🚲 The e-bike boom

Forget about electric cars, ride an e-bike

Apr 22, 2022

Good afternoon everyone 👋

Welcome to the 24th edition of our weekly insights. Today, we’ll unpack one of the hottest trends in micromobility. They are eco-friendly, Covid-safe and often faster than mass transit. Let’s talk about e-bikes.

We’re not going down the whole supply chain but will focus on how business models evolved to keep up with the growing traction of e-bikes.

Ready? ⬇️

🚲 The e-bike boom

Before the pandemic, the main appeal of electric bikes (e-bikes) was low-impact physical exercise, or “work-out when you want to and use the motor to go up hills”.

Now, people embrace e-bikes as a way to move around cities avoiding crowds and traffic while reducing carbon emissions. Proof is, direct to consumer sales of e-bikes have never been so high in Europe and North America.

Combined e-bike sales on both continents nearly doubled from 2018, to reach an estimated 6.4M units in 2021. Despite the pandemic, total e-bike sales grew 22% between 2020 and 2021 in Europe. By 2030, the market is expected to grow to 13.5M units if favorable legislation is upheld.

European governments and cities played a major role in accelerating the adoption of e-bikes, as they made major policy and infrastructure changes around cycling (👋 Paris). These made e-bikes an attractive alternative to cars for people living in urban, suburban and even rural areas as they fill the gaps in public transport networks.

With both behavioral and infrastructure changes, few micromobility champions took advantage as VC investors would pour money to help them scale, become more operationally efficient and get their hardware on point.

Now, while these champions fight to grow their territorial footprint, the next generation of micromobility startups strives to find alternative business models, and is going after opportunities in maintenance, AI, data and… software rather than vehicles.

Let’s go through the story.

1. Own your e-bike

Today, the major bottleneck of the e-bikes industry is distribution — or how to get e-bikes into consumers hands.

As it stands, retail distribution of e-bikes runs through fragmented bike shops and big retailers. In Europe, which is the most mature e-bikes market, Decathlon is still the largest light electric vehicles OEM. In recent years though, innovative companies have experimented exciting new distribution strategies.

The first strategy revolves around selling vehicles directly to consumers through brand stores or through a hybrid network of authorized vendors. Such strategies have been adopted by companies such as Vanmoof 🇳🇱 or Cowboy 🇧🇪, which respectively raised a $128M Series C last September, and a $80M Series C last January.

These startups have been particularly attractive for VC investors over the past few months as they are vertically integrated players (manufacturers and distributors) which generate high margins from standalone purchases, and have higher lifetime value per product sold. Their distribution strategy is also a way to collect comprehensive data on customer usage, allowing them to make fast hardware improvements and build tailored additonal services to upsell (e.g., maintenance, insurance, GPS tracking…). Virtual loop 💫

As hardware moves closer to becoming a commodity, these players understood that the heart of e-bikes will become their intelligence. They rethink e-bikes as software and hardware platforms beyond just their mobility utility.

“There is a strong opportunity for an integrated vehicle operating system, something that controls the ride dynamics and can act as an open platform for 3rd party “apps” that further enrich the UX.” — Puneeth Meruva

As it stands though, the price of owning and maintaining an e-bike from Vanmoof or Cowboy is a significant barrier to adoption for the majority of customers. Vanmoof’s S3 model for example costs €1,998 (not counting maintenance). And, at the end of the day, some customers don’t necessarily want to own a micromobility vehicle, but rather want access to one wherever they are.

2. Share one’s e-bike

To make e-bikes a more accessible product, startups have adopted distribution strategies revolving around bike-sharing without docks, through the pay-per-trip shared model.

Before the pandemic, many startups tried to enter this lucrative space: Gobee.bike, Ofo, Obike, Mobike, Jump (by Uber)… Most of them failed massively. I’m sure you’re having images of bikes ending up in dumpsters and rivers popping up in your head.

I won’t discuss the reasons why this first wave of companies failed, but there is one major component to bike-sharing services success — they can’t work without public money and local governments willingness to create the necessary infrastructure for them to take off.

Though European cities have had a liveability problem for a while (caused by cars), they were missing the opportunity to wake up to the fact and accelerate urban-remodeling to favor “soft mobility solutions”. Covid and relatively quiet lockdowns where “the missing piece”. They acted as a catalyst, and major European cities such as Barcelona, London or Paris seized the opportuntiy to expand their network of bike lanes, restrict access to roads, ramp up their own bike-sharing services etc.

That triggered the expansion of micromibility giants (the second wave) such as VOI , Bolt, Dott, Tier… which started in the e-scooter business (partly because a scooter is cheaper than a bike and easier to deploy). Later, these players raised massive amounts of funding to roll out e-bikes and build up hybrid scooter/bike fleets in cities where they operate.

By running a shared distribution model, these giants are able to market their solution and collect operations data on a massive scale. And, as a side benefit, the model incentivizes long-term robust vehicle design since that allows for the vehicles to be shared longer and more frequently, driving costs down for operators. Which is true for scooters and bikes.

There is uncertainty over where this model will go though, as players are trapped in a war of attrition, doing everything to become more cost-efficient and trying to make the business model profitable, while racing (at high price) to get the last remaining city permits. Some have already reviewed their strategies and focus on building the most resilient operating systems as a way to get more control over rider behavior, better compliance with city regulations and utlimately be the most resilient transport alternative.

What is sure is that it isn’t a game for small startups anymore, which are striving to find alternative models to compete and get investors attention.

3. Subscribe to an e-bike service

The latest iteration is the subscription or BaaS (bike as a service) model. With this model, users pay a monthly fee to keep e-bikes at home and get access to extras like maintenance services and replacement vehicles.

Germany's Dance, Bloom now Motto in France or Dutch’s Swapfiets have all raised rounds very recently to roll out this new distribution strategy across Europe.

The bike as a service model is still very nascent and just beggining, but I believe that it has the potential to take over the micromobility market in the near future, for the following reasons:

First, leasing vehicles could allow startups to maximize both the usage and the lifetime of their products through technologies like GPS, vehicle monitoring…
Second, operators don’t have to comply with cities heavy regulations over shared mobility services, nor fight for permits and pay for licences (yet?)
Third, subscription models remove the upfront price of buying an e-bike and the theft burden on customers willing to add e-bikes to their transportation mix
Fourth, operators can adopt a B2B2C acquisition strategy and partner with companies willing to offer e-bike subscriptions as employee benefits, or with local governments willing to add e-bikes to their public transportation pass (e.g., Paris recently launched Veligo, a subscription based e-bike service).

With this model, competition revolves around the level of services that operators are able to provide as part of customers’ subscription (even so that hardware become commoditized). I’m pretty excited to see how these players will scale their international expansion and manage to provide smilar levels of services in all the cities where they operate. There are some opportunities as well for maintenance companies like Cyclofix to grow here.

Let’s see were it goes.

Thanks for reading, and as always feel free to give me your thoughts in the comment section.

See you next week

Tim 👋