Investing in the ‘Little Vehicles’ Revolution – Starting with E-bikes

Focusing on transportation, a sector whose greenhouse gas emissions have remained stubbornly high, it would be easy to focus only on the long-term prize of vehicle electrification. However, developing active mobility options such as cycling can be done now, at a very low cost, and with many positive side effects in terms of public health. In this article, we investigate the ‘little vehicles’ revolution, starting with cycling and electric bikes.

In the past few months, fuelled by daily reports of record-breaking forest fires and uber-powerful hurricanes, it seems that humanity is finally starting to grasp how vital and urgent it has become to tackle the great challenge of climate change.

Here at Green Angel Syndicate, we are proud that we are helping entrepreneurs develop their technology ideas into businesses that can contribute to solve this immense problem – and we are glad to report that the pace of our investments has strongly accelerated, with five deals completed since August: GreenSpur, Open Utility (renamed Piclo), Alusid, BetterPoints and Swytch.

Sometimes, it looks as if tackling climate change requires ground-breaking innovations, complete regulatory U-turns or billion-dollar investments – but this is not true. There is a lot that can be done with existing technologies, in today’s real world, and with limited investments; and such solutions can have a positive impact not in ten years’ time but now.

Focusing on transportation, a sector whose greenhouse gas emissions have remained stubbornly high, it would be easy to focus only on the long-term prize of vehicle electrification. However, developing active mobility options such as cycling can be done now, at a very low cost, and with many positive side effects in terms of public health.

In this article, we investigate the ‘little vehicles’ revolution, starting with cycling and electric bikes.

​In most cities, cycling remains a marginal mode of transport, but it is one of the fastest growing. Three innovations have the potential to eliminate many of the traditional barriers to cycling, for the good of the environment and of residents: bike sharing schemes, electric bikes, and multi-modal transport-as-a-service offerings – which all make it easier, more convenient and cheaper for everyone to opt for cycling.

Green Angel Syndicate is proud of our investment in Swytch, the innovative e-bike conversion kits company: Swytch is addressing what we believe is a multi-billion global market, with the potential not only to make a tangible contribution to the growth of clean transport – but also to become a highly prized asset in the global race between companies such as Uber or Lyft to become tomorrow’s mobility leader.

Of course, establishing the right conditions for residents to change their behaviour is one thing, but making that change happen for real is sometimes more difficult. This is where the BetterPoints behaviour change solution can help. This is another of our recent investments that we are proud of, which perfectly fits into the idea that we can help make positive change happen immediately.

Cars in cities: emissions, pollution, congestion

Unlike other sectors such as power or industry, emissions from the transportation sector have continued to increase over the past decades. The contrast is particularly striking in the UK, as shown in the Committee on Climate Change’s 2018 Progress Report.

Greenhouse gas emissions in the UK

Source: Committee on Climate Change, 2018 Progress Report to Parliament

In addition, the many diesel-powered vehicles, including cars, buses, taxis and trucks, contribute not only to CO2 emissions – but also to filthy air pollution, through NOx and PM particles, creating what is now an acute health emergency in megacities such as London and in many regional cities.

Finally, our reliance on private vehicles – cars and growing fleets of taxis – is leading to ever growing congestion issues, which lead to a massive waste of time, with a very large economic cost.

With urban populations set to continue growing over the coming decades, solving this urban mobility problem is essential not only for tackling climate change but simply for making cities more liveable.

The need for broader thinking

Last year we wrote about why we believe that the transition from fossil fuel powered cars to electric ones will happen and why the concept of transport-as-a-service based on autonomous electric cars will ultimately become prevalent in cities.

This revolution may not take as long as the sceptics expect, but it will take decades. However, the good news is that there are other solutions to the urban mobility crisis, which are more immediate, more efficient, and which come with broader benefits – in particular, the ‘active mobility’ solutions such as walking and cycling.

In an interview with Citylab, the authors of ‘Faster, Smarter, Greener’, Venkat Sumantran, Charles Fine and David Gonsalvez, explained why this makes complete sense: “The idea that we need to transport a 165 lb human in a 3,300 lb car seems wasteful. (…) When walking, biking, buses, railways, sharing services, and a wide range of lower-carbon vehicles (…) co-exist with cars, (…) mobility options and utility can be enhanced significantly.”

Indeed, in many large cities around the world, from London to Paris, Copenhagen, New York and Singapore, local leaders are advocating that “this is about more than solving traffic problems in our cities. It’s about figuring out new ways for people to move — ways that are more sustainable, healthier, and use fewer resources”. “When it comes to mobility, we need an all-of-the-above approach to getting people out of cars” (Martin O’Malley, former Governor of Maryland).

Cycling: off a low base but growing fast

In most large cities, the three arch-dominant modes of transportation are:

  • public transport, including the tube/metro/underground and buses – representing a third of trips made in London, Paris and New York City, for example;
  • private transport, including cars and taxis – accounting for more than a third of trips in London and New York, but only 13% in Paris;
  • and walking – representing between a quarter and half of trips – see the chart below.

Shares of different transport modes for city-to-city trips in London, Paris, New York

Source: Green Angel Syndicate analysis

Walking is great but cannot be expected to cover trips beyond a certain distance – and many commuters need to cover miles if not tens of miles each day; hence a logical focus on other types of active transport such as cycling.

Today, the numbers show that cycling remains marginal, accounting for only 2-3% of trips in London, Paris and New York City.

However, there is broad-based evidence that it is growing fast. In London, cycling trips have grown by 9% per year over 2013-2016 and, on average, 730,000 trips are now made in the capital by bike per day. In Paris, the number of cycles in circulation has grown by 13% in 2016 over 2015. In New York, the number of daily cycling trips has increased by 84% between 2010 and 2016.

Evolution in daily trips by mode of transportation in London (index 100 in 2001)

Source: TFL Travel in London Report 10 (2017)​​

Cycling trips in New York City (‘000 trips per day, years 1980 to 2016)

Source: New York City Government Mobility Report, June 2018.

Source: New York City Government Mobility Report, June 2018.

Massive growth potential…

Some countries and cities show the way. For example, in Copenhagen, cycling represents almost 25% of journeys in the region – a stark contrast with the 2-3% achieved elsewhere. And focusing on commuter journeys of less than 10km, it is as much as 51% of all trips that were made on a bike. In their ‘Cycling Report for the Capital Region, 2016’, the authorities have calculated that if the inhabitants didn’t cycle, commuter traffic on roads would be 30% higher.

Of course, not all cities have the characteristics of Copenhagen, in terms of size or geography, but this is a city which is worth looking up to when we think of active mobility – and such results point to large potential growth in cycling in most other cities around the world.

Coming back to London, TfL has calculated that there are 8.2m daily trips by motorised modes (car, motorcycle, taxi or public transport) that could be cycled – and of those, 6.5m would take less than 20 minutes for most people to cycle.

Such figures and calculations confirm that, with the right solutions and policies, there is no reason why large cities cannot manage to reduce the use of fossil fuel-based vehicles and massively increase ‘active mobility’, notably cycling.

Three such solutions are: 1) bike sharing schemes; 2) electric bikes; 3) the integration of cycling in transport-as-a-service solutions.

…with the right nudge

Before delving into these three solutions specific to cycling, it is important to highlight that even with all the right tools and conditions in place, changing the daily habits and routines of people is and will remain a difficult task. Leaving the car at home and commuting by foot or on a bike, be it a shared e-bike, requires a conscious decision that can so easily be pushed back, day after day.

However, innovative solutions to make such difficult change happen do exist – and Green Angel Syndicate has recently completed an investment into BetterPoints, a company selling a behaviour change solution to local authorities and corporates, aimed at boosting healthy and sustainable habits among local residents or employees.

The way it operates is by providing the target group of end-users with an app on their smartphone, that will give them real rewards (such as shopping vouchers) for doing the right thing – for example for walking or cycling to work. BetterPoints has already demonstrated that its system has a real impact on end-users’ behaviours, and it is now looking to expand its client base in both the public and private sectors.

Source: BetterPoints

Bike sharing schemes

There are many barriers to adoption of cycling, but two of those are simply the need to buy a bicycle, and the need for a place to park it securely at home as well as at destination.
An efficient way of removing these two barriers is bike-sharing schemes – and these have mushroomed from Mexico City to Beijing, and in dozens of large cities in Europe and the USA.
Successful bike sharing offers have had a very significant positive impact on cycling. For example, in London, the Santander scheme regularly delivers more than 1m hires per month; in Paris, the number of cycles in circulation has nearly doubled since 2006, the year before Velib was launched.

Trend in monthly cycle hires for the Santander Cycles in London

Source: TfL Travel in London Report 10 (2017)

Evolution in the number of cycles circulating in Paris (index 100 in 1997

 

Source: Observatoire des déplacements à Paris, Bilan 2016

Interestingly, this growth in the usage of bicycles means that there will also be a growing support among the population for the municipality to roll out infrastructure investments, such as bicycle lanes – which often take away street surface previously dedicated to cars – and this, in turn, will help to further boost the adoption of cycling in the city, creating a virtuous circle.

Early bike sharing schemes relied on a network of docking stations, where bikes can be hired and must be returned.
However, a new generation of dockless (or free-floating) systems have exploded a few years ago, pushed by private start-up companies, of which the largest (e.g. Ofo or Mobike) originate from China. The benefits of dockless systems include their flexibility – with users able to start and end their trip without having to find a station – and their low capital cost for the municipality – no need to deploy expensive docking stations across the city.

Dockless schemes have been off to a bumpy ride in some places, notably in China (see picture), but they are increasingly adopted by many cities as a means of achieving their cycling goals. For example, in the UK, Greater Manchester has allowed Mobike to begin operations as part of a smart city demonstrator, in line with its ‘Cycle City’ plan.

E-bikes

Another key barrier to the adoption of cycling in cities is that pedalling can be quite physical and therefore is not suited to all people in all situations. For long or hilly rides, or for people who are less fit or just do not want to be sweaty when they arrive at their workplace, the assistance of an electric motor in the cycle can be a game-changing positive.

Electric bikes, also called ‘pedal electric’ bikes, provide a battery-powered boost to riders as they pedal. They are particularly ideal for bikeshare because of their otherwise high upfront cost to users, and they can improve user comfort drastically. The speed for pedal assist e-bikes is usually capped at around 30 kph.

In countries where cycling is most advanced, e-bikes are already well developed. For example, in the Netherlands, a third of bicycle sales are currently electric; in Copenhagen, it’s one in 10. In those places, statistics on usage of different types of bikes show the significant benefits of e-bikes over traditional cycles. For example:

  • in the Netherlands, 50% of e-bike cyclists use their bikes for most of their weekly journeys, compared to just 3% of ‘ordinary’ cyclists that use their bike five times a week (and 9% of cyclists at least once a week);
  • Norwegian research shows that people travel virtually twice as much on their e-bikes than on ordinary bikes, be it in terms of kilometres or in terms of number of trips;
  • in Copenhagen, the Try an Electric Bike programme (2013-2016) showed that e-bikes can cater to longer commutes as well as increase the number of people willing to cycle to work.

Given the ongoing improvements expected in batteries, both in terms of cost and range, it is no surprise that the global e-bike market is due for very strong growth over the coming years.

A report by Allied Market Research estimates that this market will grow from $16bn currently to $24bn by 2025, representing annual growth of approximately 5% – and some other sources report a much larger market.

A couple of years ago, Bosch suggested that it forecasted 30-40% of all bicycles made to carry some form of assistance in the future, and some European bike manufacturers expect this to be more than half of all production.

Cycling, an integral part of a ‘mobility-as-a-service’ offering

Each transport offering has its pros and cons. For example, public transport may be fast, but it is often crowded, whilst cycling can be inconvenient when it rains, but it provides fresh air and exercise; each resident has his or her own preferences; each commuter may want to change the way he or she travels depending on the weather or other factors.

As such, if urban planners want to optimise the use of a varied menu of transportation offerings, a solution which is attracting growing interest is to integrate all these different modes into a one-stop-shop system (or several such systems), in the form of a smartphone app where residents can choose their favourite way around, according to their specific circumstances.

One example of such an app is Whim, which was originally developed in Helsinki and is now expanding to other cities in Europe. It enables residents to plan and pay for all modes of public and private transportation within the city. Another example of such multi-modal integration is Citymapper – which is not (yet?) integrating the payment of the fare but can connect the user to the chosen provider (e.g. Uber or Gett).

As shown on the pictures below, both integrate bike sharing schemes into the menu of transport services that they offer – thereby helping the adoption of cycling in the city where they operate.

Cycling as an integral part of a multi-modal transportation offering

Source: Whim

 

Source: Citymapper

Swytch: the innovative and affordable e-bike conversion kit

When Green Angel Syndicate came across Swytch’s elegant solution to boost the adoption of e-bikes, and therefore to help the switch to cycling in cities, we were immediately seduced.

Swytch has developed e-bike conversion kits that are inexpensive and easy to fit on virtually any traditional bicycle. This looks to us like a great approach to the e-bike market opportunity, because buying a conversion kit is significantly less expensive than buying a whole new e-bike. When researching whether to enter the e-bike market or the conversion kit market, Swytch found that the public’s interest in kits was significantly greater. There are 1.1bn bicycles in the world, and it says that 99% of those can be converted using its kit – so Swytch’s target market is indeed huge.

Source: Swytch

Moreover, Swytch’s long term vision goes far beyond this initial conversion kit. The founder, Oliver Montague, wants to position the company for the broader cycling revolution in cities, focusing on specialist bikes such as cargo bikes (e.g. for parents to transport children) – which, given their large weight, can particularly benefit from an electric motor – but also on bike sharing schemes – where electrification can further help boost adoption.

The ‘little vehicle’ revolution spearheading an M&A frenzy

Swytch is right to focus on e-bikes – an immediate solution to boost cycling, leveraging the large park of underused bicycles owned by large cities’ residents.

However, we believe that the multi-modal personal transportation market will be much broader and more varied than just bicycles; that the multiplication of transport options will lead to further mergers and acquisitions activity in the sector; and that Swytch can be very well placed to benefit from this rising tide.

As detailed in a recent Citylab article, we are experiencing the era of ‘little vehicles’ – “not just bikes and scooters, but e-bikes, velomobiles, motorised skateboards, unicycles, hoverboards, and other small, battery-powered low-speed not-a-cars”. Even though many of them “look silly”, they could significantly erode private car usage and “play a key role in helping cities achieve their environmental (…) goals.”

Of course, the electric scooter sharing service craze originated in San Francisco may be over the top, but there is a strong rationale behind these ‘little vehicles’: not only are they electric and hence more efficient, cleaner and quieter than ICE-powered vehicles, but also they are small, so they take much less space than cars, and hence can reduce congestion and increase travel speeds in cities.

And importantly, all these different offerings are starting to converge. For example, Uber has acquired Jump, the dockless electric bikeshare company, and is progressively rolling out the service around the world. It has also invested in Lime, the electric scooter firm. Lyft, Uber’s competitor, is following a similar path, having acquired Motivate, the largest bike sharing company in the US. This all makes sense as these companies are jockeying to become pivotal players in the burgeoning multi-modal transport-as-a-service market.

In such a fast-moving landscape, Swytch has the potential not only to make a tangible impact on the rise of cycling – a key clean transportation option in cities – but also to become a highly prized asset in the global race fought by companies such as Uber or Lyft to become tomorrow’s mobility leader.

Antoine Pradayrol is a Director of Green Angel Syndicate. He is a Cleantech expert and Angel Investor. Formerly head of telecoms equity research, Exane BNP Paribas, Antoine provides analysis on smart cities, mobility, green & clean tech and ed tech. Follow Antoine on LinkedIn and Twitter.

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