Challenges and opportunities in the German e-scooter market

Despite challenging market conditions, sharing services for e-scooters can make a profitable and sustainable contribution to urban mobility. Cities and municipalities in Germany could set the competitive framework by tendering scooter-sharing services for a limited period in a defined urban area, awarding the contract to just one scooter-sharing provider. The resulting economies of scale would allow the sharing provider who won the contract to better integrate into the city’s public transportation system with high-quality scooters. Customers, in turn, would profit from improved service and reduced prices.

E-Scooters in Germany: Promising examples of electromobility?

Scooter-sharing providers have been permitted to operate in German cities since May 2019 and the sharing market for e-scooters has multiplied accordingly. Sharing providers enable emission-free mobility for their customers and e-scooters act as a useful interface to other means of public transport. The growth of the global micro-mobility market, of which electric scooters constitute the largest share, is forecasted at 19% by 2024. People driving e-scooters in big German cities are already shaping the image of urban mobility.

However, in German cities, up to seven sharing providers for e-scooters compete and yield poor profitability: utilization of e-scooters is low and operating costs are high. The Covid-19 pandemic has further aggravated the situation, with some providers being forced to reduce or discontinue their services. The sharing market for e-scooters is currently facing five key challenges, which are discussed below.

Challenge 1: Competitive market environment

As of 2021 – except in the United Kingdom, where e-scooters are still at the testing stage – sharing providers for e-scooters offer their services in all major European cities. For instance, Lime, Tier, Voi, and Bird are the major players in the German market. While these companies first offered their services in large cities such as Berlin, Hamburg, and Munich, they subsequently expanded into medium-sized cities. Lime e-scooters are already available in 24 German cities and Tier covers more than 50 German cities. The scooters and services offered do not, however, significantly differ from one another.

Challenge 2: Supply-side – e-scooters high operating costs and short service life

Sharing providers for e-scooters pay between €800 and €1,500 for one vehicle. The service life of a scooter and its battery is, however, still limited. The main drivers of operating costs are the charging of the scooters’ batteries and maintenance. To charge the batteries, scooters are collected at night, re-charged, and then re-distributed – primarily through diesel-fueled cars. The earliest providers have, therefore, already switched to e-scooters with replaceable batteries in order to facilitate the logistics involved in transport and charging. High operating costs are also a key factor with electric motor scooters. The Bosch subsidiary Coup no longer acts as a sharing provider, but rather as a vehicle supplier. Scooter-sharing provider Tier took over Coup’s electric motor scooter fleet.

Coverage of German cities by the four scooter-sharing providers

Challenge 3: Demand side – high prices and insufficient utilization

• Prices
  Customers pay €0.15 to €0.25 per minute for an e-scooter and usually a minimum rate of €1.00 per trip. The minute prices are therefore comparable to carsharing providers such as Car2go. Customers do not appear to be very price-sensitive: when scooter-sharing providers in Hamburg increased their prices by up to a third in 2019, demand remained practically unchanged. However, Estonian start-up Bolt has recently entered the German market with 15,000 e-scooters, charging customers just 0.05 € per minute. It would appear that price competition has just begun.

• Utilization
  Information on utilizations rate does not show a clear picture: Sharing providers report that e-scooters are borrowed between four and ten times a day and indicate an average trip time of 15 minutes. External analyses, on the other hand, yielded an average of fewer than four trips per day per e-scooter in Berlin, Hamburg, and Munich. It is estimated that at least five trips a day are necessary to operate e-scooters profitably.
  
  The average distance covered per trip with an e-scooter is less than two kilometers, i.e. the mid-point of the average distances covered by pedestrians and cyclists. Compared to the average distances covered on public transport, with private cars, or by carsharing, e-scooters do not compete with buses, trams, subways, and cars. Electric scooters thus indeed serve the “last mile.”

Challenge 4: Law and regulation

E-scooters are offered and parked in public spaces. The sharing model is thus independent of fixed locations; however, e-scooters parked on sidewalks often lead to disputes. Whether the rental/sharing of e-scooters is subject to “public use” (i.e., the use that everyone is permitted within the scope of traffic regulations) or whether they constitute “special use” and require a permit (i.e., any use of the roads beyond public use) remains an open legal question in Germany. In the approval notices for special use, municipalities can include additional requirements and conditions, such as the definition of parking locations. Based on special use, for example, the city of Bremen in Germany has limited the number of electric scooters per provider to 500. In many other cities, such as Hamburg and Munich, scooter-sharing providers have entered voluntary and legally non-binding commitments with the cities and agreed on measures to prevent e-scooters from being chaotically parked in public spaces. Such measures include the establishment of rental stations and fixed parking areas, as well as a deadline for the disposal of defective or inadequately parked e-scooters. Although indicators for e-scooters and helmet use for drivers  have been discussed in Germany, neither are mandatory.

Challenge 5: External factors

• Seasons
  The winter represents a challenge for scooter-sharing providers in terms of road safety and driving comfort for customers, meaning that some providers cease operations during the winter months in Germany.

• Covid-19
  The Covid-19 pandemic has also heavily impacted scooter-sharing providers. The demand for e-scooters has fallen considerably due to the lack of tourists, home office working and exit restrictions. Numerous providers have therefore reduced or stopped their services entirely during the pandemic.

How cities and municipalities can facilitate e-scooters

Similar to public transport, cities and municipalities could be granted the option to tender sharing services for e-scooters for a limited period for defined urban area, only awarding the contract to one scooter-sharing provider, which would enable the following:

• higher utilization of fleets and synergies in charging and maintenance logistics,
• lower prices and improved customer service,
• sharing providers to reliably plan for a certain period,
• measures to be defined with other sharing providers to avoid chaos in public spaces, and
• the integration of e-scooters into public transport using a shared app and combined tickets.

Increased demand, economies of scale and planning security would enable the sharing provider who has been awarded the contract to do the following:

• to focus on the high-turnover downtown areas,
• to switch to higher quality and more durable e-scooters,
• to change to e-scooters with replaceable and longer-lasting batteries,
• to enter into cooperation with companies and retail and to establish customer loyalty programs,
• to introduce prepaid accounts within the app to reduce fees for small transactions.

Embedded in an overall urban mobility strategy, similar measures could also be offered for bike sharing and car sharing, i.e. they could be transferred to other sharing mobility services.

Market consolidation is accelerating

Due to intense competition in the e-scooter-sharing market, scale effects on both the cost side and the sales side are limited. Nowadays, it seems that variable costs are too high and occupancy rates too low for many sharing providers to achieve profitability. The Covid-19 pandemic has placed further pressure on the market. Further consolidation in the e-scooter market is, therefore, likely, as in the case of the takeover of the European provider Circ by the American provider Bird or the takeover of Uber Jump by Lime. The German provider Wind has stopped its business activities in Germany and plans to move its fleet to Southern European countries.

As an alternative to these dynamics, tenders by cities and municipalities would replace competition “in the market” by competition “for the market”, thus yielding positive effects for providers and customers alike.

Author:
Dr. Christian Wältermann, Head of Mobility & Infrastructure (Email)