2023 : Economic Reality Hits Startup Growth Fantasy
High profile electric motorcycle startups like Harley-Davidson’s Livewire spinoff and Volcon saw sales collapse, while Sweden’s designer EV darling joined other automotive EV startups Arrival, Proterra, Lightyear and others in bankruptcy.
The reasons were clear enough if you zoom out enough.
The trifecta of sudden, steep inflation, a five-fold increase in baseline interest rates and over saturation in the consumer market spelled the end of the EV startup bubble.
The brands that focused on operational efficiency, product quality and consistent after-sales service, be it direct to consumer or through dealers, fared well. The startups that lacked fiscal discipline or underestimated the complexity of motor vehicle manufacturing all suffered financial hardship.
The electric bicycle market continued expanding, but there too unfocused startups like Van Moof, who had been carried by the spending bubbled despite poor product and manufacturing quality, failed.
Meanwhile 2 wheelers that were affordable, in the near-bicycle space, on both sides of legal compliance, soared. The poster child for ultra-light electric motorcycle success was China’s Surron, and the myriad of clones in the off-road space.
The lack of road legal homologation requirements, very light weight and modest cost combined with accessible power levels around 10kW, made these types easy to get into and very attractive to many consumers.
The luxury motorcycle sector saw consistent growth despite all the macroeconomic shocks, making winners of all legacy brands except Harley-Davidson.
Livewire, the all-electric brand Harley spun off in 2021, saw sales of under 700 units, falling far short of the 7000 units predicted in the company’s IPO documents.
But externalities like rising interest rates, the end of COVID lockdowns and a tighter venture capital environment were not the principal cause of the Cake bankruptcy. Interviews with CEO and founder Stefan Ytterborn, former CTO Krister Thour, former COO Mats Forsberg and former senior employees, suppliers and consultants revealed a company with operational weakness and a significant vacuum or experience in key areas of manufacturing, engineering and design.
“I am a storyteller.”
The Ride Cake story is a familiar one to motor vehicle industry veterans:
A group of talented individuals from outside the industry look at motorcycling and believe that they can make a breakthrough because they know better than the establishment, only to discover later that a century old industry actually know how to do things safely and profitably.
Despite excellent timing, an early abundance of cheap investment capital, a market open to innovation and electrification, and building a truly desirable product, the boring old requirements of quality engineering, testing, reliable distribution and after-sales care, and having reserves for unexpected shocks still apply.
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