Who will buy Citi Bike from Lyft?
U.S. bike-share is on the brink as their ride-hail owner looks for the exit
Five years ago, Lyft bought itself some bikes.
The deal came a few months after Uber acquired Jump Bikes, a startup maker of fire-engine-red e-bikes, as part of its shift toward being a multimodal transport platform. Lyft was forever trailing Uber—in rides, in sales, in cities, in market share—but not this time. If Uber was buying a dockless e-bikes startup with operations in two cities, then Lyft could buy the biggest bike-share operator in the U.S.
The acquisition target, Motivate, wasn’t a household name, but many of its urban bike-rental services were. Motivate was the operator behind Citi Bike (New York), Divvy (Chicago), Capital Bikeshare (Washington DC), and Ford GoBike (the Bay Area, now Bay Wheels), as well as programs in Boston, Columbus, Minneapolis, and Portland, Oregon. In 2017, nearly three-quarters of the more than 35 million U.S. bike-share trips were made on Motivate systems. Lyft paid $251 million, cash. The sale closed in November 2018.
In many ways, bikes seemed like a natural fit. Lyft cultivated its reputation as the friendly, nice-guy ride-hail platform that cared about things like green transport and sustainability. While Uber expanded aggressively into other countries and other lines of business (food delivery, driverless cars, flying cars), Lyft’s only expedition was a launch in Toronto. Taking over the leading U.S. urban bike rental platform strengthened Lyft’s feel-good, green credentials, entrenched its position in the U.S. cities that formed the core of its business and, finally, gave it something to distinguish itself from Uber.
Five years later, Lyft wants out. Bike-share is a tough business, as any micromobility company could tell you, and new Lyft CEO David Risher has deemed it a distraction. The Wall Street Journal reported late last month that Lyft is seeking buyers for its bike-share division, something the company awkwardly failed to deny in a subsequent statement citing “strong inbound interest” in its bikes and scooters business.
Risher, a veteran of Microsoft and Amazon, took over from co-founder Logan Green earlier this year and is tasked with turning the flailing business around. One of his first moves as CEO was to lay off some 1,100 people, almost 30% of staff, and plow the savings into making Lyft more price competitive with Uber. Risher has a lot of money riding on the outcome. In addition to a $3.25 million signing bonus and $725,000 annual salary, Risher is eligible for a performance-based annual bonus equal to 100% of his base salary and 12.25 million restricted stock units, worth an estimated $980 million, that vest if Lyft achieves certain stock price targets, starting with $15 a share.
In May, on his first earnings call as CEO, Risher laid out his business thesis. “We’re effectively a pure play on rideshare,” he said. “So, that’s important for us to execute on as well.” A pure play on ride-hail means no room for distractions. Lyft the previous year had wound down a short-lived consumer car-rentals business. Bikes and scooters, Risher indicated, could be next on the chopping block:
E-bikes are a big deal. When people ride e-bikes they like them a lot. But for us, I think we haven’t done the job we need to do to make sure that every time a person rides the bike, they get welcomed into the Lyft ecosystem, and frankly, welcome into the rideshare side of things.
It can be nice when someone says the quiet part out loud. The quiet part in this case is that Lyft under Risher no longer views bikes and scooters as a clean, green complement to its main service, but as another entry point into the pure-play business of ride-hail. Owning Citi Bike and those other beloved bike-share systems isn’t about enriching urban transport or closing the last-mile gap with more sustainable modes; it’s an elaborate marketing campaign to install the Lyft app onto more phones and get more passengers into its cars, and per Risher’s assessment, it’s not paying off.
A pure play on ride-hail means no room for distractions.
There has always been reason to doubt Lyft’s stewardship of urban bike-share. Cycle-hire programs like Citi Bike are, at their best, an extension of existing public transit systems. Public transport takes many forms but at its most basic level is a government-led effort to provide affordable, reliable, and accessible transportation to large numbers of people. Doing this is not typically profitable, as evidenced by the fact that most public transit systems in major global cities lose money by design. Passenger fares tend to cover only a fraction of operating costs, with the rest coming from taxes and government subsidies.
Lyft is a public company with a fiduciary duty to its shareholders. It’s supposed to make money by design, not lose it. And so any bike-share system run by Lyft isn’t really able to operate at a loss like other public transport, unless government steps in to help pick up the tab. That has a whole range of downstream implications for the service. How much rides cost. Where bikes and stations go. The level of investment and maintenance Lyft puts in. Some of these things are governed by local agreements—in New York, for instance, Lyft pledged to invest $100 million in Citi Bike over five years as part of the Motivate acquisition—but in any public-private partnership there is always an element of mutual interest and good faith. Lyft’s contractual obligations to its bike-share contracts aren’t in question, but the company’s commitment to carrying them out to the best of its abilities under Risher certainly could be.
Warning lights were flashing even before the sale sign went up. In March, Lyft shut down Minneapolis’s Nice Ride after failing to find a new sponsor for the program. (For now, e-bikes and scooters from Lime, Spin, and Veo have taken its place.) In other cities, Lyft has hiked prices to cover operating costs, leaving many riders disgruntled or priced out. Anecdotally, Citi Bike users complain the e-bikes are often dead or broken, while others say the Citi Bike app itself has become harder to use, in what they suspect is an effort to push more people onto the main Lyft system. On the operating sheet, bikes and scooters remain a fraction of Lyft’s revenue. In the quarter ended March 31, Lyft attributed $47.9 million of a total $1 billion in revenue, or about 5%, from bikes, scooters, and its Flexdrive car-rental program for drivers. Meanwhile, cost of revenue grew $109 million or 25% from the same period in 2022, in part due to a $20 million increase in bikes- and scooters-related costs.
The question now is if not Lyft, who? Who will buy Citi Bike and its bike-share siblings? Over the past weeks I’ve posed this question to many people with knowledge of the space, and none have had a good answer. Probably not Uber, which got out of bikes in 2020 by offloading Jump to Lime. Probably not Lime, which in addition to its Uber ties has shown little interest in offering the sort of white-label service behind an urban bike-share rather than fronting its own brand and devices. Certainly not Bird, which is busy attempting to salvage its business after being taken over last year by Bird Canada. Other micromobility firms that might once have been interested are in various states of distress now that capital is no longer cheap and freely flowing. Tier, which absorbed a few competitors in the past, has been exploring a merger—first with Bolt and more recently Voi—while Dutch e-bike maker and industry darling VanMoof declared bankruptcy in July.
Put another way: what sort of company would want to be in this very difficult business? You can understand why Risher wants out. The margins are thin, the operations demanding, the regulations and fees imposed by cities ever greater and more complex. In my ideal world, these systems would be absorbed by their local transport agencies and seamlessly integrated into the public system—the possibilities! free transfers from the bus to bike-share! all your transit options in one place!—but we live in the real world and it would absolutely not go so smoothly. Even if local governments had the money and political will to take on bike-share, they would still need the staff to operate and maintain the fleets as well as to update and manage the technology. A more likely outcome is that any city looking to take over its bike-rental program would simply find a new operator to contract with.
American bike-share schemes are on the brink. They are a public good operated by a private-sector company that, under investor pressure, has rapidly lost interest in unprofitable, public-minded lines of business. This problem is bigger than Lyft; it goes to the very core of the bike-share model. For urban bike-rentals to ever truly be an affordable, accessible, reliable layer of public transportation, they require sustained public investment. Until then, they seem destined to stay a transit hot potato, passed in bursts from one private owner to another.
Lyft also bought PBSC Urban Solutions in early 2022, the manufacturer of bikeshare bikes and docks for not only Motivate systems but almost every major docked bikeshare system in the world. 😬
I'd be interested in hearing the same analysis for B Cycle, owned by Trek (a bike manufacturer), which runs the bike share for small and mid sized cities in the US. Trek isn't publicly traded so there won't be as much info about it, but I wonder if it's easy enough to track if they're net entering or exiting markets to show whether the space could be profitably managed by a 3rd party.
My experience riding a Cincinnati RedBike is that I don't think I could damage the thing if I tried. They're clunky but e-bike options can neutralize that shortcoming. Maybe robust bikes from an actual bike manufacturer that's incentivized to build a model that lasts is the way to go.