The Ukrainian manufacturer of electric bicycles’ founders discuss micro-mobility, the adaptability of urban infrastructure to it, a future factory in Ukraine, and its sales markets in North America in an interview with the CFTS portal.
Micro-mobility has become a new trend in the development of urban transport around the world in the past couple of years. The coronavirus pandemic and the transport restrictions that countries have imposed have only intensified this trend, with affordable means of transport becoming more relevant than ever. Cycling infrastructure was expanded in many cities around the world in spring and summer 2020 to enable citizens to move around on bicycles, electric scooters, or electric bikes as much as possible.
The use of the latter for transportation and logistics purposes is another trend that has developed in recent years. For example, the DB Schenker company has launched transportation of goods on e-bicycles in Germany, emergency medical e-bicycles have appeared in Paris, and the Mexican police have begun using e-bicycles to patrol streets. It is noteworthy that Mexican law-enforcement officers are doing this on electric bicycles manufactured by the Ukrainian company, Delfast.
Delfast began operation as a courier delivery service in 2014 and transformed into a full-fledged manufacturer of electric bicycles within a few years. However, its electric bicycles are better known abroad than in Ukraine. The CFTS decided to remedy this situation. We spoke to the company’s founders (CEO Danylo Tonkopyi and COO Serhii Denysenko) about the company’s operations, where its bikes are produced and sold, and the realities of the Ukrainian micro-mobility market.
How did the idea of creating a delivery service that uses electric bicycles come about?
One day, I wanted to order a smartphone and nobody could deliver it from online stores within an hour. That was how the idea of delivering goods from online stores at the speed of a pizza delivery was born. We immediately understood that gasoline-powered transportation was not suitable for us because of its high cost, since we needed to spend at least UAH 6,000 per month on gasoline alone. Couriers get tired on bicycles, so it is necessary to replace a courier after 50 kilometers. Moreover, cars get stuck in traffic jams. An electric bike was needed to solve our problem. We bought the ones that we could find in Ukraine. Then we ordered more from China and Europe. However, all the bicycles that were available then (and even now) had a low mileage of 30-35 kilometers on a single charge. However, we needed 150 kilometers because a courier travels that much distance per day on average. Since we could not find anything suitable, we had to start developing electric bicycles ourselves. We made our first delivery in November 2014.
How and where did you start assembling bicycles?
In our workshop. The very first bike was made in China, but we bought it in Novohrad-Volynskyi. It had a range of 30 kilometers. We then began refining it. Then, we bought the next batch from Odesa. These bikes were not suitable either, their design was unsuitable, and their batteries were heavy and had a short lifespan. We assembled the next version in Dnipro. We assembled many in Kyiv. We used other electric bicycles and regular bicycles as the basis. For example, we took an ordinary Comanche pedal bike, inserted a battery into its frame, installed a motorized back wheel, and added electronics, a pedal-assist system, etc. In short, there were hundreds of experiments. A few years later, we started buying frames from Ternopil and they later began making our courier bikes to our specifications.
How did you enter the international market?
We came up with the idea of selling electric bikes in 2017. We did not yet know whether there would be demand for them. We launched a Kickstarter campaign for this idea in September 2017 and took our bike to the Interbike show in Las Vegas. We made a splash there. When people found out that our bike had a range of 236 miles on a single charge, they were delighted and bewildered. For example, the bike that was presented by Bosch, the leader in motors in the European Union, had a range of only 20 miles. We understand why they looked at us in disbelief.
How did this happen? They did not have similar technology?
I had impostor syndrome when we went to this exhibition. I could not believe that it was possible to travel such a distance on our bike and not on others. Maybe everything had already been invented before us. However, this exhibition allowed us to believe in our strength and understand that we were making a really cool product that was significantly superior to everything else on the market.
There were haters and distrustful people who were trying to expose us. Therefore, we had to set an official record. Before that, we rode on our bike from Kyiv to Rivne and further (380 kilometers). However, they did not believe us. They said that our video was edited because it was filmed with a GoPro device. Bosch, Yamaha, and other manufacturers also did not trust us. Therefore, we set a world record on the Kyiv cycle track in October 2017, which was entered into the Guinness Book of Records. After that, nobody could argue with the fact that we had made the best product in the world.
Even those haters who said it was impossible noted that it is much easier to ride in a straight line than on a cycle track. In a straight line, you ride at the same speed but on a cycle track, you lose power when turning, which increases energy consumption. Moreover, the weather was cool when the record was set: it was raining and our rider was wearing winter gear, which increased his weight by 3-4 kilograms and resulted in poor aerodynamics. We could have traveled about 400 kilometers on the same cycle track in the summer.
Are you developing the technology yourself?
Initially, we put various parts together to choose the best option and achieve the most important thing, which was mileage. After that, we began to improve the option that we chose. We already have patents for rechargeable batteries and the controller. So yes, we are designing the electronics.
Is the development taking place in Kyiv?
What about production?
We did not have the opportunity to create a full production cycle in Ukraine. Delivery of spare parts and logistics from Ukraine were not established, so we decided that we could establish production in China (at the contractor's facilities near Shanghai), especially since the bulk of spare parts are produced there. That was in 2017-2018.
In 2019, we set ourselves the goal of building a factory in Ukraine in 2020. However, we were unable to secure funding, and we decided to just start somewhere with our own money: we opened a center where we could assemble a small number of bikes (up to five bikes per month). We found partners in Ukraine who could make the frame and plastic. We began producing our own frames and plastic in Ukraine in 2020, and we plan to start assembling batteries.
Have you given up on the idea of a factory in Ukraine?
On the contrary, we want to build a factory in Ukraine. We will be able to completely transfer production from China to Ukraine when we raise the amount necessary to organize an entire development and assembly complex. It did not work out this year because we could not raise the funds, but we have launched a crowdfunding campaign. We are currently raising the required USD 3 million. In a year, we will start producing bikes and selling them all over the world. We have also sold our courier service, and the proceeds will be used to create warehouse stock and purchase spare parts. That is, it will essentially also be used to finance production.
Will it be profitable to produce electric bikes in Ukraine?
The market dictates conditions. The final decision was made when the United States erected protectionist barriers against China. That is, an electric bicycle from China is now subject to a 25% duty. In Europe, Chinese electric bicycles are subject to an 86% duty. This makes our bikes uncompetitive.
This was an important reason, but not the only one. There is also quality control of bikes. Instead of setting up a quality-control service in China, it is easier for us to do quality control here. In addition, the speed of implementation of new developments in China is very slow. It can take up to a year to make changes to a model but we can make changes here almost immediately. We have our own design bureau, our own engineers, and our own designers and developers.
Do you see a stable market for your products in Ukraine?
Yes, after we start production here.
How much will your electric bikes cost in Ukraine?
Our price is currently about USD 6,000. Taking account of the latest legislative initiatives regarding duty-free importation of spare parts for electric vehicles, we hope to cut the price for Ukrainian buyers by half.
Can we say that there has been an upswing in the prospects of micro-mobility-related businesses since the start of the pandemic?
Our sales have tripled this year compared to last year. McKinsey analysts say that the global market of electric bicycles is growing. It was USD 97 billion in 2019 and it will increase to USD 150 billion by 2022.
Is this due to the pandemic or did the pandemic simply accelerate processes that were already underway?
It accelerated them. In general, people have faced several transportation problems over the past few decades. First, vehicles are in traffic jams. The more cars on the road, the longer the traffic jams. That is, this is a road to nowhere. The second problem is that cars pollute the air. The third problem is the cost of fuel. A motorcyclist who drives around town all day spends about USD 200 per month on gasoline.
Few people in Ukraine had heard about electric bicycles when Serhii and I began creating the courier service six years ago. Now everyone already knows about them. We have since acquired a tremendous level of expertise and understood that we got onto this trend on time.
Where are your main sales markets?
Our first market is North America (about 60% of sales). Europe accounts for 30%, of which Ukraine accounts for about 5%.
Who are your clients?
Currently, 80% of our sales are to private customers. Previously, they were "techno geeks" for whom our electric bikes were not the first they bought. Now, people buy them as their first means of transport. If an electric bike was previously a form of entertainment, it is now a full-fledged means of transport.
How friendly do you think the urban environment in Ukraine is to electric bicycles?
It is dangerous to ride a bicycle in Kyiv. Our couriers were cut off and not respected on the roads. Driving on the sidewalk is also inconvenient because of pedestrians. In addition, there are open manholes and no exits from sidewalks... There is no bicycle infrastructure as such. It is good that a public-transport lane has at least been opened for bicycles. Proper police response to bicycle theft is also required.
I will hold nothing back. City halls promise a lot but do little. For example, Klitschko (the mayor of Kyiv) promised to build 260 kilometers of bike lanes in Kyiv. They announced in 2020 that they had built 60 kilometers. This is shorter than the planned length, but at least it is something. We decided to look into these 60 kilometers and found that the city administration simply allowed bicyclists to ride in lanes allocated for public transport. Most of those 60 kilometers are just public-transport lanes with signs stating that cyclists are allowed to ride there. This is a profanation. It is dangerous for a cyclist to ride in the same lane as a bus.
What is the situation in your main market, North America?
The cycling infrastructure in the United States is less developed than in Europe. However, they still take care of all road users there. In particular, a program for development of urban roads was adopted there several years ago. Roads in major cities in the United States used to have six lanes for cars. These six lanes are now being converted into two lanes for cars, two for buses and taxis, and two for bicycles. That is, the priority is changing and the importance of public and two-wheeled transport is growing.
What types of bikes did you deliver to Mexico?
TopCop. This is an improved modification of the TOP 3.0 bike. A motorcycle saddle is installed on it so that saddlebags can be installed, the fork is a little more powerful, it has a rear shock absorber to enable it to carry more weight, and it is equipped with flashers and a siren.
How did the Mexicali police obtain your bikes?
It was a big and meticulous job. We started working with the Los Angeles Police Department two years ago. They immediately became interested in our bikes. They wanted 2,000 electric bicycles but the bicycles need to be tested and approved by all the regulatory authorities. We started this work, but we realized after about one year that we would be able to close a deal in 2-3 years at the earliest.
Therefore, we began working with several hundred other police departments in the United States, Canada, and Mexico simultaneously. Of these, about 25 police departments showed interest immediately after receiving our commercial offer. We began sending bicycles to the police departments for test drives to allow them to try them, order small batches, and then begin using them in real-world conditions. With the Mexican police, we are currently at the stage of a test batch.
What are the possible levels of cooperation?
We will be able to say when a contract is signed, unless there is a nondisclosure agreement. Overall, we assess this market as large. We were invited to the Mexican embassy in Kyiv after we signed the agreement with the Mexicali police. According to the attaché, they would like to extend beyond one city. If the tests are successful, they will be interested in delivery of our bikes to other cities. However, for now, these are only negotiations.
The search for customers is constant, and we are continuing negotiations with the police in Florida, New York, North Carolina, and outside the United States.
However, the police are not our only target customers. They also include courier services and postal companies such as Nova Poshta in Ukraine and Poczta Polska in Poland.
Your head office is located in the United States. What is the reason for that?
Yes, our parent company is an American corporation. Firstly, it is psychologically easier for an American buyer to communicate with an American company. Secondly, the investors that are investing in our company will not invest in the Ukrainian-based limited liability company because such a limited liability company can be reregistered tomorrow with the help of some dummy court. American jurisdiction is more comprehensible to an investor and offers more protection.
However, our main staff and headquarters are in Ukraine. The most important thing is that all the intellectual property, development of new models, modifications, and communication with customers come from Kyiv.
You sold your delivery service in Ukraine. For whom are you developing a new tricycle?
About a year ago, Nova Poshta called us and asked if we had three-wheeled electric bikes for transporting cargoes. I replied that we did not yet have such bikes but we would see what we could do. We began studying the market, but everything that was on sale on the market had low mileage and low speed while our specialty is high mileage, high power, and high speed.
We received a grant for financing the development of a three-wheeled bike from USAID in April this year. We developed the prototype within six months, installed our electronics, used our intellectual property to develop batteries and controllers, and assembled the prototype. We showed it to Nova Poshta a few months ago. They are still thinking about it. Simultaneously, we began communicating with other logistics operators, postal companies, and courier companies that might also be interested in this bike. We have received interest from small restaurants and small businesses.
Whom do you consider your competitors?
Gasoline-powered vehicles and the subway. We are fighting gas pollution and trying to move people away from public transport.