Over the past few months, I’ve been following the “scooter wars” raging on in SF as part of a very interesting class on the sharing economy I took at Stanford. Several scooter companies have emerged across major metropolitan areas in the United States, offering electric scooters for people to zip around on. San Francisco has emerged as one contentious battleground, where scooter companies, riders, local residents, and city officials fight over the future of this new transportation network. As one can imagine, this has been a field day for journalists, with wonderful titles like “Silicon Valley Scooter Wars” and “Adults are Terrorizing San Francisco on Tiny Electric Scooters“.
As of current, SF officials have banned scooter companies from operating their scooters in the city, with a plan to slowly reintroduce scooter rentals through 5 permits, with 500 scooter allotments to each. Major players in the space – Bird, Lime, and Spin – have applied for these permits, but ridesharing companies Lyft and Uber have also decided to apply, indicating that the latter two view these scooters as a potentially lucrative expansion opportunity.
From an economic perspective, a back-of-the-envelope calculation indicates that these companies can be profitable:
Fixed cost of scooter: $500 (Xaomi scooter) + $200 for tracking device, lock
Variable costs: $10/week maintenance * 8 weeks = $80
Revenue: ($1 + $.15/minute *10 minutes)*10 rides/day * 60 days = $1500
($1500) – ($700 + $80) = $720, with the individual scooter breaking even on the 32nd day.
There are several logistical concerns that can cut into these profits, however. Scooters need to be recharged daily, and for scooter companies that allow people to pick up and drop off the scooters wherever they want, scooters will need to be manually returned to high-traffic areas. Regardless, if a critical mass of people are interested in using the scooters, the potential profit from high-turnover scooters is very enticing to market entrants.
Although the scooter wars have quieted down a bit thanks to the SF officials’ blanket ban, expansion into other major cities and powerful ridesharing companies eyeing the space will keep things interesting.