E-Bikes and Cargo Bikes Heading for Over 50% Market Share

I remember, back in the days when we still owned and published the quarterly print edition of Bicycling Trade magazine, boldly predicting that, “Within three years e-bikes would become a mainstream part of the Australian bicycle industry!”

Unfortunately, I don’t own an archive of these magazines, so I can’t look up the year I wrote that prediction, but it was probably at least 15 years ago – certainly before any of the major brands had a single e-bike in their ranges and possibly even before Bosch and Shimano had entered the e-bike drive system market.

It was a bit of a cop out term to use a vague term like “mainstream”, but it was probably closer to six or eight years after I wrote those words before that prediction actually came to pass. Although I may have been overly optimistic by three to five years, e-bikes have certainly made up for lost ground since then.

For five individual months over the past two years since it first happened in late 2022, the value of e-bikes imported to Australia has exceeded the value of conventional (let’s call them analogue) bikes. E-bikes are now a critical part of the sales mix for the vast majority of Australian bike shop owners.

We’re just part of a global trend. For example, in a recently published survey by Cycling Industry News of UK-based bicycle dealers, 54% of dealers said they were planning to allocate more floor space to e-bikes in 2024, compared to 8% who said they would allocate less space.

As one Australian dealer recently summarised, “E-bikes are more reliable now. They’re more widely accepted by the public and easier to sell.”
Another when commenting in our most recent How’s Business column said that pre-covid he used to have 3-4 ebikes displayed on his showroom floor. These days it’s more than 20.

Cargo Cult

Meanwhile, cargo bikes are still not mainstream in Australia and only just starting to be added to the ranges of Trek, Specialized, Cannondale and other major brands. But there’s no doubt that this niche is growing. Within the cargo bike category, most are e-cargo bikes. It’s fair to say that adding electric power assistance has been a game changer for cargo bikes which of course are heavier and harder to push than regular-sized bikes. In fact, most cargo bike models today have been designed from the ground up to only offer electric assist versions.

Even though it’s a relatively small market so far in Australia, even within cargo bikes there are many sub-categories.

First you can categorise most into either long tail or front load, which are sometimes called “box bikes”.

Then there’s “standard” sized cargo bikes, and more recently, “compact cargo bikes” typically with 20 inch wheels.
There’s also increasingly specialised commercial cargo bikes with larger (or multiple) batteries, heavier duty frames and other relevant features. These in turn can be segmented into food delivery vs parcel delivery categories, each with their own design specialisation.
If cargo bikes aren’t yet mainstream in Australia, it could be an even a longer journey before parcel delivery bikes reach a tipping point. But the economics for freight companies are compelling.

Although they have a slower top speed, because they can park just about anywhere, filter through traffic etc, cargo bikes can make the same, if not more deliveries per day than a full size ICE (internal combustion engine) powered delivery van that might cost $50,000 more to buy and $200 more per day in fuel and running costs.
If commercial fleets really take off, this will be a significant potential new market for bicycle shops to at least service, if not also get the initial sales.

Of course, cargo delivery bikes’ greatest advantages are in denser cities and they’ll struggle to be as cost-effective in outer suburban sprawl or rural areas.

In the meantime, in Australia the most common ‘cargo’ for cargo bikes is young kids being taken to day care, pre-school or school. That in itself creates an opportunity for dealers, because there are typically higher accessory sales to be added each cargo bike sold in terms of baby seats, kids seats, cages, platforms, bags and more. Usually, accessories return higher percentage margins for dealers, partially offsetting the lower margins on the bikes.

For dealers, cargo bikes create literally huge challenges. The bikes are larger and take up more precious showroom floor space. For smaller shops in particular, this makes it a tough decision how many to display.

Cargo bikes cost more in inbound freight from the wholesaler to the store. Then they take longer to build and after all that effort, the margins are typically lower in percentage terms than other bikes. When it comes to servicing, they take up more precious workshop space and require an electric hoist or even a ramp and platform system to elevate them.

Considering all of these factors, should you stock them in your store? Of course, that’s a decision that only you can make. But those stores that have embraced cargo bikes, meaning they’re stocking and selling a range of models, not just a single token one on display, appear to be making good sales at high unit prices.

Threats to E-Bikes

Clearly, it’s not all plain sailing for e-bikes at the moment. E-bike battery fires are in the headlines far too often. They are almost always caused by no-name, non-standards compliant bikes and battery chargers.

But law abiding bicycle dealers who are doing the right thing in only selling reputable brands are still paying a high price in terms of increased premiums for their store’s annual business insurance.

The federal government could easily improve this situation by cracking down on the importation of sub-standard products. There are also issues around the ‘gig economy’ that could easily be improved, such as requiring that the major delivery companies properly employ all of their riders and supply them with safe bicycles and chargers.

Then there’s the issue of varying regulations across each state or territory. The current EN15194 pedelec standard which was previously adopted in all states and territories includes a power limit of 250 watts. But last year NSW changed their limit to 500 watts and this is also being considered by Tasmania.

At least one importer, NSW based cargo bike specialist, Tribe Bikes, upped their specifications to 500 watts for one new model after the law was changed there. Others are also offering 500 watt options. But it makes it hard for all bike brands when they have to decide whether to have different power level models for different states, or just stay with the 250 watt standard.

Many riders and industry members would prefer to see a slightly higher power limit. In New Zealand for example the power limit is 300 watts and there’s no maximum power assist cut off speed. For commercial e-cargo bikes in particular the 250 watt limit is too low.

Meanwhile there’s a strong case that Australia’s current 25 kph power-assist speed cut off is too low. It doesn’t hinder e-MTB sales, but for e-road bikes in particular, it’s too slow. Even for commuting, most experienced riders would prefer at least a 32 kph power-assist limit.

This section cannot be complete without mentioning the phenomenon that now plays out daily in every Australian city, particularly along the beachfront bike paths and boulevards. One, and often two, young people, typically aged between about 12 and 20, speeding along on a ‘California Beach Cruiser’ style e-bike. These are often include a throttle-only option, motors well over the current 250 watt legal limit and power assist speeds well over the current 25kph limit.

Add to that, the young rider and passenger are possibly not wearing helmets, possibly no shoes and perhaps with one hand twisting the throttle fully open while the other is holding a surfboard.

I’m deliberately painting a stereotype here. Debate is certainly raging in the local media of many Australian beach side suburbs in particular.

On crowded bike lanes, particularly in New York and other cities, the dangers of over-powered, high speed ebikes is causing huge concern to other cyclists and pedestrians who are using the same paths.

Is this new phenomenon a good or bad thing for the Australian bicycle industry? If you have any opinions regarding this, we’d love to read your comments in the section below.

What’s Next?

Despite the threats and challenges outlined above, e-bikes are clearly here to stay.

Although they have lower power densities, meaning that batteries would either need to be larger or provide less range, there are alternative battery chemistries available now that are far less flammable. And as previously mentioned, if governments and their agencies got serious about cracking down on sub-standard products, most of the fire issues would be solved, even with lithium ion batteries.

Likewise, there’s nothing that couldn’t be solved in terms of setting reasonable standards that are uniform across all states and territories, for power and speed.

E-bikes offer dealers lower margins than analogue bikes, typically 25% to 30% compared to 30% to 40%, but because their unit price is on average about twice as high, there’s still a good dollar margin to be made on e-bike sales.

Plus, they tend to be ridden more and to be a little harder on tyre, brake and drivetrain wear, so there’s more ongoing servicing revenue for each bike sold.

There are still more sub categories of e-bikes emerging, such as the recently announced Tern Orox – perhaps the first ‘adventure cargo bike’. It features a 300 km range, 210kg total weight capacity, fat tyres and full off road capability – a bit like a bicycle Landcruiser.

Meanwhile companies such as Porsche have been investing heavily in the bicycle industry, particularly in relation to e-bike drive systems. As we reported previously here, one of their multiple recent acquisitions was high-end drivetrain manufacturer Fazua. I would expect to see new technology launches from them and others at Eurobike this year.

New models and new technology will drive new customer demand and more sales for dealers.

In summary, I think there’s still plenty of upside for both the e-bike and e-cargo markets. These already crucial new sectors of our industry should continue to grow. Given their more technical nature and greater need for servicing, they should also see a higher proportion of sales going to the IBD sector compared to the mass merchant sector. That is surely a good thing, both for our industry and for consumers.