SCOOTIN’ AROUND
Is the electric scooter a dangerous toy, or tomorrow’s vehicle of the future?
Scooter-sharing company Lime recently relayed a troubling messaging to its users: a portion of its fleet was at risk of bursting into flames.
The startup recalled about 2,000 vehicles (less than one per cent of its scooters) following its Oct. 30 warning. The situation brought to mind scenes from three years ago of hoverboards catching fire and promptly falling out of use. Would spontaneous combustion sink the scooter next?
Lime blamed a manufacturing defect at one of its suppliers, Beijing-based Ninebot Inc. But the company isn’t just any scooter assembler. Ninebot has become the single-biggest source of scooters in the world. The little-known manufacturer is an essential provider for just about everyone trying to ride the rise of micro-mobility, a movement that aims to transform urban transportation through the proliferation of cheap alternatives to cars and mass transit.
The scooter trend began last year with the launch of Bird Rides Inc. in Santa Monica, Calif., setting off a venture capital-fuelled boom in micro-mobility. Investors soon poured in hundreds of millions of dollars, giving Lime and Bird valuations north of a billion dollars, while Uber Technologies Inc., Lyft Inc. and major carmakers rushed to launch scooter services of their own.
Lime electric scooters entered the Canadian market for the first time with a pilot project in Waterloo this fall. The company said it hoped to roll out the e-scooters to other Canadian markets eventually.
All of this brought more business to Ninebot. Uber now sees Bird and Lime as potential acquisition targets, in part to address the difficulty in getting enough scooters to put on the road, according to reports in the Information and Financial Times.
“We’re working with all the capable players that you can imagine,” Ninebot CEO Gao Lufeng said. Ninebot’s scooter sales grew sixfold this year, he said, and the company estimates that 80 per cent of electric scooters in use worldwide come from one of its three factories, although Gao declined to reveal the total number of scooters it ships. The six-yearold firm is now valued more than $1.5 billion (U.S.), and is plotting a public offering.
In this surprise year of the scooter, Ninebot was one of the only assemblers with the expertise to turn them out in large numbers. But, as the aftermath of the Lime recall shows, there are risks from being the biggest maker of scooters. The Chinese manufacturer’s business partners appear ambivalent about helping it entrench itself any further.
Visitors to Ninebot’s headquarters are greeted with a display that resembles a strange museum from the future. Lined up on a white linoleum pedestal is roller skate-hoverboard hybrid dubbed the Drift W1, a onewheeled orb with retractable foot stands and a go-kart that travels 15 miles per hour. There’s something called the miniPro that looks like a Segway sawed off midthigh. A video screen at the office shows a group of svelte models dancing, somehow, perched atop miniPros.
The Segway itself is also part of Ninebot’s product lineup. Back in 2015, Ninebot acquired the once-buzzy maker of selfbalancing, two-wheeled vehicles. The Segway was to the early 2000s what hoverboards were to 2015 and scooters are to today: a new form of urban transportation inspiring ridicule, even as enthusiasts insist it will transform cities. The Segway revolution never materialized, and the odd-looking people-movers are now mostly remembered as novelty devices.
Ninebot never stopped making Segways, along with other assorted vehicles for short trips such as electric unicycles and a series of L-shaped kick-scooters with electric engines. At first, the scooters didn’t seem earth-shattering. They were basically adult-sized versions of a kid’s toy. But lucrative business often comes from the unlikeliest places.
Gao’s office is on the second floor, just up the stairs from rows of young people typing away at computers. Ninebot has about 3,000 employees and plans to add up to 400 more next year. Some staffers commute to the office on Ninebot devices or use them to zip around the sprawling campus. Gao, who doesn’t scoot to the office, is soft-spoken and wears thick-rimmed glasses and a ca- sual black jacket with a small, white company logo.
Next to a polished desk there’s an award from Xiaomi Corp., the phone maker that, together with the investment arm of its founder, Lei Jun, owns about 20 per cent of Ninebot. Unlike other young Chinese entrepreneurs, Gao, 39, never studied in the U.S. or worked for a Chinese tech kingmaker. He started the precursor to Ninebot in 2012 and now he runs, by most estimates, the world’s largest shortdistance vehicle manufacturer. Gao slices the short-trip transit market of the future into five different segments, ranging from scooters to air travel. “We aim to make our footprint in all these tiers,” he said.
Yet, there are serious questions about whether hundreds of thousands of people will be scooting to work a year from now. Detractors see the scooter craze as a passing fad that brings unwarranted risks. Accidents have led to a handful of fatalities as well as a wave of concussions, chipped teeth and broken bones. A lawsuit filed in California in October blamed the injuries on negligent operators and manufacturers, including Lime and Ninebot.
Lime’s recall supports the case that the scooters are dangerous toys, although Gao insisted the blame shouldn’t lie at his feet. Three days after Lime’s statement, Ninebot issued its own account that faulted Lime and warned scooter riders to take an operator’s safety record into account. “We prefer more professional companies to provide maintenance services, but it seems Lime wanted to have its own team doing so,” Gao said later.
Gao was referring to Lime’s “juicers,” the term for independent contractors the company pays a fee to retrieve depleted scooters off the streets for charging. These contractors, Gao said, caused the problem by using chargers that weren’t compatible with Ninebot scooters. “Of all the consumers we have,” he said, “Lime is the only one with this issue.”
Even before the announcement, Lime and Ninebot severed ties. Gao brushed off the dispute, noting that Lime accounted for less than10 per cent of his shipments. It wasn’t his first conflict with a U.S.-based partner. The Solowheel is an electric unicycle, and an inventor in the U.S. named Shane Chen wanted someone to believe in its potential.
In spring 2014, a year before the deal to buy Segway, Chen said that Ninebot invited him to Beijing to discuss the Solowheel and eventually offered a partnership. The Beijing native was initially interested and remembers Ninebot boasting that it would topple Segway in the market. When Chen asked for more time, he said Ninebot got pushy and then told him he was unnecessary.
By August, Ninebot had released its own one-wheeled scooter, the Ninebot One. “They were a little bit like bullies,” Chen said.
Chen filed patent lawsuits in the U.S. and China over the Solowheel, and he claimed Ninebot lifted his design for electrified skates. Chen said the U.S. case is still pending and that Ninebot is appealing a verdict in China in Chen’s favour. Gao called the accusations about the skates “groundless,” and a Ninebot spokesperson responded to several questions about the dispute with identical wording: “We do not recommend putting this information in the news story.”
Ninebot has been accused of turning out designs similar to those made by rivals. Before buying Segway, Gao spent years squaring off against the American company. Segway sued Ninebot and other Chinese manufacturers repeatedly, claiming they ripped off designs. At one point, Segway tried to block Ninebot from selling in the U.S. Then, in April 2015, Gao called a news conference, supposedly to discuss new investors. Toward the end, a message flashed behind Gao in Chinese: “Ninebot buys Segway.”
Ninebot reportedly paid more than $75 million for the company, which had cycled through multiple owners and tragic turns.
A prior owner, James Heselden, plunged to his death off a cliff riding a Segway. From Beijing, the deal was a marker of a shift in the epicentre of personalized transportation tech.
“Today, it’s not just copycat China,” Neil Shen, a Ninebot investor with Sequoia Capital, boasted at the event. “China will expand through its own innovations and through acquisitions.”
The idea of shared transit had already captured the imagination of the tech industry at the time Ninebot closed its deal for Segway. Uber and Didi, the Chinese ride-hailing giant, had become major forces pointing to a future that didn’t necessarily depend on individually owned cars. But Gao had no special insight that the same economic model would work for scooters. “We didn’t expect the sharing business would have such hypergrowth,” he said.
A former Ninebot executive said the company was tinkering with around 10 vehicle forms before the scooter boom. One, the Segway-inspired miniPro, didn’t have handlebars at first and so riders didn’t have a graceful way to get off. The addition of handles still left Ninebot unsure exactly how people would use it. At one point the company considered pitching BMW on a plan to put them inside car trunks.
After Gao met Bird CEO Travis VanderZanden earlier this year, Ninebot’s scooters started showing up Los Angeles and other cities. More clients lined up, including traditional automakers. Ninebot sells vehicles to Spin, a scooter company recently purchased by Ford, and Gao said that he is supplying both Lyft and Uber.
The rush of competitors into the scooter-sharing market has meant that operators are pressuring suppliers to make scooters that last longer, hold up in the rain and come with features that set rival scooter services apart from one another.
If almost everyone looking to launch a scooter-sharing service has turned to Ninebot, the operators have come to see that reliance on a common manufacturer is a vulnerability. It’s tricky for any company to claim to have a superior vehicle when everyone’s buying them from the same place.
Right now, Lime juggles multiple suppliers, relying on one to fill an order while another makes a new batch of scooters. Before cutting ties with Ninebot, Lime only used Gao’s firm to “fill in some gaps,” said Joe Kraus, Lime’s chief operating officer. “It is hard to get enough scooters.”
Thomas Yao, a partner at IMO Ventures, which invests in Lime, sees the scooter market still grappling with supply shortages.
But those shortages might ease as Ninebot faces new competition. Yao said there are now four other “quality” scooter suppliers in China.
“We’re working with all the capable players that you can imagine.” GAO LUFENG NINEBOT CEO