Electric Bikes Gaining Traction

The number of e-bikes sold in the U.S. is expected to reach a record 170,000 units this year as big retailers get in on the action

A decade ago, Frank Jamerson helped develop General Motors' (GM) first electric car, the EV1, only to see interest in the fuel-efficient vehicle fizzle within years. He's determined to ensure another pet project, the electric bike, doesn't suffer the same fate.

So far, so good for Jamerson, a retired 81-year-old physicist who can be seen zipping around his hometown of Naples, Fla., on an electric bike.

Amid rising fuel costs in recent years, baby boomers, commuters, and college students have begun biking more often. In the U.S. and Western Europe, the fastest-growing niche of the bicycle market is electric bikes, a category that includes motorized vehicles of various stripes—from bikes to pedicabs to tricycles—that range in price from $350 to $14,000.

Wal-Mart Upping the Ante

The number of e-bikes is likely to rise to a record 170,000 units in the U.S. this year, from 120,000 last year, says Jamerson, who's long compiled research on the industry. The U.S. market pales in comparison with China, where there are 20 million e-bikes sold annually. But while China, the largest e-biking market, has stagnated, sales are on the upswing in the U.S.

E-biking is getting a jolt as big retailers get in on a market once dominated by specialty bike shops. Earlier this year, Wal-Mart (WMT) began selling bicycles from Currie Technologies, the largest maker of e-bikes in the U.S., in 145 stores. More recently, the world's largest retailer expanded availability to more than 450 locations.

By next spring, Wal-Mart plans to carry the gadgets in more than 850 stores, says Larry Pizzi, president of Currie, based in Chatsworth, Calif. Toys "R" Us plans to expand its distribution of the e-bikes tenfold, to 550 stores. "This has been the most rapid growth year in the company's [10-year] history," Pizzi says. "We've seen dramatically increased interest thanks to financial motivations, environmental concerns. And baby boomers are getting older [and need some help getting up that hill]." Target (TGT) also sells e-bikes.

Driven by Gas Prices

How long can the e-biking boom last? The dramatic decline in gas prices in recent months has lessened the urgency for alternative transportation for some commuters. A credit crisis is making it harder for consumers to borrow. Eric Sundin, president of Electric Bikes Northwest & California, one of the largest distributors of high-end electric bikes from the likes of Giant Bicycle in the country, says he's noticed a slowdown in mid-October. He notes that late autumn is typically a slow season for the industry. Still, "if gas prices come down, people's interest becomes more lukewarm," he says, adding that bicycle purchases are "very largely correlated to disposable income."

So far, Pizzi hasn't heard of any change of plans among retailers. "For the most part, the motivation to bicycle isn't solely the gas price," says Jennifer Dill, director of the Center for Transportation Studies at Portland State University and an avid biker herself. "It just can be a much more enjoyable commute. You see people in their front yards, and you feel more connected to your surroundings."

Major bike brands including Schwinn have jumped into this market, to compete with Chinese firms and high-end startups. They've helped improve e-bikes' battery life, acceleration speed, and charge-up time. Bruno Maier, executive vice-president for marketing at Cannondale Bicycle, the maker of Schwinn-brand bikes, expects his company's U.S. e-bike sales to jump fivefold between August 2007, when Cannondale introduced its first electric bike, and next year—faster than sales in any other bike category. To meet anticipated demand, the manufacturer plans to double its investment in e-bikes in 2009 and to establish a separate product group focused on the motorized models.

Kits to Convert Ordinary Bikes

Other high-end manufacturers report long waiting lists for their gear. Boulder (Colo.)-based Optibike puts out 24 limited-edition bikes a year, featuring custom paint jobs and gold-plated motors. Founded in 1997, the company has already pre-sold half of its 2009 limited-edition models, priced at $14,000 apiece. "November was our best-selling month of the year so far," says Optibike Marketing Director Craig Weakley, who notes that buyers aren't deterred by the falling price of gasoline. "People are still looking to the future," he says. Last spring, the outfit moved from a 2,000-square-foot shop into a 13,000-square-foot facility to meet mounting demand.

EcoSpeed, a Portland (Ore.) company, makes kits costing $2,500 to $3,500 that convert recumbent bikes into motorized machines. The company plans a new product lineup for next year, including kits that convert ordinary, upright bicycles. It expects 100% growth this year from last year, says Brent Bolton, president of EcoSpeed. The company is likely to sell 100 kits, which include electric motors and related parts, in 2008.

After seeing e-bikes at work during a visit to China in May, Wakefield Gregg has been trying to scrape together funds to open up a specialized electric bike shop in Portland, Ore., considered the most bike-friendly U.S. city. He is still more than $40,000 short. "I just can't get funding," he says. So for now, just like Jamerson, he contents himself with zipping around Portland on his electric contraption, the eZee Torq electric bike from eZee Kinetic Technology. "I've never driven to buy groceries," he says. And he doesn't plan to start now.

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