Scooters have taken the world by storm, and Bird, Lime, and their competitors are capitalizing on a growing market that would rather scoot around a city than drive or ride public transportation. And, the argument goes, scooters also help the environment by reducing carbon emissions, so it’s a win-win.
But so far, neither Bird nor Lime have found a way to win big. Last year, The Information published a presentation that Bird reportedly gave investors, which revealed the company had a gross profit margin of 19% on its rides. But when operational costs are factored in–like employee costs, rent, and other expenses–the company was hemorrhaging cash, according to a Crunchbase report from last year.
That’s some eye-opening context to the company’s Wednesday announcement that it will sell its newest scooter directly to the public. When it’s released this summer, the Bird One scooter will cost an eye-popping $1,300 and come in a choice of Jet Black, Dove White, and Electric Rose. And, of course, Bird noted, preorders are available immediately.
What is Bird thinking?
The company has not only built its business on scooter sharing, but its customers have been conditioned to share–not buy–scooters.
And though a ride costs less than a latte, for scooter companies, the opportunities are clear. In an interview with Inc. earlier this year, mobility analyst Horace Dediu said the market opportunity for scooter companies is huge. “We’re talking trillions of dollars,” he said.
But, that price.
At $1,300, Bird is asking consumers to drop a considerable amount of cash to buy an electric scooter that they could otherwise rent–just down the street, from Bird, no less–for $1. (They then pay a nominal fee–15 cents–for every minute they’re rolling around town.)
According to the presentation published in The Information, Bird users’ average ride came to $3.65, so they’d need to be serious scooter user to come anywhere close to spending $1,300 in rental fees.
Yet heavy Bird users already have a way to subsidize their two-wheeled addiction. Just last week, the company unveiled a new rental program that lets customers ditch the per-ride charge and pay a flat, $25-per-month fee to ride its shared scooters. The program, which will be tested in San Francisco and Barcelona before it rolls out globally, allows for unlimited rides.
“Renting a Bird for an entire month of unlimited use will cost less than just a couple of ride hail trips or parking garage days in most cities,” Bird CEO Travis VanderZanden said at the time.
At an annual cost of $300 per year, Bird’s personal rental program would require four years of monthly participation before it would be smarter to shell out $1,300 for a Bird One to call your own.
But the move to sell scooters also brings Bird new competition, now coming from the retail scooter market.
For example, Chinese electronics maker Xiaomi sells a long-range, high-end scooter called the Mi Electric Scooter for $448 on Amazon. Meanwhile, the top-of-the-line Swagtron 5 Elite, a scooter designed for heavy city use, will set riders back $350. The Swagtron Swagger 2 Classic, meanwhile, is designed for both adults and children and goes for $200.
Yet it’s likely that Bird isn’t thinking of consumers’ pockets, as much as it’s thinking of its own. (Bird did not respond to Fortune’s request for comment.)
Until now, the company hasn’t had much trouble funding its business. According to Crunchbase, it’s raised $415 million across five investment rounds and most recently secured a $2 billion valuation.
But eventually, investors want to see a game plan for actually generating profits. And the more of its own cash that Bird can use to fund its business, the less it’ll need to raise next time around. Making more money, in other words, is critical.
Bird ostensibly believes that selling a wildly expensive scooter is the path to that. The company told investors last year, according to The Information, that it pays $551 for each scooter. Assuming a similar cost on the Bird One, the company could stand to make hundreds of dollars on each sale and boost margins.
In an interview with The Verge, Bird’s CEO Travis VanderZanden said the move makes sense. He said his company’s goal is to “not just do sharing, but to do sharing, rent, and own.”
He’s now gotten his wish. The next question is, will it pay off?