The Commoditization Of The Electric Fat Bike

The indiegogo campaign for the Storm has been taking the world by storm. The kickstarter for the first 30 days stalled out at around $90,000 which was over their initial necessary boundary of $75,000 but not by much. Then it went viral. Suddenly it was making almost $500,000 a DAY as it got posted to the Yahoo News feed and many other blogs. They are now up to almost $2,000,000 with no end in sight. How in the world did this happen?

stormdesert

If you want one of these for $499 you have to hurry, the offer ends Fri 2/6/14 at noon.

The answer is simple, what we are seeing is the Commoditization of the Electric Bike in the US. I went to visit China about 10 years ago for about a month as I’ve rambled about in my travel blog here. My entire month there, not counting a side trip to Tibet or the plane ticket to get to China ended up costing me about $50. That includes lodging, transportation and food. There is no place else in the world that you can get by for so long with so little. I rode public transportation, which is an experience in itself and ate street food and stayed in hostels or cheap hotels. Most of the time I had my own room. One of the things that amazed me about China was how electric bikes were ALREADY a commodity there. Almost every single grocery store had racks of ebikes at the entrance for people to buy. There was every color, every configuration and most of these ebikes were Lead Acid Battery powered. Imagine that, you go to your local Wegmans to buy groceries and you pick up a really cool electric bike at the same time. For an American it was completely inconceivable.

At the time I had never heard of or seen an electric bike in the US, here they were everywhere. On the streets bikes outnumbered the cars almost 100 to 1. I fell in love. Dreams of importing these amazing bikes quickly vanished when I got back to the US and started looking into the shipping costs for a container of these bikes.  There was just no way for me to come up with that kind of capitol for a large order. Shipping containers from China is relatively cheap, shipping within the US is relatively cheap, shipping large boxes from China is not cheap.

Enter crowdfunding.

A typical grocery storefront in China

A typical grocery storefront in China

Indiegogo and Kickstarter are the perfect tool for almost anyone to put something out there and try to make it happen. Once the money appears, often times these things actually happen. The reason is that having a large amount of available cashflow makes everything a whole lot cheaper. Trying to borrow money to make money is one of the most expensive ways to get money there is.

The real change here is not in the distribution of ebikes or the shopping habits of Americans, the real change is in the mentality of Americans towards ebikes. Remember how computers used to cost $2000 each for one that didn’t suck? $2000 puts the computer solidly in the range of a ‘Luxury item’ even though for most people it’s not a luxury anymore, its a necessity. Dell brought the prices down for computers until they settled on around the $500 mark for computers that didn’t totally suck. Everyone else tried to charge more, but they lost TONS of sales to Dell who only took about a 5% cut on their low-end machines and made most of their money on stuff like servers where there was still a 50% markup. Who is going to cheap out on their server, right?

When an item like a computer or a mode of transportation hits the sub $500 mark it suddenly becomes a Commodity like a toaster oven or a microwave. We stop caring about brand names and we start expecting it to last around 3-5 years before it is thrown out. Electric bikes are the perfect commodity because the batteries tend to die anyway after about 4-5 years. The Ebike companies can sell the bikes for a low markup then nail you for a battery in a few years and make a 50% profit. Everyone knows shipping a lithium battery is a pain due to their propensity for spontaneous combustion so you can just add a huge shipping cost, Chinese companies fleece American Ebike Hobbiest for shipping costs all the time.

This bike costs less in volume and is way cooler than the Storm, it even comes with multiple gears.

This bike costs less in volume and is even cooler than the Storm, it even comes with multiple gears.

The people on endless sphere have known for a while there are tons of electric fat bikes available from china, many of them are much nicer than the Storm design like the one here. Do a search on alibaba for electric fatbike and you’ll see 183 different products to choose from. The electric fatbike already is a commodity in China. The problem comes with the minimum order of 20 pieces, that is $10,000 an order before you start having to deal with shipping costs, which can be high.

So where do we go from here? There really is no large volume electric fatbikes being produced in America right now, nor will there ever be. With the insatiable appetite for ebikes in China it is likely that over 90% of the factory ebikes that end up in America will be made in China. Hobbyists will build their own and there will be a few specialty shops that make them as well, but by and large there is no one in the US who can make an ebike with the specs of the Storm and make any money on it at all selling it for $500. More than likely everything will get a lot cheaper as the big box stores see that there is actually a demand for these things and start stocking them. I hope that it won’t edge out the small shops like Boxy Bikes here in Ithaca NY, but more than likely cheaper ebikes will mean that these shops will need to rely more on service to survive. I strongly urge everyone to work to support your local ebike shop as no one else is really going to be able to help you understand your ebike and fix it when it fails.

If you want to get involved on the Storm Electric Fatbike, you should do it now, as the price goes up $100 this Friday at noon. You can get one now for $499 here. Once the kickstarter is over they will increase to $1299.

Ride On.

2 thoughts on “The Commoditization Of The Electric Fat Bike

  1. LIke the article and bringing up the bike I posted on Endless. I think you’re right in terms of ebikes becoming a commodity. A $500 ebike opens up a huge market that hasn’t been there when retailers are asking $2,000.00 especially when the bulk of the cost is associated with the batteries, a rapidly depreciating asset. It will be fun to watch the two ends of the spectrum with the Stromers of the world and startups like the Storm.

    I am anxiously following your Dolomite build as it seems to be a great low cost DIY platform. I read you were having to adjust the bottom bracket for the mid drive build. I thought the Dolomite came with a 68mm BB.

    Like

  2. Pingback: Is The Storm E-Fatbike A Total Scam Or The Most Important Crowdfunding Campaign Ever? | Electric-FatBike.com

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