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Rick Vosper: E-bikes, part three: new room, new elephants

Published April 8, 2019

In part one of this series, we looked at the overall size of the IBD portion of the e-bike market relative to EBD (independent or single-brand e-bike-only retailers) and consumer-direct sales (25-30% apiece to the IBD and EBD by units, the rest to direct). In part two, we dug a little deeper into the EBD market and discussed whether it will ultimately merge with the traditional IBD and IBD brands) or remain autonomous (the answer depends on who you talk to). And now it’s time to unpack the whole What Happens Nextpiece of the equation.

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Problem is, there are a couple additional variables in that equation which, in typical bike industry fashion, no one seems to want to talk about.So let’s talk about them anyway. I’m referring to the rise of e-bike share/rental programs financed by companies with functionally limitless budgets, and the introduction of entire new e-bike brands by giant auto and motorcycle companies—as much as fifty times larger than even the biggest bike industry brands.  There are a couple additional variables in that equation which, in typical bike industry fashion, no one seems to want to talk about.

Bikeshare was never about bikes ... and that goes double for e-bikeshare

It seems increasingly likely the bikeshare market will leapfrog its pedal-only phase and move directly to e-bikes This is especially true in hilly cities like Seattle or San Francisco in the West or San Boston or Pittsburgh in the East. Ultimately, any discussion of bikeshare becomes, de facto, a discussion of e-bikeshare. 

But the bikeshare business is not primarily about bikes (or even e-bikes) as much as it is about gaining and controlling share of vehicular traffic for companies like Lyft and Uber. The latter famously acquired e-bikeshare company Jump a year ago at a rumored $200 million. Lyft acquired bikeshare company Motivate in November, poured $100 million into programs for New York city alone, and announced the addition of more than 600 of Ford's GoBike e-bikes to its fleet a month later. 

These businesses are operating under an entirely different set of rules from the traditional bike business. But whether we like it or not, what they do will impact what we do. It’s not a question of whether or when, but one of how and, more importantly, how much. 

For purposes of this discussion, let’s set aside the swarming gnat-cloud of practical issues confronting bikeshare initiatives — docked vs dockless, injuries and lawsuits, stolen or abandoned vehicles blocking sidewalks or impeding street traffic, bicycle graveyards, and on and on — and focus purely on the bike-business aspects. 

Will bikeshare programs put more Americans on bikes? Almost certainly. Will that translate to increased sales for local bike shops? Not so much, if at all. 

The debate goes like this: more people riding and enjoying bikes through bikeshare means more potential bike owners, people who find it more convenient and economical to buy a bike than rent one. Therefore, the rise of bikeshare means more bike sales long-term. But there’s a counter-argument too, which says that, in addition to creating new riders, bikeshare will also pull potential bike owners — people who would normally have bought IBD-quality bikes anyway — away from purchases and into rentals. At the end of the day, it’s anybody’s guess. 

Will bikeshare programs put more Americans on bikes? Almost certainly. Will that translate to increased sales for local bike shops? Not so much, if at all. 

My opinion is that any gains or losses will be marginal, and that concerns about bikeshare — and specifically, e-bikeshare — are at best a distraction for those of us who actually try to make a living making and selling bikes, electrified or otherwise. But industry doomsayers can take heart from the fact that there’s still plenty of new competition coming up, and aimed straight at the heart of our core business, too.

Welcome our new motor sports overlords

Of much greater importance than bikeshare is the role of auto and motorcycle companies as direct e-bike competitors. Their products will end up going head to head with those from traditional bike companies, not to mention established e-bike-only brands like Pedego or Rad Power. I did a quick count the other day and with a little help from Google, came up with a dozen major car and motorcycle brands who are either already in the e-bike business, claiming they will be any day now, or, like Tesla and Harley-Davidson, teasing the possibility.

I asked e-bike consultant Ed Benjamin of eCycleElectric about car companies and e-bikes. 

"I have the good fortune to have four automotive industry clients," he says, although he declines to name specific brands. "And I've learned a bit from them. These guys are willing to put in an enormous R&D investment before they put a product out. It's sort of the opposite of the bicycle world. And the bottom line is, quality of the products is much better than what we're getting the bicycle business.

"(Car companies) bring astonishing resources and quality and value to their bicycle products. But ... they have no idea how to sell bikes." — Ed Benjamin

"Their new vehicles go through two years of testing before they go to market. (Car companies) bring astonishing resources and quality and value to their bicycle products. But...they have no idea how to sell bikes. They are confused about the whole ‘first and last mile’ thing. But they have an enormously powerful potential resource with auto dealers, marketing expertise, and budget. So far their dealers haven't been interested in e-bikes, despite the fact that an electric bike has better selling margin than some small sedans."

Among many others, General Motors wants a piece of the e-bike business. In November, GM announced it would begin two e-bike models consumer-direct in 2019 in Germany, Belgium and the Netherlands, and of course rumors have been flying about a North American presence ever since. 

“I see GM as more of a market enhancer than a disrupter, just because it's going to bring more people into bikes, including people who might not be familiar with bike brands today. We're looking for people who live and work in cities, and they're looking for alternatives that work for them and the way they live. I call it being 'transportation agnostic.'”

That’s General Motors’ Hannah Parish, and she is positively bubbly about the positive effects her employer’s e-bikes might have not just for the IBD, but the entire cycling world at large. But Parish isn’t just another corporate shill. She’s global director of GM’s ARĪV group (fancypants crowdsourced spelling and all), and comes to the conversation with heavyweight marketing credentials from the IBD side of the business. These include stints as head of marketing for Specialized Canada and director of marketing for the CSG (Cannondale et al) brand portfolio.

When asked about initial sell-in of GM’s e-bikes in Europe, Parish is upbeat but nonspecific. “So far, so good,” she says diplomatically. “We're very pleased with how our presales have been going.”

The initial model for the Germany and Benelux launch will be consumer-direct, she explains. Assembly when needed (one model, the folding Merge, arrives fully assembled and ready to ride) and service/warranty will be supported by German provider Live Cycle, which has a brick and mortar presence in a number of German cities as well as mobile outreach, according to the Live Cycle website

But when I press Parish for more information about GM’s sales channel plans, things get very interesting, very quickly.

“We'll have a multichannel approach,” she says. “In April, we've announced we'll be shipping product, first in the e-commerce channel and eventually including the ability to sell into IBDs, large retailers, and national accounts. Of course we're a startup, so we'll add those incremental channels over time. As I like to say, we fish where the fish are."

I note we had a corporate minder with us on our call, a nice woman from GM’s advanced technology communications group. Since there were no howls of outrage following Parish’s last statement, it’s safe to conclude this information is now what corporate types like to call “market-facing.” 

Let’s start with the sort of “click and collect” model that goes live for GM this month in parts of Europe, and explore how it might apply to the USA, I suggest. “When we think about the United States, we haven't made the plans yet, so I can't tell you," Parish says. “I wish I could give you something, but I can't speculate.”

Fair enough. But last time I checked, Velofix had fifty-one mobile sites in the USA and eighteen in Canada. And according to Beeline CEO Pete Small, his company’s network of mobile service providers now includes more than 200 participating dealers with 350+ brick and mortar locations in the US. That number includes its Powered By Beeline partners via parent brand Accell.

One or both of these companies could support a whole lot of e-bike sales, which is another way of saying “provide a cost-effective, scalable solution to that thorny ‘last mile’ challenge.”

And it’s by no means the only solution. 

Hmm, lessee. Global brand recognition, proven track for reliable with high-quality consumer products. Know any hungry IBD-segment retailers who might be interested in taking on an e-bike line like that? Well … how about the more than half of all US bike shops who don’t currently have their available floor space hamstrung by agreements with Trek, Specialized or Giant, for starters? And then there’s every EBD shop not already locked in with Pedego.

That’s a lot of prospective dealers. And, at least potentially, a staggering number of e-bike sales. 

Now take that model and multiply it by more than a dozen nascent e-bike brands, from corporate behemoths like GM, Toyota, BMW and Yamaha to sexy boutique marques like Porsche, Maserati, Ducati and Buell, and you have the power to move markets. Yes, even if only a fraction of these brands end up adopting the model. Not to mention the resources to empowering a currently underserved segment of the retail base, perhaps even toppling the dominant bike industry paradigm.

A possibility that big deserves a special name. I think I’ll call it ... Bike 4.0.

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