Shared mobility tenders and regulations are now quite common across Europe. However, the availability and impact of tenders are not equally spread across modes. That’s why we invited the shared mobility data specialists from Fluctuo to share their thoughts in this guest article. They highlighted top-level insights and answered some of the most frequently asked questions regarding tenders. The authors, Julien Chamussy and Harry Maxwell, focus on shared micromobility tenders, as they are more frequent, whilst also sharing select thoughts on carsharing tenders too. Additionally, they take a deeper look at shared kick scooters in Bordeaux and Oslo and how tenders affect user behaviour and ridership.
- Q1: Why do cities regulate shared mobility markets?
- Q2: Are tenders for car-sharing as important as they are for micromobility?
- Q3: What are the consequences for operators who lose tenders?
- Q4: Do tenders improve or limit market development?
- Q5: Do tenders accelerate or hinder innovation?
- Q6: What are the most important criteria in winning tenders?
- Q7: Do current operators tend to win?
- Case Study 1: Bordeaux
- Case Study 2: Oslo
- Key Takeaway
Why do cities regulate shared mobility markets?
There are a number of reasons why regulating shared mobility can be beneficial:
- Limit the number of vehicles in the city. The number one reason why cities create tenders is to limit the number of vehicles in the streets. If we’re talking about kick scooters, they could be perceived to litter pavements or collect in areas that become a nuisance. Cities tend to limit the number of vehicles in the streets to strike a healthy balance between daily usage and occupation of public space.
- Reduce the number of operators. If many operators share a small fraction of the total number of vehicles, they won’t have enough vehicles to achieve economies of scale and run profitable operations. This also has a significant impact on the quality of service: operators are more likely to invest in the city when they know they have a 2 or 3-year contract (or more).
- Set objectives for operators. By launching a tender, you can set goals for the selected operators (pricing, parking, inclusivity, operations in specific parts of the cities, CO2 impact) and ensure these goals are aligned with the transportation goals of the city. Part of the tender can also be the requirement to provide the city with data on the estimated emission savings of the operator’s service itself.
- Encourage closer collaboration with cities. When operators have to win a tender process to operate in a city, they will work just as hard to keep it. Cities want shared mobility to be safer, more accessible and more complementary to existing and future public transport offers. To do this, they must benefit from the data of the services, and so a general requirement is that operators must share data related to their operations to inform public policy and planning decisions.
Cities tend to award a small number of licenses to encourage healthy competition between operators – something that operators also appreciate. It results in a higher quality of service for the end user (and makes it easier and less confusing for them), and makes it more likely for the operator to run consistently profitable operations.
Are tenders for car-sharing as important as they are for micromobility?
In short, no. Firstly, car-sharing companies don’t usually deploy thousands of vehicles per city, and there are no problems with sidewalk riding and fewer issues with inconvenient parking, whereas this can be the case for bikes and scooters. Cars must always be parked in car parking spaces, unlike bikes and scooters that are sometimes parked on sidewalks – but occupy the public realm. Car sharing users are also used by (on average) a more mature audience: to use a car you must have a driver’s licence, and you must be over 18. This is not the case for micromobility.
However, car sharing is essential to a city’s mobility offer to reduce a) car ownership and b) private car usage. The rise of new players like MILES Mobility and E-VAI, alongside the traditional players like free2move (and SHARE NOW) and Enterprise Car Club, means that the space is getting more competitive. We could imagine that if cities bring in incentives to promote car-sharing (cheaper parking spaces for shared cars, exclusive parking for shared cars, etc.), tenders could well become as important as for micromobility.
“The permission to operate a free-floating car-sharing business varies from country to country and even from city to city. In Germany, for example, car-sharing is permit-free, meaning there are no restrictions or conditions for operating a free-floating car-sharing business. However, in other countries, such as Italy, car-sharing comes with certain requirements for the company and the service, such as a minimum operating area or number of vehicles. If these requirements are met, the operator can start and get access to special parking regulations. In any case, close cooperation with cities is crucial to promote shared mobility and increase quality of life in cities.”
Sven Heyen, Head of Business Development & Public Affairs at SHARE NOW
There is nothing worse than having a shared mobility service stopped. It sends a message that shared mobility is unreliable, and that people should drive their own cars. A tender is a way to give more visibility to operators and to encourage them to invest, recruit more users and develop usage over the long term. But as the example of SHARE NOW and carsharing in Germany shows, tenders are not the only way to regulate a local shared mobility market.
What are the consequences for operators who lose tenders?
The most obvious consequence is the short-term loss of revenue. When an operator loses a tender and is forced to leave a profitable market, it can be a significant blow – especially for the largest (and most profitable) cities. Then comes the ramp down of existing operations, which can involve layoffs, relocation costs (vehicles, personnel), and any money lost on leases for warehouses, workshops and offices. Some operators have also invested in parking infrastructure for vehicles. The final consequence for the departing operator is that this market may not be up for grabs again for at least 2 or 3 years.
This is one of the biggest problems with some micromobility tenders – they are too short. If we compare the 5, 10 or 15-year contracts awarded to public transport or bike-sharing companies, two or three years isn’t enough time for an operator to make their mark. When an operator is guaranteed to operate for 5 years, they can really go for it, rather than making conservative decisions in the event that they might have to stop operating.
Do tenders improve or limit market development?
Cities and operators usually look at tenders in the same way. Operators like when cities commit to a long term vision – it gives operators time to set up and build a user base to run a financially sustainable business. When a city has this long-term approach, it’s because they see the value that shared mobility can provide in reducing private vehicles and increasing the modal share of sustainable modes. When the city selects operators, it means that they are open for collaboration with these companies, and the dialogues are usually good.
When there are fewer players with more of a market share, it results in ‘friendly’ competition where each service is pushed to innovate to get more trips. Having too many operators makes it difficult for each service to achieve economies of scale, driving down service quality. One operator gives no choice to users, and also means that the operators could lose the desire to innovate (although this is likely not the case, since operators rely on their margins to turn a profit – so continual improvement is a modern operator’s mindset, regardless of the competition).
On a country or continental level, it could be said that tenders limit market development on the operator side. The largest operators have the most money and the existing city references, so they are more likely to be chosen for one of the few licences to operate. Logically, there is less space for the ‘challengers’. That said, local knowledge is key to a successful service, so all hope is not lost for regional or national players.
Do tenders accelerate or hinder innovation?
Picking up where we left off with the previous point, operators are pushed to innovate to stay competitive. We see tenders as an accelerator because when cities have more control over regulations, cities can force would-be operators to adapt to meet the requirements of a tender. Once the services are up and running, amendments to laws might have to be brought in to increase safety (for example), which will push operators to make changes quickly and adapt (e.g. ID Verification). Because tenders are so competitive, each operator must innovate to bring the best, safest technology to win a spot.
What are the most important criteria in winning micromobility tenders?
For most cities, it comes down to five key criteria when choosing a micromobility operator:
– Environmental responsibility: the net impact of their service on the environment (net positive outcome, demonstrated longevity of vehicles, recycling and repair practices)
– Safety: technology that prevents accidents (speeds limited, ability to detect when riding on the pavement, ID verification technology to restrict minors from using services)
– Service level: the ability to provide a high level of service (high fleet availability and good maintenance)
– Commitment to the city: the willingness to invest in the city and be collaborative with city authorities
– Reputation: the ability to point to other schemes that have been successful in cities of a similar size, population density and culture.
Do current operators tend to win?
It’s no surprise that an operator that is currently operating in a city has the upper hand in a new tender process. They are already speaking and collaborating with the public authorities, have an existing user base, and can report on real statistics. For other operators, some of what they submit will be hypothetical – based on their performances in other cities.
Below is a table that shows three cities before and after tenders.
The only ‘newcomer’ in the three tenders was E-dog, a new startup that is a Bordeaux-based company. It is likely that they were chosen because of their local knowledge, as well as to improve the local economy.
At Fluctuo, we looked at two case studies from the kick scooter sharing industry: Bordeaux and Oslo. Using their experience of recent tenders, here are some data-driven key takeaways.
Case study #1 – Kick scooter sharing in Bordeaux, France
Eleven operators across bikes, kick scooters and mopeds used to compete for market share in Bordeaux with only 100 vehicles each. This was neither profitable for the operator, nor manageable from a city perspective.
To improve the quality of service and allow operators to achieve economies of scale, Bordeaux released a tender to allow two operators for each mode (bikes, kick scooters and mopeds).
Now, two kick scooter operators and two bike operators each have 750 vehicles, and the two moped operators will operate 250 vehicles each. Citizens now have more vehicles available to them and, whilst the number of services has been reduced, they still have at least two services to choose from per mode – with the public bike system, V3, always an option.
Key Takeaway: by narrowing the number of operators from 11 to 6, services in Bordeaux were able to improve unit economics and profitability. It also meant fewer vehicles concentrated in the city centre, and a more even coverage of the city.
Case study #2 – Kick scooter sharing in Oslo, Norway
Oslo had an unregulated market, where as many companies could put as many scooters as they wanted in the public domain. Before they introduced a fleet cap, there were more than 16,000 scooters in the streets.
In June 2021, the city decided to award licences to just 3 operators, with a maximum total fleet size of 8,000.
Although the total number of trips slightly dropped, the number of rides per vehicle per day increased from around 4 to 5.5, meaning that the fleet had better utilization and there were less vehicles sitting idle in public spaces.
Outcome: the utilization rate of shared scooters in Oslo increased significantly post-tender, leading to greater profitability per operator and increased sustainability per vehicle.
Tenders can be an essential part of ensuring that shared mobility services contribute to the wider mobility goals of a city. Regulated markets can provide conditions that make it more likely for operators to succeed. When operators run a financially stable service, they are able to provide a great level of service over a long period of time. However, an over-regulation can set operators up to fail: heavy restrictions can result in operators not wanting to enter certain markets out of fear of not being able to reach break even.