We Have the Best Batteries in the World - Exclusive Interview with Zero Motorcycles (Page 2)

← Continued from Page 1 of "We Have the Best Batteries in the World - Exclusive Interview with Zero Motorcycles"ae: What's more important for Zero, building new bikes, offering a model for virtually any type of rider, or making the current line-up better and more affordable? SH: Definitely the latter. We think we have the product line covered. In fact we struggled to add the two new models for a total of six bikes altogether, and that's a lot for a small company like ours. Each addition adds another layer of business, in terms of costs, marketing perspectives, parts management, engineering and the like. We believe we have the right product for the dual-sport, standard bike, a good trail, off-road bike, a street one. We just need to keep improving them: the motorcycle itself, the design of the motorcycle, and the cost of the motorcycle. Last year, unfortunately, because of the exchange rate, Europe didn't benefit from the price reduction we made in America. The battery costs went down faster than we anticipated so we operated a price reduction, and it stimulated sales. We couldn't do that in Europe because the exchange rate basically consumed all of that. Instead of a price increase, we kept the prices flat. Still, making a better product, exposing it to more people and becoming better known are key directions. [QUOTE]On young people, young customers, technology and motorcycles - it's a very complex problem that still needs a solution[/QUOTE]
Scott Harden, Zero Motorcycles 1 photo
Photo: Florin Tibu
ae: How about the young customers? They can be difficult at times, so how's this issue for Zero Motorcycles?
SH: Unfortunately, the entire motorcycle industry has a huge problem with young people coming to this world. We, as a whole, aren't attracting enough new young people into this.

Young people today are into a world of computers and internet, smartphones and social networks, they aren't like we were when we were young. They aren't any longer so eager to get out there and drive a car or ride.

In the US, for example, young people are waiting longer and longer to get their driver license, it's just no longer a big issue for them. When I was young, the very first day I was old enough to drive I was at the DMV office to have my license. I had to have a car!

Nowadays it's different; young people are becoming more urban, living in cities, they are tuned more into computers, and there's a big problem for the motorcycle industry. We are having some success attracting young people to our new technology because if there's one thing young people are looking for, it's new ideas and new ways of doing things.

I think we may have better chances to bring in new people with electric vehicles than with internal combustion ones, possibly because of what the ICE (internal combustion engine, red.) represents in their mindset. This is a big challenge and not just for Zero, but for all.

ae: In a way, they should be drawn to these new machines. They need less maintenance than traditional ones, they are far cleaner, and don't require too many spare parts.
SH: Not only that! We have an app that allows you to manage all those systems on your bike; we were actually thinking about the younger riders when we developed this. A way to integrate their phone, their world with their motorcycle. Anything we can do to connect the two, I think it helps the idea of making electric motorcycles more acceptable.

ae: Hmm, and what are OLDER guys thinking about the idea of integrating smartphones and motorcycles?
SH: It's a nice feature to have, especially to those who know how they work and how to tune the engine settings characteristics. They really appreciate this because they can custom-tune an engine setting, but the other guys just want a motorcycle that can offer a real thrill when they ride it.

And we sell a product based on the experience it offers. It's not here to save the planet, it's not a low-cost, no-maintenance thing - when you ride our bike it's exciting, it's thrilling, it's got a great feeling about it, it accelerates really hard. You twist the throttle, there's no sound, you're just flying along, with the wind in your hair: a magic carpet ride experience.

ae: E-bike manufacturers are trying to convince the state in the markets they're present to offer as many incentives as possible. Is Zero lobbying for this, too?
SH: We do keep track of such incentives, and when they are available, we are offering them, but this is not the strongest selling point. As I've told you, it's an experience thing that sells the bike.

I've ridden all my life and electric bikes give me a feeling no other motorcycle can. We believe that if we get enough people to ride it and try it, they'll be excited about it and want to own it.

[QUOTE]As long as oil is cheap and abundant, electric vehicles will receive little subsidy from the government, but this will not last forever[/QUOTE]

Let's face it, so far, we have been supporting the oil industry and the ICE vehicles massively, and by we I mean governments and monopolies. They have been waging wars to keep the oil flowing, and the subsidies for oil are a million times bigger than what the electric vehicle industry has gotten so far.

There was even a time when there were great electric cars back in the 1900's, but they were killed because of the auto industry and the cheap oil in America.

Getting back to your point, we are glad when we see such incentives, we are glad that they're there and provide the consumer with some help to getting started in this direction, but we are not counting on that, or that the whole strategy should be revolving around that. At the end of the day, we have a great value proposition that stands on its own.

ae: Is it worth marketing the advantages of electric mobility and trying to show the governments how they could profit from them? Like a lobby for the entire electric segment...
SH: Our course of action supports this idea. There are some 75 police departments that run Zero motorcycles in the US alone. The reason they are using it is because they work, they provide a tactical advantage (going places they couldn't otherwise go, they can sneak into action silently), and there's the cost of operation!

One cent per mile, no routine maintenance, no oil changes, no air filters, no valve jobs, no tune-ups. These bikes just make sense: tactically, financially, from a PR point of view, there are advantages everywhere you look. So the same thing that apply to fleet customers applies to the consumers as well.

ae: A lot of guys who are at least considering going electric often try to figure out how long it would take to see their initial investment turning into palpable profit. How many miles should a motorcyclist ride a month or a year to feel they are actually saving money?
SH: It always depends on what you're comparing our motorcycle against. If it's another premium, high-performance motorcycle, I can tell you that if you ride 15,000 km a year, the cost advantage is completely in favor of the electric bike in just two or three years.

And it grows the more you ride. We estimated that riding 15,000 km a year would cost a Ducati Monster owner some $150 per month. In Germany we started out a program where you can buy our SR motorcycle, which normally is $15,995, for $10,000 plus a battery financing program worth €80 or $85.

So you get a premium bike for less, and also spend less on fuel and maintenance, and hopefully the advantage makes even more sense for more people. The program in Germany is called "The Electric Advantage" and the move includes battery insurance, plus you own the battery at the end of the period as well. The program is only functional in Germany on a trial basis, but I am sure it's going to be expanded to other markets.

ae: How well established are you in Europe?
SH: I think we have around 70 dealers right now, but it's growing at a rate of four to five a month. We are aggressively looking for dealers, and we only have three dealers in Italy, with lots of room to grow there and in France, too.

ae: How are sales in the US compared to those in Europe?
SH: It's about 50-50, I'd say, I don't have exact figures. Could maybe stretch to 60-40 in favor of the US, but we're bully-ish on both markets. We have a strong foothold in Germany, but we can do better, especially as we started distributing bikes in Turkey, South Africa, Israel, and more.

ae: I suspect that the sales volumes are not to be disclosed now...
SH: Yes, they are confidential so far, because we are not yet required to report the sales and we don't want the competition to know how we stack.

ae: We can live with that, but are you happy with the numbers?
SH: We could always sell more, that's sure. Our trend is in the right direction, even though I can't say our growth this year exceeded 30%.

We are still a small company, we don't even sell 10,000 units a year, it's much less than that, but we are happy with the progress, and so are our investors. We are looking forward to the day when Honda, Yamaha, or KTM will be serious about electric motorcycles.

ae: Are you considering partnering with bigger investors to fuel your growth? I mean, like Ducati or MV Agusta did?
SH: Funny thing you mentioned Ducati, because we had meetings with them and they tested our bikes, and so have BMW and a number of other companies. We had discussion with a lot of other people, and our door is always open to people whose strategies match ours.

We are very blessed with our investors, who are not the typical investors. They have very deep pockets; they manage a $4-5 billion fund and have plenty of money to see this project through. They are happy with the current state and don't need money from additional sources, so we can afford to be selective who we work with.

[QUOTE]We are not looking for another round of cash to have things floating for 5-6 months. If the right opportunity arrives, we will consider it.[/QUOTE]

ae: Since you mentioned "a round of cash," EBR is up for grabs again!
SH: This shows how challenging things are in the motorcycle business. The $2.2 million in this particular case isn't enough to fund another round of production. If you don't come to the table with a lot more money than that, you're not going anywhere, you're just going to piss that money away. Erik went through $20+ mil in what, a year, a year and a half?

I can tell you that starting a motorcycle business is not for the faint of heart. It needs a very, very high level of capital investment whether you produce 100 or 10,000 units. You have to have the R&D, the engineering, the production capabilities...

Then there's distribution channels, marketing, and the raw materials are probably last on the list. Year after year after year.

ae: So those who seek crowdfunding for a nice idea should read this interview before getting their hopes too high...
SH: You'd be surprised how quickly you burn through 5 million dollars, or 10 million dollars, or even 20 million dollars. It may sound like a lot, but this is not that much money. You need a lot more than that if you want to be a motorcycle producer.

[QUOTE]We make our own batteries and we are the best guys in the world at this[/QUOTE]

ae: Who makes your batteries?
SH: We can say we have the most energy-dense and most powerful batteries in the whole electric vehicle industry, of course speaking about production machinery.

We get our cells from the Chinese manufacturer Farasis, they are partners in this. The packaging, the peripherals, the management systems, the design, and all the rest are done internally at Zero. We actually build the batteries on an assembly line at our factory.

We take the raw cells that come from our supplier, and we build everything around it. We guide our own destiny in this, and we even work with Farasis when it comes to the chemistry of the batteries. We have very talented people working on fine-tuning and tweaking every detail. This year's range increase comes from tweaks to the chemistry of the batteries that our people implemented.

ae: Any thoughts on the lithium-air technology?
SH: There are a lot of things out there, lithium-air and solid state, which seems to be the holy grail of the industry. Right now, we believe that the current technology we are using is the best bet for at least the next two years. We don't see anything with a major industrial scale impact approaching.

ae: Any guesses as to what may be next?
SH: It's hard to tell, as things change a lot these days, but I guess that Zero will be right at the middle of it when it happens. We are so involved in this and we are tracking our own progress with an internal testing program.

We are more deeply involved in this than most people would imagine, and I am sure that when the time comes, we will be at the forefront of whatever breakthrough comes through. We are also counting on the fact that this WILL happen because there will come a day when 500 miles of range will be packed into a lightweight battery occupying only a small area.

When that happens, it will be a game-changer. We will be able to redesign the bike, we can change the way the bike looks altogether, and we can change everything about our product.

ae: Speaking of range, one of the first things that come to mind is Tesla Motors. Zero versus Tesla?
SH: We do believe we're ahead of Tesla. If you look at it, Tesla doesn't even have to be very clever with the battery design because inside a car there is so much real estate for batteries.

They are still using cylindrical cells, which,volumetrically, is very inefficient. We are way more efficient in terms of space. We can even teach them a thing or two when it comes to packaging a battery. Taking a bunch of flashlight batteries and taping them together just doesn't cut it.

I don't have a cut section battery here, but if you look inside one of our designs, you'll see the cells stacked like a deck cards, with just enough space between them for expansion and contraction under temperature. That's the meaning of a "compact design." Try to do that with a bunch of baseballs and see what you get.
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