Nick Sciple: Welcome to Industry Focus, the podcast that dives into a different sector
of the stock market every day. Today is Thursday, December 6th, and we're discussing micromobility.
I'm your host, Nick Sciple, and today, I'm joined by Motley Fool senior auto analyst
John Rosevear via Skype. How are you doing, John?
John Rosevear: I'm doing well, Nick! How are you?
Sciple: I'm doing great! We were just talking before the show, there's so much news going on in
the auto space and the micromobility space. We've got a lot to talk about today.
First off, I want to ask you about Waymo. Waymo yesterday opened up its Waymo One ride
sharing service to the public in Arizona. What's your instant reaction to that and thoughts
going forward? Rosevear: My first reaction is,
well, the strong hint was they were going to do something by the end of 2018, and they have. We have
to be careful calling it autonomous, because these vehicles do have human drivers monitoring
the system. We don't like to say something is fully level four autonomous if there's
a backup driver ready to grab the controls. But certainly, this is a prototype of what
they hope will become a level four system soon.
My reaction is, it's interesting. It'll be very interesting to watch how the public reacts
to this. It will be interesting to see what Waymo has to say about when the human drivers
will be going away. They're No. 1. They've done it before anybody else. GM has been talking
for a while about doing it next year, but Waymo beat them to market. Whether that matters
in the long run, I have no idea. That's my reaction. This is interesting. It's a landmark moment.
It's still not quite full autonomy, because we've got
the human safety backup drivers in the cars. But we will look back on this as a big deal.
Sciple: Definitely. They're just in Arizona today,
in the Phoenix area, but as they continue expanding out, it's a phenomenon that's going
to sweep the country over the coming years. Rosevear: The thinking is, at least in urban areas,
this will make a lot of sense in time. This is, in one sense, a baby step,
but it is a landmark moment, too. They have deployed. Sciple: We have liftoff. We'll see where we go.
Then, before we pivot into micromobility, I had a listener question from Twitter.
Simon on Twitter asked about your thoughts on KAR Auction Services, ticker KAR. He says it seems
like a value with a great opportunity to grow, plus their margins are getting better,
but it's been selling off. What are your thoughts on KAR Auction Services?
Rosevear: Let's talk a little bit about who they are, first of all. When you trade in a car,
or more often, when you return your car at the end of the lease, used cars go
to auctions. There are a few big auction services. One of them is called Manheim. They're the
dominant one in the U.S. They have a big rival called Adesa. Then, there are some smaller
independent auctions that remarket these cars at auction. That's where your dealer gets
their used cars, it's where specialist brokers get cars, and so on. These are wholesale auctions.
That's the business that KAR is in. They own Adesa. They also own another company that
is in a parallel but somewhat separate business of selling wrecked cars, cars that are salvaged,
that have been totaled that are sold for parts or rebuilding or whatever.
What KAR has done that's interesting is, they have tried to build an online, smartphone-based
auction service working with their rivals and counterparts around the world. The eventual
vision is that a dealer in Indiana can see all the Corvettes coming to market in
the world and bid on them as they come, or whatever, any other kind of car. I say Corvette because
there used to be a local dealer here who sold only Corvettes, and that's how they did it.
They would go to Manheim and Adesa auctions and buy them up. That's something you can
do with this system. KAR was hoping to build a platform where you could do it on an even
grander scale.In terms of why is it selling off,
I had not done a deep dive into their finances, so I can't say that, but it looks like they popped
after second quarter and now they're kind of settling back down to where they were before
the pop following third quarter results. I would dig a little bit deeper into that,
whether their guidance changed or something like that. I agree that they have a great opportunity to grow.
Used car sales tend to jump as the economy goes south. If we're late in the cycle
and a recession is looming, that will favor used cars. And it does look like profits are
growing and their margins are improving. It's certainly a company worth a deeper dive.
Sorry I don't have a conclusive answer for you right now. I would look at what they've done over
the last three, four quarters. Sciple: As we were mentioning before the show,
we see GM and Ford doing some restructuring. Those are signs at least those major OEMs
think we may be hitting a bit of a cyclical top in auto sales and maybe looking at a downswing,
which would fit that thesis with a spike in used car sales based on where the cycle is.
That'll be something to follow. Definitely an interesting opportunity.
Let's get into our main topic, which is micromobility. First off, just off the bat, what is micromobility?
What should investors know about this space in general?
Rosevear: Micromobility is the last mile. It's electric scooters, it's bike rentals,
it's mostly an urban phenomenon. What investors should know is that it's exploding. The valuations
of some of the companies that have jumped in here just in the last year or two,
with the scooter rentals that you can get by smartphone app and so forth, the valuations have soared,
at least on paper. None of them have come to the public markets yet, so we haven't seen
how that's doing. In places like San Francisco and D.C., these scooters are everywhere.
This is a very recent phenomenon -- a year, sometimes even less. More and more people
are using them or trying them out. It's really easy. You download the app, for a very small fee,
you can take the scooter and just go. And you don't have to return it, you just leave it.
This is seen as addressing what we sometimes
call in shipping the last mile problem. This is, how do you get from the bus stop to home?
How do you get from the train station to your apartment? If it's three quarters of a mile,
sure, you could walk. But what if you've got a heavy package? Maybe you could throw that
on your bag and jump on a scooter. Maybe you could put in a basket and ride a bike, something
like that. These are the kinds of applications that people are thinking about. Because these
things have become so cheap, it's the falling price of batteries, it's the falling prices
the GPS trackers that allow the companies both to tell you where they are when you want
one and to go pick them up later on. And, of course, cheap capital has made this something
that is really starting to explode. That's what it is.
It's not just scooters, although that's what we talk about right now. It's also bike rentals.
People who have been to New York know about Citi Bike, which has been going on for several years.
They're these stations around the city where you can rent a bike for the hour and
just return it to another station. Ford has a business called GoBike that they bought
about a year ago which is similar. They're operating in Seattle, looking at some other markets.
The scooters are an even simpler thing because they're electric scooters.
You hop on and it goes. Sciple: This has been a phenomenon over the
past year or so where we've seen several private companies come to market. Bird and Lime
are two of the largest ones. Within 12 months, Bird hit 10 million scooter rides. About 3.6%
of the total U.S. population has used one of these scooter devices in less than a year.
For context, bike sharing has been going on for about eight years and they're at 13% penetration.
Car sharing has been around for about 18 years and it's at 16% penetration. So that 3.6%
amount doesn't sound significant, but to have gotten there so quickly is very remarkable.
To follow up on how you use it, these are dockless scooters. Folks reserve them on their smartphone.
It typically costs $1 to reserve and $0.15 a minute thereafter to use the device.
Whenever you're done with it, you ride it to your destination, leave it on the sidewalk
or what have you. Then, the next person can come up and reserve that device.
You also mentioned that it's to serve that last mile problem. Part of that problem has
been related to the rise of ride sharing. According to a National Household Travel survey,
over 60% of trips are less than five miles in length, which would make them appropriate
for a bike or scooter. But, another 60% of people who use ride sharing in large,
dense cities, if ride sharing did not exist, would have used public transportation. They would
have walked, they would have biked. They wouldn't have used ride sharing. So, what we're seeing is,
the rise of Uber and Lyft coming into these urban areas has actually led to an increase
in traffic as this surge of ride sharing riders has come in to service the market, where otherwise,
the traffic wouldn't have been present. Folks would have used a different transportation system.
So, these bikes and scooters, what they really do is help reduce traffic in urban cities.
They encourage pedestrians who might have walked or done something otherwise
to use the scooter instead of ride sharing, which encourages more Uber and Lyft drivers,
because they can have longer fares for the people who actually use their service. And, it helps
with the traffic problem. I pulled a stat. China has really bought in
to bike sharing. The overall share of trips on bike has doubled to 11.6% since they launched
dockless bike systems in China, which has led overall congestion in some of the largest
cities in China -- Beijing, Shenzhen -- has dropped 4%-7%. We can really see a tangible
benefit to traffic as a result of these things rolling out to consumers.
Rosevear: And, they tend to penetrate neighborhoods where maybe the people setting up the docked
bike systems a decade ago didn't put a dock. It's lower-income folks, it's folks who maybe
don't live on the major routes or near the major routes. You can take a scooter,
and then there are scooters in your neighborhood. And as people do it, they find their way to
where the people are. That's one of the advantages of the dockless system. And over time,
if you're managing one of these companies, you can see the patterns and see where the people are.
This was, in fact, Ford's thinking with GoBike,
that they would watch where they GoBikes went and then maybe set up a shuttle service.
If there are a lot of people coming from neighborhood X to neighborhood Y, OK, maybe we can offer
a low-cost, crowdsourced shared shuttle doing that, too, on the rainy days, on the cold days,
on the days when people don't want to ride a bike. They saw them as partners.
So, that's an interesting way that someone could build on one of these businesses, as well.
Sciple: Sure. John, let's go ahead and talk about the business of micromobility. There are four
different ways that companies are interacting with this trend. First, you have
the pure-plays. These are the actual scooter companies that are running these scooter services
that came to market this year. We've got ride sharing companies, Uber and Lyft.
They're getting involved in this space. We've got automotive OEMs. Ford and GM have both taken
some steps to get involved in this space. Then we've got the hardware companies.
Xiaomi is one of the major manufacturers right now. Let's go through that list and break down
these companies. Talking about the pure plays right now, there are several different companies operating.
They all have very interesting names. Bird, Lime, Skip, Spin, Scoot.
Rosevear: It has to be a short word that fits on the scooter. [laughs] Seriously.
Sciple: Yeah. It has to be, you can look at the name and it tells you what it's trying to do.
The two big players here are Bird and Lime. Based on the equity of that they've risen,
they're both unicorns. When it comes to their sales growth, they've really jumped
out ahead of the rest of the market. Since October 2017, their relative monthly sales
are up close to 100X over that period compared to some other providers.
What are your thoughts looking at these? Another company to mention as an aside, Razor scooters,
the kids toy from the early 2000s, they also have a scooter sharing service in Long Beach,
San Diego, Tempe, Arizona. Really, anybody that's touching the scooter space
came into that market. What are your thoughts on these pure-plays and what opportunities there might
be in that space? Rosevear: This is like any new niche opens up,
like we've seen with, for instance, marijuana stocks. There's this neat idea that starts
to deploy. There are only a few places to invest in, so those get bid way up. As more
companies enter, I think valuations will sort themselves out over time.
The cost of entry here is not real high. Everybody's buying the same scooters pretty much.
But you do need to develop the infrastructure and the software, the app and so forth.
I think it's going to be interesting to see which of these companies -- Bird, Lime,
and maybe one or two others that are a little further behind and just emerging --
which of them develop traction and where? Are we going to see regional players? Are we going
to see one dominant player? Are we going to see two dominant players where you'll have
scooters of two different colors scattered all over your city, and you pick the one with
the app that you go with more often? Or, what? Are we going to see differentiators emerge?
Should I prefer Bird over Lime? Why? That kind of thing.
Long story short, it's very early. It's very early to see where this is going, who's going
to be able to make money, and who the dominant players are going to be. But it's clear that
this is an idea with some traction at this point.
Sciple: One thing to add there when it comes to how it shakes out vs. number of businesses
is going to be how these municipalities react, how they want to regulate these scooters.
I know San Francisco has placed a cap on the number of scooters that can be in the city.
Is that a trend we're going to see? If that is, then, of course, the players that are
already in those markets will be in a position to benefit as we lock in who the competitors can be.
Rosevear: That, too. There seems to have been
a couple of cities where the scooters came in, and then suddenly, they're all over the place.
And then everybody said, "Wait a minute, we have too many scooters." Because people
just leave them! You go to where you go and leave them. That's part of the appeal.
You lean it up against the building when you arrive, and it's done, and somebody else comes and
gets it later on. Eventually, if you have 18 scooter companies trying to compete,
and they're all bringing in scooters, they're all over the place. It reaches the point of
being a mess and something that people will object to.
So, yes. I think this is one of several emerging transportation areas where cities need to
get a little quicker about developing policies and developing roles and maybe talking to
other cities about what they're doing and what has and hasn't worked. This is sort of
a mayor's council kind of thing that maybe needs to be sorted out sooner rather than later,
right along with docked bikes and autonomous taxis and all this other stuff that is emerging
right now that is going to revolutionize how we get around cities.
Rosevear: Let's talk about docked bikes a little bit. Talking about these ride sharing
companies that are playing in the micromobility space, Lyft, just this past week,
finalized their acquisition of Motivate, which is the largest operator of bike sharing systems in
the United States. You mentioned Ford GoBike in San Francisco, Citi Bike in New York City.
They also operate Capital Bikeshare in D.C. According to Lyft, in connection with that merger,
more than 80% of U.S. bike share rides occurred on Motivate systems in the past year.
So, you're really seeing Lyft push into this dockless space, in addition to, they've started
rolling out some scooters in the past year. What are your thoughts on this Motivate acquisitions,
and what kind of advantages it might give Lyft in the micromobility area?
Rosevear: Everybody wants to build the whole chain. Just to go back to Ford, Ford's vision
-- I know this from talking to execs about a year ago -- is, you have an app that can
get you everything. It can get you a parking space if you're driving your own car. It can
get you a bike. It can get you a ride on the shuttle. It can get you, in time, perhaps,
an autonomous taxi. All of this, all the way up and down. You have this one app,
which they call Ford Pass, and it offers you all of these mobility options, depending on where you are.
I think Ford is not the only company with that vision. Lyft would like to
have a piece of, if you have to walk three blocks to get your Lyft, that can be on the scooter
or bike or whatever. Motivate, as you say, operates a lot of these systems for other
people that are branded otherwise. I think it's a way to get into a part of the business
that doesn't depend on whose bikes are the best this week or whatever. It's going to
be a more sustainable revenue source over time. I think it was a smart move.
We'll see how it shakes out. It's going to be a few years before we really know. Again, it's another
company thinking through the vision of being somewhat more end-to-end operating from one single app.
Sciple: Sure. Another thing about this Motivate acquisition
that stood out to me, as I mentioned earlier, there is a little bit of risk with
these micromobility companies that maybe some regulation comes in from cities limiting
the number of bikes or scooters that can be on the street. But acquiring Motivate, they have
these existing docked services that already have agreements with cities, already have
physical assets in place. So, Lyft probably is less exposed to those regulatory risks,
given that Motivate already has these relationships and contracts with municipalities to put these
bikes in place. Rosevear: Yeah. If you know New York at all,
Citi Bike isn't going anywhere. Ford's approach is to come in and work with the city government
and say, "OK, what can we do, where, and when?" They do it top-down. Where they've come in,
they are working with the government. But, again, some of these other scooter things,
it's been sort of beg forgiveness rather than ask permission. And then the cities have had to react.
I think your point is a good one. This is a somewhat more stable business than
perhaps some of these new scooter companies, and perhaps, over time, a more stable revenue source.
Sciple: Sure. Let's spend a minute or two
talking about Uber, as well. We gave Lyft some time. Uber is also getting into this space.
They acquired Jump, which is a leading e-bike service, for $200 million earlier this year.
They've integrated that into their app. That's actually rolled out in D.C.
You open up your Uber app, and there's a button at the top where you can get an Uber X,
or you can switch it over and get a bike. So it's all integrated there.
Also, just in the past week, some rumors have come out that Uber is trying to position
itself to make an acquisition of either Bird or Lime, which, as we mentioned, are the two
largest players in the pure-play space. Is it the same story for Uber here? Just trying
to totally integrate top to bottom these transportation opportunities? Is there anything
different about what Uber's doing that maybe stands out to you?
Rosevear: Uber has an app that a lot of people open already. You land in a city, well, OK,
Uber, where are the cars? To the extent that Uber could build more and more services into
that app that are right there when you open it, they will benefit. Oh, I can take a bike;
oh, I can reserve a hotel; oh, I can get a car share. They're thinking in those terms, too.
We have this app, what else can we load into it that somebody who lands in an unfamiliar
city might be interested in? Sciple: Sure. One public area where we can
invest in micromobility, let's talk about GM and Ford, what they're doing. When it comes
to acquisitions, there are acquisitions in this space, as well. Recently, Ford acquired
Spin for $100 million. This is an e-scooter company. They've also introduced the
Ford GoBike Plus e-bike earlier this year in connection with their San Francisco GoBike service.
What are the opportunities there for these OEMs? They don't have the app infrastructure
that the pure-plays and the ride shares have. However, they do have capability when it comes
to manufacturing that I don't think these other folks can match, at least not in the near-term.
Rosevear: Ford has been quite loudly talking
about the fact that it wants to transition to being both an automaker and a provider
of shared mobility over time. They do have an app. It doesn't have a whole lot to it yet,
but they're building out an infrastructure, it's called Ford Pass. Again, their vision
is a lot like what I was just talking about with Uber -- you can get a car, you can get
a parking space, you can get a bike, you can get, who knows, a scooter, a shuttle ride, whatever.
Over time, they're going to add as many things as they can to this,
hoping to capture the customer for whatever their mobility needs are.
GM is going a different route here. We know that GM has the subsidiary Cruise that is
looking to launch an autonomous taxi service, as we talked about before as a rival to Waymo.
But what GM also has going on is, they're gearing up to mass produce autonomous taxis.
Presumably, they will be delighted to sell them to Uber or Lyft or anyone else.
GM is selling pickaxes and jeans to gold miners in '49. It's that role. They're building
a foldable e-bike. Presumably, they will be delighted to bang these out for any company
that wants to set up an e-bike service anywhere in the world in time. It comes with some integration
into their OnStar platform, which they have greatly expanded from beyond being just
the button you push in the car when you crash to call 911, which is where it started.
It's becoming their platform for network transportation. And yes, they do own a stake in Lyft,
although GM and Lyft have not quite parted ways, but they have gone in different directions from
where they were a couple of years ago. So, I would downplay the importance of that right now.
I do think GM is looking at, as Josh Wolfe,
venture capitalist, said this week, the smart thing to do whenever there's something like this,
with low barriers to entry and a lot of entrants, is to be the arms dealer.
Be the one selling the pickaxes to the Gold Rush miners, or the jeans, as Levi Strauss found out.
That turned into a good business. Although GM is talking about launching their
own taxi service, I think they're very much thinking about being the arms dealer here.
And this builds on what they've done with the autonomous taxi with their subsidiary
Cruise Automation, building an e-bike. Yeah, we'll sell it to anybody. We've got a platform.
Maybe they'll operate e-bikes on their own in some areas where that makes sense for them
under their Maven car sharing subsidiary or under something else to be determined,
maybe under Cruise. But it's interesting that GM is trying to set itself up in that position,
in the position of, we're making the products that facilitate these businesses, come talk
to us and we'll tell you what you need. Sciple: I'm glad that you mentioned
being the arms dealer and the whole picks and shovels and jeans approach. When it comes to these scooters,
there's another really interesting way to play it, and that's the hardware for
these scooters, the folks who make the actual scooter that these folks use. Xiaomi is really,
at least when it comes to the public markets, the big player right now.
Xiaomi, as folks may know, is a device manufacturer in China. They make smartphones. They make
a really staggering number of different products. They make their own scooter, which is used
by several different pure-play players, including Spin, Bird, and Lyft. They also own Segway Ninebot.
They own 20% of that company. Segway Ninebot is the largest scooter manufacturer
in the world. They're the same company you think of as the traditional Segway. They also make
these scooters. Ninebot scooter sales grew 6X in 2018, and they sold four out of
the five scooters that were sold worldwide. They currently have a valuation over $1.5 billion
and are considering an IPO next year according to Bloomberg.
What are your thoughts when it comes to these hardware players, Xiaomi, and on the private side,
Segway Ninebot? What opportunities do they have? They're really selling to every
single one of these manufacturers. Their devices are powering almost all of these operators.
Rosevear: To some extent, it's the same problem we see with autonomous vehicles. Xiaomi is,
as you pointed out, a business with fingers in lots of different pies. How much does it
profit from the scooter trend? I think when Segway Ninebot comes to market, that's going
to have a great deal of interest if this trend continues and sustains. It should. At the moment,
they are the major arms dealer. The question is, is there somebody who could disrupt them?
Or who could least underprice them or come out with a more competitive entry?
We'd have to dive a little deeper into there. It's awfully early to call the winners here,
of course. But, at the same time, these companies are worth watching. Just as I'm not sure
I would tell somebody to buy Alphabet for Waymo right now, I'm not sure I would tell somebody
to buy Xiaomi for scooters right now. But as these businesses grow, you may see spin-offs,
you may see tracking stocks that make it worthwhile to own the parent company looking forward toward that.
Sciple: We can also talk about the fact that
a couple of manufacturers are really the main suppliers for this entire industry.
In a way, that shows that it's hard for any of these operators to stand out from one another.
Their hardware is basically the same, the infrastructure that you use to access it and do the tracking
is very similar. That's a risk for these operators. If they can't start making their own devices
or find a way to differentiate themselves, they're really putting themselves in a position
where it's going to be a commodity market, and folks could care less which app they end
up using, which is, of course, not great for anyone gaining significant market share.
Rosevear: Right. It's also not great for margins, either. If it costs me $3 to take the Bird scooter
and $2.80 to take the Lime scooter, and they're both right in front of me,
I'm taking the Lime every time. [laughs] But, Lime's making less money on that ride.
That then goes back to, OK, maybe we need to talk about buying Ninebot instead of buying Bird or Lime.
This is the same problem people have bandied
around for several years with Uber and Lyft. If the ride is just a low-cost commodity and
it's everywhere, where are the profits? Again, before we can start to call winners or losers,
we need to see how this emerges somewhat. You may find some of these companies are
able to sign deals with cities where they're effectively a monopoly in a given city. If
you want to get around Chicago, you may only have one choice, for instance, or whatever.
We may see that emerge over time. Then race becomes, who can lock up the most lucrative
urban deals or the most urban deals and the steadiest revenue streams and negotiate the
highest prices or the best margins? It's very early, again. I understand investors
want to come running in here, but I think we need to watch this a little more and see
where it goes before we can start to say, "That's the investment opportunity."
That said, it does seem like scooters are an idea with some traction. If Segway Ninebot
creeps towards an IPO, I will be watching that very carefully.
Sciple: Let's throw a little cold water on these players. Let's look at the unit economics
of these scooters and devices. According to some reporting from The Information --
I've seen several different numbers, but we'll go with what The Information has because they
have the full cost structure. It's taken from Bird investor materials. The average Xiaomi
scooter that Bird bought when these numbers came out over the summer was about $551.
On average, that scooter generated about $3.65 per ride. So, you're getting $3.65 of revenue
per ride. However, they have to spend $1.72 on average for charging costs. You have to pay
freelance individuals to pick these scooters up off the street and charge them each night,
then drop them back off on the street. That adds an additional cost. They spend about
$0.51 per ride on repairs, about $0.41 per ride in credit card fees, another $0.20 per ride
on fees for city permits, $0.06 on customer support, and $0.05 on insurance. What does
that give you? That gives you about $0.70 per ride in gross profit, which gets you to
about a 19% gross profit margin. How does that get us to breakeven?
Based on the numbers that I've seen, you're averaging about five to six rides per day. If you get
about five rides per day, at a $0.70 gross profit, you're going to make about $3.50 a day.
To hit that $551 that it costs to acquire the scooter originally, it would take about
157 days or 5.25 months for Bird to break even on a scooter at that price point. Of course,
the average life for these scooters, based on the information that industry executives
have sent out, is usually about one to two months before they need to be replaced.
So, just doing that math, if it takes five months to break even and it only lasts two months
Rosevear: Not worth it. [laughs]
Sciple: -- we really need to see some new hardware for this to make sense as a business.
I've seen some more recent numbers, Bird suggests that it's brought down some of its prices.
But this is a real issue, when you have a product that is not differentiated, that we're
all buying from the same supplier, and the unit economics, at least from the numbers
we've had available to date, do not suggest that these scooters are profitable over their lifetime.
There's going to need to be some more development in this space before these
companies really make sense as long-term investments. Rosevear: I guarantee somewhere, probably multiple
somewhere, people are looking at, how do we design a four seasons urban scooter
that lasts two years? And what does that cost? And how do we deliver it for under $1,000
so that it makes sense for a company like Bird or Lime? Somebody is looking at that problem.
I couldn't begin to imagine what their scooters will look like. They may be
heavy as who knows what. But, yeah, clearly, this is another area where
there's going to need to be more innovation. As you point out, to make this business work,
if the scooter only lasts a month and a half, it needs to be a lot cheaper than it is,
or we need scooters that aren't 5X more expensive that last 5-10 times longer.
Sciple: Exactly. Bird is doing something interesting as well along these lines.
You say that the unit economics don't necessarily make sense for the provider. They just rolled
out a new service called Bird Platform, where they're going to allow independent entrepreneurs
to purchase these scooters at cost, use Bird's infrastructure, their servicing infrastructure,
their ability to hail and reserve the scooters through their apps, in exchange for 20% of
the cost of each ride as Bird's servicing fee.
What are your thoughts on that? When I saw that, I'd seen these numbers about the unit
economics, and how maybe it doesn't make sense at scale. And you see Bird pivoting a little
bit to say, "Hey, you guys, you independent providers, you worry about making money on
the hardware, all those sorts of things. We'll take our 20% service fee and make money that way."
What are your thoughts to that approach, how sustainable that may be long-term as an
alternative to running things top to bottom? Rosevear: My first thought is, Bird is looking
at what they've got built -- chargers, mechanics, so forth -- and saying, "How do we make more
money off that?" [laughs] Obviously. How do they monetize that further? How do they
keep those people busy? How do they keep more scooters at those chargers around the clock?
And so forth and so on. This is a quick way to do that without significant investment.
They probably had to build some software and have a few people doing customer service here,
but they don't have to actually go out and deploy much further.
As you noted, this suggests that they'd like to be making more money off what they're spending.
[laughs] Which suggests that the level of profitability isn't sufficient for their investors.
Otherwise, they would be doing what Uber did for a while, which is spending money on expansion,
on busting into new markets, aggressively putting stakes in the ground before their rivals get
there over and over. That does not seem to be where they're putting 100% of their effort.
Sciple: Basically, the takeaway for investors here is, this is still a developing area.
It's an emerging trend that I do expect to grow over the long-term. However, there are
some real questions on the economics of these companies right now that need to be worked
out before they really make sense as long-term investments. Of course, most of these companies
aren't public yet. Even if you would be tempted to buy where they're at right now,
there's not an opportunity to do so. Rosevear: I do want to add one last thought
here before we go away. Somebody is going to be making money off this. The scooters
seem to be getting traction. It seems to be a good idea. Somebody is going to figure out
the formula to make money off this. It's a little early to see who that person is going to be.
It might be somebody we don't expect. Who knows? Maybe General Motors will come
into this in three years with the killer scooter that they're making themselves in an unused
factory somewhere. We don't know. That's just spitballing, of course. It could be Bird,
it could be Lime, it could be one of the entrants that we think of as a smaller entrant right now.
Somebody is going to put the formula here together because this seems to be
an idea with traction. Sciple: Yeah. Going away, Austin Lieberman
gave us a question on Twitter, asking about, what's the realistic total addressable market
for this space or the liability considerations? How should we invest in that? Maybe lumping
that together, how should investors look at this space going forward? What should they
really pay attention to? And if you were going to put some money to work in the next 18 months
in this market, where would be the first place that you'd look for those ideas?
Rosevear: In this market, meaning micromobility? Sciple: Yeah, this industry.
Rosevear: I'm looking at who's making the scooters. I'm watching companies like Bird
and Lime to see if either of them or other entrants like them are starting to get critical
mass or finding ways to monetize their sunk costs, their platforms, their software platforms,
their mechanics and chargers, and so forth, as we just talked about. I'm looking for
the company that's going to find an edge somewhere, whether it's a profitability edge or an edge
that makes me choose the Bird scooter over the Lime scooter or whatever, expanding to
the whole competitive set. I'm going to look at hardware makers.
I'm also going to look at, we had a suggestion from a reader, is there an insurance play here?
Maybe there is. Maybe that's the way to get into this.
I think, again, we just need to watch how it expands. But watch also the companies that
seem to be doing something a little differently. There will be a lot of tinkering, and some
of that tinkering will turn out to be ways to really improve margins.
Sciple: Yeah, this is going to be an industry and a space that evolves over time. I know
for our listeners, we've really thrown a lot at you today. Hopefully this is a good primer
on the micromobility space. Going forward, I know we'll have a lot more to talk about
in this whole area over the next few months. Lyft started filing its IPO papers this past week.
I'm sure we'll have you back on later on, John, to discuss that and keep following
these developments. Rosevear: Yep, indeed. Just one last thought.
This is one of those places where a lot of people are banging their heads against the
idea of, how do we invest here? I think some clearer pictures will emerge over time.
I know it's frustrating. I wish we could say, "Buy Bird, that's the way to go!" We can't yet.
Not only because Bird isn't public, but because it's not clear that Bird is going
to be the company that walks away with the best margins here.
Sciple: Awesome! John, we'll keep tracking that going forward. I'm sure I'll have you
on here in the future to discuss it. As always, people on the program may own companies
discussed on the show, and The Motley Fool may have formal recommendations for or against
any of the stocks discussed, so don't buy or sell anything based solely on what you hear.
Thanks to Austin Morgan for his work behind the glass. For John Rosevear, I'm Nick Sciple.
Thanks for listening and Fool on!
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