‧Previous pandemics led to bursts of innovation and subsequent growth in the bicycle market
‧Continent could see 40 million pedelecs sold annually by 2026
‧Opportunities and pitfalls abound
Crisis Creates Opportunity
According to Hannes Neupert, President ExtraEnergy.org/Executive Director EnergyBus.org, the societal effects of CoronaVirus should be seen as an incredible opportunity for both newcomers and established pedelec companies alike.
“The pandemic has caused the pedelec market to expand and fueled an extraordinarily rapid growth in market demand. The existing sales alone will result in a more than tenfold increase in market sales over the next few years,” Neupert predicts.
“Since early summer, most bike dealers all over Europe have been sold out of their stock of all products for commuting and daily cycling, like pedelecs, city bikes, bags and helmets. There has also been strong growth in repairs and replacement parts due to the wish of many consumers to make their bikes street ready again,” said Neupert.
This triggered long waiting times in many stores due to unavailable parts or insufficient service capacity.
“Even getting a flat tire fixed could take weeks”, said Neupert, who believes these bottlenecks show that market demand is already outstripping supply, and points to an even bigger growth in the coming years.
His prediction for a tenfold increase stems from the effects of SARS on the e-bike market in China.
“The industry has seen a virus-induced Light Electric Vehicle boom before. In 2002 and 2003, the Asian SARS epidemic caused electric two-wheelers to be sold out in China. Within just 3 years annual sales numbers increased from 1.6 million to about 6.7 million by 2004,” said Nuepert.
Pre-SARS the market was dominated by 4 companies who were originally traditional bicycle makers. However, post-SARS the majority of the 6.7 million units were delivered by newcomers which had not been visible in the market before and had never made or sold mechanical bicycles.
This specialisation in electric bicycles, combined with the market growth, was good for business, added Neupert.
“These newcomers were completely focused on the mission of making and selling electric two-wheelers that fulfill customer wishes and expectations. Any company that had the capacity to deliver bikes with even mediocre quality was able to sell all available quantities,” he said.
This unprecedented growth continued after SARS as in 2005 the Chinese market practically doubled to 12 million units.
This growth was slightly delayed after the virus due to the fact that the start ups making the electric vehicles needed some time to establish production capacity capable of meeting demand, according to Neupert.
“The next doubling of the market took 4 years. By 2009, annual sales reached 23.7 million units a year, and by 2019 that number had increased to 40 million annual sales. But the end of growth is, most likely, still not reached since technology and performance improvements are still triggering market growth by providing more value for money and opening up more use cases,” said Neupert.
He pointed to the widespread use of sharing electric bicycles and electric scooters as an example of a new use case that has accelerated the market growth in the last few years.
Not everyone is as optimistic about future sales. Earlier this year the head of the largest pedelec sales network in Europe, ZEG, Mr. Georg Honkomp was quoted in Bike Europe as saying that, “2021 will not be as good as 2020, it can’t be. (But) I think we will have a good situation for the next 5 years”.
“In the last decades European bicycle leaders have repeatedly stated that the electric bicycle is a niche product, and every year their sales estimate has been proven wrong,” said Neupert.
“Mr. Honkomp seems not to share the vision that pedelec sales are still in the infant stage and most of the market acceptance is still to be developed. He is one of the brightest minds in the industry and has a proven success record over the last decades, but for the market estimation of pedelecs, I do believe that he is still referencing the experience gained by selling traditional bicycles too much and not accepting that the potential of the pedelec is exponential compared to traditional bicycles,” argued Neupert.
“Or he is smart and does not share his real growth expectation with other market players and the press,” Neupert added wryly.
Lessons From SARS
Neupert believes that the crucial elements that kick-started this growth in China were the normalisation of using electric vehicles as a mode of transportation and the game changing approach of newcomers in the market.
As to the link between the SARS experience in China in 2002 and the current situation in Europe, Neupert was clear.
“The virus transformed the existing electric two-wheeler market from early adopter consumers to early majority consumers, thus, pedelec riding transformed to a ‘normal’ means of transport,” said Neupert.
“The pandemic in 2002 was just a catalyst for the general society to understand and accept this mode of transport,’ he added
“Customer acceptance was triggered by the pandemic, which was caused by the massive transition from public transport to individual electric two-wheeler mode of transport. The motivation to invest in an electric two-wheeler for most buyers was, at that time, to avoid the risk of exposure to infection in public transport,” he said.
Neupert pointed out that, unlike many new products, the market growth was limited by the suppliers’ capacity to deliver, not by customers’ readiness to buy such vehicles. Which is a crucial consideration for companies when moving forward in the current climate.
According to Neupert the pandemic is also a cautionary tale to the current market leaders in pedelecs as the existing “heritage bicycle makers” lost their leading market position due to their failure to identify the potential for extreme market growth in pedelecs. Newcomers who believed in the light electric mobility market took the chance to swiftly adapt to the market demands and capitalised.
Most of the companies that were newcomers in 2002 continue to dominate the market and are making and selling 4-10 million units each annually.
Path to Growth
Because of all of the aforementioned factors, ExtraEnergy.org estimates that the European market will see a growth pattern similar to that experienced in China 18 years ago.
“Currently it seems that the only limiting factor for further sales increase is the staggered supply. Although manufacturers started to assemble bikes in multi-shift operations and suppliers ramped up production, demand has clearly outstripped supply and there are few indications that this situation may improve soon,” according to Neupert.
Despite the fact that many industry events, like Eurobike Trade Show Friedrichshafen, and Taichung Bike Week have been canceled or delayed in 2020, manufacturers are reporting full order books for 2021 much earlier than in the past years.
“A shortage of all components from lamps to tires will limit production, but exceptionally high capacity utilization concerns the suppliers of key components such as internal gear hubs and electric bike components,” noted Neupert, adding that the industry’s similar supply-chain processes and joint vendor pool does not improve the situation.
“Current winners are the companies with extensive cash flow, long-term purchasing and optimistic pre-orders. Their deliveries are secured in massive volume, and they will be able to produce and sell next year and probably achieve double digit growth,” added Nuepert.
Neupert firmly believes that sales numbers for pedelecs could easily outstrip traditional bicycle sales by a factor of ten or higher as the benefits of a pedelec are already well understood by riders that have experience with pedelecs.
“To attract users with no prior pedelec experience just requires low entry barriers to trigger a first test ride that leads in almost every case to regular pedelec usage,” said Neupert.
Beware The Disruptors
The recent supply-chain crisis and innovative approaches taken by disruptors presents an exceptional opportunity for new market entrants.
“We have already had some new players which have grabbed market share from the established “heritage bicycle brands”. Like in the Netherlands where companies like Cortina, Stella and Amslod have grabbed massive market numbers in just a few years – and even further, secured a dominant position in some segments,” said Neupert. “From the perspective of the established brands those companies came out of nowhere.”
“Further, those newcomers do not work according to the established patterns, like the common industry-practice to sell products through the bicycle dealer network or having annual completely new model ranges,” Neupert added.
“The moment for new players to take over market shares and turn the market upside down has come. The market changes in Europe and many other locations in the world are a chance for newcomers to bypass the present component scarcity by pulling a high degree of vertical integration of the value chain in-house,” said Neupert.
Starting from an own drive system development to a user-experience optimized distribution channel, there are multiple opportunities to disrupt the market with new processes and product offerings, he added.
“Dutch Company Stella Fietsen for instance, developed within 10 years from a newcomer to the market innovator and leader in the category of electric bicycles in the Netherlands. They tailored their distribution channel and value proposition to the needs of their target customer: Online orders, testing of the product at home and long-term guarantee are some of the services Stella has offered to distinguish itself from their competitors – with great success,” Neupert highlighted.
Other aspects of the current pedelec industry practice call for a distinctive approach.
“A slimmed-down and optimized product portfolio offers the opportunity to streamline production processes, and therefore, limit the sources of potential errors market players and the press. While, industrialization and automatization of pedelec production improves efficiency and allows economic savings of the retail price,” according to Neupert.
27 years ago German bike brand Cube took a similar approach by starting their production according to their experience gained in the area of chair manufacturing. Today cube’s numbers put them as a market leader in several European countries in the middle and premium mountain bike and road bike segments and they are by far the largest producer of pedelecs and mechanical bicycles in Germany.
“When observing the pedelec industry in Europe, it is obvious that new players are the ones that benefit from the current situation. Large budgets on product development and marketing create great advantages for newcomers,” explained Neupert.
New companies are seeing the gap in the market as they are able to actually ship products while traditional bike makers are sold out for months to come.
“One example is the Amsterdam based company vanmoof.com which has just attracted 40 million Euros of capital for expansion of their business and is completely focusing on two models which are exceptional from customer experience, sales method, price tag and USP’s,” Neupert pointed out.
Neupert said that the state of the market can be seen when browsing adverts of recruiters.
“For instance the Amsterdam based shared mobility startup, dott, which has 50 million Euros of capital on hand is currently searching for a pedelec development manager. This potential industry disruptor is aiming for sales numbers in the millions in the next 2-3 years,” Neupert said.
“The newcomer is a market leader in motor controllers for two-wheeler, thus, having core competency in production, electronic components and software. Their business strategy aims to integrate all core activities of the value chain to gain a clear competitive advantage and supplier independency,” according to Neupert
As a result, the company is setting up production in Germany and wants to offer a pedelec with great product features for an extremely competitive price, delivering exceptional user-experience.
The Future Is Now
Neupert believes that this is an incredible opportunity for companies to be part of the ongoing disruption of the market in the next few years and a chance to help to reshape the market in a positive way, which will enable all 750 million Europeans to end up cycling on their pedelec to a happier, healthier and more sustainable mobility future
“Considering the tough times in most companies in the automotive industry supply chain and the sluggish behavior of most suppliers in the automotive industry to take chances in the non-automotive world, talents with a vision on future mobility might migrate to the rising stars and disruptors of the LEV industry,” he said.
“The growth and innovation wave to come is expected to be much bigger than what was triggered 18 years ago in China since the technology available today is much more advanced in so many areas and further, distinct sales models are available as well today, thanks to the mobile internet and pay by use options,” he added.
“Considering that pedelec use might be paid per ride and even get reimbursed for the health and society benefits created by riding it - who of the 750 million Europeans would not change their mode of transport?”, concluded Neupert.