E-Bikes – Sweet spot.

Public transport’s loss is e-bikes’ gain.  

• The aversion to asset sharing is likely to persist for as long as there is no reliable vaccine (evidenced by the sudden spike in demand for e-bikes) meaning that the pressure on the asset sharing industry is not going to change anytime soon.
• The example of New Zealand shows that it is not until the spread of the virus has been completely crushed (see here) that things can go back to normal.
• This essentially means that life will remain like this until there is either an effective vaccine available in billions of doses or at least 60% of anyone country (herd immunity) will have been infected.
• Neither of these two things is likely to happen before the end of 2021 and so masks and social distancing is the new normal for now.
• This makes public transportation a source of arguably the greatest risk of infection as the spread of the virus is at its maximum in small confined spaces and indoors.
• Transmission outdoors is relatively rare which is why it is quite possible that the current protests where social distancing has been thrown out of the window may not result in a spike of cases.
• In fact, the silver lining may be a more rapid relaxation of restrictions in outdoor environments which should help a range of businesses survive the summer.
• However, buses, metro rail, trains, ride-sharing etc are going to remain high-risk which is why many countries have issued advice to avoid them.
• One of the main beneficiaries of this is e-bikes where sales have increased by 90% YoY and most retailers are out of stock with waiting lists.
• E-bikes are a good replacement for public transportation because the motor assistance makes the commute much easier for those that are less fit or do not want to arrive at the office drenched in sweat.
• However, how this works when winter rolls around again remains to be seen.
• This trend is likely to be more prevalent in Europe (where the use of public transport is greater) and in dense metropolitan areas and where users can afford the relatively high cost of bikes themselves.
• I can also see this trend being replicated in e-scooters where regular use quickly tips the economic balance towards ownership rather than hiring.
• This does not bode well for the scooter and bike-sharing companies because it points towards a user preference towards ownership and away from sharing.
• Hence, the hiring companies may be left with only the occasional users where the low level of usage makes it more economical to rent rather than to own.
• Hence, the way to get on the right side of this trend is to be positioned in the companies make or supply e-bikes and e-scooters.
• That way the investor is covered regardless of the balance between hiring and ownership.
• It does also confirm the trend that the segment of the asset sharing industry that is going to recover the quickest is where there are no other human beings present.
• I continue to think that journeys by private vehicle will also benefit from this trend with private ownership and car-sharing both faring reasonably well.
• This could provide a much-needed boost for the beleaguered vehicle manufacturers.
• This means that ride-hailing, real estate sharing (Airbnb), office sharing and so on are going to continue to have a very difficult time.
• I would steer clear of this part of the industry for the foreseeable future.