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Uber Plans to Shift Focus to Electric Scooters & E-Bikes for Short City Trips

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【Summary】With Uber vehicles clogging city streets and the company itself being blamed for increasing traffic in some cities, the company is taking action. Uber is planning an emphasis on electric scooter and e-bikes instead of cars in cities, according to Uber CEO Dara Khosrowshahi.

Eric Walz    Aug 27, 2018 12:26 PM PT
Uber Plans to Shift Focus to Electric Scooters & E-Bikes for Short City Trips

With thousands of Uber vehicles clogging city streets, the company itself is being blamed for increasing traffic in some cities. Now Uber's CEO is taking action. Uber is planning an emphasis on electric scooters and e-bikes instead of cars as a transportation option. Speaking with the Financial Times, Uber CEO Dara Khosrowshahi said more individual modes of transport, such as electric scooters and bicycles, were better suited for crowded city centers.

"During rush hour, it is very inefficient for a one-ton hulk of metal to take one person 10 blocks," Khosrowshahi told the Financial Times. "We're able to shape behaviour in a way that's a win for the user. It's a win for the city.

Khosrowshahi is aware that the move would take revenue away from Uber's drivers.

He admitted that, in the short term, the move would mean a further financial hit for a company that had losses of over $4 billion last year.

"Short-term financially, maybe it's not a win for us, but strategically long term we think that is exactly where we want to head." he said.

Ahead of Uber's highly anticipated IPO, Mr Khosrowshahi said investors had to be aware that short-term losses were necessary to achieve longer-term goals — and part of that was a focus away from cars in crowded city centers.

Uber has yet to turn a profit as it looks to a 2019 IPO. Last week, the company hired a new CFO Nelson Chai, a position that remained vacant since 2015, when former CFO Brent Callinicos departed for personal reasons.

Electric Scooters are a Growing Trend

Electric scooter and e-bikes are a growing trend in cities with startups Lime, Bird, Jump, and others flooding cities nationwide with hundreds of scooters and bikes that can be unlocked with a smartphone app for short trips. The influx of electric scooters created some unexpected new competition for Uber, leading to its acquisition of Jump this year as it looks to keep riders on its platform.

Uber acquired New York-based bike-sharing company Jump for about $200 million in April. Jump's electric bikes are available in eight U.S. cities, including New York, Washington and Denver. Riders in these cities can select a Jump bike option directly from the Uber app.

Uber's main rival Lyft purchased Motivate this year, the parent company that operates New York's Citi-Bike for a reported $250 million.

uber bike nyc.jpg

Uber CEO Dara Khosrowshahi announcing the launch of Jump in Washington DC

Uber also invested over $300 million in electric scooter company Lime, as well as Masabi, a London-based app that provides mobile ticketing for public mass transit, with the aim of building what he calls an "urban mobility platform".

Mr Khosrowshahi said no single product would serve the $6 trillion global mobility market and that the "ultimate competition" for Uber was personal car ownership, which Uber would try to disrupt in any way possible.

Helping Uber Drivers in the Long Term

Khosrowshahi believes the switch to alternate modes of transportation will help its driver partners to earn more, adding that Uber drivers would eventually warm up to the idea. He said Uber drivers acknowledge that offering electric scooters and bicycles would reduce demand for short rides, leaving them available to complete longer, more lucrative trips instead.

Khosrowshahi foresees that completing these longer trips might be easier—if roads were less congested with Uber vehicles vying to complete short trips.

"When I've spoken to our driver partners about it, the first impression was, why are you bringing in a bike to compete against me?" Khosrowshahi said. "The second impression after the conversation is, oh, I get a longer ride where I can make more money? Sign me up."

Khosrowshahi admitted that Uber makes less money from a bike ride than from the same journey in a car, but said he expected that impact to be offset if customers used the app for more trips on a regular basis, an effect the company has already seen with cyclists in San Francisco.

"We are willing to trade off short-term per-unit economics for long-term higher engagement," said Mr Khosrowshahi. "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."

Along with the company's longer term goals, Uber's decision to emphasize bikes and scooters might have been influenced by pushback from city officials, such as in New York, where earlier this month the city council voted to cap the number of Uber driver's operating in the city. In New York, Uber is being blamed for an increase in Manhattan traffic—with thousands of Uber vehicles clogging city streets each day.

New York City has more than 80,000 app-based cars, up from 12,600 since 2015, according to the New York City Taxi and Limousine Commission.

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