E-BIKE MAKER STRIVES TO GO FASTER, CHEAPER AND SAFER
Vancouver startup winning over investors, tech community and younger consumers
In a nondescript grey building in Vancouver's Downtown Eastside, a small company that believes it can succeed where other startups have failed is working to build electric motorcycles for the masses.
Damon Motorcycles has already convinced investors and the tech community to buy into its product and business model, raising $8 million and winning accolades. A focus on rider safety and bike components made in-house has propelled it to US$17 million in presales so far, which are growing at a clip of US$2 million each month, mostly thanks to millennials living in sunny California, where the weather allows for zipping around on a motorbike year-round. But it must edge out competitors from a crowded space dotted with the gravestones of failed predecessors. Consumers often balk at available e-motorcycles, unable to look past the high prices and low range — Ev-speak for how far a vehicle can travel before it needs a recharge. The COVID-19 pandemic has further exacerbated the industry's challenges, with record unemployment and a global tightening of disposable income. Still, Damon sees opportunity, releasing two new lower-price submodels with a subscription-style payment plan for preorder last week in what it called the “tip of (the) iceberg.”
“We're not going to be a sportbike company with only one motorcycle for the rest of our lives,” Damon co-founder and CEO Jay Giraud told The Logic, explaining that customers will want different things from their bikes. Some desire long range, while others care more about price. “Obviously, we have to have a line of products.”
Damon debuted its first model, the Hypersport, at the start of the year at the annual CES trade show. One of the bike's biggest selling points is its safety features. Its Copilot system tracks vehicle activity around the motorcycle and warns riders about possible danger in several ways, including with vibrating handlebars. The program is designed to learn; the more time it spends on the road, the smarter the system becomes.
The desire to enhance motorcycle safety inspired Giraud along with co-founder and CTO Dominique Kwong to start Damon in 2017. An avid motorcyclist, Giraud tells the story of visiting a friend in Indonesia where he was eager to hit the pavement on two wheels, excited at the prospect of riding among millions of others. It was
“absolutely insane,” he said.
It made him realize that people who can't afford cars equipped with airbags deserve to be able to buy safe motorcycles so they can commute with similar peace of mind. Even recreational motorcyclists want better safety features, he added. Accidents are commonplace wherever people ride motorbikes, and some riders will even kneel and say a prayer before jumping on their motorcycle, he said. In 2018, 4,985 motorcyclists died in traffic accidents in the U.S., according to the most recent data from the National Highway Traffic Safety Administration. The fatalities accounted for 14 per cent of all traffic-accident deaths. Safety, it turns out, is enough of a concern for Giraud that he'd consider putting the company's safety technology into a gas motorcycle. “I'm not going to say no … I want to make a really big difference to safety, regardless of whether it's gas or electric,” he said.
Damon isn't Giraud's first time helming a company in this space. He founded Rapid Electric Vehicles in 2008 and raised more than $5 million for the venture before creating Mojio “from the ashes” of REV. The Vancouver-based company makes connected-mobility solutions for vehicles. Giraud served as CEO until late 2015. In 2017, he and Kwong took Damon through the American seed-stage accelerator Techstars' mobility program; the company is also a Creative Destruction Lab alumnus. The $8 million Damon has raised includes investment from Techstars, as well as from Round 13 Capital, Extreme Venture Partners and Pallasite Ventures.
Damon is one of a handful of prominent players in the industry that's poised to grow rapidly, wrote Prasenjit Saha, senior research analyst at Global Market Insights (GMI), in a note to The Logic. Part of that comes down to their innovation, including the Copilot system. Integrating advanced technology into the bikes also helps attract younger consumers, he said.
Another factor giving Damon “a definitive edge” over some competitors is making components in-house, said Saha.
Giraud's company makes everything but the battery cells. Damon has created a platform — much like Tesla's model for building its electric vehicles — called Hyperdrive. It can adapt that core element to different models to change the range, horsepower and speed. Its four models range between about 160 kilometres to roughly 320 kilometres per charge, and between 108 and more than 200 horsepower. Those are respectable numbers in the field. In comparison, Harley-davidson's first electric bike, released in July 2019, has 235 kilometres in range; its 2020 model has 105 horsepower. “In-house production is a key strategy,” Saha explained, allowing for benefits like better quality control, a quickened pace of bringing products to market and stronger protection of trade secrets.
The price of electric motorbikes has long been a sticking point for customers, when gas-guzzling alternatives cost thousands less. Harley's Livewire came with a manufacturer's suggested price of US$29,799. Damon's models range between US$16,995 and US$39,995. Damon plans to use Hyperdrive as the base for a dozen motorcycle models in the future, said Giraud, likely including some lower-price ones to appeal to a broad range of consumers' needs and budgets.
Outside of the EV world, Harley's least expensive gas-powered street model starts at just shy of US$5,400. “The high initial cost of electric motorcycles & scooters is one of the major factors hampering … market growth,” a GMI report reads. COVID-19 and its impact on consumer wallets hasn't helped, the report adds, predicting a “temporary slowdown” in the market this year. National unemployment figures hit record highs during the early months of the pandemic in Canada and the U.S. — two of Damon's biggest markets, with 95 per cent of presales in the U.S., mostly California, and three per cent in Canada. The remaining two per cent is in Europe.
Damon attempted to make the price more digestible last week when it released not only two lower-priced models — shaving off US$23,000 between the highest- and lowest-end options — but also a subscription service. The company sees this working in the same way as many people purchase smartphones, with a down payment and monthly instalment plan, and the ability to trade in devices and receive a credit for an upgrade. Customers can choose two-, three- or four-year plans that guarantee a residual value at the end of their term. “This is intended to incentivize customers to trade in with us and not have our motorcycles end up stuffed among a bunch of other used bikes outside at a dealership somewhere,” wrote the company's external media relations spokesperson Donna Michaels in an email.
Damon, which sells direct to consumers, also plans to open stores in the long term, similar to the showroom model of Tesla or Peloton. The direct-to-consumer model allows companies more control over sales aspects such as price and, consequently, profits, said Saha, but can also be an expensive choice, “as it involves setting up company-owned distribution centres in several locations.”
Damon also takes comfort in the fact that most of its buyers don't consider the purchase a luxury item, but rather their version of a necessity, the way a large suburban family might feel about a minivan. One-quarter of presales were to people under 25 years old, said Giraud. These customers often live in condos without parking spots and have never owned a car. The motorcycle will be their primary mode of transportation, he said.
COVID has actually created some opportunities: With people avoiding crowded, enclosed spaces and public transit during COVID, bicycles and motorcycle sales are seeing a lift.
“Motorcycling is experiencing a strange revival right now,” Giraud said. The industry is seeing “an upward trend” in developed economies in North America and Europe, said Saha. Another Damon competitor, Italy-based Energica, reported a threefold increase in its order backlog of its electric two-wheelers, he noted, as the European market sees high growth from environmentally friendly consumers concerned about COVID-19 and looking for new commuting solutions.
And the electric-motorbike subset was already growing steadily. The market for electric motorcycles and scooters was valued at US$30 billion last year, according to GMI, which estimates a compound annual growth rate of more than four per cent between this year and 2026. Electric motorcycles accounted for nearly a third of the market share in 2019 and, by 2026, will reach an estimated US$12 billion in revenue. Part of the growth in market size comes down to consumers' growing concerns around air quality, as well as governments offering attractive subsidies for purchasing electric vehicles and developing more charging infrastructure.
Still, the pandemic has cost the company some future sales, and “is a very real risk from a supply chain point of view,” Giraud acknowledged.
GMI echoed that concern in its report, noting “significant disruptions in automobile production” thanks to Covid-related labour shortages and supply chain disruptions. Damon is somewhat protected from that risk, as it intends to manufacture in Vancouver and is working on securing a location for that purpose. However, it imports parts from about eight different countries, including Italy. Much of the European nation entered a lockdown earlier this month after coronavirus deaths hit a six-month record high.
The pandemic hasn't stopped Giraud from dreaming big for Damon, which has 50 employees and is hiring more staff. “We're actually going to transition the motorcycle industry away from the word `motorcycle' over the next five years, and we will define a category called `light electric vehicles,'” he said.
The vehicle Giraud has in mind is a motorcycle-like contraption with the safety and convenience elements — including a shield — of a car. That could be the first vehicle for which Giraud's mom gives up her Toyota Prius. “Damon will solve that,” Giraud said, “and when we do there's a whole new category of commute vehicle that's going to sit between the motorcycle that you know today and the car that you know today in a way that the masses can adopt. And that's really our long-term goal.”
The company is keeping an eye out for future acquisitions. It acquired the intellectual property portfolio of Mission Motors, a deal it announced in March, to accelerate development.
If the right technology comes along to give Damon a boost again, Giraud could see another acquisition in the future. But Damon itself is not looking to be sold; it may instead decide on an initial public offering.
“I think there's a time for Damon to do that, and we don't know when that is yet.”
There's a whole new category of commute vehicle ... that the masses can adopt. And that's really our long-term goal.