Micromobility is doing just fine!

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Micromobility's Near Curtain Call

Several large, well-capitalised and public companies have tried and failed, which looked like the curtain call of micromobility. 

Players in this space have typically focused on a pre-dated concept of inflated revenue with profitability out of line of sight. They employed what we refer to as a "dynamic doom duo" approach—an unsustainable combination of dockless systems and low-cost e-sooter designs. This mix, while initially promising for rapid expansion, led to increased vandalism and high recovery costs. As a result, the asset lifespan was significantly reduced, ultimately preventing the companies from recouping their initial investment in the vehicles.

Compounding these issues, the companies were not attuned to the evolving regulatory landscape across different cities, states, and countries. By failing to adapt to these varying regulations, they inadvertently found themselves at odds with regulators, creating additional hurdles for their operations.

Companies rushed to expand across new markets without first securing profitable economics in their initial cities. Minimal effort was made to profile and understand true demand clusters, resulting in fleets being haphazardly scattered. This approach, favoring rapid horizontal growth over sustainable operations, eventually spiraled into a downward trajectory for the business.

There it is, unit economics going bust– leading investors to either write off the space entirely or view it solely as an impact-driven story.

While the challenges in micromobility have been evident, the story of micromobility is far from over. The demand for efficient, eco-friendly urban transportation continues to grow, driven by rising urbanization, sustainability goals, and changing consumer preferences. The challenges faced by current players are tough but not impossible to overcome.This underscores opportunities for innovation and operational efficiency improvements, paving the way to build profitable and scalable businesses.

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Success Mantra: Top-Line is Vanity, Bottom-Line is Sanity 

Finding the Right Balance: Vertical Integration vs. Hybrid Ops 

From a unit economics standpoint, it’s essential to profile the target geography and determine the approach that best aligns with the desired economics and scale. 

A one-size-fits-all strategy won’t work across different countries and cities. For a successful model, it’s critical to recognize that technology and operations are deeply interconnected, both playing key roles in achieving the desired scale. With operations at the forefront, adopting a fully franchised approach would reduce control over on-ground execution, limiting the operational finesse needed to refine the model and drive scalable growth.

Regardless, the operational nuances of this industry demand a hyper-local approach, where each geography (right till city level)  requires detailed profiling and a tailored strategy.

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Vertically-integrated Ops @ Scale

Here the on-ground operations are controlled by the company with the company having complete visibility and authority.A vertically integrated operations model creates a virtuous cycle that drives both top-line growth and bottom-line efficiency. This approach hinges on two key factors:

• Highly efficient operations, which improve vehicle availability and attract rider preference, thereby boosting demand
• Reduced operational costs, which support profitability and faster fleet expansion. Together, these factors allow for lower rider costs and increased demand, reinforcing the cycle of growth and efficiency

Vertically integrated mobility businesses enhance efficiency through improved coordination and optimization of operations. By managing various components of the mobility value chain—such as fleet management and ride-hailing—these businesses streamline processes, reduce redundancies, and eliminate inefficiencies associated with multiple external partners. This agility and ability to innovate across the value chain can provide a competitive edge and keep the business at the forefront of the market.

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Hybrid Ops @ Scale

• Leveraging local expertise for expansion into long-tail cities

Fleet managers bring valuable insights and on-ground experience that are critical for scaling operations into long-tail cities—those with smaller populations and unique market characteristics. Their familiarity with these locations allows them to anticipate local challenges and opportunities, enabling them to adjust operations and deploy fleets more effectively in these markets. This tailored approach not only enhances efficiency but also supports sustainable growth in underserved areas.

• Outsourcing for Cost Efficiency and Flexibility

In long-tail cities, outsourcing operational costs to fleet managers can be a strategic move to reduce expenses. A revenue-sharing model can be implemented, where fleet managers retain an initial share of revenue, providing them with incentive and accountability. Additionally, fleet managers can handle initial infrastructure investments, allowing for a leaner, more scalable model that requires less capital investment while maintaining effective control over fleet operations.

Even while adopting a hybrid strategy it is essential for the company to maintain visibility into operations. This requires the company to provide an end-to-end tech stack, adaptable form factors, and advanced analytics—all seamlessly integrated with the local fleet operator’s processes.

This strategy enables a cost-effective "land and expand" approach, allowing the company to enter new cities and markets with minimal upfront investment. As the business scales and targets specific economics, it can continue hybrid or transition to a fully vertically integrated operations model.

Note: We've found that businesses succeed when they establish a vertically integrated playbook for specific geographies, creating a strong foundation from which hybrid operations can then expand into targeted regions. A full pivot to a hybrid model is not recommended; it's essential to retain certain key geographies under a vertically integrated model, allowing the company to maintain full control and achieve favorable unit economics.

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Robust Technology Stack

Conversely, a robust technology stack is essential to support this model and enable operational scalability.

Software

IoT forms the foundational layer

The micromobility market using IoT is expected to reach $26B in less than decade and is growing at a CAGR of  ~17%. This helps address key aspects: 

• User Experience: IoT facilitates effortless connectivity between the vehicle and the user. This allows for real-time tracking of the vehicle's location, providing users with easy access and ensuring that demand-based distribution is optimized.
• Improved Internal Process: IoT allows real-time monitoring of each and every vehicle that is deployed on ground and can track the health and performance of the vehicle. This will further help the company to preempt timely servicing, maintenance and repair of vehicles. 

In addition, it also tracks how each user treats the vehicle which helps understand product usage and improve performance. 

Data, data, data

Cloud computing and machine learning are the brains behind the IoT which makes the software “smart”. This system extracts and analyzes data from various stages of the mobility value chain to enable comprehensive analytics and data integration. This data-driven approach supports informed decision-making, optimizes resource allocation, and fosters the development of customized services that better address customer needs.

Hardware

As much as the software, we can’t stress enough how important it is to build reliable hardware. The form factors need to be purpose-built which should suffice all the conditions across geographical presence. 

Recognising that vandalism is an inherent challenge in this industry, it's crucial to design or co-develop purpose-built vehicles with the right partners to ensure a longer asset lifespan that aligns with a reasonable payback period. 

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Establishing a Multi-modal Strategy

Adopting a multi-modal approach enhances user engagement by increasing touchpoints, offering a broader range of use cases for different Ideal Customer Profiles (ICPs), and improving overall user experience.

Multi-modal → Boost Interactions→ Increased Utilization → Drive Revenue

By providing multiple mobility options within a single platform, users interact more frequently, attracting a larger customer base and facilitating cross-mode bookings. This diversified offering also helps offset potential substitution effects, ultimately driving up net revenue for the platform.

There are different strategies can be employed to embrace a multi-modal approach:

Partnerships

• Establish partnerships with operators across diverse mobility solutions, integrating both their services and third-party offerings into a single app
• These partnerships may span private mobility (e.g., micromobility,  ride-hailing) or public systems (e.g., public transportation)
• Compared to launching new mobility form factors, this approach is faster and requires less capital investment
• Many mobility platforms are embracing multimodal partnerships to expand their audience reach and enhance user convenience

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Launching new form factors 

• Here, the micromobility operator introduces a multi-modal fleet featuring various vehicle types and designs. Compared to partnerships, this is a slow & capital intensive strategy 

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Case in point | Yulu

Yulu is India’s largest scalable and sustainable solution for short distance urban commutes, complimenting mass-mobility. The company provides an economical, and regulated solution network to the urban mobility landscape via an intelligent dynamically-balanced on-demand network of smart electric bikes. 

While many peers in the US and European markets have struggled, Yulu has successfully cracked the micromobility code, and that too in India. From the outset, its strategy was to prioritize depth over breadth, focusing on building a robust foundation with profitable unit economics rather than rapid expansion. 

Yulu has excelled in every aspect by implementing a strategic playbook centered on docked stations, building a strong presence in micro-markets and driving deeper market penetration.  The company implemented vertically integrated operations to establish a strong presence in key cities, and later by incorporating hybrid operational models to expand effectively into smaller, long-tail cities and achieve scale. At the core of Yulu's operations is a robust, end-to-end technology stack that seamlessly integrates every element of its ecosystem. Leveraging advanced AI and ML capabilities, the platform drives operational efficiency, ensuring scalability and precision across its tech-powered business model. On the hardware front, Yulu has forged an industry-defining partnership with Bajaj to develop 100% homegrown, purpose-built form factors. These vehicles are designed not only to withstand but to excel on Indian roads, ensuring significantly longer asset lifespans. Demonstrating a well-executed multi-modal strategy, Yulu has introduced variants tailored to serve its diverse ICPs across both B2C and B2B segments effectively.

Furthermore, Yulu is reinforcing its leadership in the Energy-as-a-Service industry through its collaboration with Magna by establishing India’s largest battery-swapping network.

Yulu  deploys 40K+ bikes per month, across people and goods mobility. The company is present in 13 cities, has reached a scale of $30M ARR and achieved EBITDA profitability.