COVID 19 will have lasting and profound impacts on many aspects of life, including transportation. As a result, micromobility will emerge as a winner from the pandemic. Work from home, social distancing and batteries are the driving factors. Micromobility will have far greater reach beyond the urban environment into the suburbs.
What is it?
The word “micromobility” sounds fancy, but it’s exactly like it sounds. Small-scale transportation. However, there are other factors that define it:
- Weight less than 1000 lbs
- Top speeds between 15 – 30 mph
- Can carry a passenger or cargo
- Self-powered or electric
- Owned or shared
For the most part, today, we usually think of electric scooters and bicycles as micromobility. And it’s nothing new. I’m sure you’ve all seen the ubiquitous Lime, Lyft (NASDAQ: LYFT) or Bird electric scooter laying on a sidewalk in person or in the news. Certainly, they’ve become popular over the past several years with the concept of closing the “first-mile” and “last-mile” gap.
Why are people using it?
A lot of factors play into the rising popularity of micromobility. Electric scooters have really emerged as a leading type of travel. Mainly, because of its small footprint, cost, decent range and especially the proliferation through dockless scooter sharing companies.
While, on a macro level, urbanization, environmental awareness and generational preferences are contributing factors. Notably, folks making between $25,000 to $50,000 have the most positive perception of electric scooters.
Changing Trends on Travel
If we compared travel during May 2020 to pre-COVID times the year before, there are some interesting observations. Overall, there was a significant decrease in travel (driving, rail, transit and air) across the board because people were staying at home more. However, during COVID, people did more < 1 mile trips than 1-3 mile trips compared to pre-COVID.
While there are probably other factors that play into changes in trip patterns, it looks like very short trips of < 1 mile were favored during the pandemic. That suggests that Americans were driving or taking transit to destinations very close to home. Perhaps indicating that work from home (WFH) kept people in their neighborhoods. Trips were probably limited to a few places open at the time such as grocery stores.
I don’t think anyone has a solid guess on how long the COVID pandemic will last. Overall, in the US, the trend in new cases has been decreasing. However, I believe the impacts on daily life after the pandemic will be long lasting.
WFH will be adopted more post-COVID than pre-COVID. More people in the workforce prize flexibility and that sentiment is likely to grow. There’s also a greater awareness of cost-saving opportunities from employers.
McKinsey has an interesting view on the impact of COVID on micromobility. They believe that coming out of a slump during the pandemic will result in a sharp rise in micromobility use a few years later. All of this makes sense when you consider that a lot of people have been confined to their homes during the peak of the pandemic.
However, while McKinsey shows a steep recovery, their study includes both private and shared micromobility. The key thing to point out is that shared micromobility’s recovery will be more muted than private because of hygiene and that a good portion of shared micromobility was being used for commuting and commercial activity.
While I generally agree with McKinsey’s outlook, I believe the 5 to 10 % increase in usage from pre-COVID times seems conservative, especially over a 10 year period. I think that shared micromobility will gain its footing again, but rather you’ll see tremendous growth in private micromobility for a few reasons:
- Declining battery costs
- Cost of ownership vs. car
- Build out of bike lanes and infrastructure
- Environmental stewardship
Batteries and Going Green and Small
However, a lot of that has been made possible due to cheaper and cheaper batteries. If you take a look at battery costs over time, lithium-ion battery packs have seen mostly double-digit annual declines. That trend is expected to continue in the future.
Think about this, batteries are about 50% the cost of an EV. But it’s got to be a very sizeable portion of the cost of an electric scooter. That means that you should expect greater declines in electric scooter costs compared to that of electric vehicles over the next several years.
Gas vs Electric vs Scooter
Imagine that you’re in a world where WFH is the norm and people are still social distancing because of lingering fears from the pandemic. You’ve got a typical 9 to 5 job and each day you take a couple of trips to run errands, go out to eat, etc. Each trip has a roundtrip of 2.5 miles, a total of 5 miles a day. Then on the weekends, you do some recreational activities for a total of 10 miles. Total annual miles equaling about 2,250 miles … not a whole lot.
So now you’re in the market to buy a vehicle to handle short commuting. Your options: (a) a compact car, Nissan Versa, (b) the cheapest EV, Nissan Leaf, or (c) the Gucci of electric scooters, the Dualtron Thunder.
Here’s how they compare:
|Nissan Versa||Nissan Leaf||Dualtron Thunder|
|Propulsion Type||Gas Engine||Battery||Battery|
|Range||367 miles||150 miles||75 miles|
|Annual Fuel Cost||$152||$73||$7|
|Annual Operating Cost||$1,889||$1,781||Minimal (~$50)|
|Annual CO2 Emissions||1,688 lbs||689 lbs||70 lbs|
Total Cost of Ownership
And here’s a total cost of ownership for 5 years, assuming that you could finance the Versa and Leaf at 4.5% and have resale value of 60% and 30% respectively. EVs depreciate a lot faster than ICE vehicles. For the Dualtron, I assumed you’d purchase it upfront with cash, given it’s price, and that it would have no resale value.
As for fuel costs, I picked Florida as a benchmark since they have relatively moderate gas prices and electricity rates.
Not a whole lot of surprises, the Dualtron will cost you an arm and a leg less than both cars. It’s a scooter after all. Interestingly, the Versa has lower cost of ownership than the Leaf. And that’s because you need to drive more miles for the EV to be economic – you make up for the higher upfront cost in fuel and maintenance savings.
Yes, it’s a completely apples vs. oranges vs. limes (… zing) comparison here. But the main takeaway here is how much more would you pay for having air conditioning and cargo space for very short trips … $14k or $24k over 5 years?
The Dualtron can actually go over 50 mph. For short commutes, you can get to places pretty fast. And with a 75 mile range, you’re more than covered. This really underscores the major opportunity with private micromobility.
Cities are already overhauling their policies for micromobility all over the world. The lockdown from COVID is a big reason – limited car driving has made way for more capacity to accommodate bikes, scooters and walking. Seattle, Oakland, and New York are some major cities that have provided miles of lanes for micromobility.
You should see this trend propagating to the suburbs. We’ve seen bike sales and ridership expand tremendously during the pandemic and people need paths and lanes to ride them. Being more confined to the home has also sparked a desire to be outside more for leisure. All this also coincides with the greater trends of being more eco-conscience and healthy living.
Bright Path Forward
Micromobility has the potential to be disruptive in many ways with second order effects. In essence, it’s democratizing mobility. Cheaper and faster movement of people will mean impacts on commerce and how we live. It’s a promising thematic investment if you’re looking for fundamental shifts in markets.