Ethics And The Ebike Industry : The Correlation Between Honesty And Profitability

This article discusses 3 different aspects of ethics in the ebike business.

  • The ethics involved in crowdfunding ebikes
  • The differences between the different ebike vendor and pricing models
  • How to attempt to run an ethical ebike blog or review site
Court Rye looking pretty goofy in this picture is the gold standard for ebike reviewers that I will never hope to live up to

Court Rye from electricbikereview.com, looking pretty goofy in this picture, is the gold standard for ebike reviewers that I will never live up to

Over the last year I have watched most of the ebike crowd funding campaigns very carefully. There has been a pattern that has emerged again and again. Crowdfunders who exaggerated the specs of their ebikes tended to do very well, and people who were honest about what they were selling tended to get funded, but often did not make much more than they were originally looking to fund.

The campaign that has had the most blatant exaggerations was by far the Sondors Electric bike campaign which raised $6.1 million dollars for a grossly underpowered and inexpensive ebike. One of my friends still hasn’t received their ebikes promised in the first campaign six months ago and has been completely ignored in his requests for more information about his ebike. It now looks like Storm\Ivars has started a 2nd campaign under Kickstarter and has already raised to date another $1.2 million dollars with 6 more days to go. So what happened? Did Ivars run out of money and then start another campaign to pay for the bikes that he has already sold and not delivered? Will he ever be able to catch up?

Why I don’t write about ebike crowd funding campaigns anymore

Although I have been contacted by several other people doing crowdfunding campaigns to have their products written about on my blog I have declined to do so. After the Sondors campaign, I decided that I explicitly did not want to support any more crowdfunded ebikes for the simple reason that people were gambling with their money. When they donate money to the campaign in their mind they are buying a product as if they were on an Amazon, but in reality they are really just donating huge sums of money to Ivars or the entity that he created in order to possibly receive a perk at some point in the future.

This “crowd funding gambling” has created a strange phenomenon where people who donate to the respective campaigns become obsessed with them, probably because their brain keeps going in loops about whether or not they will ever get the perk that they were promised. When they get the product many months later they express widespread relief and excitement because they have been so uncertain about the outcome for such a long period of time, that it’s emotionally quite taxing. I’m going to call it ‘crowdfunding obsession disorder’ and it seems to be pretty widespread right now in the US and I was personally afflicted with it when I had personally invested in the Sondors ebike. The entire crowdfunding system is flawed because it is based on trust and the people who create these campaigns are not necessarily very trustworthy, although many of them are.

Roshan from Biktrix did a CF campaign for his Juggernaut BBS02 powered fatbike last January. He was honest about the specs of the bike and as a consequence got funded, but not as radically as he could have gotten if he had lied about his bike. The bikes were mostly delivered when they said they would be delivered and Roshan ended up with a lot of very satisfied customers. Roshan and the Biktrix Juggernaut campaign were the very model of what CF ebikes should be.

The jury is still out on Ivars Sondors. If only he could complete the orders from the first campaign before starting a second one.

The jury is still out on Ivars Sondors. If only he could complete the orders from the first campaign before starting a second one then I’d believe him … and not lie about his real name … and his ebikes weights and range … and … At least he’s not spending all that money on haircuts.

Your milage may vary

One of the biggest contentions is the claimed mileage on different ebikes sold through crowdfunding sites and through dealers. There is currently no Federal oversight on claimed mileage and its a hard number to pin down because you can actually pedal the bikes instead of sitting there as a lump of dead weight on top. This means there is no easy way to decide what real world mileage to list with your bike specifications. The ebikes that have outrageous mileage claims tend to do very well on crowdfunding sites as uneducated ebike consumer has no way to know if the claims being made are realistic. Until there is some kind of standard and Federal oversight let the buyer beware.

The-Taxman-Cometh1

The taxman cometh

Another serious issue with crowdfunding that no one seems to want to talk about is the issue of taxes. A retail bike shop pays sales taxes for the bikes they sell, but according to the letter of the law when someone does a crowdfunding campaign the taxes go directly to that person as personal income. This means that they cannot deduct their Cost of Goods from that amount and only pay taxes on their profit because legally what they are providing to contributors is a Perk which they are just donating.

What this means is that unless Ivars set up a not for profit entity to receive the money from the ebike donations that he is personally liable for a very large tax bill. This puts Ivars in an impossible situation where he has to either setup a not-for-profit entity which is not terribly ethical since the Sondors ebike is really all about the profit or he has to pay a AMT 28% tax bill in 2015 of over $2,000,000 which he just can’t do. This means that most everyone who is doing a crowdfunding campaign and successful at it is either being unethical and setting up not for profits to receive their funds or they are cheating on their income taxes. Do you really want to support that kind of behavior and gamble with large amounts of money at the same time? If so, then you should make your way over to a Trump-branded Casino with $694 as it’s pretty much the same thing.

Differences in dealer channels

The second part of ethics I want to talk about which is completely unrelated to crowdfunding and involves the structure of ebike dealers in the US. There are essentially 4 kinds of ebike dealers in the US

  1. Small brick and mortar shops that sell hand-built ebikes directly to end users
  2. Larger established bike shops that sell factory pre-built ebikes direct to consumers
  3. Larger distributors that sell ebike kits and bikes to the smaller brick and mortar shops
  4. Online retailers that deal directly to ebike builders and consumers

It gets even more confusing because many shops are a combination of more than one of these types. Let’s go through examples of these kinds of shops one by one.

1. Boxy Bikes

My good friend Larry Clarkberg started Boxy Bikes over a year ago in Press Bay Alley in Ithaca, NY. One of my closest friends John Guttridge who I started my business Computer Gurus with me over 20 years ago separated his business from mine and bought a very large multi-million dollar building in the heart of downtown Ithaca to house his 17 full-time employees. He wanted to invigorate the Ithaca downtown so he built Press Bay Alley with “Micro shops” that were each only about 200-300 sq feet each. This area has become one of the coolest places to go in Ithaca and recently even opened a Circus School (which I personally supported through Kickstarter). Larry rented a tiny shop from John and started Boxy Bikes because he felt ebikes were his calling in life.

One of Boxy Bikes more popular models.

One of Boxy Bikes more popular models, the featherweight folder.

Larry has an impeccable character and is the very model of integrity. He started the shop because he LOVES bikes and loves ebikes doubly so. His passion for electric bikes is what originally got me started and we have become close friends due to our mutual addiction. I have mentioned his store several times in my blog and also listed one of his first electric Dolomite fat bike builds which is still the cheapest non-sucky electric fat bike you can build yourself at only $700 without the battery. Larry builds all his bikes from ebike kits and puts them on bikes that he usually purchases from his bike distributor or bikesdirect.com, he generally doesn’t sell any factory pre-built electric bikes unless they are used.

One problem Larry has is that he will sell a BBS02 to a customer and charge them a certain amount of money to install it. The customer at a later time will go shopping on Alibaba.com and see the exact same drive unit for sale for a much cheaper price direct from China. They then get angry and want to know why their BBS02 cost so much from Larry. What they don’t understand is how difficult it is to buy product from China and learn how to make the technology work together properly. He often jokes that he hopes that his customers don’t find my website because it makes building an ass-kicking ebike so easy and all the instructions on how to do it are written here. One thing I have learned from spending a lot of time in Larry’s shop is that owning an ebike shop is really hard work.

These guys are the soldiers on the front line of the ebike world and they are the ones that will move the industry forward. We owe a lot to them and should work to support them in any way that we can.

Is it ethical for Larry to charge a markup on a BBS02 installed on a customer’s bike? I believe that it is.

There is the first ebike I ever bought third from the right, the Giant Twist. Jeff's shop sold more Giant Twists than everyone else in the entire NE USA combined.

There is the first ebike I ever bought third from the right, the Giant Twist! Jeff’s shop sold more Giant Twists than everyone else in the entire NE USA combined. I bought mine used from Larry.

2. Cayuga Ski and Cyclery

Cayuga Ski and Cyclery is by far the biggest local bike shop in Ithaca and run by my good friend Jeff Inman. They sell bikes and they sell a whole lot of bikes. Jeff’s target market is the mid-range to high-end customer and he doesn’t really care that much about the budget buyer. Since I am most certainly a ‘budget buyer’ there is little or nothing in his shop that appeals to me. His bikes cost more than what you would buy on bikesdirect and he makes no apologies about that. He has a strong and loyal customer base and his bike techs are competent and inexpensive.

I use his shop for repairs that I hate to do like bleeding brakes and occasionally stop by and buy items here and there, but I will probably never buy a bike from him. He stocks a few factory built ebikes like the Felt Leboswski (reviewed here) but it is unlikely that he would ever carry anything that I would want to buy. He is interested in ebike technology that ‘just works’ like the Bosch system. Jeff is honest to a fault and although his bike prices are higher than what you would pay online from the cheapest seller, no one would ever say that he was trying to rip people off. He stands behind what he sells and doesn’t really look at Boxy Bikes or Bikesdirect as direct competitors.

Is it ethical for Jeff to sell his bikes at a higher price than what you could pay online? I believe that it is.

Lectric sells more BBS02 branded drive units than anyone else, with good reason.

Lectric sells more BBS02 branded drive units than anyone else in the US, with good reason.

3. Lectric Cycles

Chris and Legrand at Lectric Cycles have created by far the biggest Bafang mid drive ebike kit dealer distribution network in the USA. Their model is simple, sell the kits and batteries to other dealers throughout the US and focus and producing and selling something good with extra value added. Their e-RAD branded BBS02 has done incredibly well and is the only option in the US for a BBS02 with a gear sensor from gearsensor.com that automatically cuts power when shifting under the PAS system. Their prices on their website are higher than what you would pay directly from China for a lot of reasons. One reason is that their units come custom-programmed as well as having lots of options like the gearsensor with a dedicated plug, and adapter with options for Raceface N\W chainrings and different ebrake selections.

The biggest reason their pricing is higher that might not be obvious to many ebike consumers is that they simply cannot put rock bottom pricing on their website because it would piss off their entire dealer network who they would then be directly competing with. This is a subtlety that is all to often missed by the average ebike consumer. Is it a conflict of interest to sell to ebike dealers and also to the public? If it is, then Lectric seems to be walking a the tightrope with poise and grace as they seem to be able to appease almost everyone, most of the time.

The cold hard reality is when you buy stuff from China most of the unreputable sellers don’t care about you, they don’t care if your product works or not. Once they get your money it is nearly impossible to get any kind of support from them. This customer service and support is what you are paying extra for when you purchase an e-RAD drive system. I have purchased 2 e-RAD units from Lectric (68mm & 100mm) and had very few issues with them. There was a problem with the first run of 100mm axles so they sent me another free of charge and the kits were shipped without shims for the chain wheel which I got about 2 weeks after I got the kits. Chris and Legrand seem to be honest ethical people with an interest in moving the industry forward in a big way.

Is it ethical for them to sell their e-RAD drive units for more than you would pay for a BBS02? I believe that it is.

These 18650 LG cells claim to have BOTH 3000aH of capacity as well as the ability to do 20Amps sustained.

Eric imports 18650 cells into the US by the thousands and sells them wholesale on his website

4. Lunacycle.com

About 2 months ago Eric the owner of electricbike.com decided to start lunacycle.com to sell batteries and drive kits directly to consumers. He looked at examples like bikesdirect.com and Dell and decided that there was enough demand in the builder community to start marketing and selling directly to builders and consumers. Eric reached out to me with questions about the BBS02 and we quickly became close friends. I have been waiting for someone to step up and start offering Chinese prices for US sold goods and he was someone who was willing to do it on his website.

The model he is using is offering the cheapest price he can get away with and offering only a limited warranty and support (90 days with the BBS02 750W unit). This has pissed off and alienated a lot of other dealers and many people in the ebike industry look at lunacycle.com as the biggest current threat to their profitability. Unfortudently I strongly believe that this attitude and energy is completely unfounded. The 7000 ebikes that Sondors has sold has not hurt other ebike retailers because these people probably would not have been purchasing ebikes in the first place. The motors and batteries that Eric is selling is pushing the industry forward faster and competition in a free market economy is always good. The problem with lithium batteries is the price is dropping by almost 8% a year for many years in a row. For an ebike vendor to get on their website and lower their battery prices all the time it is a very painful thing to do, especially when they feel like they are hardly making any money to begin with. What we have seen in the industry is the price of batteries fall overseas but mostly stagnate in the US market. Eric is changing all that by offering battery packs for much cheaper than what you can buy anywhere else in the US. It seems unlikely with all his connections in the ebike world that he will be able to get away with unethical behavior and every interaction I’ve had with him, while they have been quirky, seems legit.

Is it ethical for Eric to sell his batteries and drive units so cheap and undercut all the other dealers and only offer limited support and warranty? I believe it is.

Running a blog and staying true to myself

One of the hardest parts of running electric-fatbike.com has been trying to navigate through the murky sea of what is ethically moral behavior. I never anticipated this as an issue but it seems to be a recurring theme. When you run a perceived ‘review site’ lots of people contact you and want to send you stuff to review. This causes a number of problems, first off I don’t consider electric-fatbike.com to be a review site, it’s a blog. Second if I accept free stuff then that puts me in the incredibly awkward position of feeling like I have to write a positive review on whatever I got for free. Considering that I much prefer to write reviews that absolutely rip things apart and point out their shortcomings that puts me at odds with my own bad-ass nature.

This bike has nothing to do with the article but Im putting it in here because I know you the reader need lots of pictures or you will lose interest and click away from this article

This bike has nothing to do with the article, but I’m putting it in here because I know you the reader need lots of pretty pictures or you will lose interest and click away from this article

The gold standard for ebike reviewers is Court Rye from Electricbikereview.com. He is widely regarded as having a fair opinion and not being swayed by offers of free stuff. He doesn’t accept free bikes or stuff and mostly just travels around the US to try out different ebikes out only accepting reimbursement for traveling expenses like hotels and food. Since I have no interest in traveling around and writing boring reviews on factory built ebikes that I hate riding, that leaves me with few other options. I’ve been contacted by ebike manufacturers that want to ship me bikes for free to test to which I usually respond, “Are you frickin crazy?” Not only is it incredibly unwise for anyone to loan the Master of Disaster their ebikes for any reason whatsoever, I actually don’t really have any interest in trying out your crappy underpowered ebikes. Once you’ve gotten used to riding a 1400W mid drive, it’s hard to ride anything else and not be completely disappointed.

So how to I get my hands on stuff to try? When I want to try something I generally just buy it. I don’t ask for discounts and will accept them if they are offered but only down to what the cost of the product is. I never accept free stuff and I make sure to warn people that just because they are offering their product to me at a discount does not mean they will get a good review. It’s a fine line to walk but one that I have managed to navigate successfully thus far.

Aluminum frame with a steel front fork this frame can take plenty of weight and power.

My desire to build a 3000W Lightning Rods BB torque sensing cargo bike out of Eric’s cargo frame was the straw that broke the camel’s back as far as deciding whether to do work for him

The platinum standard for having an ebike site and not shamelessly self-promoting yourself on it goes to Justin of Grin tech. Justin has done more than just about anyone to push the ebike industry forward including buying endless-sphere.com (ES) when it was going to go commercial. He has left ES alone and hardly even posted to it in all the years he has owned it. Justin creates an ethical standard that it is unlikely that the rest of us will ever be able to live up to. I actually find it quite amusing how almost everyone on ES seems to have their own ebike business on the side and work hard promoting themselves while at the same time not looking like they are promoting themselves.

Justin from Grin tech took his passion for ebikes and made awesome products that do cool stuff

Justin from Grin tech took his passion for ebikes and made awesome products that do cool stuff

Some people have called into question the conflict of interest that arises from Eric owning electricbike.com as well as having the online ebike retail business lunicycle.com. Is that ethical? Again it depends on how he handles it. If he doesn’t allow mention of other retailers in his electricbike.com website and constantly posts blatant promotions of his online retail store then I would say that is not really all that ethical. So far I haven’t really seen that happen, as there are still plenty of references to em3ev, Empowered Cycles, California Ebike and Lectric cycles in many of his previous articles. These could be considered to be his primary competitors, except Eric doesn’t see it that way. His direct distribution model does not directly compete with other ebike vendors.

Eric hounded me for weeks to help him with lunacycle.com as he is completely overwhelmed with the success of this business venture. After refusing several times, I finally relented and came up with this deal. I would help him with the website if he sold me items from the lunacycle.com store at retail price with the money I’ve earned. This allows everyone to win, and I don’t feel like I owe him anything when I review his batteries and fat bike frames and he doesn’t feel like he’s getting taken advantage of. Is this business arrangement ethical? I believe that it is as long as I don’t let my personal feelings for lunacycle.com affect my reviews of their products. I personally believe that Lunacycle.com could take the ebike business to the next level and I’m willing to work to make that happen.

We can accomplish more working together than we will ever be able to do alone

We can accomplish more working together than we will ever be able to do alone

A call for unity

What we need in the ebike industry is for all the ebike dealers in the US to come together and work towards a common goal: To make e-bikes a dominant form of transportation in the US. Our petty squabbling and infighting does nothing but bring everyone down and keep this industry from reaching its full potential. There is enough room for everyone to make a decent living and a tidy profit. This feeling of scarcity only leads to everyone fighting over table scraps instead of moving things forward as we should. In 2014 $6.1 Billion dollars worth of bicycles and bicycle related crap was sold in the states, that’s Billion with a ‘B’. In 2013 173,886 electric bikes or ebike kits were sold in the US.

Tell me that pie isn’t big enough for everyone to have a piece and I’ll tell you you’re full of bologna.

Ride On.

10 thoughts on “Ethics And The Ebike Industry : The Correlation Between Honesty And Profitability

  1. Well thought, well written. Oh, and that pic, cool as it was, didn’t make a difference: anyone having already made it that far was in it for the content.

    I think that you can safely assume the same for most of your texts. Thanks!

    Like

  2. I understand all the frustration with the Sondors CF campaign. He’s sucked a lot of oxygen out of the room by selling 8000 ebikes this year, or selling the hope of 8000 eBikes this year.

    What I don’t understand is the lack of transparency by reviewers of all these other products.

    First generation and second generation BBS mid drives: What perecentage of those have failed, and what did the companies do to reimburse the customers.. Seems to me these products had all sorts of design problems that the unwary customers had no knowledge of until they failed on the road.

    FLYKLY: Where is the outrage over this fraud? Their big sell was an AMERICAN made all in one wheel with great range, under 10 lbs.. Two years late deliver and what backers were delivered didn’t even work half the time because of software/bluetooth issues.. They promise BT 4.0 what they got was something else. They promised 20 mph and 30 miles range.. What did they get?

    All I’m saying is that let’s shine the light on all these other products.

    Why are reviewers silent on the significant problems with all the other eBike hardware out there? Does advertising and or perks have anything to do with it.

    Like

    • I have published an article about the shortcomings of the BBS02 drive unit here.

      I still think it is the best thing on the market.

      I would not say it is outrage toward Ivars, it’s just unfair that he lied about the specs of the bike and sold 8000 of them. Other more honest ebike crowdfunders did no where near as well not because the Sondors ebike is something special, but because they were honest about the specs. If he can deliver what he has already promised then all the more power to him. I wish he would stop claiming 50 miles of range but what can you do?

      Like

    • When we had failures of the early BBS01 and BBS02 we either repaired the motor or replaced the controller (even beyond our 1 yr warranty). More than 1000 of those kits are still out there running today. With the new Mosfet design the controller failures are virtually 0. We offer deals to people with older 8 fun kit purchased from us that want to upgrade to the new controller with the gear sensor. We are thriving on repeat customers and folks that bought product elsewhere and found us to repair their kits when the original seller would not.

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  4. Great Article Karl! I’ve been in the business for 7 years now and always welcome the new comer as there is plenty of room for all of us. I do take issue with one statement: “Is it ethical for Eric to sell his batteries and drive units so cheap and undercut all the other dealers and only offer limited support and warranty? I believe it is.” I do not know Eric, but selling cheap, saying it is great, but providing little or no support and warranty is a “Chinese” business model. Fair prices can be achieved while still providing personalized customer service with strong product warranties. To not provide a good warranty says, “roll the dice and just trust me.” Supporting customers after the purchase takes time and a little extra money, but it is what moves the industry in the right direction. My experience is that with good products the vast majority of customer questions years down the road are educational items and/or easy fixes. A business model that supports standing behind the product for extended periods is what is ethical…

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