Shared Mobility Subsidies Dry Up, Revealing the Industry’s Economic Realities

Companies are looking to generate profits, but customers have come to expect low-cost, subsidized travel and raising prices will prove challenging.

2 minute read

August 16, 2019, 6:00 AM PDT

By Camille Fink

Uber Jump bike

paul.wasneski / Flickr

Alana Semuels reports that shared mobility operators are facing a conundrum: how to start becoming profitable and meet the demands of stakeholders without losing the customers who have become used to cheap travel.

As these companies go public, the venture capital that allowed them to heavily subsidize travel options—by car, bike, and scooter—is disappearing. To turn a profit, they will have to raise prices, says Semuels:

[Sam] Korus, the analyst, thinks that shared scooter companies in particular are in trouble as subsidies come to an end. By his math, it costs scooter companies like Bird $2.55 per mile to rent dockless scooters to customers. Before they raised their prices, these companies were generating just $2.43 in revenue per mile, he says, meaning they will eventually have to raise prices to make money. But as they do, fewer people will use the service.

For some customers, purchasing their own devices is a more cost-effective option. Others will just stop using those services and revert to transportation modes they used before, such as walking or transit. Monthly passes or subscriptions are one strategy companies are considering to hold on to customers, and public subsidies are another possibility.

But the economic viability of shared mobility remains uncertain, says Semuels. "While we’re in an economic expansion at the moment, these companies appear particularly vulnerable to the threat of an economic slowdown. If another recession is coming, as observers like presidential candidate Elizabeth Warren have warned, consumers may be even less willing to pay for rides and other shared services once subsidies disappear."

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