You Just Got (Lit)t Up
If you caught the hit drama series ‘suits’, I’m sure you will come to understand the title. The central topic of discussion for this article will be focused on Lit Motors’ strategy for the future. This sexy two wheeler piqued my interest two years ago when I was first introduced to it by an ex-colleague of mine. Being an avid motorcyclist, I have owned not one, but two motorcycles and I have come to my own opinions about how Lit Motors could transform the auto industry.
“Creating the future of transportation, today” is the first line that greets you when you enter the company’s webpage. Lit Motors’ take on this is to occupy a whole new niche in the electric vehicles space(eVs), albeit a smaller but non-trivial market: the motorcycle industry. Lit Motors should be targeting to riding out the wave of increasing consumer interest on eVs thanks to the likes of Tesla. It is easy to envision a future where Lit Motors can become the de-facto standard of personal mobility transport in the next 5–10 years depending on how the macro environment shapes up to their favor.
The average vehicle occupancy is 1.55 passengers per vehicle in the US in 2009 and motorcycles at 1.18. The C-1 is designed to take up to two and carry the load you would typically board an aircraft with. It is arguable that the product(s) down the company’s pipeline does fulfill basic mobility requirements. Gyroscopic stabilization, a car-like user interface and a protective hood, blurs the space between motorcycle and cars but by addressing these concerns, Lit Motors successfully addresses what we fundamentally need to get out of getting from point A to point B on a regular basis.
Is it a car or is it a motorcyle? The risk of appealing to neither segment of vehicle owners are evident as well. To quote Tim Cook on convertible tablets, “You can converge a toaster and a refrigerator, but you know those things are not going to be probably be pleasing to the user”. Only time will tell if the C-1 can stand up to demands from both consumer segments to be like the Microsoft’s Surface Pro series.
Vehicle ownership and usage
Approximately 90% of Americans own a car today. On the flip-side, as of 2011 there was just over 8.4 million privately and commercially registered motorcycles. This represents just about 2.6% market penetration for the U.S. If Lit Motors C-1 takes off, they can potentially take advantage of this untapped potential and expand rapidly to acquire new customers.
When we consider that just 5% of Americans take public transport to work, the average occupancy rates of 1.55 makes perfect sense. Public transport infrastructure varies in quality from state to state and the sheer land size poses a challenge to standardization. The vastness of American land space will continue to justify vehicle ownership making personal mobility devices more relevant than ever. From that perspective, Lit Motor’s C-1 can help to reduce road congestion and alleviate the loads on public infrastructure.
In Elon’s Musk’s part deux of his Tesla Master plan, he has dedicated an entire section dedicated to ride sharing to optimize car usage. To quote, “since most cars are only in use by their owner for 5% to 10% of the day, the fundamental economic utility of a true self-driving car is likely to be several times that of a car which is not.” These boundaries can be pushed a little further with the right mix of two and four wheelers. An illustration by Karl Jilg, shows just how car-centric our reality is. A self-driving type C-1 as personal utility vehicle that is simultaneously space efficient (the C-1 is only 25% the volume of a typical passenger car) allows for a more dynamic and vibrant transportation network, which is optimized for the current passenger occupancy rates. It could exist to serve more people concurrently as compared to self driving cars with a four passenger capacity.
Gogoro, a successful Taiwanese electric scooter company’s CEO Horace Luke discusses in a previous article that by 2030, there will be 41 mega cities and the majority of it will be in South East Asia. In that cauldron brews the right ingredients such as constraint land spaces, an increasingly polluted environment and rising middle class, setting up the region for potential explosive growth. The futuristic C-1s, much like scooters, could flow by the thousands through the clogged streets of metropolises like Bangkok and Ho Chi Minh City. These cities are ripe targets for slashing smog and reducing congestion.
After a thorough review on the commitments by the Lit Motors team, the delivery dates appear to lie somewhere around mid 2018. We can immediately draw similarities to the corporate strategy of Tesla of which Lit Motors is trying to employ. At a count of 1,100 reserved vehicles, at $24,000 each, immediate revenues stand at approximately 24M from this batch delivery alone. It is make or break for the whole crew of 32 at this point.
The company has since procured around 5M worth of funding, with the successful delivery of the EP-4 prototype. It might be too much to ask to reallocate attention to expansion requirements. From now till 2018, the company needs to work intently on showing the success of the C-1, much like how Tesla did with the Roadster in its early inception days and work backwards to achieve their end goal. Any excess funding obtainable now should be channeled to hiring more help and ensuring first batch delivery.
Once production goals are more or less in sight, hiring needs should be dedicated to building out customer success teams comprising of customer service and after-sales support. The 24M collected from previous C-1 sales can now be channeled into production of the C-2 and expand hiring to other geographical markets and build up the C-2s’ distribution network. A larger scaled version of their existing production facility plans can be designed and site development can commence. These new production facilities will enable the C-2s to be delivered at scale and mass distribution well above the 1,100 benchmark of the C-1, with better range and a more affordable price point.
Concurrently, strategic partnerships can be formed with companies like Tesla, BMW, and Honda. Further additional funding obtained can be used to reinvest in supporting infrastructure for EVs in new cities or in other complementary technologies such as more efficient batteries.
Strategy 2020-2021 and beyond
The C-2 should be released with better range, and target production >20,000. At this stage, it depends on how scalable and the turning price points of motorcycles but a target range should be approximately $14,000 which should be appropriate given the average price of luxury bikes. The next iterative phase would involve creating new models that are better suited to the needs of various industrial markets. This is again dependent on the size of the team to manage these expansions in a sustainable manner.
Thank you for reading this far! If you are a motorcycle fanboy like myself, have ideas to contribute, especially how Lit Motors will attract both motorcycle enthusiast and car owners, or how the electric motorcycle industry can potentially pan out, please comment below!
The accompanying slide deck can be found here.
Disclaimer: I have no affliation nor shares in Lit Motors Inc. This article is written out of pure interest for the company, and material from this article will be reused in my Tech Strategy Class for Spring 2017.
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About Jensen Loke
Jensen Loke is the co-founder of soCash, an on demand service for cash based out of Singapore and he is currently pursuing his MBA at Carnegie Mellon University in the U.S. and will intern at Amazon this summer. Prior to this, he has spent four years in banking, operations improvement, demand forecasting and was a Product Manager with DBS Bank, the largest bank in South East Asia. He is passionate about product management in technology. Follow Jensen Loke, @jensenloke on twitter or on linkedin.