Jan 13, 2024
The future looks bright for the European market of new energy vehicles. Not only does the EU policy overwhelmingly support carbon neutrality, but carmakers are also racing to announce their
The future looks bright for the European market of new energy vehicles. Not only does the EU policy overwhelmingly support carbon neutrality, but carmakers are also racing to announce their electrification plans. However, with the mid-to-long distance travel market approaching saturation, the "last mile" short-distance direction presents new opportunities.
The answer lies in electric-assisted bicycles, or E-bikes. As a two-wheeled mechanical means of transportation, bicycles have been popular in Europe for nearly 150 years and have become a necessary recreational, fitness, and entertainment tool for every family. During my time in Ireland, I often saw the typical heartwarming scene of grandparents, parents, and children riding bikes together on weekends and holidays. If we add an electric motor, a controller, and sensors to the bicycle, making riding easier while retaining the pedals and gears to give users the power to control the vehicle at any time, doesn't that sound like it perfectly meets the habits of foreigners' love for cycling sports and adds a touch of imagination to the overseas capital market?
As expected, this track is currently crowded with players. Among the Chinese brands that are focusing on the European market, TENWAYS (十方科技), Urtopia (哲轮科技), and DYU (大鱼智行) are the top players, having completed financing totaling hundreds of millions of RMB. Ma Yuchi, co-founder and CEO of DYU, once stated in the media, "In 2022, 7.5 million E-bikes will be sold worldwide, with China accounting for 3-3.3 million." However, as a traditional large-scale bicycle market, European countries have also incubated many well-known local E-bike brands in recent years, such as VanMoof, Onemile, and Mate.Bike. When a group of foreign players with massive capital arrive here, what kind of surprises or difficulties will they face?
What is the E-bike? Why Chinese Consumers Don't Like it?
E-bike, strictly speaking, should be translated as "electric-assisted bicycle" rather than "electric bicycle." This is because, with the installation of a three-electric system, the former retains the original form of the bicycle, and the pedals and gears can still be used as the main tools for human-powered driving. In contrast, the latter weakens human power to an infinite degree and may retain pedals but is rarely used in the case of strong battery-driven power. If we explain it more simply, E-bikes and electric bicycles both use electricity as the driving force, with the difference lying in the proportion of power sources: electric-assisted bicycles are partially driven by electricity, while electric bicycles are entirely driven by electricity. This is also the root cause of the polarization of the two industries.
If it weren't for their great success in the European and American markets, many people would not be aware of the existence of E-bikes. In China, due to the convenience of travel and the relative disorder in the early electric vehicle market, people on the streets and alleys almost exclusively ride electric bicycles or even electric motorcycles. In my memory, the rise of electric bicycles and electric motorcycles can be traced back to between 2005-2010. The prosperity of this industry is largely due to the large-scale urban anti-motorcycle movement in China at the beginning of this century. Major provincial capital cities successively introduced relevant measures between 2000-2005, such as stopping the issuance of licenses or limiting them by zones. For example, Hangzhou and Wuhan both banned motorcycles starting in 2002. Also, at the end of 2002, the Ministry of Transport issued a new regulation that "motorcycles on the road require a driver's license," which undoubtedly also restricted motorcycle sales. Another important factor is that the big curtain of urban transformation in China has just been opened, and many large-scale infrastructure projects have not yet begun in many places. Even the road conditions in urban areas are relatively worrying, not to mention the bumpy dirt roads in rural areas. Riding a bicycle is not only laborious but also bumpy, so the emergence of electric vehicles greatly alleviated people's fatigue in short-distance travel.
E-motorcycle in a Chinese City's Street
The various changes in external environments have led to a major outbreak in the electric vehicle market in China. Moreover, electric bicycles are easier to handle than motorcycles. As long as one knows how to ride a bicycle, one can basically ride an electric bike. Although China introduced an old national standard for electric vehicles in 1999, the relevant regulations of the old national standard did not meet the actual situation due to the fast development of the market. The old national standards also lacked compulsory legal force, and the traffic police lacked corresponding legal basis for law enforcement. Therefore, for a long time, local management of electric bicycles in China was basically laissez-faire and disorderly. For example, in many third- and fourth-tier cities and even first- and second-tier cities in recent years, when citizens ride an electric bike on the road, there are almost no checks on whether they are wearing helmets or whether they are speeding.
As a result, many unwritten rules have been formed in the electric vehicle industry during its development. For example, in order to extend the range and improve acceleration, many dealers would provide customers with privately modified batteries or offer decoding and acceleration services. The former carries too much risk, and with more long-range endurance models available, it has gradually disappeared. The latter is still very common even after the implementation of the new national standard in recent years. For example, pedal-electric bicycles that are limited to a speed of 25km/h can actually unlock to reach 30-35km/h.
In terms of price, electric bicycles are much cheaper than motorcycles that cost thousands of RMB. There are ultra-low prices of less than a thousand, as well as basic market prices of two or three thousand RMB. In the era when most families did not yet have cars more than a decade ago, electric bikes were the main means of transportation. Overall, it is not difficult to understand that the main reason why Chinese residents are not interested in electric-assisted bicycles is due to their strong demand for daily short-distance travel, while the recreational and exercise attributes of E-bikes are more apparent. Coupled with the more lenient road management of electric bicycles in China, it has led to the current situation where the overall E-bike market is small, with few categories, while electric bicycles and electric lightweight motorcycles dominate the industry.
Behind the Rapid Rise of the European E-bike Market
Under the severe inflation and rising cost of living in developed countries like Europe and America, it sounds incredible that an electric-assisted bicycle with a unit price ranging from USD 1,000 to USD 3,000, which equals tens of thousands of yuan, has seen a counter-trend growth in recent years. According to data, from 2017 to 2021, the sales of E-bikes in the European and North American markets increased from 2.5 million to 6.4 million, a growth of 156% in four years. Likewise, a report by Precedence Research shows that the global E-bike market size was USD 17.56 billion in 2021, an increase of 6.49% year-on-year, and is expected to reach USD 40.98 billion by 2023, with a compound annual growth rate of approximately 10%. Focusing on the largest E-bike market in Europe, traditional bicycle powers like Germany and the Netherlands have seen market growth rates of over 30% in the past two years. The Confederation of the European Bicycle Industry (CONEBI) and the World Economic Forum predict that E-bike sales in Europe will exceed 12 million units in 2025. Despite the high demand for new energy vehicles, the number of E-bikes purchased by Europeans each year already exceeds that of electric and plug-in hybrid cars.
Europe has a deep culture of cycling, with the world's three largest bicycle races taking place there. Meanwhile, the streets in cities and towns are narrow, with complex road conditions, and generally have dedicated bicycle lanes. The overall terrain is mountainous and steep, with a high demand for assistance from elderly riders and long-distance commuters. From an economic perspective, given the high penetration rate of cars, with nearly two cars per household, adding an electric motor, controller, and sensor components to bicycles may not seem significant to Europeans, but it solves the pain points of daily commuting to work and leisure activities - cost.
Take Ireland, where electricity is the fourth most expensive in the EU, as an example. Currently, the largest electricity company in Ireland, Electric Ireland, charges EUR 0.43 per kWh (about RMB 3.2), and the Volkswagen ID.4's battery capacity is 84 kWh, with a range of about 550 kilometers, so the cost of a full charge is EUR 36, and the cost per kilometer is only EUR 0.07. The TENWAYS best-selling model, CGO600 Pro, has a battery capacity of 0.36 kWh and a nominal range of 100 kilometers, with a charging cost of EUR 0.15 and a cost per kilometer of only EUR 0.0015. It can be said that for single-person commuting of about 20-40 kilometers to work, the economy of E-bikes is simply better than that of new energy vehicles, while also eliminating the hassle of finding parking spaces and paying high parking fees. Even compared to public transportation, E-bikes are still more economical because public transportation costs are generally expensive in European countries, with discounts only available to students, and adult one-way bus and subway fares can reach EUR 2 to EUR 3, costing more than 100 euros per month. It is no wonder that the standard configuration for households in Europe and America is 1-2 cars and 2-4 E-bikes of varying models. A cross-border E-bike seller in China once described it as follows: "In a typical overseas family with multiple children, as long as one of the parents buys a car, other family members will buy one after experiencing it." Therefore, high repurchase rates are also an important attraction for overseas capital and brands in this field.
TENWAYS CGO600 Pro（Source：TENWAYS Official Website）
More importantly, policies also play a crucial role in the rise of E-bikes in Europe, as they receive support and encouragement from governments. This is mainly reflected in vehicle purchase tax reductions and various subsidies. For example, British consumers can apply for a tax reduction of 30% of the sales amount, up to a maximum of GBP 1,500. Belgium implements a 100% tax reduction policy for merchants nationwide, while France's tax-free transport allowance can reach EUR 800. In the Netherlands, the tax-free transport allowance for commuters who cycle to work will increase to EUR 0.21 per kilometer (with an annual subsidy of over EUR 1,000) in 2023, and to EUR 0.23 in 2024. In addition, the Netherlands is implementing a "bicycle plan" that allows employees to purchase any style of bicycle at a lower price through their employer and enjoy a maximum of 40% tax benefits, with insurance and maintenance being tax-free.
Competitive Landscape in the European E-bike Market
Although local consumers in Europe have had a steady demand for electric bikes, there has yet to be a large-scale brand with the ability to monopolize the market. It should be noted that the average unit price of local overseas brands is usually maintained at over USD 2,000, and the cost of component replacement and maintenance is high, making it a luxury item for only the middle and upper classes in the early stages.
VanMoof, founded in the Netherlands in 2008, began designing electric bikes in 2014. They were the first to hide the battery inside the body of the bike and hoped to follow in the footsteps of Tesla, earning them the nickname "Tesla of the electric bike industry." In 2021, Hillhouse Capital announced that it had completed a USD 128 million Series C financing round for VanMoof, the largest single financing round in the history of the E-bike industry, making VanMoof the world's most financed electric bike company. However, according to foreign media reports, since entering 2023, due to the extremely unstable supply chain of components and quality control issues, VanMoof has been stuck in a "sell more, lose more" dilemma. More and more users are complaining that their vehicles spend more time being repaired in stores than on the road. In 2021, the company spent up to EUR 8 million on repair costs for users who had quality issues. Recently, VanMoof has been officially declared bankrupt.
Onemile, a brand with French genes, is a newcomer to the short-distance travel track, and its flagship product, the One Mile Nomad folding electric bike, has become a popular product. The bike is made of magnesium alloy, which is lightweight and pressure-resistant. It uses a Tesla-grade 21700 lithium battery and an internal BMS battery management protection system, allowing consumers to say goodbye to low battery anxiety.
In addition, Belgian E-bike start-up Cowboy received a EUR 23 million investment from Exor Seeds, an early investment fund under the Italian Agnelli family, in 2020. Two German E-bike brands, DANCE and LEMO, also completed new rounds of financing in 2021 and 2022, respectively.
There are also many car manufacturers involved in this field. Luxury car brands Porsche, Lamborghini, and BBA (Mercedes-Benz, BMW, and Audi) have all launched E-bike products, while Tesla has introduced a self-driving E-bike product, and General Motors has stated plans to launch two electric bikes. Porsche even acquired a majority stake in E-bike brand Greyp at the end of 2021 and bought a drive system manufacturer, Fazua, in May 2022.
Some consumer goods companies are also trying to get a slice of the pie. German electric motor brand Bosch and shared mobility service provider Lime have already entered the market. The latter, with its eye-catching green lemon logo, has almost monopolized the shared electric scooter market in Germany, Austria, and Hungary. UK company Swytch launched a USD 449 kit in 2017 that can turn any bike into an electric bike.
Chinese E-bike Brands' Technological Iteration and Overseas Adventure
Chinese brands going overseas bring forth new possibilities. Similar to other Chinese goods, the greatest advantage of exporting Chinese E-bike products remains the efficient domestic supply chain system and the ultimate cost-effectiveness that local brands in Europe and America find difficult to match.
Breaking down the components of E-bikes, we may find that they are essentially based on the mature industrial chain foundation in China. The frame comes from the architecture of traditional bicycles and some motorcycles, while the battery, motor, and control equipment are derived from the technology overflow of the domestic new energy vehicle and electric two-wheeled vehicle industries. The supply chains of these three industries in China have developed over many years and have basically reached a state of self-sufficiency (E-bikes do not involve high-end chips for new energy vehicles). Downstream suppliers in the industry are currently seeking opportunities for growth overseas due to the saturation of domestic demand.
Another technical challenge that Chinese manufacturers have overcome is their reliance on mid-positioned motors from foreign sources. According to reports from GeekPark (极客公园), the advantage of mid-positioned motors is that they can balance the front and rear parts of the vehicle well, but the Chinese industrial chain lacks relevant technological accumulation. Later, by targeted research and development of front and rear motors, Chinese manufacturers have controlled costs at a balance point that can pursue cost-effectiveness while meeting daily commuting and leisure needs. With a mature industrial chain and independent motor technology, the brand value that Chinese E-bike brands export naturally lies in their ability to produce products with ultimate cost-effectiveness that can rival their foreign counterparts.
Take DYU ebike as an example. The company officially went overseas in 2017. Its product design is very unique. Different from traditional E-bikes, DYU ebike uses a biomimetic design that resembles a dolphin jumping out of the water, plus a foldable function. This not only accurately captures the sub-segment market of leisure and light exercise but also satisfies the strong pain point of users who need flexible transportation tools under the developed public transportation system in Europe. At the same time, it is also the first domestic brand to enter European and American supermarkets. Its product pricing is only a few hundred dollars, which is very attractive compared to the prices of its counterparts, which range from USD 1,000 to USD 3,000. It quickly opened up the mid-to-low-end market overseas.
DYU S3（Source：DYU Official Website）
TENWAYS, owned by Shenzhen Tenfifteen Technology, is a mysterious brand that has risen in recent years on the track of exporting electric-assisted bicycles. It is called "mysterious" because it has no business in China at all, and its brand is low-key, with few exposures of its executives in the media. Although it was only established in 2021, TENWAYS has received investment from Tencent (腾讯), Hillhouse Capital (高瓴资本), and Alibaba (阿里巴巴), becoming an industry star in the eyes of various capital sources. Currently, its official website shows three models, CGO600/CGO600 Pro and CGO 800, with prices ranging from EUR 1499 to 1899 and a range of 70 to 100 kilometers. Considering the average life span of 3-5 years and excellent performance, this price range is acceptable in Europe.
Traditional bicycle and electric vehicle manufacturers in China also have overseas layouts in the E-bike field, such as Giant (捷安特), NIU (小牛电动), and Yadea (雅迪). In other large enterprises, some focus on components, such as air conditioning brand Midea entering the E-bike motor race; some belong to cross-border ecological play, such as Xiaomi (小米) launching the first-generation electric-assisted folding bicycle in 2016, and drone brand DJI (大疆创新) launching an electric-assisted folding bicycle.
However, despite Chinese transportation brands hitching a ride on the E-bike bandwagon, they still need to beware of the kind of bubble that occurred in the shared bike industry a few years ago. While pursuing cost-effectiveness, they should avoid falling into an unordered price war with low technological capabilities and manage their suppliers well. Since the most critical three-electric technology in E-bike products is concentrated in the hands of upstream suppliers, for downstream brand owners, they can only exert limited power in product definition, appearance design, and localized operations. It is difficult to form a real industry barrier. Once European counterparts find a more stable supply chain, the ultimate cost-effectiveness may no longer work. Perhaps in the near future, we will see brand owners acquire suppliers or even build their own factories after integrating technology and talent resources, and wait for the industry to give back and cultivate China's own E-bike riding culture and market after fully supplying the overseas market.What is the E-bike? Why Chinese Consumers Don't Like it?Behind the Rapid Rise of the European E-bike MarketCompetitive Landscape in the European E-bike MarketChinese E-bike Brands' Technological Iteration and Overseas Adventure