewhat) ignored. They are based on lock-downs, shortages, and double orders. There will be a “new normal”, simply because non-riders started biking and liked it, but it’s not sustainable growth that will and can continue. Just to give you a general ballpark: in interviews during the supply chain study commissioned by CIE, respondents said that demand increased by up to 300% at times, while bikes couldn’t be delivered.
So what happened (the short story) and why is the industry now seemingly in trouble?
You see, when supply was scarce, vehicle manufacturers and customers alike bought what they could get their hands on and likely put in the same orders across multiple suppliers/retailers to increase their chances of receiving goods. This is all well, until the market turns, demand goes down, and you cannot easily cancel or push orders. And even if you continue to have customers – if even the smallest (key) component is still missing, you cannot ship. In addition, the manual processes involved in procurement can create a black box where orders are placed almost blindly. Now add payment structures in the industry to the mix – most OEMs have to pay for their components a few months or weeks before they can assemble and sell the vehicle and you end up with the current situation.
But again – understanding how the industry got here means understanding what (might) happen next. And two of these “nexts” aka mico-trends are – in my humble opinion – digitalisation and “glocalised” production with a cross-sectional theme of compliance and sustainability.
Digitalisation and the data chain
When first thinking about micromobility, you probably imagine hardware development. And a lot of the technological innovation in the traditional category from above is coming from new components and their technology. However, there is a whole lot of software development happening across product, process, and business model innovation.
For example, as NOCA is focusing on procurement processes, I am currently exploring the data chain in the cycling industry – what data is needed, collected, shared and analysed along the supply chain. Next to NOCA, this includes new services such as smart frame numbers, new processes such as online maintenance bookings, and new solutions such as fleet management software. All this data is valuable and usable by actors along the supply chain to better understand product (both vehicle and component) performance, use, and development to then make data-based plans and forecasts (with a sprinkle of gut feeling – that’s always going to be important and valuable).
Right now, I strongly believe that the industry – along all actors, offerings and services – need to digitalise processes to collect the data that is needed to build strong analysis, make use of the newest technology, and understand impact and footprint for sustainability reports. If you don’t know where your components are coming from, and/or how your products are used, you cannot perform life cycle assessments or footprint calculations. There is a rightful question around whether industry-specific solutions are required or if already existing software can cover the market – and you can imagine I am very ademend that we need the former. The how and why is a topic for another reflation and would go beyond the scope of today. But the point is, there are untapped business opportunities across all micromobility segments in the micro-trend of digitalisation.
Supply chain diversification and glocalised production
The second trend I am observing that also bears business opportunities – mainly in the hardware space – is around manufacturing and assembly. Due to outsourcing and offshoring decisions in the past, the cycling (and micromobility) industry has a very long and very global supply chain. The majority of components is produced in the Far East, with Taiwan being a leading manufacturing country both in terms of know-how and capacity. Up and coming are countries like India, Vietnam and Cambodia I believe, mainly due to the political tension between Taiwan and China. If there is one thing the industry learned from the shortages during the Corona pandemic, it is to diversify the origin of supply.
As a result, OEM vehicle manufacturers and component suppliers alike are looking to increase their share of “local” partners and production sites. Portugal has been the epicentre of European cycling-related production, but countries in Eastern Europe as well as Turkey are definitely up and coming. Together with the development of new vehicle types – I believe we have only scratched the surface of what LEVs could be – there is a big opportunity to build up know-how and development in Europe. Nonetheless, I also think it’s nonsensical to disregard the dependency we have and to some extent always will have to global production centres – they often remain cheaper, even with greater know-how, and almost always the origin of the raw material. That’s why the future of production, in my opinion, is “glocal”.
Is that an investment case? Hardware has always been hard. But looking at newcomers like Fahrwerker or New Motion Labs – there are examples of good investment cases. The news of successful funding rounds for Cycle and Ellio (IntuEdrive) also show that investments in (hardware) bike solutions are still happening. And finally, Investors with hardware as a vertical are also setting up camp – for example MotionLab.Ventures or Atlas Ventures to name two. Software advancement without hardware development can also only go that far, so I’d say yes, with strong partners and industry know-how, there are viable investment cases out there.
But….does that mean micromobility is not dead?
Conclusion: Is micromobility dead?
Let’s quickly review the points I have made:
- Micromobility is more than scooters, bikes, or sharing providers. It’s a dynamic industry that combines traditional and innovative business models, hardware and software business.
- Micromobility shows strong growth based on consumer behaviour, demand and regulation.
- As the industry is growing, new business opportunities are opening up. Among them are digitalisation (software) solutions, as well as technological and local development of manufacturing products (hardware). Not all of them are VC or investment cases – but some.
You probably knew my conclusion from the start, so it comes at no surprise that in my opinion, micromobility is not dead, but very much alive and kicking. Is it going through a bit of a rough patch? Yes. Is it going through a stage of maturation? Yes. But saying that micromobility is dead is like saying noone will ride bikes anymore. I agree that the high times are paused, where raising capital with astronomical valuations was easy. But isn’t that true for all industries* and even kind of great for investors being able to get a bit more bang for their buck? And at the same time, noone says venture capital is dead…right?
*Except generative AI, I know, I know.
