E-bike as a service - microbility business model breakdown

The Soundcloud founders - Alexander Ljung, Eric Quidenus-Wahlforss - made public their new startup: an e-bike subscription service named Dance. 59 euro per month all inclusive.

E-bikes is probably going to be the next hot microbility vertical that a lot of venture money will be invested in - the manufacturing end of the value chain is already heavily invested.

Micromobility, especially in Europe, is in its first inning of emerging development, at the intersection of the adoption of the electric-based vehicles, car banning in most of the capitals centers and a sense of urgency of using tech for climate change purposes. The scooters today are just a tease of what the public infrastructure will look like.

E-bikes have the advantages of being a cheaper asset than a car and a more comfortable, practical and reliable mean of transport than a scooter. It is a sweet spot for consumers.

In time, an e-bike will arguably become a commodity, when DTC competition will pick up. Manufacturers still need to get at economies of scale for a decent unit economic - fwiw, the global e-bike market is expected to grow from $17 billion in 2017 to $27 billion by 2025.

A subscription operation looks like an interesting opportunity to build a biz based on the right product, at the right time and by leveraging product and distribution network effects and virality. It is a much better model than the on-demand scooters preponderantly use nowadays, as it mitigates risks such as client stickiness, vandalism and city regulations.

Dance needs to solve for the consumer frictions and hidden costs associated with buying (i.e. choosing a suitable one and setup) and the total costs of ownership (i.e. maintenance, theft, gears and consumables etc) providing an outstanding experience and support.

The defensibility should come from strong brand and community around the business which can translate into a revenue line (just look at what Rapha did with their club). As Dance solves this, the lock-in, up-sell, and after market will be some of the main upside drivers. It's a strong marketing play, with the brand and its values aligned with the consumer proposition.


1 Comment

Chikashi Miyamoto 18:03 on 23 Oct 2020

I would be interested in seeing how the numbers stack up. 59€ is lower than the 75€ that Swapfiets are charging for their e-bike option, but I wonder about the servicing costs of the particular bike model they are using. Even the most expensive ebike models from major brands are riddled with warranty issues, particularly with the electronics and even the motor. If the problems are covered under warranty, it is less of a problem, but I don't know what the impact is from assets not being available for use, finding the right service providers, etc. I assume these bikes are basic models that have a max speed of 25 kph, so they are not very expensive, but I wonder about the unit economics. Not being sceptical, just very curious, curious enough to bother leaving this comment.

Rapha's move to basically outsource their marketing and public relations to consumers was interesting. The visibility is undeniable, within the niche world of road cycling, but I don't know if the RCC thing has ever evolved into anything more than a breakeven proposition since I have not been privy to their numbers. Also, RCC was initially conceived to be something else, which obviously didn't pan out the way they envisaged when they phased out Rapha Travel. In any case, to build a strong brand and community, they will have to come up with a story / ethos around which people can convene and interact. Not sure if creating a tribe of sorts is an obvious evolution for Dance.

Back to the core proposition, I think a big external factor is the prevailing tax regime. The reason why ebikes, particularly the faster, more expensive ones, are selling like crazy in Belgium is because of the tax incentive given to businesses (and employees) and independent workers. There is an incentive to buy an ebike outright rather than having a monthly subscription for one. I don't know which other countries have similar tax incentives for ebikes, but where there is one, it will have an impact on prospects.