The value of global private equity and venture capital transactions in the micromobility sector is on track to drop for a second consecutive year in 2024 as investors demand companies prioritize profitability over growth.
Micromobility refers to lightweight vehicles usually used for short distances such as bicycles, scooters, motorized cycles and mopeds. In the first nine months of 2024, the global micromobility sector raised $142.9 million from private equity-backed deals, just 26.9% of the $531.6 million secured in all of 2023. In 2022, the value of such transactions reached $2.40 billion, according to S&P Global Market Intelligence data.
The number of private equity-backed deals in the sector is also set to fall this year, with just nine announced as of Sept. 30 compared to 27 in full year 2023 and 41 in 2022.
Private equity and venture capital interest in the sector waned in the past two years as the investment climate became rougher and some micromobility companies struggled to become profitable, said Kersten Heineke, partner at McKinsey & Co.
"What the investors wanted from the companies and demand from the companies changed," Heineke said in an interview. Previously, investors were pushing companies to grow. However, at a certain point, they wanted companies to be profitable as quickly as possible, saying they will only keep providing funding once companies show they can actually be profitable, he added.
Micromobility companies were not able to meet investor expectations quickly because their business models were not built to launch in a new city, optimize operations and become profitable, Heineke said.
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Biggest deals
The two largest private equity-backed deals in the micromobility sector year to date through Sept. 30 involved India-based electric scooter makers.
In the biggest deal, Ather Energy Ltd. secured $71.5 million in an investment round from the India government-linked alternative asset manager National Investment and Infrastructure Fund Ltd.
The second-biggest deal was River Mobility Pvt. Ltd.'s $40.3 million funding round, with participation from Lowercarbon Capital LLC,
India is the world's largest market for electric two-wheelers, according to a Feb. 6 news release by Yamaha Motor Co. Ltd., the lead investor in River's funding round. Electric two-wheelers are expected to account for 60% to 70% of all vehicle sales in India, owing to their accessibility and affordability, McKinsey said in a September 2023 report.
Between January 2022 and September 2024, micromobility companies in India secured $620.1 million in private equity and venture capital-backed investments, according to Market Intelligence data. One India-based micromobility company, Yulu Bikes Pvt. Ltd., hopes to raise over $100 million in a series C funding round to support expansion plans, The Economic Times reported in August.
In the first three quarters of 2024, Asia-Pacific secured the majority of private equity-backed investments in the sector, receiving $121.8 million, driven by the Ather Energy and River Mobility transactions. Europe, meanwhile, received $21.0 million.
Among the micromobility subsectors, scooters received the most investment, $111.8 million, followed by bicycles and bicycle equipment with $31.0 million.
Outlook
Private equity activity in the micromobility sector has begun recovering and is expected to grow as the investment environment improves, McKinsey's Heineke said.
"Most of the micromobility players, especially in the shared space, have made the shift towards profitable operations and they're making money," Heineke said. "They've got their business model sorted out and the business model is working ... they can now focus on growth yet again. And growth can mean either growth in the existing cities that they're in or advancing also to new cities."
In the third quarter, the value of private equity-backed deals in the sector stood at $102.5 million, up from $25.1 million in the same period in 2023. The number of deals also grew year over year to six from four.
