Why Is Uber Buying an Electric-Bike Company?

Because short car trips are costing it a fortune—and riders might be seduced by a bicycle with some extra oomph.

Two electric Jump bicycles on the street.
Since January, Uber has offered rides on Jump’s electric bikes through its app in San Francisco and will now make the option available in other cities. Jump Bikes

There’s a joke that every startup is answering the question “What is my mom no longer doing for me?” (Giving me a ride, doing my laundry, you get the idea.) Subtext: Silicon Valley is teeming with young men in various stages of arrested development trying to recreate their carefree high school years.

A new crop of businesses suggests venture capital is amenable to winding the idea clock back even further, toward childhood, where startup founders brainstorming over apple juice and Goldfish might have come up with this proposal: Everyone rides scooters and bicycles everywhere.

That is what’s happening in cities like Santa Monica, San Francisco, and Washington, where an enormous amount of money is being spent to distribute electric scooters and bicycles, bookable via smartphone, all over town. And while this sounds like something Tom Hanks would have engineered in Big, it may do nothing less than reinvent short-distance transportation in the American city.

On Monday, Uber announced it would purchase Jump, an electric bike–share startup, for a price said to be as high as nearly $200 million—more than $13,000 a bicycle. Since January, Uber has offered rides on Jump’s “pedal”-assist bicycles (meaning the electric motor gives your peddling legs some extra oomph) through its app in San Francisco and will now make the option available in other cities.

Meanwhile, Santa Monica, California–based Bird, which raised a $100 million funding round last month, has announced plans to offer its electric scooters in 50 cities by the end of the year. And the dock-less bike-share company LimeBike has debuted an electric scooter called the Lime-S. A colleague in D.C. recently rode one back from lunch. It cost a little more than a dollar to ride two miles. The Lyft he took to lunch was $15.

These new modes of transportation represent the collision of a number of trends. Both the electric motor and the battery that power them are smaller, cheaper, and more powerful than they used to be. Smartphone penetration has reached nearly all Americans age 18 to 44, and 88 percent in the general population. Venture capital money is sloshing around looking for moonshots.

And, of course, the way we handle short trips in American cities—by car, by and large—has long been expensive, slow, inefficient, and environmentally irresponsible.

You can see why Uber would want to move as many riders out of cars and onto bikes as possible. While the company’s $4.5 billion loss in 2017 was received as good news, Uber continues to spend the same 80 percent of revenue on driver payouts and rider subsidies year after year.

Transferring shorter trips to a cheaper mode could be a windfall. Shorter trips by bicycle would allow the company to get by with fewer drivers. Less traffic makes rides go faster. More importantly for the rest of us, Uber can serve as a way to introduce the electric bicycle to skeptical consumers. Bird has already prompted some users to go and buy their own electric scooters.

Jump has said it buys e-bikes for $1,000 a piece. The service costs $2 for 30-minute ride, and 7 cents a minute afterward. In San Francisco, each Uber-Jump trial bike has gotten six to seven rides a day. At that rate, a bike pays for itself in three months. (That does not include the costs of maintenance, charging, and distribution—two issues the companies are struggling with.)

One of the big promises associated with shared autonomous vehicles is the possibility of “right-sizing,” or making sure that each vehicle is perfectly suited to the task at hand. Today, many Americans buy SUVs because they anticipate family vacations or other edge cases where they’ll need a small truck at their disposal. But in reality, most cars, most of the time, are driven alone, no matter their size. If riders are paired with smaller cars for solo trips, researchers estimate energy usage in transportation could fall by 20 to 40 percent.

But what if those trips aren’t made with cars at all? “Cars are to us what books are to Amazon,” Uber CEO Dara Khosrowshahi said at a conference in February. And while the company has made few serious forays beyond four wheels and an internal combustion engine so far, the rapidly evolving electric vehicle industry has clearly caught Khosrowshahi’s eye.

“Over the last two years,” Jump founder Ryan Rzepecki wrote on Medium after the purchase was announced, “the bike share industry shifted from a slow-moving government contracting business to one of the most well-capitalized and competitive consumer technologies in the world.” That transformation began in China, where the explosion of dock-less bikes has caused the bicycle’s share of total travel mileage in Chinese cities to spike from 5.5 to 11.6 percent in just two years, and cut car travel in Shenzhen by 10 percent.

Those companies and others are now trying their hand in the United States, with mixed results. Challenges in the American city include big distances, cold weather, NIMBYism, and unsafe streets. But at least with the first of those, electric vehicles can help.

In the fall of 2014, an enterprising data nerd wrote about his experience driving for Lyft in San Francisco, determining that the average ride distance in October was 3.35 miles. The median must be quite a bit lower. And that means that quite a number of trips fall within the sweet spot for alternative transportation, less than two miles. In New York, more than half of taxi trips are less than two miles. This trend persists outside urban areas, and for private cars, as well: The 2009 National Household Travel Survey found that 43 percent of car trips were three miles or less.

In short, there’s a massive market of people who want to make shortish trips without driving cars. For Uber in San Francisco, the average Jump trip was 2.6 miles, which is a similar distance to the average cab ride, the company told the New York Times. Traditional, manually powered bike share will retain its appeal—but in other ways, it functions as a gateway drug to a newer, more powerful mode.

The moment is reminiscent of Uber’s initial rollout, when the new mode was caught between eager consumers, defensive incumbents, and wary city governments. As you might expect, the companies have faced opposition from planners and residents who object to the perceived disorder of scooters and bicycles littering the right of way. It’s true that the debuts have been a little chaotic, though the companies are now taking a more heavy-handed approach to ordering their wares—Jump bikes must be locked to a pole or rack; Bird has launched a “Save Our Sidewalks” responsible scooter-parking campaign. But if more people are leaving their cars at home to ride bikes and scooters, that’s without a doubt a good thing for cities—not least for the people who still do want to drive.