The UK is a union of petrolheads. Cars and taxis remain by far the most popular means of transport, while cycling made up just 1.7 per cent of trips in 2018 – a figure that had barely changed in the preceding 17 years, according to Cycling UK. The London 2012 Olympics did encourage many of us to pile into Halfords (HFD) in search of lycra and shoe cleats, but as a way of getting to work, cars and trains have reigned supreme.
This balance has perhaps been reflected in the government’s attitude towards less conventional means of transport during the coronavirus pandemic. Cycling data is notoriously difficult to collect, but while the Department for Transport (DfT) announced a record £2bn package for cycling and walking last month, cycling has only recently become part of the government’s frequent breakdown of transport use at its briefings.
The figures are staggering. Cycling activity more than doubled for much of May, occasionally crossing the 200 per cent threshold, while rail and bus usage remains low. Coronavirus has left a permanent impression on many people. Just over a quarter of respondents to Transport Focus’s latest weekly survey said that they are now more likely to cycle for journeys where they previously used public transport. Halfords has reported a roaring trade in bicycles, opening up a growing investment theme. Electric bikes make up a small but nascent cadre of bike sales, while electric scooters are on the horizon.
The pandemic has also thrown into question the future of other alternatives to conventional public transport. Uber (US:UBER) recently thanked customers for "not riding" and urged them to stay at home during the crisis. The company made several rounds of job cuts as the amount of people using its ride-hailing platform around the world plummeted.
I want to ride my e-bicycle
The London Stock Exchange isn’t awash with cycling investment opportunities. Halfords operates 446 stores in the UK and Ireland, where it sells bicycles, cycling clothing and accessories, and car parts. It is the leader of a cycling market that also contains Frasers (FRAS), which operates the Evans Cycles chain.
Both companies are likely to benefit from the government’s cycling investment pledge, which will create subsidies for bicycle repairs, promote the Cycle to Work bike discount scheme, and make roads more cycle-friendly. A shift in working patterns could also boost cycling sales and move the cycle commute beyond inner cities, in the view of Francois Austin, partner at Oliver Wyman. “If you assume there will be a trend post-Covid of reduced office space in city-centre locations, and maybe moving to a more networked company structure,” he says, “then you could see that cycling trend not just in the urban centres, but in suburban areas as well.”
Halfords also has a foothold in two small but lucrative long-term ‘micromobility’ solutions: electric bikes and electric scooters. E-bikes made up 11 per cent of its cycling sales last year. The UK compares unfavourably with other European nations on e-bike uptake – according to the Netherlands’ RAI Association and dealer association BOVAG, over 68 per cent of the €1.2bn (£1bn) in Dutch cycle sales were e-bikes in 2018. UK infrastructure upgrades and greater awareness are expected to support strong growth projections.
Halfords’ own forecasts, which earmark 10 UK key cities for e-bike adoption, project that e-bike sales will cross 8,000 in 2030 in these locations, rising to 1.5m in 2050. Johnson Matthey (JMAT), which provides e-bike batteries, offers alternative exposure to this trend.
The government has meanwhile fast-tracked its process of legalising e-scooters for roads. The UK is the only major European country where they aren’t road-legal. Trials have been brought forwards from next year into this month and expanded across the country.
These machines are viewed as a route both to enlarging 'shared micromobility' and to providing an affordable alternative to car transport. Indeed, at an estimated price of $400, McKinsey analysis suggests that at five rides a day, an owner would break even after four months. Once more, Halfords is the leader here, it being the only nationwide stockist of the popular Xiaomi e-scooter.
What is the future of Uber?
Ride-hailing platforms represent another form of mobility that has already changed how we move around cities. Uber is the dominant platform in the UK – its closest listed competitor is Lyft (US:LYFT), which has limited presence here.
Uber, which listed in the US last year, has had a rocky time in the UK that extends well beyond coronavirus. It is appealing the Transport for London authority’s decision to ban it from the capital in response to concerns over passenger safety, while app downloads have plunged during coronavirus. While not a typical commuting method, ride-hailing platforms play a role in connecting workers across cities and returning late-night white-collar workers, such as bankers and lawyers, to their homes.
Both Uber and Lyft investors were prepared for early losses, in the view of Clement Thibault, content manager at SimilarWeb. “The big thing for them was growth, and growth at all costs,” he says. “Unfortunately for them, obviously the new reality of Covid kind of put a dampener on their growth.”
Uber’s net loss for the three months to 31 March 2020 widened to $2.9bn (£2.3bn) from $1bn last year. It has incurred additional Covid-related costs, including driver support and cleaning supplies. Coronavirus has already changed how consumers are able to access the app. Its UberPool option, in which passengers share space with strangers, was suspended in London due to health fears.
In the long term, ride-hailing passengers may opt to pay more for singular and premium services such as UberLuxe instead. “I see the shift for Uber to more really private parts of public transport,” Mr Thibault predicts.
