Tariffs could put the brakes on booming scooter-sharing industry

Global Business

Waves of electric scooters are rolling over the streets and sidewalks of many U.S. cities. But the trade war between the United States and China could put the brakes on the booming scooter-sharing industry. The made-in-China products could soon be subject to a 25 percent tariff on the imports. Mark Niu has the details. 

Max Ibel rides his electric kick scooter to work because its quick and helps him avoid dealing with parking. He bought his Chinese-made Xiaomi scooter on Amazon. As a venture capitalist, he believes the potential 25 percent tariff on China-made scooters could be problematic.

 “They are all made in China,” said Ibel, Partner at Amino Capital. “It will just get expensive for those companies. Especially if you have a startup that’s operating at the margin, it makes actually a big difference if things are 25 percent more expensive.”

U.S. startups like Bird and Lime have adapted the ridesharing business model to kick scooters, helping thousands of people to get from place to place for just a few dollars.

Once focused on bicycle sharing, the startup Spin is now converting its entire fleet of bikes in more than 70 U.S. markets to electric kick scooters.

“Our revenue, usage on scooters is at least twenty times higher than bikes,” said Derrick Ko, Co-founder & CEO of Spin. “That just shows an extremely strong product market fit. It’s something that people want to use. When tariffs come into play, and if they do, it’s just a bump on the road.”

Electric kick scooters would likely fall under the tariff category listed as motorcycles, including mopeds and cycles with electric motor for propulsion.

Spin is currently using Ninebot scooters, which are made in China and owned by Xiaomi. 

“We definitely don’t expect ultimately to change the business model too much.  We don’t intend on passing the cost down to our riders,” said Ko. “In parallel, we are looking at trying to explore other options, should the tariffs… if and when they do hit us, try to reduce the impact of that by looking at U.S. manufacturing.” 

With a new headquarters in San Francisco, another transport startup is eyeing the market. Shared electric scooter maker and electric bike maker Scoot is about to enter the kick scooter arena.

Founder Michael Keating doesn’t think the tariffs will dramatically impact their bottom line.

“One of the great strengths we’ve seen from China is producing a lot of great, small electric vehicles to solve a big problem, which is how do you get hundreds of millions of people to move around cities?” sais Keating. “And that’s something we can learn from in the U.S. and we can take advantage of that. And when we erect barriers to that kind of collaboration and sharing. that just slows things down a little but it doesn’t actually stop the progress.”

As scooter sharing has yet to become big in China, U.S. startups have a chance to lead the market, though a trade war could make that more challenging and expensive.