SAN FRANCISCO/LOS ANGELES (Reuters) - Segway-Ninebot Group, a Beijing-based manufacturer of electric scooters, rolled into Los Angeles this week hoping to bolster its position as the main supplier for a new wave of well-funded scooter-rental startups and offer a peek at new battery-powered transit products.

Gao Lufeng, chairman and chief executive of the firm, said the company expects to double its revenue every year for the next three to five years. Formed by the 2015 combination of China’s Ninebot and U.S. transportation pioneer Segway, the company was most recently valued by private market investors at $1.5 billion and is now looking to raise $200 million from financiers, Gao told Reuters in an interview.

Gao was in Southern California for a press event trumpeting his company’s new electric transportation gadgets, as Segway-Ninebot scooters become an increasingly common sight around urban areas like Los Angeles and Oakland.

But Segway-Ninebot, along with the rest of the instant industry that has popped up around scooter rentals, may have a bumpy road ahead. A host of companies are piling into the business - many spurred by euphoria around Southern California-based Bird, an app-based service for on-demand scooter rentals that is valued at $2 billion by venture capitalists less than a year after it was launched - and industry watchers wonder if it is a fad.

Investors poured $3.5 billion into scooter- and bike-rental startups globally for the first half of 2018, according to data firm CB Insights, even though basic issues such as how cities will regulate the motorized two-wheelers remain unresolved.

U.S. city regulators are capping the number of scooter companies and scooters allowed and requiring permit fees. Regulators are also grappling with scooter infrastructure - both sidewalks and bike lanes seem inadequate - and helmet laws.

“There is an enormous amount of hype around the industry and we are still seeing how sustainable the market is and how the fundamentals will play out over time,” said Dan Hoffer, managing director with Autotech Ventures, which invests in mobility startups, but has not yet put money in electric scooters.

BETTER THAN BIKES

The fixation with electric scooters grew out of dockless bike-sharing, where companies offer bike rentals that can be picked up and left anywhere convenient to the rider. The once-lowly scooter, now equipped with better batteries, lighter-weight materials and tracking sensors, suddenly looked like an even better urban transport option, especially for professionals in business attire.

Slideshow ( 11 images )

San Francisco-based Spin, which started with bikes, says its scooters have gotten 20-times more usage, and it recoups the cost of a scooter in two to three weeks. Its hometown in June issued a temporary ban on e-scooters until companies were properly permitted, a response to complaints about the growing clutter of scooters blocking doorways, walkways and driveways.

New competitors are still lining up. Razor, a longtime scooter-maker, is launching an app-based service this summer. Uscooter, a Los Angeles-based firm that calls itself “the Ferrari of scooters,” is rolling out an app of its own.

Segway-Ninebot has been way out ahead in supplying Bird and Lime, another well-funded bike-and-scooter outfit. But that is breeding manufacturing rivals as the company struggles to keep up.

A spokeswoman for Lime said it can “take longer than we expected” to get scooters from Segway-Ninebot and Lime is “always looking to find new suppliers.” Bird’s CEO, Travis VanderZanden, has publicly lamented a scooter supply shortage.

Spin has an agreement with Segway-Ninebot for scooters that will meet demand through the end of the year, but Spin said it is looking to design and build its own scooters. Battery maker CLEVR Mobility is designing e-bikes and e-scooters to have batteries that can be swapped out, giving scooter-rental services an alternative to a workforce of contractors that collects and charges scooters nightly.

DURABILITY QUESTIONS

Complaints about Segway-Ninebot’s scooter quality have also encouraged competition. Dave Kammeyer, a Silicon Valley software developer, said he bought a Segway-Ninebot scooter similar to what Bird offers after trying out a rental.

“It’s definitely not built to the standard of what I’d consider a durable vehicle,” he said. He estimates his scooter will last for up to 300 miles (480 km) “if I’m lucky. That said, I love riding it, and it was only $300.”

Slideshow ( 11 images )

Gao denies there is any manufacturing bottleneck and rejects criticisms about the durability of his products. But he added the company is working with Bird and Lime to improve the lifespan and quality of the scooters.

Even as new companies join the scooter business, others are retreating. Chinese bike-rental company Ofo blamed what it called heavy-handed city regulations when it announced this month it would dramatically scale back its North American business, before it had even put any electric scooters on the ground.

“We are seeing several of these players contracting and pulling back from markets,” said Paul Asel, managing partner at NGP Capital, which invested in Lime.

Even Segway-Ninebot is hedging its bets. The company told Reuters it is in talks with a handful of major automakers about a new design that would enable scooters to charge in the trunk of cars, encouraging more individuals to buy scooters.

It also plans to acquire artificial intelligence, battery technology and other robotics companies in an effort to build delivery robots, and on Tuesday was set to unveil a new line of e-toys - electric roller skates and go-karts.