EMERGING TECH RESEARCH

The Future of Taxis Is Electric and Asset Heavy

Startups could dethrone incumbents amid shift to e-mobility
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PitchBook Data, Inc. Although automation is often viewed as the most likely disruptor of the
John Gabbert Founder, CEO ridehailing industry, emerging business models consisting of fleet-owned
Nizar Tarhuni Senior Director, electric vehicles (EVs) may present a more near-term threat to incumbent app-
Institutional Research & Editorial only ridehailing providers.

Institutional Research Group

As the ridehailing industry faces growing regulatory pressure to transition to
Analysis EVs in order to reduce emissions, incumbents such as Uber (NYSE: UBER)
Asad Hussain Senior Analyst
and Lyft (NASDAQ: LYFT)—which have rapidly scaled by using contracted
asad.hussain@pitchbook.com
pbinstitutionalresearch@pitchbook.com drivers—are at a disadvantage given they do not own and operate EV fleets
and charging infrastructure. Against these outsourced models, a new wave of
Data startups that manage fleets of electric taxis from e-mobility hubs presents a
Matthew Nacionales Data Analyst
disruptive threat.
Publishing
Designed by Caroline Suttie
Having raised significant funds from venture capital (VC) investors, EV ridehailing
startups are leveraging emerging technologies such as battery storage and
Published on October 26, 2021 battery swapping to maximize utilization and improve unit economics. As
opposed to incumbents, this new class of ridehailing entrants will utilize full-
Contents time drivers to ensure quality of service while sidestepping the regulatory issues
that have plagued the gig economy business model. As an added benefit,
Overview 1
EV ridehailing providers will promote power resiliency to cities unequipped
VC funding and exits strong to handle the power draw of electrified transportation. Ultimately, we believe
for international ridehailing 3
the entire ridehailing industry is in the early stages of transitioning from the
companies
current outsourced car and driver model to fully owned EV fleets with fully
Industry facing pressure to
3 employed drivers.
decarbonize
Uber and Lyft likely to fall short
4
of EV mandates
Future of ridehailing is electric
4
and asset heavy
E-mobility hubs will play an
4
important role as strategic assets
E-mobility hubs will provide
power resiliency amid EV 5
transition
Industry likely transitioning from
contracted drivers to full-time 5
drivers

Key startups in the space 6

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 EMERGING TECH RESEARCH

PitchBook Analyst Note: The Future of Taxis Is Electric and Asset Heavy 2

Ridehailing VC deal activity

101
88 86 83
67
61
57
52

36
30
17

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*
Deal value ($M) Deal count
Source: PitchBook | Geography: Global
*As of September 30, 2021

Ridehailing VC deal count by stage

120

100

80

60

40

20

0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*
Angel & seed Early-stage VC Late-stage VC

Source: PitchBook | Geography: Global

*As of September 30, 2021

Ridehailing VC quarterly deal activity ($M)

$16,000 35
$14,000 30
$12,000 25
$10,000
20
$8,000
15
$6,000
$4,000 10
$2,000 5
$0 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2016 2017 2018 2019 2020 2021*
Deal value ($M) Deal count 2 period moving average for deal value

Source: PitchBook | Geography: Global

*As of September 30, 2021
 EMERGING TECH RESEARCH

PitchBook Analyst Note: The Future of Taxis Is Electric and Asset Heavy 3

VC funding and exits strong for international ridehailing companies

In the first three quarters of 2021, ridehailing companies raised $7.4 billion
from investors, up 1.8% compared to the same period in 2020 but falling short
of the $12.0 billion raised in the first three quarters of 2019. VC deals include
Bolt’s $709.6 late-stage deal led by Sequoia Capital—valuing the company at
$4.7 billion in August 2021—India-based Ola’s $500.0 late-stage deal in July
2021, and Indonesia-based Gojek’s $300.0 million late-stage deal in May 2021.

Ridehailing exits have also seen a surge this year. Dubai-based Swvl plans to
raise up to $445.0 million via a SPAC market debut. Singapore-based Grab
plans to raise up to $4.5 billion through a SPAC market debut and concurrent
$4.0 billion PIPE. Finally, in March 2021, China-based DiDi Global (NYSE:
DIDI) raised $4.4 billion through an IPO. However, DiDi’s IPO quickly ran the
company afoul of Chinese authorities who accused the ridehailing company
of illegally collecting customer data and ordered online stores not to offer
the DiDi app. DiDi Global is reportedly mulling going private to placate
Chinese authorities.1

Because the leading US ridehailing companies are public, strong appetite

exists among VC investors to back new entrants with an EV-first business
model. In November 2020, e-moped and EV taxi provider Revel raised
$14.0 million of seed funding from Blue Collective, Maniv Mobility, and
LaunchCapital, securing the company’s pre-money valuation of $40.0 million.
In June 2021, premium ridehailing provider Alto raised $45.0 million in a deal
led by Tuesday Capital and Goff Capital Partners with the express purpose of
transitioning to an electric fleet.

Industry facing pressure to decarbonize

The ridehailing industry—which mostly consists of gas-powered vehicles—is

facing increasing scrutiny over its impact on climate change and local emissions.
Ridehailing trips are displacing mass transit, biking, and walking, resulting
in increased emissions. A study from the Union of Concerned Scientists
showed that ridehailing trips produce 69% more climate pollution than trips
they displace.2 Practices such as deadheading—driving between picking up
customers—further contribute to emissions. According to a Carnegie Mellon
study, deadheading is a key factor in ridehailing leading to a 20% increase in
fuel consumption and emissions when compared to private car ownership.3

Ridehailing companies are facing increasing regulatory pressure to go all-

electric to solve these issues. California has mandated that 90% of miles
traveled in rideshare fleets must be electric by 2030. Washington lawmakers are
currently weighing a similar measure for the state. Several European cities such
as London and Paris plan to establish zero-emission zones—in which all cars
must be electric—starting in 2025. We expect regulatory pressure to continue
and anticipate that additional states in the US will mandate a shift to electric for
ridehailing companies.
1: “DiDi Global Considers Going Private To Placate China and Compensate Investors,” The Wall
Street Journal, Jing Yang, July 29, 2021.
2: “Uber and Lyft Generate 70 Percent More Pollution Than Trips They Displace: Study,” The
Verge, Andrew J. Hawkins, February 25, 2020.
3: “Ridehailing Services Could be Making Pollution Worse, Research Finds,” Automotive News,
Pete Bigelow, September 30, 2021.
 EMERGING TECH RESEARCH

PitchBook Analyst Note: The Future of Taxis Is Electric and Asset Heavy 4

Accordingly, ridehailing companies are committing to electric fleets. Uber

has pledged that all taxis offered through its app in the US, Canada, and
Europe will be electric by 2030—and all taxis will be electric by 2040.
As part of this initiative, the company will contribute $800 million to
incentivize drivers to buy EVs by 2025. Lyft has made a similar pledge to go
all-electric by 2030. Uber has partnered with UK-based EV startup Arrival
to develop an EV specifically for the needs of ridehailing drivers.

Uber and Lyft likely to fall short of EV mandates

We believe that despite commitments to decarbonize, ridehailing

companies Uber and Lyft face a disadvantage as they do not own and
operate fleets or e-mobility infrastructure. Instead, they act as software
intermediaries that connect contracted drivers operating their own vehicles.
Outside of incentivizing drivers to purchase electric cars, Uber and Lyft
have limited options to ensure all their drivers use electric cars.

While both Uber and Lyft could simply require their gig economy drivers
to use electric cars, we believe there are several reasons why this would
be difficult. These include the high cost of EVs—approximately $50,000—
that are likely beyond the reach of part-time drivers, lack of charging
infrastructure in many locations—particularly city apartments where many
drivers live—and lengthy charge times eating away at drive times.

Future of ridehailing is electric and asset heavy

In addition to having a favorable regulatory profile, EV fleet ownership

has the potential to improve unit economics among ridehailing providers
through reduced running costs and increased utilization. Relative to
internal combustion engine (ICE) cars, EVs offer several benefits including
no fuel costs, reduced maintenance costs—given fewer moving parts to
service—less-specialized equipment and labor needs, longer warrantied
lifetimes, and steadily declining battery costs. In addition, effective fleet
management can enable ridehailing providers to scale more efficiently and
maximize vehicle utilization. In our view, the future of ridehailing is likely
to be dominated by providers that own and operate their own fleet of EVs.
New entrants in the US that are operating under this model include Revel,
Alto, and Kaptyn. We note that although Alto has not transitioned to an
electric fleet, the company plans to do so by 2023.

E-mobility hubs will play an important role as strategic assets

To service growing EV fleets, e-mobility hubs will play an important role as

strategic assets for full-fleet ridehailing providers. Incumbent ridehailing
providers seeking to operate in this space will likely make investments in
this type of e-mobility infrastructure to remain competitive.
 EMERGING TECH RESEARCH

PitchBook Analyst Note: The Future of Taxis Is Electric and Asset Heavy 5

E-mobility hubs enable fleet operators to charge their vehicles at a fraction

of what consumers pay. Charging economics are optimized by drawing
energy during off-peak hours and storing it in batteries. Solar installations
can also supplement energy demand, helping e-mobility hubs reduce
charging costs by as much as 75%. E-mobility hubs can also serve as
locations where drivers can swap batteries, greatly reducing charge times
for drivers. Centralized mass charging stations also have the potential to
feed power back into systems during periods of peak demand, providing an
additional revenue source.

These hubs must be strategically located to allow on-demand service while

being able to draw enough power without straining local power grids.
Successful installations will require collaboration with utilities providers
regarding planning, network upgrades, and grid management. As the
ecosystem develops, we believe first movers staking prime locations in
dense cities will be well positioned for growth.

E-mobility hubs will provide power resiliency amid EV transition

Evidence is mounting that the US energy grid is woefully unequipped to

handle the transportation system’s transition to electric. The National
Renewable Energy Laboratory projects that US electric capacity will need
to double in order to power the 66% of US vehicles that are expected to be
electric by 2050.4 In the meantime, power grids will face a major challenge
in supporting the transition to EVs.

E-mobility hubs could help alleviate this problem by providing power

resiliency to energy grids through reducing power draw during peak times,
drawing from renewable sources, and storing power on-site. In addition, we
expect future e-mobility hubs—and the commercial vehicles they manage—
to help stabilize power grids by feeding power back into systems during
periods of peak demand. Ultimately, this could represent a paradigm shift
in energy systems, resulting in a more distributed, flexible model.

Industry likely transitioning from contracted drivers to full-time

drivers

While contract drivers have enabled Uber and Lyft to scale quickly, we
believe the outsourced model is ultimately unsustainable and will lose
ground to full-time driver fleets that are positioned to provide better
service and offer superior employment opportunities that can reduce driver
turnover for providers.

The gig economy has been criticized for leaving many drivers in poverty.
A UC-Berkeley study concluded that an Uber and Lyft-backed proposal
in Massachusetts that counted drivers as contracted workers would
result in drivers taking home just $4.82 per hour when accounting for
deadhead time, operating costs, and reduced healthcare benefits. 5

4: “EV Rollout Will Require Huge Investments in Strained US Power Grids,” Reuters, Nichola
Groom and Tina Bellon, March 5, 2021.
5: “A New Massachusetts Proposition Pushed by Uber and Lyft Could Mean Some Drivers Only
Make $4.82 an Hour, Study Says,” Business Insider, Isobel Asher Hamilton, September 30, 2021.
 EMERGING TECH RESEARCH

PitchBook Analyst Note: The Future of Taxis Is Electric and Asset Heavy 6

Although the passage of Prop 22 in California has removed some of the

pressure faced by ridesharing and delivery companies in the near term, we
believe labor regulation will remain a battleground issue in the long term.
Ridehailing businesses will likely be affected by regulation in other US
states such as New York and Washington that are targeting the use of gig
economy workers.

Long term, we believe mobility providers employing full-time workers will

likely be more successful in attracting the best talent and ensuring quality
of service. Upstart competitors such as Kaptyn and Alto, which market
themselves as premium services, tout the fact that their drivers are heavily
vetted and trained. The promise of full-time work (and accompanying
benefits) is likely to help these companies attract the best talent—especially
amid an unprecedented driver shortage that has caused Uber and Lyft
prices to surge 79% from pre-pandemic levels.6

Key startups in the space

Kaptyn is an operator of a premium prearranged electric taxi service

in Las Vegas. The company operates a fleet of over a hundred vehicles
and employs over 150 full-time drivers. Unlike other providers focused
on on-demand services, Kaptyn provides prearranged rides, which are
more profitable. The company operates its taxi service out of several
e-mobility hubs that provide charging, maintenance operations, and
shift changes—in addition to reducing the company’s cost of energy. In
the future, the company plans to shift the power source of its e-mobility
hubs to renewable. In addition to its core business as a mobility provider,
Kaptyn has also developed an integrated software platform with improved
dispatch, telematics, demand aggregation, and route optimization to
manage its EV fleets efficiently. Unlike other startups in the market,
Kaptyn is agnostic to demand and open to providing its vehicle supply to
ridehailing companies such as Uber and Lyft.

The company raised $1.23 million of convertible debt financing from ATW
Partners and other undisclosed investors on October 23, 2019. Kaptyn is
currently in the process of acquiring several taxi companies in Las Vegas.
While the company is currently focused on expansion in Nevada, it plans to
expand to markets such as Los Angeles and Miami.

6: “Lyft and Uber Prices Are High. Wait Times Are Long and Drivers Are Scarce,” NPR, Bobby
Allyn, August 7, 2021.
 EMERGING TECH RESEARCH

PitchBook Analyst Note: The Future of Taxis Is Electric and Asset Heavy 7

Revel is an operator of a shared electric moped and on-demand taxi ser-

vice. The company provides a fleet of over 4,000 shared e-mopeds in sev-
eral US markets including New York, Washington DC, and Miami. In addition
to its core e-moped platform, the company has launched an on-demand
electric taxi service. Revel currently operates a fleet of over 50 Tesla Model
Y taxis in New York and employs over 150 full-time drivers. Revel oper-
ates its fleet out of several e-mobility hubs in New York City, enabling the
company to reduce its cost of energy and manage fleet operations such
as charging, routing, dispatch, and maintenance. In August 2021, Revel
announced it would partner with battery storage startup Electric Era to im-
prove power utilization. As part of this partnership, Revel will install battery
storage facilities in its e-mobility hubs to reduce peak power consumption.
Revel has also partnered with smart building software provider Logical
Buildings to dynamically adjust the charging schedules of its fleet to sup-
port New York City’s electric grid.

The company raised $14.0 million of seed funding from Blue Collective,
Maniv Mobility, and LaunchCapital on November 25, 2020, putting the
company’s pre-money valuation at $40.0 million. Ibex Investors, Evolution
VC Partners, and Toyota Research Institute also participated in the round.
Of the total funding, $2.6 million was raised in the form of debt.

Alto is an operator of a premium on-demand and prearranged ridehailing

service. The company operates a premium service with vetted full-time
drivers, air filtration, and special touches such as personalized music and
climate control. To ensure quality of service, the company scores drivers
using telematics devices and onboard monitoring. Alto partners with local
businesses for corporate memberships to provide taxis for employees and
customers. In addition to its taxi service, the company recently launched
a concierge delivery service. Although Alto’s fleet is not currently electric,
it plans to transition to a 100% EV fleet by year-end 2023. Alto currently
operates in Dallas, Houston, Los Angeles, and Miami and plans to expand to
every major metropolitan area in the US by 2025.

The company raised $45.0 million through the combination of debt, Series
B1, and Series B2 venture funding in a deal led by Tuesday Capital and
Goff Capital Partners on June 28, 2021, putting the company’s pre-money
valuation at $50.0 million. Road Ventures, Alumni Ventures Group, Green
Park & Golf Ventures, Hope Ventures Capital, Senterra LLC, and Franklin
Templeton also participated in the round.
 EMERGING TECH RESEARCH

PitchBook Analyst Note: The Future of Taxis Is Electric and Asset Heavy 8

Electric Era is a developer of lithium-based battery cells that pair with

fast-charging stations to buffer the power draw on electrical grids, which
helps charging stations avoid large fees from utility operators during high-
demand periods. By adding dedicated batteries, charging stations could
reduce charging fees and minimize the excessive power demands that
would likely result from thousands of EVs charging simultaneously.

The company raised $3.7 million of venture funding in a deal led by REMUS
Capital on June 1, 2021. Climate Capital, Asymmetry Ventures, Social Starts,
and other undisclosed investors also participated in the round.

Ample is a developer of autonomous robotics technology enabling EV

battery swapping. EVs fitted with Ample’s modular battery packs can uti-
lize the company’s battery swapping stations to swap to a new battery in
minutes, rather than waiting hours for a full charge. Unlike previous forays
into the space—most notably, that of Better Place—the company focuses on
swapping battery cells, not battery packs, significantly reducing the cost
of infrastructure and improving unit economics and scalability. Currently,
Ample battery stations take about 10 minutes to swap batteries, but the
company plans to reduce swapping time to under five minutes. The compa-
ny works with several automakers including Nissan and Kia.

We believe battery swapping could be an attractive option for fleet oper-

ations such as ridehailing. Depleted electric taxis could swap out batteries
and be back on the street generating revenue instead of sitting on a lot
charging. Battery swapping technology could enable e-mobility providers
to operate fewer cars per fleet—thereby improving profitability. Uber has
partnered with Ample to operate five battery swapping stations in the Bay
Area for Uber drivers of Nissan LEAFs and Kia Niro EVs.

The company raised $160.0 million through the combination of debt and
Series C venture funding in a deal led by Moore Strategic Ventures on
August 19, 2021, putting the company’s pre-money valuation at $740.0
million. Shell Ventures, ENEOS Innovation Partners, PTT Public Company,
SMRT Corporation, Rose Park Advisors, and Disruptive Innovation Fund
also participated in the round. Previously, the company raised $34.73
million of Series B venture funding from ENEOS Innovation Partners and
MacKinnon, Bennett & Company on April 26, 2021, putting the company’s
pre-money valuation at $178.0 million. Transform VC, VAS Ventures, Energy
& Environment Investment, and Prefix Capital also participated in the round.