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After Wild West start, scooter providers chase scale to survive

Source: Reuters

LONDON, Oct 14 (Reuters) – The era of breakneck growth for electric scooter firms is giving way to more selective expansion focused on profits as they face tougher regulations, more demanding customers and wary insurers.

Hurt badly by global coronavirus lockdowns last year, companies offering by-the-minute rental of e-scooters say ridership is soaring to pre-COVID 19 levels among urban consumers eager to avoid public transport or taxis.

But that doesn’t mean the app-based industry is returning to the free-wheeling, pre-pandemic world where “micromobility” firms were loosely regulated and raked in money from investors.

Scooter firms now face cities that are using licensing to limit the number of operators, consumers demanding better software and vehicles, and insurers leery of safety risks.

This is forcing up costs and will push the low-margin industry towards further consolidation. Some smaller providers have already been snapped up, including Boston-based Zagster, bought by transport technology company Superpedestrian in 2020, and San Franciso-based Scoot, taken over by Bird Rides in 2019.

“It really takes scale to get the economics to work,” says Travis VanderZanden, CEO of Santa Monica-based Bird, which is due to go public via a merger with special purpose acquisition company (SPAC) Switchback II Corp . “So I think we’re going to see some of the smaller players fall by the wayside.”

Bird is a global player that expects revenue to double in 2021 from a pandemic-hit 2020, and then double again to $400 million in 2022. That is still small compared to a car-based ride hailing company such as Uber (UBER.N), which had gross revenues of $4.1 billion in 2019.

Bird’s planned merger – which will go to a Switchback II shareholder vote on Nov. 2 – values the company at $2.3 billion, about 20% below its January 2020 price tag, according to startup data platform PitchBook. Lime, also a global player, saw its valuation fall nearly 80% during a June 2020 funding round from one less than a year earlier.

While the pandemic battered valuations at the top, an analysis by Reuters found it also cut off funding for many smaller e-scooter providers.

“There are a lot of companies that can’t invest in hardware, can’t invest in safety features and can’t invest in training,” says Wayne Ting, CEO of Lime, whose investors include Uber. Lime acquired Uber’s micromobility unit Jump.

The current environment is a far cry from 2017 when electric scooters accessed through smartphone apps first appeared in large numbers. A flood of new providers created “Wild West competitions” as predominantly European cities hosted unlimited numbers of vendors, said Candice Xie, CEO of Chicago-based Veo, which operates in more than 40 U.S. cities.

“A lot of companies raced to the bottom in order to get market share,” she said.

Vehicles were dumped on streets from Detroit to Paris, and the term “scooter blight” was born.

Early rental scooters “were consumer grade and not built for a high level of utilization,” said Voi Scooters CEO Fredrik Hjelm. Stockholm-based Voi operates nearly 100,000 scooters across western Europe.

NEW SHERIFF IN TOWN

Now, cities and countries have tightened regulations, creating tough bidding processes for licences aimed at limiting the number of scooter providers.

Copenhagen temporarily ejected all scooter providers earlier this year while it rewrites its regulations.

Some U.S. cities, including Columbia, Missouri, and Winston-Salem in North Carolina, have allowed e-scooter providers to return with more oversight after expelling them.

Large scooter providers say awarding licences to a few major players with track records guarantees better service and allows them to operate larger fleets profitably.

“This has become a game of slim margins and scaling up,” said Voi’s Hjelm. “And it’s far better to have fewer operators with greater density.”

Britain has launched trial projects for e-scooter providers in certain cities – but with speed restrictions, and users must have a driver’s licence.

“We’re determined to make sure safety is at the core of our trial and that it works for everyone,” said Helen Sharp, head of Transport for London’s e-scooter trial for three operators: Lime, Tier and Dott.

To meet London requirements, Berlin-based Tier has developed software to stop its scooters accessing certain busy roads.

“You might just be able to push it, but it wouldn’t be easy,” said Tier’s UK and Ireland head of cities, Georgia Yexley.

But better scooters and software drive up costs.

Fred Jones, Tier’s regional general manager for northern Europe, said the company’s scooters can now last five years and have 83 replaceable components to extend their lifespan.

“That costs a lot, not just the scooter, but the parts and skilled labour to service them,” Jones said. “If you don’t get that right, the economics won’t work.”

Ensuring they do is key for funding.

Silicon Valley venture capital firm Autotech Ventures avoided micromobility firms until this year when it bought into Chicago’s Veo and another unidentified firm.

“Veo has taken a disciplined approach to growth, achieving impressive unit economics and much higher profitability than virtually all of its peers,” said AutoTech Ventures managing director Dan Hoffer.

According to PitchBook, in the first half of 2021 venture capital deal activity in the micromobility sector fell to $1.4 billion from $4.6 billion in the same period in 2020.

WARY INSURERS

Another problem for would-be e-scooter providers is insurers see e-scooters as inherently more dangerous than bikes or cars.

“Riders are particularly vulnerable, more so than cyclists,” said Martin Smith, technical claims manager for motor at Aviva (AV.L), a large UK insurer that does not cover e-scooters.

Regular motor insurers such as AXA UK (AXAF.PA), Admiral (ADML.L) and Unipolsai (US.MI) also avoid e-scooter providers, leaving them to specialist players, such as Zego. Bird CEO VanderZanden said to get lower insurance rates it uses data from the 300 cities it operates in globally, highlighting the benefits of scale.

It has also added physical safety features like a double brake and developed software to boot irresponsible riders off its service – all running on its own operating system.

“Having amazing vehicles is one thing,” VanderZanden said. “But you need data to show insurance companies to make this work.”

Additional reporting by Paul Leinert in Detroit, Andrea Mandalà in Milan and Muvija M. in Bengaluru Editing by Joe White and Mark Potter

Our Standards: The Thomson Reuters Trust Principles.

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Could electric vehicles be the answer to energy flexibility?

Rolf Bienert, Managing and Technical Director, OpenADR Alliance

Last year, what was the Department for Business, Energy & Industrial Strategy and Ofgem published its Electric Vehicle Smart Charging Action plans to unlock the power of electric vehicle (EV) charging. Owners would have the opportunity to charge their vehicles while powering their homes with excess electricity stored in their car.

Known as vehicle to grid (V2G) or vehicle to everything (V2X), it is the communication between a vehicle and another entity. This could be the transfer of electricity stored in an EV to the home, the grid, or to other destinations. V2X requires bi-directional energy flow from the charger to the vehicle and bi- or unidirectional flow from the charger to the destination, depending on how it is being used.

While there are V2X pilots already out there, it’s considered an emerging technology. The Government is backing it with its V2X Innovation Programme with the aim of addressing barriers to enabling energy flexibility from EV charging. Phase 1 will support development of V2X bi-directional charging prototype hardware, software or business models, while phase 2 will support small scale V2X demonstrations.

The programme is part of the Flexibility Innovation Programme which looks to enable large-scale widespread electricity system flexibility through smart, flexible, secure, and accessible technologies – and will fund innovation across a range of key smart energy applications.

As part of the initiative, the Government will also fund Demand Side Response (DSR) projects activated through both the Innovation Programme and its Interoperable Demand Side Response Programme (IDSR) designed to support innovation and design of IDSR systems. DSR and energy flexibility is becoming increasingly important as demand for energy grows.

The EV potential

EVs offer a potential energy resource, especially at peak times when the electricity grid is under pressure. Designed to power cars weighing two tonnes or more, EV batteries are large, especially when compared to other potential energy resources.

While a typical solar system for the home is around 10kWh, electric car batteries range from 30kWh or more. A Jaguar i-Pace is 85kWh while the Tesla model S has a 100kWh battery, which offers a much larger resource. This means that a fully powered EV could support an average home for several days.

But to make this a reality the technology needs to be in place first to ensure there is a stable, reliable and secure supply of power. Most EV charging systems are already connected via apps and control platforms with pre-set systems, so easy to access and easy to use. But, owners will need to factor in possible additional hardware costs, including invertors for charging and discharging the power.

The vehicle owner must also have control over what they want to do. For example, how much of the charge from the car battery they want to make available to the grid and how much they want to leave in the vehicle.

The concept of bi-directional charging means that vehicles need to be designed with bi-directional power flow in mind and Electric Vehicle Supply Equipment will have to be upgraded as Electric Vehicle Power Exchange Equipment (EVPE).

Critical success factors

Open standards will be also critical to the success of this opportunity, and to ensure the charging infrastructure for V2X and V2G use cases is fit for purpose.

There are also lifecycle implications for the battery that need to be addressed as bi-directional charging can lead to degradation and shortening of battery life. Typically EVs are sold with an eight-year battery life, but this depends on the model, so drivers might be reluctant to add extra wear and tear, or pay for new batteries before time.

There is also the question of power quality. With more and more high-powered invertors pushing power into the grid, it could lead to questions about power quality that is not up to standard, and that may require periodic grid code adjustments.

But before this becomes reality, it has to be something that EV owners want. The industry is looking to educate users about the benefits and opportunities of V2X, but is it enough? We need a unified message, from automotive companies and OEMs, to government, and a concerted effort to promote new smart energy initiatives.

While plans are not yet agreed with regards to a ban on the sale on new petrol and diesel vehicles, figures from the IEA show that by 2035, one in four vehicles on the road will be electric. So, it’s time to raise awareness the opportunities of these programs.

With trials already happening in the UK, US, and other markets, I’m optimistic that it could become a disruptor market for this technology.

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Navigating the commercial vehicle sustainability conundrum

By David Wilson, Business Development Advisor, NEOL Copper Technologies Ltd.

As road transport companies implement their environmental, social, and governance (ESG) strategies to ensure they are contributing positively to the planet and society while also being run ethically and transparently, they are faced with a conundrum.

With increasing regulatory and social scrutiny on carbon emissions, the transportation industry which is the second largest (20%) contributor to carbon emissions worldwide, faces growing pressure to meet the near-term net-zero targets, requiring an immediate move to being more sustainable.

The industry has recently undergone significant changes that have impacted the cost of running a successful business. Factors such as high fuel costs, increased labour expenses, and maintenance costs, as well as excessive costs to renew the fleet, have all contributed to this. Additionally, businesses now need to consider how to incorporate the future of electric and autonomous vehicles.

The future of electric vehicles

ESG strategies such as investing in fuel-efficient, low-emission technologies and adopting alternative sustainable fuel sources are essential to reduce carbon emissions, air pollution, and preserve natural resources, while protecting the industry’s long-term viability.

In order to make the industry more sustainable electric trucks will need to play a significant role. The migration to electric trucks is also an option for the fleet manager but there is presently a narrow choice of vehicles, an associated high procurement or lease cost, and a lack of public charging infrastructure.

Most commercial vehicle OEMs (original equipment manufacturers) now offer a range of electric trucks that are specifically designed for zero-emission deliveries. However, the use of heavy-duty electric trucks for long-range transport is not feasible yet, mainly because the batteries and charging power are insufficient. The large-scale adoption of electric trucks is going to take time, and it may not be until 2035 – emphasizing that the electrification of the trucking industry is around 10 years behind passenger cars in terms of electrification.

Transitioning away from fossil fuel is a complex challenge for fleet managers. It will take time for a complete shift of the 600,000+ heavy good vehicles currently navigating the UK roads to electric power. To address the issue promptly and enhance the fuel efficiency and sustainability of the current fleet, proactive measures are imperative to optimise their performance and curtail emissions immediately.

Addressing the sustainability conundrum

The vast majority of today’s commercial vehicles on the road today are powered by internal combustion engines (ICE) that run on diesel fuel. Since the first introduction of European exhaust emission standards in 1993, more stringent guidelines have been released every four to five years to reduce and eliminate harmful pollutants such as carbon dioxide, nitrogen oxide, hydrocarbons, and particulate matter from new vehicles sold in the EU.

 To meet the latest Euro VI (2015) emission standard, trucks are now typically equipped with diesel particulate filters (DPF) to capture particulate matter and lubricant ash, and selective catalytic reduction (SCR) technology to convert harmful nitrogen oxides to nitrogen and water, and exhaust gas recirculation (EGR) technology to lower the combustion temperature, reduce nitrogen oxides, and improve engine efficiency.

Euro VI engines are advanced and highly sophisticated systems that offer dependable and efficient performance. Together with the correct low-SAPS (sulphated ash, phosphorous, and sulphur) and low viscosity e.g. SAE 5W-30 engine lubricant, the fleet manager will benefit from reduced fuel consumption and warranted protection of the engine and exhaust aftertreatment devices (ATD).

As engine hardware has advanced, so has the lubricant technology. However, even with the latest low-viscosity oils, levels of fuel saving at 1-1.5% (compared to higher-viscosity oils) have not reached its full potential. Moreover, the continued use of metal-containing detergents and ZDDP (zinc dithiophosphate) antiwear components risk negatively impacting the performance and efficiency of the DPF, as well as the precious metal catalysts & sensors in the SCR units. This can lead to unplanned service and replacement of one or more of the ATDs, causing costly downtime for fleet managers.

 Euro 7 emissions regulations will be implemented in a few years, and it will require ATDs to perform as new for 200,000 km or 10 years. Therefore, the lubricant industry is facing a new challenge of lowering the levels   in engine lubricants even further.

Reducing unexpected downtime with technical lubricants

The fleet manager has access to high-quality diesel engines and lubricant technology, but they are concerned about unplanned mechanical issues due to the wear and tear of components from extended use. Additionally, the blockage of DPFs (which creates backpressure and increases fuel consumption) and the possible failure of sensors may lead to faults being registered on the truck’s OBD (on-board diagnostics) computer systems, still causing great concern for managers as they strive for maximum productivity and profitability.

Whilst the use of fossil fuels will remain crucial to power heavy-duty diesel engines, we must wait for further advancements in electrification. However, we can improve the lubricants currently being used to make commercial vehicles more efficient, with lower emissions and greater fuel economy. By doing this, we can reduce unwanted unplanned downtime for repairs or component replacements.

It is easy to see the clear link between reducing wear to increase the longevity of your machine assets. Additionally, by reducing friction, we can improve fuel savings which helps to increase efficiency, all essential steps towards acting more sustainably and making changes for a better future.

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Preparing for the Surge: Meeting the MCS Requirements of Electric Trucks

John Granby, Director of eTruck & Van, EO Charging and Erik Kanerva, Sales Director at Kempower

Auto electrification is moving at a rapid pace, with electric vehicles (EVs) going from a passion project for early technology adopters to the mainstream – especially when you consider the need to electrify consumer and commercial vehicles ahead of the government’s 2035 Zero Emission Vehicle mandate.

Electrification is also starting to play a vital role in public policy and commercial plans, leading to vehicle availability and a variety of improvements and increasing interest among commercial fleets’ prospective customers. As a result, all of the main car and van manufacturers have a respectable EV offering, and the eBus industry is well on its way to proposing a similarly credible offering for citizens.

Heavy-duty vehicle electrification has progressed slowly, but the pace has picked up over the last year, with several of the major truck manufacturers testing completely electric heavy trucks that are now near-ready to enter the general market.

This is a critical shift in the move towards net zero, given that heavy commercial vehicles account for around 25% of CO2 emissions from road transport emissions in the EU and approximately 6% of the region’s overall emissions. It’s a similar situation in the US, where medium and heavy-duty trucks account for around 29% of total road transport emissions or approximately 7% of the country’s total but make up fewer than 5% of all vehicles on the road.

Having clear goals and objectives in place for fleet electrification will be vital to ensuring the transport sector is on track. For example, Scania’s goal is that 50% of all vehicles it sells annually by 2030 will be electric. Despite Scania being the slowest into the market with battery electric vehicles, other vehicle manufacturers are following the same target, with Volvo Trucks setting itself a target for 50% fully electric vehicles by 2030 and the same with Renault, for example.

Meeting this ambitious goal will require the appropriate charging infrastructure in place so customers have the confidence to invest in the large-scale electrification of their fleets. That is one of the reasons why charging system manufacturer Kempower expects the commercial vehicle DC charging market in Europe and North America to have a 37% compound annual growth rate until 2030.

Trucks require substantial battery packs to provide a similar range as traditional engines, and having the right infrastructure in place to keep them regularly charged is certainly a key factor to consider when electrifying truck fleets. According to the European Automobile Manufacturers’ Association (ACEA), trucks will require up to 279,000 charging outlets by 2030, with 84% located in fleet hubs. By 2030, buses will require up to 56,000 charging outlets, with fleet hubs accounting for 92% of the total.

The Charging Interface Initiative (CharIN) is a global organisation that has been working on a standard for the rapid charging of trucks for several years. CharIN developed the Megawatt Charging System (MCS) concept, which serves as the foundation for the ISO and IEC standards which govern the design, installation, and operation of truck fast charging infrastructures.

The MCS is intended to standardise the quick delivery of enormous amounts of charging power to vehicles and provide stronger communication, which minimises downtime caused by unsuccessful charging events.

Customers who drive commercial vehicles follow particular driving habits. By taking advantage of the required break time from the hours-of-service restrictions governing their drivers, customers can travel further each day thanks to the increased charge rate that MCS offers. Better electrification of commercial cars is made possible by legislation that mandates that drivers take rest breaks. As a result, shorter charging durations to accommodate these breaks are beneficial.

The MCS will operate at up to 3,000A and 1,25 KV at its final development stage, delivering up to 3,75 MW of power when charging. With the backing of a significant segment of the industry, MCS is founded on an international consensus on technical standards. An internationally recognised standard is essential to promote harmonised solutions that reduce costs and boost interoperability without sacrificing safety and uptime.

Trucks on the highway are a key focus of the MCS, not only depot pricing. Large truck units operating long-haul routes and some smaller rigid trucks operating cross-border short-haul deliveries—such as logistics organisations operating deliveries between the United Kingdom and continental Europe—pay particular attention to this issue.

Most MCS charging occurs while drivers take breaks from their routes, but some depots may have a single MCS charger on site to do a flash charge if a truck needs to be turned around quickly. In order to balance this unit’s demand against other chargers on site, load management is crucial because it will require a power supply of at least 1 MW+.

Fleet operators should look to consider incorporating MCS into their whole charging ecosystem and solutions, regardless of whether they are thinking about how electrification will affect their fleet of vehicles on the road or how their depots will operate.

Adopting cutting-edge energy management technology solutions will enable effective fleet electrification, particularly at depots. Investing in effective load management technologies will be critical to maximising existing grid infrastructure capacity while decreasing the need for additional investments in generation or distribution capacity.

Investing in and deploying effective energy management technologies is the key to a smoother, more efficient shift for commercial fleet operators. They are critical in lowering energy expenses, both economically and environmentally.

Energy management solutions for charging electric fleets will also help maximise existing grid capacity, reducing the need to invest in new generation or distribution capacity. This will be an essential factor for fleet managers to consider as eTruck fleets expand and other commercial vehicle fleets, such as buses, increase demands on infrastructure.

With unprecedented energy and investment going into electrification, 2024 looks to be a pivotal year for picking up the momentum of progress around MCS in the logistics sector. If done right, it will create a shift of optimism in the market to accelerate the electrification of commercial fleets and promises to positively impact other sectors, such as marine and aviation, contributing significantly to reducing carbon emissions.

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