~ Auto Buzz ~: CW 5Q: Richard Walker Zero Motorcycles’ CEO plots an electric road map.

Richard Walker posing in front of his Zero Motorcycles

From its humble beginning producing electric mountain bikes, Zero has become the world's leading manufacturer of zero-emissions motorcycles. During the 2015 press introduction at company headquarters in Scotts Valley, California, we pinned down Richard Walker, the Chief Executive Officer, to get his take on where the electric-bike market is headed. Q: Since Zero was founded in 2007, it has only had to compete with other small makers of electric bikes. Now some major players are toeing the waters. How do you feel about that? A: We’ve consistently felt that when the big names come in to put a stake in the ground and say electric is part of their future, all it does is validate what we’re doing and show that we’re not the only ones who think that electric is going to be a significant part of the motorcycle business in the future. One of the things that we cannot do by ourselves is educate the market on what electric is. We’ve just not got the resources to do that. Harley-Davidson going around the country with its Project Livewire has now got a whole bunch of people exposed to electric bikes. They're also taking it to Europe. When you get the big boys coming in like this and talking about it, I think it’s great. Q: In the early days, Zero’s products were shipped directly to consumers. Now you’ve got a proper dealer network. How is your sales model different from other manufacturers? A: When we first got into this business, we had the same mentality as you see from the other OEMs, which is minimum representation. If you don’t have your four bikes on the floor and a couple of demos, you aren't ever going to be big in this business. But with electric bikes, that’s not really necessary. So our requirement is to just take two bikes as demos. The goal is to get as many people riding those bikes as possible. And then when a customer places an order, we'll carry a central stock either at our facility in The Netherlands or here in Scotts Valley, and will turn that around. We’ll carry the inventory risk.

Q: Assuming that demand for Zero's products continues to grow, what is your plan for expanding manufacturing? A: Our goal is to grow at as rapid a rate as we can. If you look at ’14 over ’13, we had pretty much 100 percent growth year over year. I’m not saying we can sustain that going forward. But if you look at the mix of geographies, today North America versus the rest of the world is basically a 50/50 split. I think as we look forward we'll see Europe start to grow quicker. Our issue here is less production capacity than it is all of the materials attached to that. We are putting the battery line outside. That gives us the ability to put another production line inside. We could add one operator per station or a swing shift. Storage is probably the biggest concern in the short term, but certainly over the hill [in the Silicon Valley] there’s plenty available. Q: Electric-vehicle technology is evolving at an astounding rate. How do you manage rate-of-change expectations? What do you tell a customer whose bike seemingly becomes obsolete overnight? A: That is a difficult question. If you look at the value we put into the ’15s over the ’14s for literally $350 more, it’s a phenomenal value. So you’re correct in that respect. That isn't necessarily going to happen every model year. And so we will get those situations. The ’13s were dramatically better that the ’12s, so the ’12s’ resale value plummeted. But ’14s coming over ’13s, again, some really good enhancements, but it didn’t completely destroy the ’13s. The ’15s coming in over the ’14s, definitely, there's a gap there. And then when we look at our ’16 content, we have a lot of these discussions to figure out how best to proceed.

Q: For many would-be electric-bike buyers, price is ultimately what puts them off. How do you manage cost going forward? A: If you look at the price points of our motorcycles today, $10,000 to $17,000 broadly, that is at the higher end of the market. We absolutely understand that the battery is half the cost of the bomb, so I think there are a couple answers to how we do that. One is as we get to a certain scale, that will drive down some of the costs. Likewise, as battery technology progresses, there will be some cost savings due to the changing chemistry roadmap. One of the decisions we took was to move off the battery technology that we had been using with the ’12s and go to this technology that we began using with the ’13s. So as you see that you can get the same range from three [battery modules] as opposed to four, you get to take out 25 percent of the cost straight away. The decision that we made on our battery partner has proven to be great for us. We’ve had some of the biggest names in batteries come knocking on our door with different technologies and we’ve said, “There’s the space, go at it.” And not one of them has been able to do it. We believe we have the best chemistry available.