This is the second part in a series of features examining the impact of Covid-19 on the region's transport and mobility startups
There was a brief period a couple of years ago in Silicon Valley, when e-scooter startups became the hottest ticket. Their founders claimed to have solved the last-mile issues faced by people living and working in cities across the world.
Soon, scooters spread from the US to cities in Europe and eventually to Dubai where several startups positioned their scooters in densely populated areas, offering a cheap and fun alternative to taxis. Interest was high in these micro mobility startups, that is until the Road and Transport Authority (RTA) banned them, citing safety concerns. And so the scooters that had sprung up in Dubai vanished, a couple of companies relocated to Abu Dhabi whose regulator had a more favourable view of them, but as lockdown kept people stuck indoors, the fate of micro mobility startups seemed numbered.
Germany’s Circ responded by shutting down its Middle East operations in Abu Dhabi, Bahrain and Qatar while Careem halted its bicycle-sharing business in the UAE in the early stages of the lockdown.
“The mobility sector in general was hit by more than 70 per cent during the early stages of the pandemic as people were growing wary of using public transit or ride-hailing services of all kinds,” says Mohamed Nagaty, chief commercial officer (CCO) and co-founder of Egypt-based logistics, tuk-tuk and motorcycle ride-hailing startup Halan. “The average number of trips per user was cut in half towards the end of Q1 2020.”
While the number of trips has now picked up across the region as lockdown measures are lifted, the B2C side of micro mobility is still struggling.
DIFFICULT UNIT ECONOMICS
Investor appetite has diminished as work from home and flexible working conditions have driven down the need for everyday transportation across the world. According to Dheeraj Bhardwaj, group CEO of Arnab, UAE-based e-scooter startup, this lack of investor appetite in micro mobility stands as a key deterrent to the sector.
Prior to the lockdown, Arnab had expanded to Sharjah, was confident of a return to scooters in Dubai and was in the process of raising venture capital (VC) funding - a deal which has faltered due to the negative impact that Covid-19 has had on the company's B2C operations.
But the woes of e-scooters are not limited to the aftermath of the pandemic.
“When it comes to the business itself, there is another major challenge concerning the scooters as you need to constantly ensure that they are in good shape. You will lose all your assets if you abandon them in the warehouse,” says Bhardwaj.
The constant need to make sure their batteries are fully-charged requires manpower, an uncharged or idle scooter makes no money, there is also the risk of damage and theft which makes for “difficult” and somewhat risky unit economics.
The almost year-round hot weather conditions coupled with the inhospitable infrastructure for micro mobility in many cities in the region make it hard for a startup to ensure long-term sustainability according Saif Eddin Jabarim, global network assistant professor at New York University who believes that micro mobility cannot qualify as a daily commute solution.
“The infrastructure is not well suited for this kind of transport mode given that the UAE is a high-road oriented country,” says Jabrim “[But] using bicycles for recreation is a trend that is likely to pick up.”
Scooters are not suited to long-distance travel, or even between neighbouring areas in some cities due to a lack of infrastructure and so some companies are limiting them to specific, sometimes enclosed areas. Saudi Arabia-based e-scooters provider Dabeeb limited its operations to crowded marketplaces like parks and university campuses.
“In a country like Saudi Arabia – where the weather is mostly hot throughout the year - cars are the most common mode of transport as people have to [go] large distances between destinations,” says Mohamed Khalaf, co-founder and general manager at Dabeeb. “However, we saw a demand for our services in small communities and residential areas where people can use our scooters for short-distance travel.”
A NEW OPPORTUNITY
In terms of passenger movement, McKinsey & Co predicts that micro mobility service providers will suffer short-term losses, but the sector is set for recovery as lockdown measures are lifted. In a 2019 report, the consultancy predicted the micro mobility sector will be worth $500 billion by 2030, whether this is still likely remains to be seen, but right now, much of the growth is coming from the B2B segment.
For the majority of micro mobility startups in the Middle East and North Africa (Mena), Covid-19 presented an opportunity to pivot, to leverage their existing fleet of scooters and tuk tuks to use them in last-mile delivery services.
Instead of moving people, Halan responded by doubling down on delivery and e-payment solutions in Egypt to stay relevant in the changing business climate. Amid the crisis, Halan launched peer-to-peer delivery services and piloted courier services. “We also had to dispatch more drivers to restaurant chains. In Sudan, we offer a grocery delivery service to cater to our customers,” says Nagaty.
For Arnab, the pandemic has led to the emergence of its B2B model.
“Surprisingly, we were approached by the Dubai Police and the Dubai Municipality as they asked us to provide scooters to them so they could use them in patrolling operations to ensure that the people were following the lockdown rules,” says Bhardwaj. “Some local supermarkets also started to use our scooters on a subscription basis for delivery purposes.”
Meanwhile, Dubai-based electric motorcycle and e-bike startup One Moto saw an increase in interest for its vehicles from on-demand delivery companies and other service providers in the UAE.
“One of the delivery companies we are working with has gone from 12,000 to 40,000 deliveries over a week. So, they had to increase their fleet by nearly four times to meet the unprecedented demand,” says Adam Ridgway, CEO and co-founder of One Moto, who expects the B2B market to continue to grow in the short term.
“Around 80 per cent of delivery operators throughout the region use electric vehicles for their commercial deliveries,” he says. “The motorcycle deliveries market in the UAE is estimated to be valued at $150 million. While the market in the GCC or the Mena region including Egypt and Saudi Arabia is 18 times larger than the UAE market.”
Dubai’s RTA ban on scooters did not extend to personal scooters and so the sight of individuals whizzing past on an e-scooter is still somewhat common in certain parts of the city. In a roundtable session with Wamda, representatives from the RTA explained that the ban is under review and new regulations will be issued once safety studies are completed.
In the meantime, Bhardwaj expects more people will invest in personal micro mobility devices as a way to travel between short distances, especially now that public transport is deemed a health risk. For those who cannot afford to own their own device, e-scooters, tuk tuks and bikes will seem more appealing than buses and micro-buses.
But for Jabarim, it is the B2B space that will drive the growth of micro mobility.
“I do not think there is a lot worth investing in the ‘moving humans’ space right now. But I think there is a lot of potential when it comes to moving products,” he says.
It is a sentiment that Halan’s Nagaty agrees with. “On a global level, micro mobility on its own is not an attractive sector for investment today, unless bundled with other services. Investors must focus on companies with profitable business lines, and a clear path to profitability - which would be tough to achieve if the company runs solely on mobility,” he says.