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Research Briefs

January 6, 2021

By 
Puneeth Meruva


THE THREE AXES OF MICROMOBILITY: SUPPLY CHAINS, DISTRIBUTION, AND MAINTENANCE

* 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.

‍

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


Ninebot/Segway manufacturing facility in China


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


400w Bosch eBike Battery Pack

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 Bafang Ultra Max mid-drive

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


Aero Road Direct Mount Caliper Carbon Frame R006-V and Shimano 105 R7000
Groupset

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



VanMoof Driver App and Shimano Steps E5000

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


Particle's Tracker One Field-Ready Reference Product

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


Hardware strategies of some of the largest players in this industry.

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


VanMoof retail brand store in Amsterdam

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


Skip Scooters' components replaced due to operational wear and tear.

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's magic: autonomous maintenance

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 retail brand store in Berlin

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



"The Nightmare of Traffic Jams," "Will we go around town like this?"

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
   


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