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Saturday, June 02, 2018

The Urban Economics of "The Bird"

I live close to UCLA and the streets of Westwood are covered with "The Bird".   These are scooters that travel at a speed of up to 15 MPG and cost $1 to rent and 15 cents per minute of use.  The Bird is produced by Xiaomi (a Chinese company).  My rough guess is that it costs this company $250 to make this product.

Let's do some arithmetic about the operating profit per bird.

Let there be sunshine for 12 hours a day so there are 720 minutes of sunshine a day. It rarely rains in LA.  Let the "occupancy rate" for the typical Bird be 5%.    Let the typical trip take 5 minutes.

So, the typical bird makes (1/20)*(720/5) trips per day= 7 trips per day.  That sounds pretty low to me but let's work with this.

The expected revenue per day per bird = 7*1 + 7*.15*5 =  $12.25

Now keep in mind that unlike UberX , you do not pay the driver (you are the driver) and there is no parking cost.

Suppose that your Bird lives for 1 year.  Your expected revenue  = 365*12.25 =  $4,471

What are your costs?  You must buy the bird and fuel the bird. 

Here is a piece describing the urban economics of fueling the bird.   The bird's App signals that it is low on electricity.  A pickup truck swings by driven by a "gig economy" person who then takes them home and used special equipment to recharge them. Once they are recharged, they are redeployed.

If I am right about the expected revenue per Bird, then even if the refueling guys are expensive this is still a profitable enterprise.

If these "birds" could be fitted with solar panels to recharge themselves, then the middle men refuelers could also be cut out from this chain.

As I watch the young people at UCLA use these, I see that this is a popular alternative for UberX for short rides.   If young people originate and end their trips in central locations then the next user of the Bird will easily find one and the utilization rate (my 5% listed above) could increase.