Uber: Focusing on e-scooters and e-bikes

Uber Jump Lime Article - August 27 2018.jpg

The CEO of the ride-hailing giant has just told the Financial Times that Uber is planning to shift short-journey focus from cars to electric bicycles and electric scooters. The news were highly anticipated, particularly since Uber made an investment in Lime, the bike-sharing and scooter-sharing operator last July. Uber is also the owner of Jump, the bike-sharing company that started as Social Bicycles in 2010, and which it acquired for a reported $200m in April 2018.

Jump NYC pricing

Expectedly, Uber will be making less money from each scooter/bike-ride than it would from a similarly long car ride. In New York City, for example, Jump bikes are available to riders for a flat-rate fee of 2$ for the first 30 minutes, with each minute past this adding just $0.07 to the bill. Pedal-assisted electric bikes, such as the ones used by Jump, allow riders to move faster and put less effort into their pedalling around the city. The battery-powered vehicles, though, need to be regularly collected, recharged, and then repositioned in strategic locations in the city. The cumbersome process is ordinarily carried out during off-peak, nighttime hours by people known as "chargers"; it is just another cost detracting from the net profit Uber makes from each ride. 

I’ve found in my career that engagement over the long term wins wars and sometimes it’s worth it to lose battles in order to win wars.
— Dara Khosrowshahi in an interview with the Financial Times

Dara Khosrowshahi did not steer away from the obvious: acknowledging the potential drop in revenue for Uber, at least in the short-term, he explained how the company is willing to "trade off short-term per-unit economics for long-term higher engagement". Admittedly, the writing is on the wall: Autonomous vehicles will eliminate ride-hailing as we know it today - companies such as Waymo are launching their first, commercial robo-taxi services; Uber, which is reportedly considering ending its AV-development programme, does not seem close to putting a self-driving taxi on the streets. Additionally, dockless scooters and bikes are leading a new revolution in the mobility sphere - younger audiences are particularly attracted to them and the markets are placing a huge bet on them becoming the next, go-to transportation solution, particularly as a piece of the Mobility-as-a-Service puzzle. Dara is absolutely right in repositioning Uber: adjusting to what will likely be the new status quo is a matter of survival, rather than one of opportunity. 

Is this the end of ride-hailing as we know it, though? No, not yet. As the CEO of the ride-hailing giant claims, Uber drivers still have a role to play. Although drivers reacted negatively to the news of bikes and scooters being added to the platform, Dara explains, they relished in the idea of making more money by taking longer rides. There was no mention of Uber changing its pricing structure to allow drivers to receive a greater portion of the money they make; given that the company is trying to boost profits ahead of its 2019 IPO, this seems unlikely. Given this context, it is not clear how the anticipated drop in short-range car-rides (and the corresponding drop in driver revenue) will be balanced out by longer rides. If not a change in the pricing structure, then what will be the driver of growth in the longer-range car-rides? It should also be noted that, as much as drivers need Uber, Uber needs its drivers too: if the ride-hailing company wants to offer a different solution than Lime (bikes and scooters), for example, it needs to retain its vast network of drivers. As it stands, there is a possibility that the drop in custom for Uber drivers will lead them to other platforms, such as Lyft, or encourage them to abandon driving altogether. 

Uber's move, announced by the CEO during an interview to the FT, constitutes not only a strategic repositioning of the company, amidst the scooter and bike takeover of mobility in urban centres, but also, another grand move in Dara Khosrowshahi's scheme to rebrand Uber as the friendly, ethical mobility provider. Since taking over from former Uber CEO, Travis Kalanick, Khosrowshahi has taken a number of steps to tackle the toxic work culture that led to accusations of sexual misconduct, for example. The shift to modes of transportation which are greener, cheaper, and take up less space in the crowded city centres will help Uber market itself as a player that cares about making cities liveable more than it does about profit.  

There will surely be further questions arising in the following days: One of them relates to Uber's Advanced Technologies Group. Is the new focus of the company hinting at a potential shutting down of its self-driving car programme? Moreover, Uber is currently one of the investors in Lime, yet not its owner. Other companies, including the Alphabet group (whose subsidiary, Waymo, is expected to compete directly with Uber when its autonomous taxis are rolled out more widely), have invested in Lime, and Lime itself also provides bike-sharing services (which Uber is not using). Does this new development suggest Uber may be interested in acquiring Lime? If not, then what happens in cities where Jump and Lime compete in the bike-sharing sphere, or in the likely scenario of Alphabet/Waymo choosing to launch a Mobility-as-a-Service platform, using its robo-taxis and Lime's bikes and scooters? 

Photo Credit: Paul Wasneski/Flickr