The consolidation on the e-scooter market expected this year is in full swing. This is good news for the industry.
The merger of the two startups Tier and Dott came as no surprise – there had been rumors for months that Tier was looking for partners. colderal / Getty Images
The year started with two reports from the e-scooter industry. The US provider Bird had to file for bankruptcy and the two startups Tier and Dott merged. The merger, announced on January 10, 2024, brings together two of Europe’s key industry players and forms the largest European e-scooter rental company. Which further increases the pressure in the industry.
The merger did not come as a surprise. The entire e-scooter industry is facing questions about its financial viability and path to profitability. There have been rumors for months that Tier is looking for new partners, also to fend off a takeover by its competitor Bolt. The Swedish provider Voi had also aroused Tier’s interest, but according to internal information they could not come to an agreement.
Wrong strategy at Bird
It is also not surprising that the US provider Bird had to file for bankruptcy. Bird’s decision to go public in 2021 via a SPAC merger (purchasing a publicly traded shell company) resulted in a significant loss in market value, falling dramatically from an initial valuation of $2.3 billion reduced value fell. This devaluation was accompanied by a warning from the New York Stock Exchange (NYSE) due to the low stock price and ultimately led to Bird’s delisting from the stock exchange. This in turn led to a bottleneck in further financing.
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Bird is a vivid example of the industry’s problems. A business model was chosen that relied on a fleet manager program in which contractors rented and used Bird scooters. This approach resulted in less control over vehicle placement and higher operating costs. Furthermore, unlike its competitors, Bird did not introduce replaceable batteries, which further increased operating costs.
Globally, the e-scooter market is oversaturated, resulting in lower utilization rates and increased competition. This saturation, coupled with the aggressive expansion strategy, resulted in higher costs and lower demand. In addition, cities no longer wanted to stand idly by and watch the wild growth. New rules are making the situation worse for many providers.
Mergers bring advantages
Fewer providers mean relief for cities. You no longer have to negotiate with numerous companies, but you can also break new ground. In the USA there are the first cities to conclude exclusive contracts with just one provider, but then also integrate this provider into the local public transport network. This offers security for both sides and secure income for the startups.
Consumers also benefit. On the one hand, clearer rules ensure that e-scooters are used sensibly. On the other hand, concentration on the market will lead to stable prices and allow companies to expand further. Although there will be fewer providers, they will likely be found in more cities in the long term. But which companies have a chance of surviving?
In the long term, in the USA and the EU it will probably be Bolt, Tier and Lime that will divide the market between themselves. Smaller, locally operating companies will still exist, but they will not play a major role. Bolt probably has the best chance of dominating the market. The startup has not only relied on e-scooters for a long time, but has also established itself in the area of taxi brokerage and car sharing. Expanding the portfolio is probably the best protection against possible negative movements on the e-scooter market.
Don Dahlmann has been a journalist for over 25 years and has been in the automotive industry for over ten years. Every Monday you can read his “Torque” column here, which takes a critical look at the mobility industry.
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