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ENVO E-Bike MARKET REPORT

By Ali Kazemkhani

Aug 19, 2022

Electric Bike
Industry
ENVO E-Bike MARKET REPORT
ENVO and Sports Excellence Announce Strategic Partnership for Electric Bike Sales at SEC Retailers Across Canada Reading ENVO E-Bike MARKET REPORT 11 minutes Next A Journey to Micro Electric Mobility by Ali Kazemkhani, CEO, ENVO Drive Systems Inc | CleanTechies

IN THE FOOTSTEPS OF EUROPE: EBIKE MARKET GROWTH IN NORTH AMERICA

Ebike markets in Canada and North America are experiencing growth in popularity of all makes and models while running 4-5 years behind Europe in scale.

The global market for Ebikes has a combined annual growth rate (CAGR) of 13% led by Asia and followed by Europe. The third most in growth being North America which leads in expansion capacity. All this growth is fueled by increasing adoption of Ebikes as a transportation mode by the public, the advancement of technologies, cycling lanes across main developing cities, and Increasing policy support across the globe.

Last year, in 2021, the total Ebike market in Europe was 12 billion Euro.  US and Canadian markets combined, accounted for approximately 1.4 billion USD. With both having similar population and economical landscapes, this is proof of an 8 to 10 times market growth potential in the next few years for North America.

COVID and Lifestyle Paradigm Shift

2020 saw the advent of radical covid restrictions and immense lifestyle changes. This gave way to an unprecedented appetite for the adoption of ebikes. Cars were suddenly parked with cancelled insurance by a labor market that stopped commuting to work. The world saw reduced trust in public transportation, vacation destinations were restricted and ebikes became a national pastime with media coverage daily. Ebikes became a big story!

Supply chain dynamics

Global manufacturing scene:

The global manufacturing landscape consists of two types ebike makers and parts suppliers

A)The old and famous parts and bike manufacturers such as Shimano, Bosch, Giant, Trek, etc.

B) The new increased scaling parts and bike factories located in China and eastern Asia.

Both types of these manufacturers were tuned for a 9 or 10% annual growth rate. However, with the rapid, global increase of ebike demand in Q2 of 2020, Type A remained on track for their planned growth, with Type B, being smaller factories and therefore more agile, started to leverage the market vacuum and scale up production capacity with the goal of capturing a greater proportion of market share.

North American ebike distribution scene

B2B:

Major ebike brands in North America have evolved from bicycle brands that follow a traditional distribution model of selling through bricks and mortar Independent Bike Shops (or IBS). IBS’s sell to local communities powered by the trust and support they have built through years of sales and service in their locations. People who buy from a local IBS, rely on the quality and the after sales service guarantees of the seller. When an IBS sells a product, they need to support it for years to come. This customer loyalty is supported by trusted and reputable supply brands and this model fits well with the Type A value proposition. Ebikes are products that are difficult to purchase without the customer touching and testing the product prior to the buying decision. As well, after sales service such as tune-ups. maintenance and parts replacement make these bike shops the logical choice for consumers to purchase ebikes.

D2C:

eCommerce development in past couple of decades has created a vast opportunity for ebike distributors to sell direct to consumers via websites or through on-line marketplaces. Ebikes and eCommerce, two rapid growing industries have married strongly. Ebikes are a relatively new product with limited exposure in the traditional bricks and mortar model. Thus, the power of the internet combined with the published information of the internet paved the way for a click and buy solution online. However, the online D2C model does not offer their customers the service one could expect from the local shops but does provide a wealth of information as well as options to browse and purchase at a lower initial cost.

Ebike Supply-Chain Disruption

As was the case with may other industries, the bicycle and ebike components supply chain experienced a significant disruption due to COVID-19. Unprecedented delays caused by raw material shortages, ill-prepared parts manufacturers, massive quarantines in Chinese industrial provinces, followed by shipping delays and backlogs of shipments departing Asia caused massive delays in the delivery of ebikes to market destinations including Canada. Combine all of that with an already short cycling season and the cyclic nature of the bike business in general magnified the problem in Canada. 3 months of delivery delays in Canada meant that there would be no bike availability for an entire year.

Quick shifts and Market saturation

The surge in ebike demand caused by COVID-19 and the news coverage of bicycle supply chain disruptions became top stories in the media. Asian Type B manufacturers and all the past D2C popularity had made it easy to jump into the new booming business of electric bikes. A common “road map” emerged for consumers:

  1. Search Chinese ebike manufacturers
  2. Select a few from their catalog
  3. Create a trademark or re-purpose the use of an existing non-ebike brand
  4. Order a few containers as the OEM and put a logo on it
  5. Start up a new D2C brand of ebike.
  6. Set up eCommerce platforms and start online promotions.

With the large demand vacuum, success was guaranteed when considering an end goal of simply, more sales. However, the North American consumer market is all about after sales service and customer satisfaction guarantees.

Ebikes are a new product concept with new technologies. Combine that with limited availability of parts, service and repairs and many brands of ebikes were forced into fragile positions after the actual ebike sales occurred. The cost of honoring warranties and after sales service promises to consumers skyrocketed due to the lack of local expertise in diagnosing, troubleshooting, and repairing the electronics, battery packs, sensors and motors of ebikes. Direct to consumer ebike brands were significantly exposed to this shortfall and were faced with the need to either create sophisticated customers service establishments or be forced to go out of business in a year or two.

Each year there have been new ebike brands emerging in Canada and then going out of business shortly after their start. This trend was boosted by COVID. Almost twenty new ebike brands popped up in the market. Besides the new suppliers, the existing D2C suppliers also launched ambitious expansion plans while facing the customer line-ups and the lack of inventory. The last two quarters of 2021, saw Type A ebike manufacturers return to near normal levels and Type B manufacturers started scaling up with aggressive production capacity and fulfilling their OEM branded ebike orders.

An unfulfilled historical steady demand of bricks and mortar traditional brands extended the demand vacuum of Canadian bike shops for type A products to the 3rd quarter of 2022. In contrast, D2C suppliers had an abundance of inventory arriving late in 2021 and the 1st half of 2022.

2022 saw Canadian imports of $357 Million CDN in ebikes and escooters of all types, mostly in the second half. The absence of product availability of the Canadian bricks and mortar big three ebike brands (Giant, Specialized and Trek) compared to $198 Million imported in the previous year signalled a market shift in the new brands’ behaviors. This would become the era where conventional bicycle brands would lose their ebike market domination to younger ebike brands.

As well, social media and all advertisement media platforms were saturated with ebikes and e-scooters and Q3 of 2022 saw a new era in “slashed prices”. The D2C market segment encountered an unprecedented marketing and sales challenge. Digital marketing ROI dropped by almost 25% of the historical values. This was new ground in unprecedented market behavior. D2C ebike market saturation would be a direct and in-direct threat for various parts of the NA ebike industry. The game had changed. Ebike sales and service became not a business where it difficult to sustain a successful brand, but also a tough business to launch.   

The Future of E-Bike Suppliers

The market has shown that there will be multitude of new ebike brands going out of business by encountering the challenges of marketing, sales, and customer support. The result will be an abundance of ebikes in the market without a supporting brand because of these frequent exits. Canadians will continue to see absurd sales and slashed prices for products which eventually will be discontinued with unavailable brand support.

Larger D2C businesses such as Rad Power bikes who have invested significant financial resources in ambitious expansion plans might keep bleeding money and be forced to revisit their marketing and expansion plans. Additional investment money will be more challenging for a negative cash-flow sales model without a boom market. These businesses will need serious management overhauls with significant strategic corrections.

Medium D2C businesses that captured new market share and brand recognition may decide to continue the hard work needed in a competitive and slow-paced line of business or could even facilitate further growth through mergers and acquisitions. The number of ebikes on the streets is certain to grow, and there will be more unfortunate incidents related to Li-Ion batteries or ebike safety design features. Local and federal government bodies are starting to review and apply additional regulatory measures for the sale and use of ebikes. This may include new definitions of street legality, special markings requirements, recycling measures, such as mandatory certifications like UL2849. All of these factors will require additional commitments from ebike manufacturers. Enforcement measures will include subsidies and clean mobility funds, traffic policing, restricting regulations on importers, independent retailers, marketplaces, and big box stores.

All of these factors promise that electric bikes and electric micro mobility in general will become a more regulated and predictable business than ever before. It will eventually be a more complicated business for both sides, distributors, and consumers; hence the need for local bricks and mortar availability will increase, making them more dominant than online D2C retailers.

As independent bike shops capture a more significant share in the sales and service of ebikes and e-scooters, the emerging sector of Micro Mobility Retailers will be the new players in the marketplace. Vertical integration of ebike brands launching corporate branded retail operations will be the next chapter in the evolution of electric micro mobility.

ENVO Electric Bikes Placement Strategy

As a part of its’ sustainable growth strategy, ENVO initiated a radical shift from D2C to a B2B bricks and mortar distribution model in 2021. This fundamental change expanded ENVO’s B2B share of revenue from 25% in 2021 to over 60% in 2022. ENVO will continue to develop its strengths and opportunities to foster a more effective business relationship with local retail operators.

  1. Price and quality positioning of ENVO products will be kept as affordable quality; fully featured ebikes that have 50% more value but are priced only 20% more than mainstream brands old online D2C and will be continuously improved and developed for the bricks and mortar business model with competitive margins.
  2. A broad range of unique micro electric mobility products will continue to be offered to expand Independent Bike Shop business models.
  3. Robust digital marketing and Online2Store sales models are in place for lead generation. Dealers will convert ENVO’s local digital leads to in-store pickup or ship-to-store transactions
  4. As the 1st Canadian ebike company to initiate compliance testing and UL certifications, ENVO commits the continuous improvement of products features and quality.

ENVO has a long-term industry leadership vision in electric micro mobility. As a bootstrapped and positive cash-flow manufacturer, ENVO is not affected by financial stresses, and cautiously observes market behaviors and continues to work on finding new ways to support dealers and grow ENVO's market share.

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