Scooter Wars and Investing in the Sharing Economy

If you live in a major U.S. city, there’s a good chance you found yourself pondering at some point recently, “What the heck is the deal with all these scooters?”

In what’s been referred to as the “scooter wars,” the “scooter invasion,” and even “Scootergeddon,” city streets across the country have been flooded with thousands of rentable electric scooters over the last several months.

The domineering company in the scooter wars so far is Bird, founded by former Uber and Lyft executive Travis VanderZanden. The dockless scooter company, aptly dubbed the “Uber of scooters,” now operates scooter sharing in at least 22 U.S. cities.

Download the Bird app, find a scooter to unlock, and you’re ready to start riding. It’s really as simple as that.

Already valued at $2 billion, Bird is just one of several competing dockless scooter companies, part of a new trend known as micro-mobility. The business model is not without controversy, as there’s plenty of user abuse, but at as little as $0.15 a minute and just $1.00 to unlock, there’s little to complain about from a value perspective.

While private investors are going gaga over Bird and competing companies Lime and Spin, though, public investors are unfortunately stuck waiting on the sidelines. That may or may not be a good thing depending on how you see it, as the companies carry a very high risk, with scooters already being banned or impounded in San Francisco and Denver.

Yet while dockless scooter companies don’t yet represent a viable investing opportunity for the average Joe, they further highlight a growing trend in consumer habits, particularly amongst millennials and the emerging Gen Z: the propensity to rent rather than to own.

It’s Not Just Scooters…

Often referred to as the “sharing economy,” this growing trend is one that investors should be paying plenty of attention to, as it continues to disrupt existing business models at an unprecedented scale.

Take what happened to the taxi industry after the emergence of ride-hailing apps.

In San Francisco, the launch pad for ride-hailing services like Uber and Lyft, the average monthly trips per city taxi plummeted 65% between 2012 and 2014.

In New York City, the price of a single taxi medallion fell from $1.32 million to as little as $650,000 between 2013 and 2018.

And in Chicago, 42% of Chicago’s licensed taxis are now inactive.

This level of disruption has had a clear impact on select public stocks, even while Uber and Lyft have remained private. Medallion Financial Corp. (NASDAQ: MFIN), for instance, has provided a compelling short opportunity for investors over the last five years.

The company, which finances private transportation, has been defenseless against the sharing economy, as its stock has plummeted 68% since 2013.

Then there’s Avis Budget Group, which bought car-sharing company Zipcar in January 2013. Investors watched shares skyrocket following that purchase, from $21.00 a share to $68.00 a share over a period of just 20 months.

Shareable transport has also had a negative impact on the auto industry. As Navigant Research reports, millennials have a lower rate of car ownership than previous generations did at their age.

There are a variety of reasons why this may be the case, but easily accessible ride and car sharing are certainly contributing factors.

Big Auto has already begun to embrace millennials’ lack of purchase commitment as an inevitability. Volvo, for one, has begun offering subscription services for its vehicles. It’s kind of like leasing a car, but with much more flexible terms.

The ultimate goal, though, is for auto companies to offer subscription services for automated ride-hailing services. Among other auto companies, Ford (NYSE: F) has made entirely clear in its last couple of conference calls that it intends to develop an autonomous taxi fleet.

As wild as it might seem, this is among the top ambitions of today’s auto and tech giants. Alphabet (NASDAQ: GOOG)-owned Waymo is actually launching a hailable fleet of self-driving minivans by the end of the year. 

Needless to say, these efforts are going to spark a wide array of investment opportunities (and pitfalls) for investors, so it will pay to keep on top of those developments. Not only will this new model of transport have a profound impact on Big Auto, but it will also prove a major boon for supplier stocks and other auxiliary industries.

5G: The Foundation of Our Shareable Future

The single most obvious auxiliary industry for the shareable economy will be mobile connectivity, as demands for asset tracking and data transfer are becoming increasingly robust. According to Intel (NASDAQ: INTC), for instance, an autonomous car will use 4,000 GB of data per day.

All you need to do is compare that to your current mobile data plan to realize that today’s networks simply cannot support the inevitable proliferation of autonomous vehicles and robo-taxi fleets.

As Forbes reports, “Autonomous cars won’t work until we have 5G.”

And as Business Insider rightly claims, “5G will drive the adoption of self-driving cars.”

Of course, shareable goods will extend beyond robo-taxis, as we’ve seen recently with the scooter invasion. There’s no telling yet exactly which industries remain to be impacted, but we can be certain that advances in mobile connectivity will drive new business models along the way.

For investors, today’s course of action should be obvious enough: Find the 5G stocks poised to skyrocket and begin profiting off the economy of tomorrow, today.

Until next time,

Jason Stutman

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