* I discussed this research with the Micromobility Industries team, the podcast can be found here.

* Reilly and I discussed the future of owned Micromobility at the Micromobility World Conference, the video can be found here.

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If you would prefer to listen to this brief and see its accompanying slide deck, please watch the video below:

Breaking down the future of micromobility along its three core axes

Micromobility (micromobility or MM) as an industry has blossomed over the last ~4 years since the term was coined. In 2019, McKinsey estimated that micromobility would be a $300B-$500B industry by 2030, and new estimates adjusted for the effects of the pandemic suggest a further boost of 5%-10% in the number of passenger km traveled. In 2020, according to the NPD group, e-bike sales reached $490.8M in sales in the US alone, resulting in an 144% increase year over year. However, major growing pains still plague the industry: many early vehicles in this space were not robust enough to withstand the realities of commuting in rough urban settings, many questions linger around the poor unit economics of shared dockless scooters, cities and riders alike are unsure of the balance of shared vs owned vehicles, the market of manufacturers and suppliers is vastly fragmented, and the infrastructure required to support light-electric vehicles (LEVs) is nearly non-existent. In this report, we contend that micromobility, its challenges, and its opportunities can be broken down along three core axes: supply chains and manufacturing, distribution, and maintenance and aftersales. Our thesis is that value accrues to the one that vertically integrates along these three axes.

There are many definitions of micromobility, and that discussion alone warrants a brief of its own. For the sake of this research, we are referring to SAE’s definition of powered micromobility. This typically refers to electric, motorized vehicles such as e-boards, e-scooters, and e-bikes that weigh less than 500 pounds and are used for urban trips under 5 miles.

Manufacturing and Supply Chains

The Stakeholders

Modern micromobility came about from the convergence of three unique supply chains:

Bicycle Supply Chain

Micromobility’s rise this decade was on the back of the traditional bike supply chain, including dominant companies like Shimano and Bafang. A large majority of all bicycles in the world are made in Taiwan and China, a region with massive distribution and manufacturing scale. The industry guidebook (called the ‘Goldbook’) lists every manufacturer and supplier that can help build a bike.  However, many of today’s products from this supply chain are undifferentiated commodities, and even their 6-12 month lead times are now deemed too slow for an industry scaling at the pace of consumer electronics. We believe the role of the traditional bike supply chain will slowly wane.

Consumer Electronics Supply Chain

The consumer electronics supply chain is comprised of companies like Foxconn, Flex, and smaller electronics sub-components (i.e. connectivity and batteries) suppliers. In fact, consumer electronics components becoming cheaper and more reliable is really what kick-started the micromobility industry. This supply chain is perfectly designed for micromobility; consumers expect the experience and intelligence of smart consumer electronics products and its 1-3 year design lifecycle and quick retooling ability line up perfectly with micromobility’s new model cadence.  We believe that building a micromobility light electric vehicle looks more like building a consumer electronics product than an automobile.

Automotive Supply Chain

The final supply chain supporting the micromobility ecosystem is the automotive supply chain. Automotive contributors in this industry are primarily Tier 1 suppliers like Bosch, Valeo, or Continental (phasing out production as of 2020), using powertrains as their beachhead. The key value that the automotive supply chain brings to this industry is its ability to provide certified, road grade components; given that automotive suppliers are already used to providing validation testing and failure modes for road grade automobile components, it is simple for them to scale their testing/validation expertise to light electric vehicles like e-bikes or scooters. However, automotive manufacturing is hyper-optimized and rigid. While this approach lends itself well to manufacturing cars at scale, it leads to an inflexible production methodology and a 5-10 year design cycle that simply can’t keep up with micromobility’s expected new model cadence. As such, we believe that the automotive supply chain’s current role in this industry revolves around building road-grade hardware that doesn’t need to be updated every 1-3 years (i.e. motors and breaks) and around developing and educating the industry on road-grade component standards.

The Core Primitives of Micromobility

The framework of suppliers in micromobility is very similar to that of the consumer electronics industry in that micromobility ‘brands’ often handle the final assembly, testing, and packaging (known as FATP) of vehicles, while the core building blocks of the vehicle are either built in-house or sourced from suppliers. We refer to these basic blocks as the 5 core primitives of micromobility:

Vehicle intelligence tends to blur across the 5 core-primitives based on vehicle type and use-case. However, broadly speaking, high light-electric vehicle intelligence functions will live under the user interface or compute/connectivity primitives while firmware functions will live under the powertrain or battery primitives. 

The Battery

The battery in a light-electric vehicle is the most expensive component in its bill of materials. It is broken up into three sub-components. 

The cells used in micromobility are largely the same used for automobiles or cheaper cells that couldn’t achieve automotive certification. The higher-end Tier 1 cells are produced by the likes of LG, Samsung, or Panasonic, while lower-end Tier 2 cells are produced by a myriad of smaller Taiwanese or Chinese manufacturers. 

The next sub-component are battery packs. While there are some off-the-shelf battery packs available from the likes of Bosch and Bafang, most brands integrate packs themselves. It is generally best to integrate packs yourself, since it is almost 3 times more expensive per kW to source a micromobility battery pack than an automotive battery pack since micromobility simply doesn’t have the same volumes. 

Finally, the last sub-component of micromobility batteries is the battery management system. Again, most OEMs typically build their BMS in-house since the few off-the-shelf BMSs that exist in the market lack firmware flexibility and are hard to diagnose.

The Powertrain

The powertrain is the second most expensive primitive, and arguably has the greatest impact on drive dynamics and experience. Although many direct-to-consumer (DTC) brands and other high-end luxury brands build their own powertrains, most vehicles today primarily use one of two different powertrain suppliers:

• Bafang: Known to be the best “bang for your buck” option in the industry. They provide full stack e-drive kits for various use-cases (i.e. cargo, commuting, motor biking, etc.) with moderately open firmware for customization.
• Bosch: On the other end of the spectrum, the German supplier sells some of the most expensive powertrains in the market. E-bike powertrains are some of Bosch’s most successful product lines, and the company has spun up an independent micromobility division. In addition to their manufacturing scale and experience creating road-grade components, Bosch’s core advantage as a powertrain supplier in this industry is their maintenance infrastructure. Most bike shops today sell e-bikes with Bosch e-drives, meaning that the supplier has access to the most mature servicing network in the industry. However, Bosch’s e-bike product lines are known to be a closed ecosystem because they are relatively difficult to integrate with.
• Valeo: A new up-and-coming entrant in the space is Valeo. Announced recently, Valeo is looking to bring its drivetrain manufacturing expertise from the automotive world to the micromobility industry by applying their 48V smart e-mobility platform to the micromobility use-case. Their system (currently still in the prototype phase) is a mid-drive motor platform with an integrated 7-speed automatic transmission.

The Chassis

Chassis components are primarily standardized and certified commodities that are passed down to the commuter use-case from the competitive/sport cycling world. The largest supplier for this core primitive is Shimano, who supplies all chassis components but is particularly known for its shifters and brakes. In fact, “Shimano sales constitute ~70%-80% of the global bicycle component market by value,” largely due to its monopolistic history of integrating Shimano components with each other and making them incompatible with those of competing brands. Another major supplier is Giant, who focuses more on frames, wheels, and tires.

The only significant unsolved chassis problem is the subpar brake system. Today’s mechanical or hydraulic brakes in micromobility vehicles fail often, don’t work well in inclement weather, and ultimately need to be replaced frequently. As such, there has been a strong movement toward electronic brakes since they have fewer mechanical failure points and therefore have longer lifetimes. Automotive tier 1s Valeo and Bosch are best suited to bring electronic brakes to the market because they have strong competencies around low voltage design and experience around building road grade components that are as robust and maintenance-free as possible.

The User Interface‍

The user interface on the vehicle is fairly basic and refers to sub-components like display units, acceleration/deceleration units (i.e. pedals or brake handles), and steering units (i.e. handlebars). Shimano is a dominant player in this category.

As vehicles have grown to host more software and intelligence, many new light-electric vehicles now pair with a smartphone app. These apps are primarily used for locking/unlocking, location tracking, and trip data analytics. However, more sophisticated apps (such as VanMoof’s) also provide the ability to control the ride dynamics by letting riders change assist light-electric vehicles, gear shifting, alarms, etc.

The Compute/Connectivity Unit

The connectivity units used in most light-electric vehicles, supplied by the likes of Particle, Omni, or CoModule are largely off-the-shelf IoT units that have been ported over from the consumer electronics industry. Although they are great for prototyping, providing connectivity quickly, and managing connected devices and their integrations to cloud platforms, they can be hard to integrate deeply with a vehicle’s other core primitives. Therefore, most manufacturers eventually build compute units in-house and only source off-the-shelf subcomponents like SIM cards or GPS chips. Regardless of whether a manufacturer buys an off-the-shelf compute unit or builds it in-house, the average budget for compute that most manufacturers allocate in their bill of materials is ~$150.

Vehicle Assembly

There are three different types of stakeholders that take care of final assembly, testing, and packaging of micromobility vehicles. 

Most obvious are bike OEMs like Giant, Specialized, Xiaomi, TREK, and Cannondale. These are for the most part traditional sports and performance retailers shifting to the commuter, urban mobility use-case.

Next are contract manufacturers like Okai, Foxconn, and Fritz Jou. While these players have incredible manufacturing scale, the quality of their vehicle testing and integration has typically been behind market expectations. This comes as no surprise since these contract manufacturers have little powertrain experience or expertise around road grade component validation. However, their integration and validation competencies are quickly improving as they continue to build more vehicles and realign their incentives and processes with those of vehicle design.

Finally, direct-to-consumer brands, primarily selling for the owned use-case, generally handle final assembly, testing, and packaging themselves. For most direct-to-consumer brands, it is particularly important to handle final assembly, testing and packing in-house, as it allows them to construct vehicles according to user requirements learned through their direct consumer relationships and gives them total control over the user experience. 

Is the Micromobility Supply Chain Broken?

People often say that the micromobility industry has a broken or immature supply chain. This statement fundamentally refers to six core problems:

1. Lack of Alignment: The micromobility supply chain was never optimized for after-sales. Given that light-electric vehicles were never more than a toy, supply chain stakeholders rarely cared about these vehicles once they left the door, which led to the robustness and quality problems that plagued early vehicles in this industry. Additionally, failures of a micromobility vehicle are safety critical, not just a mere customer inconvenience. A light-electric vehicle has to work safely not just on day 1, but also on day 1000. Unfortunately, most stakeholders in the micromobility ecosystem today don’t have the vehicle engineering and safety testing experience required to ensure that vehicles are road-grade. This is ultimately a supply chain, engineering, and process control problem all in one that is yet to be solved.
2. No understanding of failure modes: An interesting statement from one of our interviewees was that “it doesn’t matter if components aren’t street grade, as long as you know that they’re not street grade and you can design around them.” There are no standards or standard setting bodies in this industry that enforce certification and documentation of safe vehicles. In fact, e-bikes today fall under the purview of the Consumer Product Safety Commission. This is the same commission tasked with regulating toys, and it is obviously woefully under-equipped to regulate vehicles. There are no metrics summarizing what percentage of units fail, and it’s impossible to detect why components fail because there’s very little tracking of failure to begin with. Everything in this industry is being built for the first time, so safety-critical failure modes simply aren’t caught by manufacturers or third party certifiers. Ultimately, there aren’t enough suppliers, the industry as a whole doesn’t have enough history or historical data producing these products, and there isn’t enough independent verification of quality.
3. Component Specifications: Many suppliers today can’t provide detailed specifications of the components they sell (i.e. acceleration curve of a motor, battery consumption). These specifications have a massive impact on ride dynamics and experience given the size of  light-electric vehicles, yet manufacturers unfortunately don’t have access to this information. Many suppliers are also unable to design sub-components by taking in detailed specifications as input from manufacturers (if the manufacturers had the vehicle engineering know-how to provide these specifications to begin with). Therefore, there is a misalignment around what manufacturers would like to use sub-components for and what suppliers spec’d the sub-components for. 
4. Supplier Relationships: For many operators and manufacturers, supplier relations is perhaps their biggest pain point. The most mature suppliers in micromobility usually work with other competing operators or manufacturers, meaning that manufacturers can’t get exclusivity over supply and their IP gets leaked to their competitors. As such, they end up having very little ownership over their product and become over-reliant on a single supplier.
5. Supply Chain isn’t circular: Replacement logistics are virtually non-existent in this industry; replacement parts are incredibly hard to find and most sub-components are not reusable or recyclable.‍
6. “Crying for Scale”: There isn’t enough demand or volume on any one manufacturer or brand’s part to be able to go to suppliers with any leverage, which is what causes such strained supplier relationships. Ultimately, if brands don’t figure out ways to increase volumes and scale, consolidation seems imminent.

Supply Chain Strategies

In the industry’s short history, two key supply chain and manufacturing strategies emerged: Vertical integration or relying on off-the-shelf 3rd party suppliers/contract manufacturers.

Vertical Integration

The vertical integration strategy is to build a majority of sub-components and handle final assembly, testing and packing in-house. One of the main benefits of this strategy is deep control over firmware and embedded software, which is the key to optimizing drive experience. In small vehicles like light-electric vehicles, tuning even the smallest parameters like the acceleration curve of a motor has a significant impact on the ride experience. Vertical integration also solves the pain point around specifications and allows manufacturers to better test and certify quality of sub-components.

Vertical integration also allows manufacturers to have IP exclusivity and multi-source. In fact, there are a lot of politics in the bicycle industry that vertical integration lets manufacturers avoid. Some of the largest suppliers in the industry are known to throttle how much they sell to certain customers if they start to compete with their larger customers. Vertical integration lets manufacturers control their own supply chains and avoid over reliance on single suppliers.

Additionally, it’s is cheaper to scale. Although the cost of vertical integration is high early on, the overhead of scaling manufacturing is much lower than the margin lost when sourcing sub-components. It's also easier to scale: Since vertical integration allows OEMs to own their entire supply chain and manufacturing processes, they can simply copy and paste their procedures for additional facilities to spin up a larger supply of products.

Finally, vertical integration allows for a tight operations feedback loop, which is particularly important for shared operators. Because of the low design and development latency of vertical integrated manufacturing, operators can quickly incorporate learnings into their designs and tailor vehicles to make operations and maintenance as easy as possible.

Relying on off-the-shelf 3rd party suppliers or contract manufacturers

The most common vehicle manufacturing strategy in the micromobility industry relies on 3rd party suppliers and contract manufacturers. This strategy has been perceived negatively due to the poor quality of many initial vehicles in this market. However, this wasn’t necessarily because the suppliers were inadequate, but because most of these vehicles were designed by operators with no vehicle design experience. Furthermore, although many brands and operators claim to design and build their own vehicles in-house, they are really only designing the vehicles’ mechanical structures. The efficiencies gained through these minute mechanical improvements (i.e. making a thicker, heavier chassis) are quickly saturating.

Relying on 3rd parties allows OEMs and brands to bring products to market with high volume and speed, since suppliers and contract manufacturers already have manufacturing scale and supply chain/component procurement knowhow. The main disadvantage to this approach is that IP leaks and brands lose product exclusivity. However, designs and IP are leaked as soon as a vehicle hits the road anyway, so getting a few months' lead in an industry that is only a few years old can be hugely beneficial. Another disadvantage is that it is difficult to set up a tight operations-design feedback loop when relying on 3rd parties. For many operators, only owning the core primitives that touch the user experience (UI, compute/connectivity, and powertrain) while relying on 3rd parties for the form factors may be sufficient. The information gained from the operations feedback loop is beginning to saturate, and it seems imminent that a lot of this information will become common industry knowledge that suppliers and contract manufacturers will also have access to. 

 Suppliers are evolving. Players like Okai and Fritz Jou have incentives aligned with the urban commuter use case. Betting against them given their scale needs to be an extremely purposeful and cautious decision.

What does a mature Micromobility Supply Chain look like?

All this being said, what does a mature micromobility supply chain look like? Most hardware product industries generally have a stack of three key stakeholders: 

1. People that build the core primitives
2. People that integrate them together
3. People that distribute final products to consumers

As most of these hardware product industries evolve, they eventually break down into a modular, specialized value chain amongst these three stakeholders. However, this breakdown can’t happen too early. Not only is the development and product-to-market cycle too slow, but there is very little differentiation in being the integrator (which is what most new entrants in an industry are). Think of the personal computing industry, which started modularizing too early. Value accrued to those controlling distribution (Best Buy and similar retailers) and to those building the core sub-components (Intel, for example). There is very little competition at these two stages given how difficult it is to build IP around core primitives or build up widespread distribution networks. However, the integrators (Compaq, for example) quickly got squeezed out, since integration is really just a commodity. The question isn’t whether modularizing works, but rather the timing of when to do it.

How does micromobility get there? In the near term, the industry needs to vertically integrate. In particular, the strongest, most expensive, and most integrated primitives (the powertrain or battery are likely candidates) need to move up the stack and vertically integrate with distribution. 

The industry will eventually reach a tipping point, a moment when the tech and supply chains settle down, the regulatory environment becomes too difficult to maneuver, and the cost of compliance becomes too expensive. It is at this tipping point that the industry needs to modularize and unbundle amongst the three key stakeholders. Right now, the cost to build and certify a car or airplane is in the millions, but for micromobility it’s in the thousands. It simply isn’t hard enough yet for anyone to build a light-electric vehicle on their own, but it will be eventually, which is when the industry will unbundle. The automotive industry can provide a roadmap of unbundling, and how the surrounding infrastructure and services should be organized.

Distribution

Distribution is the biggest bottleneck for the industry. In fact, product design, manufacturing, and supply chains are all moot if distribution channels remain the same. 

Retail distribution today runs through fragmented mom & pop bike shops or big box retailers. Bike shops have no economies of scale and are often prisoners to the specific powertrains they sell. On the other hand, big box retailers have no incentive to make a great after-sales experience because their role in user experience ends once the vehicle leaves the door. However, because they own distribution and are in no way incentivized to make a great consumer experience, they beat out better designed, better built light-electric vehicles. The industry is cluttered with poor quality, white-labeled, off-the-shelf vehicles. This is exactly why even in the EU, the region with the most progressive and mature biking culture, Decathlon is the biggest light-electric vehicle OEM. As new start-ups enter the space, they need to remember that value accrues at the distribution. New entrants need to work backwards from the job-to-be-done, the distribution, and the after-sales and maintenance services to design and manufacturing.

Innovative brands in the industry have experimented with a few different exciting new distribution strategies. 

The first focuses on selling vehicle direct-to-consumer and launching brand stores in major regions to provide marketing and maintenance. This strategy gives brands a rich ownership of the customer experience, as it builds a direct relationship with end consumers and provides comprehensive data on customer pain points and needs. This knowledge can be used to make fast, recurring vehicle improvements tailored to past consumers’ experiences. However, this strategy is expensive to scale, which is why brands are now experimenting with a hybrid network of authorized vendors, resellers, and maintenance (a la automotive dealerships).

The next strategy revolves around shared vehicles, either through the pay-per-trip shared model or the subscription and bikes-as-a-service model. Both models are built on the analogy of Iron Man’s suit, something that is instantly there when you need it and instantly gone when you don’t (thank you to Oliver Bruce for this wonderful analogy). At the end of the day, many consumers don’t necessarily want to buy a micromobility vehicle, but rather want access to a micromobility vehicle. Similarly, many consumers don’t necessarily want a light-electric vehicle in their garage, but rather want a light-electric vehicle to be available wherever they are whenever they need it. Ultimately, shared models give operators and brands the freedom to play around with this varying access and ownership model. And, as a side benefit, it incentivizes long-term robust vehicle design since that allows for the vehicles to be shared longer and more frequently.

Finally, there’s an opportunity for operators to blend the aforementioned distribution models. Micromobility vehicles are incredibly fun to ride, and offering them in an easy-access shared model provides virtually free customer acquisition and starts the cultural and educational shift towards using new form factors. By running a shared model, operators are able to market, collect operations data, and set up servicing infrastructure perfectly suited, equipped, and stocked for the specific market at hand. Fluidly transitioning to direct-to-consumer from here is trivial. The likes of Bird and Voi already doing this, and we feel that there is a significant opportunity for an operator to first offer vehicles in a subscription/bikes-as-a-service model before moving to a direct-to-consumer model. Setting up the ecosystem surrounding the vehicles under various consumer distribution models also opens the door to incorporate other non-commuter use-cases and share vehicles, infrastructure, etc.

Maintenance and After-Sales Services

The final core axis of micromobility is maintenance and after-sales service. Both maintenance infrastructure and maintenance-conscious design are immature. These problems unfold for both shared and owned vehicles.

Shared:

In the US, shared scooters need to hit ~700 rides to break even. However, most vehicles aren’t even close to hitting this mark, meaning that the maintenance or upgrades required to hit this target are still unknown. Therefore, vehicles need to be designed to make maintenance as easy and seamless as possible.

Design for maintenance today is primarily focused on more robust mechanical design that attempts to prevent the need for maintenance in the first place, but the efficiencies of this approach are quickly saturating. At a high level, operators need to understand that reducing operating expenses  and reducing maintenance staff is much more impactful. Operators need to start designing vehicles to be as repairable and modular as possible so their lifetimes can easily be extended.

Additionally, according to Skip’s public statement on sustainability and accountability, “A fleet must account for factors like parts consumption and repair logistics to capture a true LCA, let alone the total cost of ownership (TCO). A scooter that lasts a year but requires complete part replacement every three months may be even worse than a scooter that only lasts three months.” Regular monitoring of fleets is fundamental to accounting for the aforementioned factors. Skip does a particularly good job with this. Every single component on every Skip scooter has an expiration date, and each component is regularly diagnosed and maintained every time an expiration date comes up. 

Owned:

Many of the problems from the shared side of the market are relevant for  the owned side of the market: owned vehicles are designed to be heavier and sturdier rather than repairable or modular, owned vehicles aren’t regularly diagnosed, etc. 

The owned market also suffers from immature maintenance supply chains and infrastructure. The supply chain and logistics for replacement parts is woeful, and most subcomponents aren’t designed to be reused or recycled. Additionally, end-consumers don’t have the required expertise to repair their own vehicles nor do they want to handle maintenance themselves. Yet the existing network of bike shops, the only widespread maintenance infrastructure today, is insufficient since most bike shops either don’t know how to service light-electric vehicles or will purposefully not service vehicles not bought at their store.

The Trucks Thesis: Integrating the three axes of micromobility

Our thesis is that the most compelling start-up in micromobility will be the one that vertically integrates along the three axes or Supply Chain, Distribution, and Maintenance and After-Sales services. Before digging into what this looks like, let’s first look at two of the most compelling companies in micromobility today and how they take advantage of integrating some of these axes together to create incredible technical functionality and user experiences. 

Superpedestrian

Superpedestrian is a micromobility manufacturer and operator that builds intelligent light-electric vehicles and solutions. They have developed an embedded software, electronics, and firmware platform to build a fully integrated vehicle operating system with machine-level code configurability. Their core value and IP revolves around using this vehicle operating system  to conduct autonomous diagnosis and maintenance of vehicles. 

Their insight is to reverse the supply chain, which allows them to build scooters at cost and pay for labor instead of IP when approaching factories. Unlike most operators, Superpedestrian doesn't simply go to a contract manufacturer to build their vehicles. They first go to Tier 2 board manufacturers and give them board specifications, sub-components, and testing equipment. Once the Tier 2 has manufactured product that passes the provided testing standards, they go to a Tier 1 supplier and provide the Tier 2 product along with new specifications, sub-components, and testing equipment. All testing data goes back to Superpedestrian HQ. The final Tier 1 products are then brought in-house for final assembly, testing and packing. This reverse supply chain strategy gives Superpedestrian sub-supplier level monitoring and inline testing, which ensures that all design specifications are met, improves quality and durability, and makes manufacturing easier. Additionally, this bottom up approach is what allows Superpedestrian to build a completely integrated, fully configurable and visible vehicle operating system.

Superpedestrian's magic is in its approach to solving maintenance. The company uses its fully integrated vehicle operating system, which is only possible to develop because of their integrated supply chain strategy, to monitor thermal, mechanical, and electrical metrics at the firmware level. They then compare firmware level expected performance of these metrics vs real performance to detect abnormalities, and cascade this upstream to sense and predict failure. The system then takes action at the firmware level to prevent predicted failures. The advantages of this system are two-fold: not only is this system much cheaper than adding expensive sensors dedicated to failure detection (which ultimately makes the vehicle’s bill of materials too expensive), it is also capable of detecting far more granular failures than dedicated failure detection sensors. In fact, this system is so powerful that Superpedestrian was once able to protect and get a scooter working (using only software) after it was underwater at the bottom of a river for three days.

Distribution is still an area of open innovation for Superpedestrian, and the company is still actively searching for the best use-case that fully takes advantage of their incredible maintenance technology. The company has experimented with a few different strategies, from selling the vehicle operating system horizontally, or selling complete vehicles to launching their own dockless fleet. The latest iteration of their distribution strategy feels like a step in the right direction.

VanMoof

VanMoof is a dutch, vertically integrated vehicle manufacturer and direct-to-consumer brand selling e-bikes. Widely hailed as the “Tesla of e-bikes,” the company’s e-bikes are arguably the most technologically advanced and aesthetically pleasing vehicles on the market today.

VanMoof fundamentally redesigned how bikes are produced, and was one of the first to vertically integrate vehicle manufacturing. It is this strategy that ultimately gives them exclusivity on sub-components and let’s them add more value down the line during after-sales. VanMoof also uses a reversed supply chain approach: 100% of their components are designed in-house. Their motors, motor controllers, batteries, and battery management system are all fully integrated into a vehicle operating system and connect to their custom built central compute/connectivity platform. The company owns all IP, software, and testing/quality procedures. Tier 2 or 3 level sub-components are outsourced to factories (i.e. injection molding, PCB, etc.), and all other manufacturing happens under the same roof as their R&D and engineering facilities in Taipei. Vehicles’ final assembly, testing and packing currently occurs in the EU or Taipei, but the company plans on moving these processes to a distributed model where vehicles are assembled in whichever assembly plants are located closest to where the vehicle is being distributed to. Scaling manufacturing for Van Moof is trivial; in the midst of an unprecedented boom of e-bike demand due to COVID-19, Van Moof was able to more than double their supply. Since VanMoof’s vertically integrated supply chain gives them full ownership over manufacturing processes and eliminates over-reliance on single suppliers, the company can scale manufacturing simply by sourcing new factories with appropriate tooling and copy and pasting their procedures.

Distribution is another one of VanMoof’s strong suits; they are really one of the pioneers of selling light-electric vehicles direct-to-consumer and they seem to be the closest to solving the bottleneck of distribution. VanMoof retails vehicles online direct-to-consumer and uses brand stores (located strategically in major cities in the world) for branding, offering test-rides, distribution, and maintenance. The company’s direct-to-consumer strategy allows them to deeply understand customer pain points and needs, which is why they roll out extremely regular OTA software updates and have a high new model cadence similar to that of consumer electronics products. The vehicles are owned-only at the moment, but VanMoof is looking to release a subscription service in the near-term. One of the hurdles to releasing a subscription model is that it requires a significant scale of distribution, maintenance, and other infrastructure. VanMoof is exploring partnering with authorized 3rd party resellers and maintenance centers to potentially tackle this issue.

VanMoof is also an innovator in maintenance and after-sales services. According to CEO Ties Carlier, “Simply sensing that a component is broken when it’s hard to fix isn’t good enough. Our philosophy is that it is much more important to make maintenance as easy as possible.”  VanMoof’s bikes are designed and built with modularity and repairability in mind from the get-go. Some minor repairs can be handled with OTA and preventative firmware, while other larger maintenance problems are serviced at brand stores. VanMoof also provides maintenance services through Bike Doctors, which are a fleet of gig-workers that can repair e-bikes on-demand at the customer’s home. Since maintenance is so simple, bike doctors can learn how to fix most potential problems through an hour long online course. 

Their replacement parts supply chain is also incredibly mature. When VanMoof maintenance services encounter sub-components that require complex maintenance that they aren’t fully equipped to handle, their replacement parts logistics network -- paired with their modular design -- allows them to easily remove the faulty part from the vehicle, send it back to a VanMoof manufacturing facility, and replace it with a spare part.

VanMoof also offers a number of after-sales services once vehicles exit their doors. In addition to a premium subscription maintenance service, they also offer a subscription theft service called Bike Hunters. Bike hunters are contractors that track down and retrieve stolen bikes. If the bike can’t be found, it will be replaced by a new one for free. Some incredible footage covering some of these bike hunts can be found here.

The Trucks thesis in action

The most successful company in micromobility will be the one that vertically integrates the three axes of supply chain, distribution, and maintenance/after-Sales, because doing so is what transforms the user experience from that of a toy to a viable car replacement.

Brands need to first pick a specific job-to-do/use case, and develop a vertically integrated, IP-first design that focuses on repairability and modularity. This in turn leads to horizontally scalable manufacturing which then allows for strong distribution channels. If brands pair this with after-sales services, regular diagnostics, and convenience maintenance services, they are able to extend the end-of-life of the vehicle. And when vehicles eventually reach their end-of life, companies need to provide recycling or resale infrastructure to either recycle sub-components back into this cycle or extend the end-of-life further. Each step into this cycle feeds into the next and makes the next stronger, ultimately helping create moats for brands in what is an extremely crowded and competitive industry. To be honest, brands could potentially even get away with not doing as much on the design and manufacturing side as long they pick the right job to do and handle distribution, maintenance, and after-sales extremely well.

Future Opportunities in Micromobility

Based on our research thesis, we believe that the most promising opportunities in micromobility revolve around innovations within the following themes.

Design and Technology Innovations

At a vehicle level, new design opportunities revolve around building core primitives that are too difficult for everyone to build (“the Intel of micromobility”). Candidates for these types of innovations range from road-grade drive related components to replacing mechanical hardware components (like brakes) with software. Additionally, there are also opportunities for building light-electric vehicles under two different philosophies. The first is the Toyota Camry of micromobility, a high-quality, high-utility vehicle that is extremely reliable, robust, cheap, and has a huge manufacturing and maintenance scale. The latter is a premium light-electric vehicle in the $5K-$15K range. Ultimately, micromobility is faster, more frequently used, and services the most expensive trip types. There is an opportunity to build luxury vehicles with incredible features, which both help change the perception of the vehicle as a car replacement and incentivizes manufacturers to build high quality vehicles and vehicle infrastructure.

There are some horizontal design opportunities as well, although these innovations typically struggle to find adoption unless they bring to bear features that are mandated by regulation. Some vehicle primitives that are likely to be regulated first and are good candidates for horizontal retail are batteries and powertrains. On the other hand, there are also fleet level opportunities that function more efficiently when horizontally applied and therefore could be easily unbundled and outsourced to third parties. Some opportunities as such include charging infrastructure and white-labeled fleet management software.

Consumer Experiences

There is a need in the industry for incredible consumer experiences. Most existing brands today are no better than Nokia, Compaq, or the Nissan Leaf; they are undifferentiated and have little  that retains customers in the ecosystem. People often forget that vehicles are an emotional purchase. For light-electric vehicles to become viable car alternatives, the industry needs products with incredible branding that can give consumers that emotional attachment, joy, pride, and excitement when riding them. The industry needs an Apple or a Tesla that provides amazing end-to-end vertically integrated user experiences. Most brands in the market today still need to solve financing, resale, maintenance, after-sale add-on services, insurance, rider networks, among others. These are typically the types of services offered by dealerships in the auto world, and there is an opportunity for an auto dealership equivalent that can bundle all these services into one consumer interface.

However, to build great consumer brands, the industry needs 3rd-party solutions that enable great user experiences. The first such enabler is a privatized “DoT” that validates, standardizes, certifies, and educates the industry. The need for vehicle grade certification is obvious, but what is also pertinent is better education and collection of information. As per Jeff Russakow of Boosted, Power is a great example that illustrates this need. Power equals safety, and higher power doesn't necessarily mean higher speed. Rather, power makes vehicles safer; it allows for better brakes, better handling on hills or with heavier cargo, etc. Unfortunately, not enough regulators understand this. When municipalities make policies like 250 watt limits on light-electric vehicles, they are basically dooming micromobility vehicles to never have good electronic breaks or torque handling.

Another enabling 3rd party opportunity is resale. The opportunity for resale is huge: Used light-electric vehicles can command high resale prices because new light-electric vehicles have 30-90 day wait times. As per Sanjay Dastoor of Skip, "We are at the beginning of a large demand curve for these devices." Additionally, consumers want better micromobility financing, but one of the reasons financing options for micromobility are immature is because resale/residual value models don’t exist and the market for used light-electric vehicles isn’t well established. Since key primitives like batteries and motors are expensive to replace and manufacturer warranties are poorly run, it's hard to build a reputable used marketplace with predictable used prices like cars. Ultimately, the opportunity for resale either lies with primitive manufacturers like Bosch that can buy up old vehicles and refurbish the components they supply or with new upstarts like Ridepanda that could pick specific skews to re-sell and become experts at refurbishing them. Another trend we're also seeing is shared operators reselling old shared vehicles.

Vehicle-Level Platforms

There’s a need to rethink micromobility vehicles as platforms beyond just their a to b utility, and designing them as platforms cascades benefits to all three axes. There are two ways to view light-electric vehicles as platforms.

The first is as a software platform. The industry likes to think of light-electric vehicles as smartphones on wheels, but they're really still dumb-phones on wheels at best. There is a need to think software first, because, eventually, the heart of the light-electric vehicle will become its intelligence as its hardware (just like in the auto industry) moves closer to becoming a commodity. Even the best vehicles today really only have a few onboard sensors and some centralized firmware and connectivity. 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. VanMoof has built an e-bike operating system that primarily focuses on firmware, ride analytics, ride customization, etc. and are now looking to open up their platform to 3rd party apps. Particle also has a similar 3rd party platform. The biggest hurdle in developing software platforms for light-electric vehicles revolves around ensuring that safety-critical functions aren't compromised when opening up the platform to 3rd parties. We believe that the best vehicle operating system will be vertically integrated and developed by the vehicle manufacturer internally. Not only do vehicle manufacturers have the best access to vehicle sub-component firmware, but they also know that the recurring value in a light-electric vehicle lies in the software and therefore want to own this part of the value chain. Until 3rd party operating system providers tackle a technical challenge that's too difficult for vehicle manufacturers to build on their own (i.e. autonomy, mature platform of 3rd party "apps," etc.), it's difficult to see why vehicle manufacturers would outsource the operating system to an outsider.

The second is as a hardware platform. While it is important to consider micromobility as a high-growth, recurring software platform, it is also important to remember that micromobility needs to be a robust and reliable transportation service that can evolve rapidly and be maintained or updated easily. This is why many shared operators build core skateboard architectures (foundational bases usually composed of the primitives of UI, connectivity/compute, battery, and powertrain) and proliferate different form factors around them.

Fleet-Level Platforms:

Finally, light-electric vehicles are just extremely fun to ride. There are lots of fleet-wide platform use-cases that provide the opportunity to monetize on the virtually free customer acquisition micromobility provides. Micromobility podcast #78 provides 3 great examples of such use-cases:

The first use-case is last mile logistics, and the two key players in this space are Zoomo (formerly known as Bolt) and Amazon. Bolt is building a subscription-based shared fleet of e-bikes designed for last-mile delivery couriers. Amazon is also using light-electric vehicles for their last-mile logistics. An interesting direction for Amazon is to launch a stronger distribution/retail channel for consumer micromobility, which opens up the door to some interesting interplays where their commercial vehicles and consumer owned vehicles could share the same infrastructure (i.e. maintenance, charging, or parking).

The second use-case is around Maps and a MaaS platform, and the key player in this space is Google. In fact, in our opinion, Google is the most formidable potential big-tech entrant into micromobility. For Google, micromobility could be used to capture mapping data, as it is likely cheaper to launch a shared fleet of light-electric vehicles with cameras than paying people to manually collect data - micromobility could become a physical reCaptcha for Google. Google Maps is also best positioned to be the most widely adopted MaaS platform. Google Maps already exposes various transportation options like Lime, Uber, or transit, and the company already has a robust payment platform. Eventually, Google Maps has the potential to become the UI and search engine for mobility just Google Search is the UI and search engine for the internet.

The last use-case is a more embedded hardware MaaS, and the key player here is Apple. Apple has already developed the Apple Key and CarPlay. If they integrate these products with other vehicle types, Apple devices could become everyone's personal transportation computer and operating system.

History's Vision for the Future of Urban Mobility

In 1962, Italian newspaper Domenica del Corriere carried a story on how the world will look in 2022, illustrating a version of urban mobility that is fast and agile. We’ve already seen glimpses of the potential of micromobility over the past few years, and the pandemic seems to have accelerated regulatory and consumer adoption of light electric vehicles. That being said, there are still many vehicle and vehicle ecosystem problems that manufacturers, brands, and operators need to solve. From supply chains misaligned with the commuter micromobility use-case and fragmented distribution networks to unreliable widespread maintenance and after-sales infrastructure, vehicle-side stakeholders have a lot of work to do to fully take advantage of micromobility’s positive tailwinds. We’re not all that far from 1962’s vision of the future of urban mobility, but integrating the three axes of micromobility, Supply Chain, Distribution, and Maintenance/After-Sales is a critical step to get there.

If you have any thoughts on the discussed themes, or are working on new ideas shaping the future of micromobility, let’s chat! You can contact me at puneeth [at] trucks [dot] vc.

I’d like to thank the following people and resources for contributing to this research:

Interviews

• Sanjay Dastoor: CEO @ Skip Scooters
• Gabe Verdant: Ex-CEO @ Zippy
• Matt Johnson-Roberson and Ram Vasudevan: CEO and CTO @ Refraction.ai
• Reilly Brennan: GP @ Trucks VC
• Ryan Rzepecki: Founder @ JUMP Bikes
• Nick Foley: Director of JUMP Hardware at Uber
• Horace Dediu: Micromobility Industries
• Oliver Bruce: Micromobility Industries
• George Kalligeros: Director of Hardware @ TIER
• Assaf Biderman: CEO @ Superpedestrian
• Michal Naka: Product @ Ride Report
• Steven Anderson: VP of Vehicle Engineering @ Bond Mobility
• Dmitry Shevelenko: Co-Founder & President @ Tortoise
• Nathan Wang: MM Lead @ Particle
• Daniel Benchetrite, PhD: North America Powertrain New Mobility Director @ Valeo
• Stephen Lambe: Strategy and Planning @ Skip Scooters
• Ties Carlier: CEO/Co-Founder @ VanMoof

‍
Micromobility Podcasts

• 4 - Horace Dediu and Oliver Bruce
• 12 – Michal Naka, Ride Report
• 20 - Reilly Brennan, Trucks VC
• 39 – Jeff Russakow, Boosted Boards
• 43 – Frank Reig, Revel
• 44 - Dmitry Shevelenko, Tortoise
• 45 – David Hyman, Unagi
• 46 – Mark Frohnmayer, Arcimoto
• 47- Horace Dediu and Oliver Bruce
• 49 - Horace Dediu and Oliver Bruce
• 53 – Taco Carlier, Van Moof
• 54 – Assaf Biderman, Superpedestrian
• 58 – Sanjay Dastoor, Skip Scooters
• 60 - Horace Dediu and Oliver Bruce
• 66 – Mina Nada, Bolt Bikes
• 69 – Tony Ho, Segway Ninebot
• 74 – Taco Carlier, Van Moof
• 76 – Horace Dediu and Oliver Bruce
• 78 – Horace Dediu and Oliver Bruce
• 79 - Ian Kenny and Chris Yu, Specialized

Articles

• ‍Skip pulls back the curtain on the high costs of scooter maintenance
• Sustainability and Accountability
• The best way to get there
• Sensing for Safety: How Skip Uses Cameras to Make Scooters Smarter and Safer
• Moof out of the way, old bike brands
• SAE International Publishes Industry’s First Standard for Classification and Definition of Powered Micromobility Vehicles
• On the Origin of Scooters
• The Superpedestrian Story
• The Motorized Scooter Boom That Hit a Century Before Dockless Scooters
• How Uber Turned a Promising Bikeshare Company Into Literal Garbage
• Superpedestrian CEO on How Deep Tech Can Keep Scooters Alive Longer | MM Europe 2019
• We went to Taiwan & started a bike company…
• Trends Issue #67'
• Valeo at CES 2020
• The future of MM: Ridership and revenue after a crisis