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A new battlefront in the scooter wars
The Trump administration’s latest trade penalties against China could siphon millions of dollars from Silicon Valley’s latest darling: electric scooter startups. Since most US e-scooter companies rely on vehicles manufactured in China, the most recent slew of tariffs to go into effect could slam the brakes on the budding two-wheeled revolution.
"The taxes are coming at a moment when the fledgling industry already has a lot to handle"
On August 7th, the administration announced that it will be placing a 25 percent tariff on $16 billion in Chinese goods, bringing the simmering trade war with China to a boil. The tariffs are the second round of taxes that the US has imposed on Chinese goods — the first was slapped on $34 billion worth of Chinese products in July. On the proposed list of affected goods, sandwiched between special purpose motor vehicles and refrigerated vessels, is HTS code 8711.60.00, described as “Motorcycles (incl. mopeds) and cycles, w/electric motor for propulsion.” In other words, electric bicycles and scooters.
The US will start enforcing the tariff on August 23rd. And the timing isn’t exactly ideal. The taxes are coming at a moment when the fledgling industry already has a lot to handle.
Since descending upon San Francisco last March, electric scooters have swarmed more than 20 cities across the US, from Miami to Salt Lake City. The dockless two-wheelers have been sold as a way to ease gridlock while letting riders zip through streets with pizazz. “Ride your way,” the San Francisco-based Spin promises. Over the past few months, Bird raised $400 million and leapt to a $2 billion valuation. Spin began by peddling shared bikes, but quickly pivoted to scooters. Uber and Lyft made their intentions clear when the ride-share titans both applied for one of five coveted permits to operate scooters in San Francisco.
Embracing a mantra popularized by Uber (“don’t ask for permission; beg for forgiveness&rdquo, scooter startups have followed a pattern: dump vehicles in a city, raise demand, and then watch as local governments try to corral the chaos. But, like any good Newtonian physicist will tell you, a sudden, explosive force will be met with equal resistance. And that resistance is starting to add up — cease and desist orders, city-wide bans, and a torrent of criticism. That’s a lot of troubleshooting to manage even without a significant import tax.
"The majority of the startups battling for scooter supremacy use vehicles manufactured in China"
The majority of the startups battling for scooter supremacy use vehicles manufactured in China. Bird, Lime, and Spin work with Segway-Ninebot, a Beijing-based subsidiary of Xiaomi. Earlier this summer, Quartz reported that both Bird and Spin imported some of their scooters under a variant of HTS code 8711.60.00.
If the tariffs had been in place over the last six months, companies would certainly have felt their wallets get lighter. According to PIERS import data, during that time, the US imported around $61 million worth of goods from China under the e-scooter description. A 25 percent tariff would have raised costs for scooter importers by over $15 million.
That’s a lot of money when you consider what makes scooters such a hot-ticket item for entrepreneurs: they’re relatively cheap and easy to manufacture. Right now, a Chinese-made scooter costs each company around $400. Add a 25 percent import tax, and you’re looking at a final cost of $500.
“If you raise the cost of capital by 25 percent, there’s no question that it will slow the spread, city to city, of these things,” says Michael Ramsey, a transportation analyst at Gartner. “And it might change the dynamics of how much [companies] can charge.”
To offset that bump in capital, transportation experts say that startups will most likely have to charge consumers more per ride. (That or pilfer their own VC funds.) Right now, customers unlock the vehicles using a smartphone app for $1, with an additional 10 to 15 cent cost for each minute spent riding.
Some companies are brushing off the import tax with characteristic tech-bubble braggadocio. “We don’t see this affecting growth,” says Derrick Ko, CEO and co-founder of Spin. “We have built our business model to allow us to be flexible to price increases over time in terms of hardware costs. While we would rather not be hit by tariffs, it’s not the end of the world if they do come down.”
"“The tariffs might actually make [companies] be a little bit more strategic.”"
But others seem to take the potential tariff seriously. In a letter to Robert Lighthizer, the United States trade representative, Lime CEO Toby Sun called the proposed tariffs “misguided,” claiming they would result in increased prices for the public. On July 25th, Daniel Harman, vice president of Bird, testified against the tariff in Washington alongside members of the e-bike industry. Electric bicycles are imported under the same tariff code as e-scooters.
“Trade policies that raise costs for riders and hurt potential job creation are detrimental to advancing smart transportation solutions,” says Mary Caroline Pruitt, communications manager at Lime, in an emailed statement.
Lime, Bird, and Lyft did not make company officials available for interviews. Uber did not respond to The Verge’s request for comment.
Sarah Catz, a transit researcher at UC Irvine, thinks that the tariffs might bring an unintended benefit for companies whose dump-and-run approach has rubbed city officials the wrong way. “The tariffs might actually make [companies] be a little bit more strategic,” she says. “Because costs are going up, they’re going to need to not just carelessly dump scooters in a city and think that’s okay. They’re not going to want to waste them.”
But Ramsey isn’t ruling out the possibility that struggling against a huge headwind from cost (at the same time that cities are tightening their regulatory clamps) might just be enough to snuff the scooter wars out.
“The municipal regulation combined with, all of a sudden, the cost jumping 25 percent has the potential to get the legs out from this industry before it even got anywhere,” he says.
And which companies — the scrappy upstarts or the established disruptors — are the most vulnerable? “It’s not the big guys,” says Ramsey. “It’s the little guys. They’re the ones who take the punishment.”
https://www.geezgo.com/sps/35507
The Trump administration’s latest trade penalties against China could siphon millions of dollars from Silicon Valley’s latest darling: electric scooter startups. Since most US e-scooter companies rely on vehicles manufactured in China, the most recent slew of tariffs to go into effect could slam the brakes on the budding two-wheeled revolution.
"The taxes are coming at a moment when the fledgling industry already has a lot to handle"
On August 7th, the administration announced that it will be placing a 25 percent tariff on $16 billion in Chinese goods, bringing the simmering trade war with China to a boil. The tariffs are the second round of taxes that the US has imposed on Chinese goods — the first was slapped on $34 billion worth of Chinese products in July. On the proposed list of affected goods, sandwiched between special purpose motor vehicles and refrigerated vessels, is HTS code 8711.60.00, described as “Motorcycles (incl. mopeds) and cycles, w/electric motor for propulsion.” In other words, electric bicycles and scooters.
The US will start enforcing the tariff on August 23rd. And the timing isn’t exactly ideal. The taxes are coming at a moment when the fledgling industry already has a lot to handle.
Since descending upon San Francisco last March, electric scooters have swarmed more than 20 cities across the US, from Miami to Salt Lake City. The dockless two-wheelers have been sold as a way to ease gridlock while letting riders zip through streets with pizazz. “Ride your way,” the San Francisco-based Spin promises. Over the past few months, Bird raised $400 million and leapt to a $2 billion valuation. Spin began by peddling shared bikes, but quickly pivoted to scooters. Uber and Lyft made their intentions clear when the ride-share titans both applied for one of five coveted permits to operate scooters in San Francisco.
Embracing a mantra popularized by Uber (“don’t ask for permission; beg for forgiveness&rdquo, scooter startups have followed a pattern: dump vehicles in a city, raise demand, and then watch as local governments try to corral the chaos. But, like any good Newtonian physicist will tell you, a sudden, explosive force will be met with equal resistance. And that resistance is starting to add up — cease and desist orders, city-wide bans, and a torrent of criticism. That’s a lot of troubleshooting to manage even without a significant import tax.
"The majority of the startups battling for scooter supremacy use vehicles manufactured in China"
The majority of the startups battling for scooter supremacy use vehicles manufactured in China. Bird, Lime, and Spin work with Segway-Ninebot, a Beijing-based subsidiary of Xiaomi. Earlier this summer, Quartz reported that both Bird and Spin imported some of their scooters under a variant of HTS code 8711.60.00.
If the tariffs had been in place over the last six months, companies would certainly have felt their wallets get lighter. According to PIERS import data, during that time, the US imported around $61 million worth of goods from China under the e-scooter description. A 25 percent tariff would have raised costs for scooter importers by over $15 million.
That’s a lot of money when you consider what makes scooters such a hot-ticket item for entrepreneurs: they’re relatively cheap and easy to manufacture. Right now, a Chinese-made scooter costs each company around $400. Add a 25 percent import tax, and you’re looking at a final cost of $500.
“If you raise the cost of capital by 25 percent, there’s no question that it will slow the spread, city to city, of these things,” says Michael Ramsey, a transportation analyst at Gartner. “And it might change the dynamics of how much [companies] can charge.”
To offset that bump in capital, transportation experts say that startups will most likely have to charge consumers more per ride. (That or pilfer their own VC funds.) Right now, customers unlock the vehicles using a smartphone app for $1, with an additional 10 to 15 cent cost for each minute spent riding.
Some companies are brushing off the import tax with characteristic tech-bubble braggadocio. “We don’t see this affecting growth,” says Derrick Ko, CEO and co-founder of Spin. “We have built our business model to allow us to be flexible to price increases over time in terms of hardware costs. While we would rather not be hit by tariffs, it’s not the end of the world if they do come down.”
"“The tariffs might actually make [companies] be a little bit more strategic.”"
But others seem to take the potential tariff seriously. In a letter to Robert Lighthizer, the United States trade representative, Lime CEO Toby Sun called the proposed tariffs “misguided,” claiming they would result in increased prices for the public. On July 25th, Daniel Harman, vice president of Bird, testified against the tariff in Washington alongside members of the e-bike industry. Electric bicycles are imported under the same tariff code as e-scooters.
“Trade policies that raise costs for riders and hurt potential job creation are detrimental to advancing smart transportation solutions,” says Mary Caroline Pruitt, communications manager at Lime, in an emailed statement.
Lime, Bird, and Lyft did not make company officials available for interviews. Uber did not respond to The Verge’s request for comment.
Sarah Catz, a transit researcher at UC Irvine, thinks that the tariffs might bring an unintended benefit for companies whose dump-and-run approach has rubbed city officials the wrong way. “The tariffs might actually make [companies] be a little bit more strategic,” she says. “Because costs are going up, they’re going to need to not just carelessly dump scooters in a city and think that’s okay. They’re not going to want to waste them.”
But Ramsey isn’t ruling out the possibility that struggling against a huge headwind from cost (at the same time that cities are tightening their regulatory clamps) might just be enough to snuff the scooter wars out.
“The municipal regulation combined with, all of a sudden, the cost jumping 25 percent has the potential to get the legs out from this industry before it even got anywhere,” he says.
And which companies — the scrappy upstarts or the established disruptors — are the most vulnerable? “It’s not the big guys,” says Ramsey. “It’s the little guys. They’re the ones who take the punishment.”
https://www.geezgo.com/sps/35507
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