What Happens When a Company That Sells Car Trips Gets Into the Bike Trip Business?

Lyft has acquired the nation's largest bike-share company, setting up a situation where its bike trip sales will cannibalize its car trip sales.

Photo:  Shinya Suzuki/Flickr
Photo: Shinya Suzuki/Flickr

The rumors were on target. Lyft, Uber’s smaller but gigantic-in-its-own-right competitor in the ride-hailing business, has acquired Motivate, the company that runs several of the largest bike-share systems in America. The price isn’t public yet, but unconfirmed earlier reports pegged it at $250 million. The new entity is called “Lyft Bikes.”

Lyft gets Motivate’s “current engineering, technology, marketing, communications, legal and supply chain capabilities as well as some human resources and finance functions,” according to a spokesperson. The terms of Motivate’s contracts with local governments will not be affected, and those agreements — which grant varying degrees of exclusivity in New York, Chicago, San Francisco, and other large cities — are very valuable.

The transportation analysts I’ve spoken to are of two minds on the deal.

The optimistic take sees huge potential in the nation’s largest bike-share operator getting an infusion of capital. Motivate’s bicycles and its ability to run bike-share fleets are highly regarded (though Lyft is not acquiring “service operations and bike maintenance,” which will remain under a separate company retaining the Motivate name). While its systems work well and currently account for 80 percent of all bike-share trips in the U.S., Motivate’s momentum has petered out as dockless bike-share and scooter start-ups have entered the scene. Cities are taking a wait-and-see approach while changes in the bike-share market play out, and Motivate systems like Citi Bike are stagnating in the meantime.

The acquisition by Lyft could change this dynamic. Motivate has yet to show what it can do with the dockless and electric-assist bicycles it’s been developing. The announcement yesterday renews Motivate’s relevance, with Lyft explicitly mentioning “dockless and pedal-assist electric bikes” as the type of “innovation” it intends to expedite. You can also expect Lyft Bikes to start appearing in cities where Lyft already runs ride-hailing services.

But is Lyft going to maximize the potential of bike-share as a ubiquitous urban travel option for shorter trips?

The pessimistic take on the deal is that Lyft’s core business — selling car trips in cities — will put a ceiling on what it does as a bike-share company. Motivate was a company fighting and scrapping to sell people bike trips. Now it will be subsumed within a company “demonstrating how the biggest impact is realized when multiple modes come together into a cohesive system.”

It’s encouraging that Lyft reportedly acquired Motivate to fend off bike-share/scooter start-ups like Lime and Bird, as well as Uber, which recently made a play for relevance in the bike-share market by purchasing Jump. The more the ride-hail giants have to compete on terms dictated by bike and scooter companies, the better.

But Lyft’s bike-share offerings will also cannibalize its ride-hail business. As analyst Todd Schneider has shown, more than half of rush-hour taxi trips in Manhattan would be faster as Citi Bike trips. It would be wonderful for New York if bikes capture a large chunk of these trips from space-hogging cars that overrun the streets and slow everyone down. Would it be wonderful for Lyft?

I doubt that Lyft will enthusiastically try to convert its car trips to bike trips without some sort of prompt from policy makers. Bike-share is a very low-margin business. Generally speaking, regular bike-share users are spending a dollar or less on each trip. Lyft may be losing money in the brutally competitive ride-hailing business, but the easiest path to profitability still seems to be selling more car trips, or holding out until the foretold era of shared autonomous car fleets finally arrives.

It’s certainly possible to envision a company that serves the market for trips of a few miles or less mainly with bikes, and the market for longer point-to-point trips mainly with cars. That model would work well for cities. Whether it works well for Lyft and its investors remains unknown.

In all likelihood, Lyft and other companies are going to need at least a nudge in the right direction. Cities can’t sit by passively and relinquish their ability to shape transportation systems. They have to exercise their policy-making prerogative. Car trip businesses will work for cities if road pricing pushes ride-hailing trips away from congested city centers and toward areas where transit is sparser. Bike-share businesses will work for cities if car traffic is held in check and people feel safe riding bicycles on the street.

  • Josef Szende

    I’m glad you’re still here to write about this moment!

  • Komanoff

    As am I!

  • Joe R.

    This might be a blessing in disguise. I would imagine in a dense city like New York with heavy traffic congestion more people will prefer to rent a bike than a for hire motor vehicle. So this might indeed cannibalize Motivate’s ride-hail business. Perhaps this in turn will cause those in power to take bicycles more seriously as a valid mode of transportation. This is especially true of e-bikes, which can largely replace cars in cities, even for those without the physical ability to ride a bike for any distance.

  • J

    “Generally speaking, regular bike-share users are spending a dollar or less on each trip.”

    I think this may be due to a pricing model that makes it very cheap per trip for regular users. The dockless companies and even Motivate systems in DC and Chicago, have shown that a pay-as-you-go model can work too and may even attract users who don’t want to commit to a subscription. Jump has shown that people will pay more for e-bikes. Things are changing, so maybe Motivate will change too.

  • J

    Also, for most of their existence these companies competed brutally for the share of the pie of car-free/car-lite households, even going so far as to compete directly with transit.

    The optimistic view is that they’ve realized that by providing options across multiple modes including transit and by supporting things like congestion pricing and market-based parking, they can expand the pie slice of car-free/car-lite households, meaning more customers for everyone.

  • First of all, is Lyft actually making a profit? A nonexistent profit cannot be cannibalized by bike-share.

    Second of all, Lyft and Uber are notionally platform companies, but on today’s roads, every taxi ride needs a driver, so realistically their profits are encumbered by staff costs at a more than one-to-one ratio (every passenger gets a driver, plus some small percentage of headquarters staff).

    In the bike share model, the rider is the driver and the share of staff costs is much less.

  • crazytrainmatt

    Citibike remains a shining beacon despite getting nothing from the city under De Blasio. It doesn’t solve every transportation problem for everyone but its cost/benefit is off the charts compared to anything else happening. Let’s hope it at least keeps working.

  • Daniel S Dunnam

    I can certainly imagine Lyft incorporating bikes into their app so when you are looking for a ride, it shows bike share as an option along side the various car options. People will see that a car is going to cost $X and take Y minutes, whereas a bike is going to cost $Z and take 1/2 Y minutes. This could end up being a boon for bike share as people who weren’t considering it, never think about bikes, don’t have bike share memberships, etc. suddenly start realizing that “Hey, wait a minute. It seems like bikes are almost always dramatically faster and cheaper than a car…”

  • AnoNYC

    Lyft and Uber Won’t Be Happy Until They’re Your One-Stop Transit Guide

    https://www.nytimes.com/2018/07/03/business/dealbook/lyft-uber-bike-sharing.html

  • ZA_SF

    The sooner those bike docks can charge up e-bikes, the better they’ll be at competing with dockless bikes and bounty-charged e-scooters.

  • BortLicensePlatez

    I cannot imagine celebrating a firm that breaks the backs of workers and participates in the larger dilution of the economy through its regulation-busting ‘gig economy’ bullshit. Horrible news.

  • Commuter

    We still need to address how Citibike is NOT at need areas. How is there no citibike at 145 near 2/3 train where they are going to shut down that train station? If there was ppl could ride to the next train station or use it to commute? A big problem with Citibike was day 1 when after they financially failed and moved to Motivate they still employed Justin Ginsburgh. He couldn’t of contributed to getting Citibike to poorer neighborhoods and places of need due to poor transportation access, but didn’t bother. Now, how does this guy get a job now as Director JFK Infrastructure Strategy & Development? And, why can’t we bike to the airport? Shall we ask him?

  • Rex Rocket

    Oh, good! We’re “Partners” now with Lyft! Please let me know how I can support every effort of Lyft to inrcease Lyft’s revenue!

  • I am terrified that they have the same motives as Time Warner buying New Line Cinema.

  • saimin

    Dear Lyft and Uber: please prohibit your drivers from parking in bike lanes. Maybe use your apps to prohibit your passengers from requesting pickup or drop off on streets with bike lanes and no car parking spaces or legal loading zones. Thank you.

  • sebra leaves

    As the author points out, there are many direction the company may take, and, since the future of bike stations is uncertain there is no reason to expand the most controversial bike-share programs that infuriates the public.

    As one of the North Beach patrons asked when the Central Subway was being presented as an extendable program, “How can you aim a tunnel when you don’t know where it is going to end up?” We need to stop installing bike stations and see what the market does.

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