Tembici‘s docking station system seems to be paying off. The Brazilian rental bike business has announced this week that it has reached the break-even point and staggering BRL 100 million in revenues during 2020, with a balance of more than 30% in EBITDA and a 300% growth in gross margin. For 2021, the company forecasts a 60% increase, aiming at BRL 160 million in revenues.
Such a positive outcome didn’t happen by chance. The company’s growth strategy, a combination of sponsorship and user revenue, added to operational improvements implemented during the pandemic are the ones behind Tembici’s results, according to what Tomás Martins, CEO at the company, told LABS.
“The number of bike losses per month decreased to 0.1% after we implemented an IoT solution with GPS in the system. After putting a lot of electric bikes in the streets in October, we estimated to lose 20 a month and we lost 0 to date. Our EBITDA became positive thanks to these improvements in operating costs added to the user revenue,” says Martins.
With 15 million trips recorded in Tembici’s shared bikes during 2020, the company forecasts it will increase this number to as much as 25 million this year. Planning to triple its size in the next two years, the company is betting on the expansion of its docking stations and in a solid increase in the number of bikes and e-bikes.
“We bet heavily on the electric bike. It is a solution that had a lot of repercussions and increased adoption,” says the exec. Tembici’s pilot electric bike program was launched in September last year, in Rio de Janeiro. By October, there were 500 electric bikes available to users.
Based in São Paulo, Tembici is currently in the main Brazilian capitals such as Rio, Salvador, Recife and Porto Alegre, in addition to Santiago, in Chile, and Buenos Aires, in Argentina.
But even as the regions’ micromobility leader, the company still sees plenty of opportunities ahead. “In São Paulo and Rio, we have 3,000 bikes in each city. Paris has 20,000 bikes and about 15% of São Paulo’s population. New York has 16,000 bicycles and is also smaller than São Paulo. There is a lot of room to grow the number of bikes in the cities where we already have a presence.” Tembici uses a docking station system for taking and returning the bikes, similar to models like New York City’s Citi Bike and Paris’ public system Vélib’.
In addition to further increasing its presence in the cities where it already operates, in part, via its electric bikes; Martins reveals, without adding no further detail, that the company is also looking at opportunities in other countries such as Colombia and Mexico.
The company forecasts that Latin America will have more than 300,000 bicycles in docking stations by 2026. Currently, the São-Paulo based firm fills 70% of this market share.
As a social-distancing friendly business, Tembici surfed the wave of a growing concern with alternative mobility in the wake of the pandemic. With expressive growth month-over-month, Martins shares that after the first impact of last year second and third-quarters in the operations, Tembici got back on track, when in October, it reached the same level of trips recorded at the beginning of the year, before the pandemic.
“The last quarter [of 2020] was a record for the company. In fact, it recovered and further sped up, literally in a J-curve that we had in operational results. I think the pandemic somehow fostered that,” he points out.
By offering free trips to health professionals that needed to commute during the first months of the pandemic, Tembici managed to keep its customer base. “From there, we saw a significant change in daily habits, especially after the WHO recommendation for the use of bicycles to move around the city, as a way to prevent contagion,” says the exec.
As trips in Tembici’s platform resumed in the last months of the year, the company not only reached its best margin levels ever: it also managed to increase user retention to 80% after users’ first month using the bikes.
In a kind of a knock-on effect, in addition to users’ attention micromobility also caught the eyes of both public power and private market. According to Martins, the pandemic took the subject to a next level, as players and sponsors are more willing to invest in a mobility solution for cities, mainly with the ESG matter in the spotlight.
“In the private market perspective that is also financing encouragement, both bank issues and funds are looking for us. Because they understand that once you make an investment here [at Tembici], you are investing in reducing carbon footprint; in alternative and accessible mobility for people.”
On Tembici’s own ESG agenda is iFood Pedal, an e-bike project in partnership with iFood. Launched in October last year, Tembici put 500 electric bikes in the streets of São Paulo aimed exclusively at iFood delivery partners. In addition to the bikes, the project includes rest stops and an online training content on safety and road awareness, called Pedal Responsa.
Asked about taking iFood Pedal to other cities, Martins assures that the expansion is on the roadmap. “The project had a very strong adoption. The combination of an affordable electric bike solution, in a space where they [couriers] can rest, charge their smartphones, with Pedal Responsa’s training was a very nice mix. We hit twice the goal we were expecting to the project.”
Paving the way for Tembici’s growth and backing its new initiatives is a US$47 million Series B round led by VC firms Valor Capital, Redpoint eventures, and World Bank Group‘s investment arm, IFC. With a US$ 16 million slice already invested in technology, process improvements and new hirings, with new features such as enabling GPS in the fleet and enhancing the app; the other US$ 30 million will address expansion. “We have designed a part of these resources for the expansion and implementation of electric bikes, which will certainly happen this year.”
As for other plans, Martins gives a hint. “iFood pedal was a new project on a global scale and I think it had a really good repercussion, so our idea is to expand it. This opens up an avenue of opportunities besides working on people’s mobility issues, by trying to understand how we can also solve the last mile problem for deliveries,” he reveals.
“We have seen many retailers discussing this mobility issue of how to do last-mile delivery, not only in a more efficient way but in a more sustainable way,” says Tembici’s CEO. “We are starting to open conversations with companies to see how we could also have a solution in this sense.”