This will come at the expense of additional traffic jams and rising CO₂ emissions. Individual transport, which is 90% based on oil combustion, is a major driver of greenhouse gas emissions and climate change.

A paradigm shift in urban mobility, aligned with the framework of the United Nations Sustainable Development Goals (SDGs), is indispensable. Younger people, in particular, are interested in individual mobility as a service, but do not want to bear the associated disadvantages, such as acquisition and maintenance costs – leading to the advent of ’Mobility-as-a-Service‘ (MaaS) business models.

Sharing instead of owning - sharing models are established
Sharing instead of owning is a decisive concept for a sustainable change in urban transport. A wide variety of vehicles are shared, ranging from full-sized cars, mopeds and bicycles to micro-vehicles such as e-scooters. In contrast to renting for several hours or days, sharing is the spontaneous lending of a vehicle, usually for only a few minutes or hours. In Europe's big cities, all of the above-mentioned vehicles are available under sharing models, and the providers are not always new start-ups, but sometimes also established players such as Share Now, a cooperation between BMW and Daimler.

Subscription models on the rise
In addition to classic sharing offers, there are also subscription models that offer ’Mobility-as-a-Service‘, where providers offer their bicycles, e-scooters or cars in the form of a flat rate with variable terms and flexible cancellation periods. Thus, the object is exclusively available to the subscriber in the short or medium term, as if it were their property.

Costs for maintenance and insurance are included, and if damages occur, the provider either repairs the vehicle on site or simply replaces it. Flexible cancellation periods and the all-inclusive service packages seem to be increasingly convincing to city dwellers, given it means they won’t be tied to a bicycle or car for years; neither do they have to worry about sudden repair costs.

Financing solutions for MaaS providers
Like leasing providers, MaaS providers must finance the acquisition of all the vehicles to be rented out. This results in a considerable capital requirement that can quickly exceed the financing possibilities of the accompanying bank, calling for structured capital market solutions.

Asset-based financing is often the method of choice, where investors or lenders do not only focus on the overall profitability, but also on the value of the assets to be financed and the income that can be realised with them. The investor can thus reduce the credit risk of their investment, which translates into more favourable financing conditions for the MaaS provider.

In addition to the assessment of the business model per se, four revenue components are of particular importance for the investor:

-  The usage component - how often and for how long is the vehicle used or rented?

-  The price component - how much does the user pay for the use of the vehicle?

-  The cost component - how much does it cost to operate (OpEx) the vehicles?

-  The value component - what is the value of the vehicles if they have to be drawn on in the event of a financing default?

Performance component
The financed vehicles usually only generate income when they are rented out. In classic sharing models, this is usage-dependent, and the investor checks the extent to which the vehicles have been used historically.

Seasonal aspects, as well as overriding influences - the coronavirus crisis is the perfect example here - must be considered. Subscription or operator models that rent out the vehicles with a minimum term are at an advantage, as the fixed contract or rental period allows for higher predictive accuracy of future revenues.

Price component
The price for rental or use can change over the term of a financing, making it difficult to predict future cashflows, and revenue per kilometre can also be affected by pricing models such as monthly flat rates or special promotions. Subscription models have the advantage of stable prices over the contract term. For both models, additional income must also be considered; for example, from the use of the vehicles such as mobile advertising media.

Cost component
The third element to be analysed in determining EBITDA are operating costs, per vehicle and kilometre driven. The business model should be as scalable as possible (for example, the number of service employees should grow at a lower rate than the number of vehicles) to achieve higher absolute and relative returns as usage increases. A positive proof of concept shows that the business model can exist as such; in other words, without the costs of expansion.

Value component
To prepare for a potential default, the investor analyses the possibility of selling the assets and the potential proceeds from realisation. While historical values can be used for established assets such as cars, for new assets such as e-scooters or e-bikes, the question arises as to the size of the secondary market and the ability to liquidate the assets. The only option may be to sell to other providers at a larger discount.

Conclusion
Transformation towards sustainable mobility in urban agglomerations is gaining momentum, promoting the innovative business model of Mobility-as-a-Service providers. Asset-based financing offers many advantages for financing the constant and increasing capital needs of these companies.

At the same time, such financing is an opportunity for impact investors to diversify their portfolios with secured and sustainable investments. Therefore, asset-based financing for MaaS providers is a concrete example of impact-oriented financing of the sustainability transition in the context of the United Nations SDGs.

¹ https://www.un.org/development/desa/en/news/population/2018-revision-of-world-urbanization-prospects.html