Business
Business

Forget CAPEX, Think Total Cost of Ownership

by Zoov, on December 10, 2020

3 MIN READ

Are you operating a fleet of shared electric scooters, bikes or mopeds? If the answer is yes, chances are you are trying to build a sustainable business at the same time.

Within every young industry, CAPEX — meaning the upfront investment you have to make to go live — is the centre of attention. In shared micromobility, the cost of purchasing hardware (the vehicles) accounts for the biggest part of this investment.

As shown by the demise of some of the most VC-backed companies, solely focusing on CAPEX while overlooking the overall cost of operations can get your shared mobility adventure into big trouble.

Here’s how to avoid this.

What is Total Cost of Ownership and why is it important?

Put simply, the Total Cost of Ownership (TCO) in shared mobility is used to calculate the total cost of purchasing (CAPEX) and operating (OPEX) a product or service — including hardware and software — over its useful life.

CAPEX is just the tip of the iceberg

Every shared mobility vehicle comes with a variety of indirect costs, which are immediate liabilities with hardware or solutions that are of lower quality or haven’t been used in real conditions.

As pony’s CEO Paul-Adrien Cormerais pointed out in a recent panel:

“Companies like Mobike and Ofo failed on an incredible scale because they were producing hundreds of thousands of bikes that were never tried on the ground. And it’s impossible to anticipate all the issues that come with operating these fleets.”

How is Total Cost of Ownership calculated?

Total Cost of Ownership (TCO) includes the purchase price of a particular product or service, plus operating costs over the asset’s lifespan.

Your TCO will be completely different depending on whether your vehicle has a lifespan on the streets of six months, one year or three years. Cheap hardware can easily double or triple your TCO.

So, in order to calculate TCO and remove the guesswork from knowing if your shared mobility service is likely to achieve profitability one day, you need data. Data will help you break down every direct and indirect cost there is.

If we look at maintenance costs for instance, these typically include spare parts and maintenance vehicles, as well as salaries, which can very easily become ‘wasted money’ if you don’t use your team efficiently.

Bringing every vehicle back to the warehouse because you are unable to tell what kind of repair is needed will massively lower profitability. On the other hand, a vehicle that can self-diagnose most issues will save you a lot of money.

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How do you reduce Total Cost of Ownership?

At Zoov, we see every aspect of TCO as an opportunity to build more sustainable electric bike sharing technology, from hardware to software.

Here is the complete list of our top ways to improve on every level. Feel free to use it to help you and your team better assess the Total Cost of Ownership of your existing or future fleet.

10 questions to better assess Total Cost of Ownership

There is still a lot that can be done at every step of this ladder — especially in terms of energy management — and it’s never too early in the life of a shared mobility company to focus on TCO.

One thing we know for sure? Zoov’s experience in operating 1000+ electric bikes already gives us an edge to offer mobility operators the most ‘TCO-friendly’ electric bike sharing hardware and software, and our improvement cycles never cease to speed up with the expansion of our network of operating partners.