Is electric scooter business profitable?
Is the Electric Scooter Business Profitable? | by Snapiverse
Is the Electric Scooter Business Profitable?
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Oct 27, 2023
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The electric scooter business in the United States is experiencing unprecedented growth, and the numbers tell a compelling story. In 2022, the US electric scooter market boasted a valuation of $615.8 million, and experts project that it will surge to a remarkable $2.6 billion by 2027. This phenomenal growth is driven by a confluence of factors, including the rising demand for sustainable transportation, soaring gas prices, and the flourishing sharing economy.
When examining the profitability of the electric scooter business in the United States, it's evident that the industry has rapidly captured interest from both consumers and entrepreneurs. The primary allure of electric scooters stems from their convenience and environmentally-friendly nature, making them a preferred choice for urban commuters. The escalating price of gasoline has also led people to seek out alternative, more cost-effective means of transportation for shorter journeys.
However, achieving profitability in the electric scooter business is not without obstacles. One significant challenge is the intense competition within this nascent market. Additionally, the initial investment required for purchasing and maintaining electric scooters is considerable. Safety issues also present a concern, potentially resulting in stricter regulatory measures in the future.
Nevertheless, the electric scooter market shows promising profit potential. Reports, such as the one from Joyride, indicate that the e-scooter sharing industry can achieve gross profit margins of around 30% on scooter rides.
Tips for Starting a Profitable Electric Scooter Business in the US
- Select a High-Demand Location: To kickstart a profitable electric scooter business, carefully choose your operating location. Cities with substantial student populations or high tourism traffic can offer a robust customer base.
- Competitive Pricing Strategy: Attract customers by offering competitive pricing, and consider implementing discounts for students, seniors, or frequent riders.
- Invest in Quality Scooters: Prioritize the purchase of high-quality, safe, and reliable electric scooters. Doing so can minimize maintenance costs and enhance rider safety, reducing accidents.
- Effective Marketing: Develop a robust marketing strategy to reach potential customers. Utilize online and offline marketing channels to create awareness and attract riders.
Revenue Streams and Expenses
Electric scooter companies in the US generate revenue from various sources:
1. Rental Fees: This primary revenue stream involves customers paying a fee to rent an electric scooter for a specified duration.
2. Advertising: Companies can generate revenue by selling advertising space on their scooters and mobile apps, offering a supplementary income stream.
3. Data Sales: Collecting user data, such as travel patterns and preferences, allows for data sales to advertisers and other businesses interested in consumer behavior insights.
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The main expenses associated with running an electric scooter business encompass:
1. Scooter Costs: The acquisition and maintenance of electric scooters constitute the most substantial expense for these businesses.
2. Operating Expenses: This category includes insurance, marketing, and other overhead costs necessary for the day-to-day operations of the business.
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Profitability
The profitability of an electric scooter business can vary significantly based on factors such as company size, location, and business model. However, many electric scooter companies in the US have demonstrated the ability to generate a profit.
Examples of Profitable Electric Scooter Companies in the US
Several electric scooter companies in the US have achieved profitability and garnered recognition in the industry:
1. Lime: As a prominent electric scooter-sharing company operating in over 100 cities worldwide, Lime achieved profitability in 2022, marking a significant milestone in its history.
2. Bird: Another major player in the electric scooter-sharing industry, Bird operates in over 30 US cities. While it has faced challenges, the company has also experienced profitable quarters, demonstrating the potential for success in the market.
3. Scoot: A regional electric scooter-sharing company with a presence in over 20 US cities, Scoot has consistently maintained profitability since its launch in 2018.
These examples underscore the profitable opportunities within the electric scooter business, showcasing the industry’s potential for growth and success in the United States.
How to Start an Electric Scooter Rental Business in 2023
What is the profitability of the Scooter Sharing Business?
From an economic point of view, e-scooter rental is a profitable business. From the point of view of absolute income numbers, it’s rather small. Let's try to roughly calculate the profitability of the e-scooter business.
All calculations are made on the example of a scooter sharing business with a fleet of 50 scooters, the location of the business is a US city with a population of 230,000 people. Calculations of expenses and income of the scooter sharing business are approximate and we did not take into account a number of factors (competition, level of vandalism, local fees and charges), which may affect the success of this business.
Business start-up costs
It takes 2 months to start an electric scooter sharing business if you decide to use a franchise from RexSoft. If you have decided to develop scooter rental software "from scratch" - the term of starting a business may increase to 3-5 months. During the start-up period, your business will not generate income, because first you need to register the business, set up the necessary software, purchase scooters, find premises, etc. Next, we've collected the main costs you need to be prepared for at the start-up stage.
| Costs | Description | Total,$ |
|---|---|---|
| Small business registration | Legal consultations. Obtaining a tax registration number. Registration with the social insurance authorities. Obtaining a license/permit. Opening a bank account. | 100-1000 |
| Purchase of scooters | The cost is calculated based on the example of buying 50 Shenzhen X890 scooters, which have proven themselves well in the scooter sharing business. | 32500-40000 |
| Spare parts for scooters | Replacement batteries. For 50 scooters, 120 batteries are required. Headlights, stops, wheels, humpers, brake systems, other parts with high wear and tear. | 12000-14000 |
| Electric scooter sharing software | The cost is calculated for the customization and setting up of the necessary electric scooter sharing software (client app, and CRM for managers) according to the terms of the franchise from RexSoft. More information about the cost of the franchise here | 5000-7000 |
| Purchase of cars for chargers | A cargo van is required for a scooter sharing business. For example, we found out the cost of the used (from 2017) and new van - Transit Van. All information is taken from the site | 22000-50000 |
So, the costs of starting an electric scooter sharing business can be $70,000-110,000.
Business expenses
After the launch, your business will start to work and generate income for you, and to support the electric scooter sharing business, you need to cover current expenses: rent, car expenses, taxes, employee wages, etc. In the table, we calculated the main annual expenses.
| Costs | Description | Total,$ |
|---|---|---|
| Warehouse rental | A room of 30-40 square meters is required for storage, maintenance of scooters (spare parts) and battery charging. The cost of renting premises in the USA is taken from the site | 15000-25000 |
| Car expenses | Expenses for gasoline, spare parts, technical service | 15000-20000 |
| Software fee | Monthly franchise payment for the use of the necessary software | 3600 |
| Insurance | Property and general liability insurance | 500-1000 |
| Update of spare parts fund | Headlights, stops, wheels, humpers, brake systems, other parts with high wear and tear | 12000-14000 |
| Taxes | 320000-420000 | |
| Wages (charges) |
|
190000-240000 |
| Accounting, legal services | Providing legal advice, bookkeeping and reporting | 7000-12000 |
The annual costs of running an electric scooter sharing business can be $550,000-700,000.
Income of the electric scooter sharing business
The cost of renting a scooter consists of an unlocking fee of 1 USD and a rate per minute - 0.15 to 0.30 USD. Weather conditions (temperature must be above 0) in the USA allow electric scooter sharing business from March to November (270 days). We subtracted 15% from the season for days with bad weather (rain) when city residents prefer other means of transport. So we have 230 days. From the experience of our customers, we know that 1 scooter can bring from 70 dollars a day. 50 scooters can bring in a season from $100,000 monthly income, or $1,200,000 per season.
So, the electric scooter sharing business is a highly profitable type of business, because in our case, the income from renting 50 scooters allows to return the initial investment for starting the business ($70,000-110,000) and cover the main current costs of running it ($550,000-700,000) per season.
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