CNBC Business | New Kings of the Road

New Kings of the Road

The automotive industry is finally serious about electric vehicles but there is much faster acceleration in the bike lanes. Carlton Reid reports

In the Netherlands, the winner of the Bicycle of the Year award makes the national newscasts. In 2009, for the first time, the winner was an electric bike, the Gazelle Chamonix Innergy, which carries a €2,700 price tag. Although e-bikes account for less than 20% of the 1.3 million bicycles bought annually by the cycle-mad Dutch, their sales have tripled in three years. And, as they cost on average €1,945, they already account for more than a third of the total revenue.

This is a mouth-watering prospect for bicycle retailers everywhere if e-bikes become the iPhones of personal transport – perhaps more so should a global definition of an e-bike ever be reached. Part of these two-wheelers’ broad appeal is that in the Netherlands or Germany, say, where e-bikes are classified as bicycles which just happen to have battery-assisted pedals, riders are not obligated to wear helmets and they can tether their machines wherever regular cyclists can. Most of the 100 million e-bikes buzzing around Chinese cities, however, are actually e-scooters, pedal-free with throttle-operated motors.

Terminology is further muddied in Europe by petrol-electric crossbreeds such as Piaggio’s MP3 Hybrid, a powerful urban scooter with two front wheels due to go on sale next year, or its fully electric counterpart, the US-based, Italian-styled Vectrix VX1 and other pioneers such as the UK’s Ultra Motor, which has already unleashed 15,000 e-scooters into India.

In some quarters, there’s an expectation that the plug-in e-bike is a gateway purchase that will soon lead to a boom in electric scooters, which, in turn, will result in an upsurge in electric car sales. During the 1990s, Taiwan’s government subsidised the sale of e-bikes to kickstart the market; the Italian government is planning to do the same later this year, while the UK government may subsidise e-car sales, starting in 2011, up to £5,000 (€5,550) per car.

The bike as stalking horse for the car is reminiscent of a century ago, when the dawn of the 20th century saw a petrol motor added to 30 CNBC BUSINESS I NOVEMBER 2009 the Safety Bicycle, leading to the popularity of the motorbike, which, in turn, gave way to the automobile craze of the 1920s. Zoom forward to this September’s Frankfurt auto show, which fizzed with carmakers suddenly evangelising about the sorts of lithium batteries already fitted to numerous e-bikes.

Instead of hiding a frumpy electric vehicle (EV) behind the latest gas guzzler, several carmakers gave centre stage to technologies likely to dominate forecourts over the next few years as economic and environmental imperatives kick in. At Frankfurt, Renault fielded four concept EVs it claimed would be on sale by 2011 and Volkswagen unveiled the E-Up!, which, from 2013, may cover up to 130km on a five-hour electrical charge. Paul Scott, of pressure group Plug In America, was moved to proclaim: “This is not a false dawn…. This is the real thing.”

Yet this dawn is still engulfed by a heavy fog. Toyota, the world’s biggest car manufacturer, favours hybrid technology, which relies heavily on petrol engines. In the next lane, Audi is still pinning its faith on clean diesel. Meanwhile, BMW is experimenting with diesel-hybrid technology after losing a long campaign to win acceptance for hydrogen. After a terrible, loss-making year alleviated only by taxpayer subsidised scrappage schemes, some analysts wonder how the same car makers can make money out of new and technology in the face of consumer nervousness over cost and practicality. In a recent web discussion, Audi of America president Johan de Nysschen called the Chevrolet Volt – one of the highest profile electric concepts for reviving GM – “a car for idiots”, insisting that even with an anticipated US government tax rebate of $7,500 (€5,000) per vehicle, the $40,000 (€27,000) price tag would be too expensive.

As for Vectrix, two years ago its chief operating officer, ex-Ducati boss Carlo di Biagio, crowed: “After marketing, our breakeven point can be very low.” It was envisaged that Vectrix would retail at €8,000–€9,000 depending on local taxes, with a confident Di Biagio predicting: “We should break even selling just 7,500 bikes a year.” In July the company’s AIM-listed shares were suspended pending a search for a buyer.

Nevertheless, Vectrix’s misfiring illustrates the importance of timing when launching new consumer technology. Set up in 1996, the company poured resources into building a dealership network in the US while developing a product that has won almost universal admiration. According to Gijs Verhagen, the Vectrix importer and distributor for the Benelux countries, “Vectrix just took too long to bring their product to market.” Former Vectrix UK sales manager, Mark Loveridge, says: “It is over-engineered for its purpose, which means a price-tag too expensive for most markets.” He confirms that a mere 120 Vectrix VX1 bikes were sold into the UK between June 2007 and March 2009, and many of those were to state-funded bodies such as the police. Verhagen says he has sold just 60 bikes into the Benelux, adding however that he has a healthier forward order book. Loveridge, now sales director for Ultra Motor, predicts huge profits at the €3,000 price point, around a third of the price of the Vectrix. The company has just launched an e-scooter for £2,995 (€3,330) in the UK market. While the UK lags behind the rest of Europe in embracing EVs, he expects to sell “several hundred scooters” in 2010 and aims to break even in 2012. Moreover, Ultra predicts annual growth of 20%–30% from 2010, a forecast partly based on lucrative OEM contracts for component development.

Ultra is following the well-worn tracks of the conventional scooter business, says Loveridge, with the importer and distributor taking a 12%–15% cut and the dealer 10%. But even with a high volume of units sold profits are hard to find. Verhagen recently launched The Electric Vehicle Co., and dreams of franchised dealers throughout Europe coaxing customers into all manner of EVs. Despite their rapidly growing popularity, he says that e-bikes are not particularly profitable yet, partly because the marketplace is fragmented with “hundreds of brands, most low margin and low quality.”

This is rapidly changing though and for now at least, the e-bike business model is pulling ahead. The reason is relatively straightforward: as bicycles are not allowed on motorways, battery range is less of a concern. It is estimated that 750,000 e-bikes will have been sold in Europe by the end of 2009.

“The electric bike will be a standard product, not a short-term trend,” says Mathias Seidler, CEO of Germany’s Derby Cycle, owner of the Kalkhoff and Focus bike brands. Roughly 100,000 e-bikes were sold in Germany in 2008 – around 100 times the number of hybrid and electric cars –and Seidler reckons this figure will quadruple within three years.

In the US, Best Buy and Wal-Mart already sell e-bikes, and Trek, the leading US maker of enthusiast bicycles sold only via bike shops, has introduced Ride+, a line-up of electric city bikes for 2010. Trek’s e-evangelist Eric Bjorling says: “We’ve identified the following categories [of potential buyers]: assisted fitness, increased mobility/equalised speed, cargo capacity, and sweat-free commute.” He also says one of the reasons most often given for buying an e-bike has been a husband or wife who wants to ride with a more bikeexperienced spou

US-based Ed Benjamin, who co-authors Electric Bikes Worldwide Reports, believes that US and UK bike shops have been too slow to electrify. He predicts the global market for e-bikes will more than double by 2012. “I often wake up at night wondering whether I’m being too aggressive in my forecasting, then I think of the Chinese market where sales doubled every year. Half of the Chinese market for bicycles is now made up of ebikes. They will replace most of the world’s bicycles.”

Christopher Cherry, assistant professor of civil engineering at the University of Tennessee Knoxville, agrees. Cherry lives part of the year in Kunming, China, and has seen a radical shift away from the battery-free bicycle. “Kunming has an estimated 700,000 e-bikes, up from about 180,000 in 2006. Traditional bicycles are nearly extinct,” he says.

Bike industry stalwarts do not think ebikes will swamp sports bicycles in Europe, but expect the e-bike sector to swell, whether the pedal-only purists like it or not. Japan’s Shimano is now working on e-bike parts, a significant move from the world’s biggest cycle component maker. Meanwhile, in mid- September Sanyo announced it will roll out “Solar Parking Lots” for e-bikes at selected US and European universities after a threepanel unit has successfully completed a sixmonth trial outside a government department in Tokushima, Japan.

As manufacturers produce lighter and lighter e-bikes – with batteries and motors all but hidden away – it will become harder to tell who is using muscle power alone. “The electric bicycle is going to evolve and improve in ways we probably don’t appreciate today,” says Benjamin. “I like to think of the e-bike as a human-electric hybrid.”

This description is being used by Giant, one of the world’s leading bicycle manufacturers, making more than five million high-end bikes a year for itself and private label clients. Its Hybrid Cycling Technology – new for 2010, but building on 10 years of producing electric bikes – is billed as “a bike with brains.

Giant’s EnergyPak lithium batteries are one-third the weight of lead acid batteries and, with two fitted either side of the luggage rack, can help propel the rider for 70 miles of assisted effort. Previous models petered out at less than 20 miles.

Although similar breakthroughs are already changing the car market, these are not rapid enough to have made any meaningful difference to consumer habits. In fact, practically the only success story to date is Mitsubishi’s i-MiEV, an electric four-seater which launched in Tokyo this year, with around 50 vehicles. According to a report on the Green Car Advisor, a website, Mitsubishi has racked up more than 1,400 pre-orders – the entire production run for the first 12 months. Mitsubishi has said it expects to sell 5,000 i- MiEVs in Japan and export 1,000 in 2010. The US market will not be tackled until 2011.

By then, of course, we may be wrestling with definitions of bike-car hybrids. Vista, a California-based company, says production will begin within months on its Aptera 2e, an electric car which has three wheels and the appearance of a shiny terradactyl. A perfect reminder, perhaps, of the pitfalls of the evolution proces

ON THE GRID

i-MiEV
Maker Mitsubishi
Based Japan
On sale from 2009
Approximate price €35,000

jBOOST
Maker Dahon
Based US
On sale Feb 2010
Approximate price €1,99

VX1
Maker Vectrix
Based US
On sale since 2007
Approximate price €8,000

RADDAR MULTITASK
Maker Storck
Based Germany
On sale Jan 2010
Approximate price €1,750