Vectrix VX-1 in Showroom
Great design and technological innovation isn't a guarantee of success, as Vectrix's demise sadly proves.

Vectrix: Joys and Perils of Being First

Pioneering electric motor scooter manufacture begins closing its doors

By Max Edwards

After years of pioneering efforts for high performance electric scooters Vectrix is now changing status. Announcements of an expected bankruptcy have been sent to dealers, there are public articles already about layoffs of most of the staff.  So what to make of the life of Vectrix and maybe even the future, and what it means to the electric vehicle ecosystem.

First a little rationale on why I would write on the topic, Vectrix is an interesting company that basically pushed the performance envelope in terms of what electric scooters could do. At the same time, from a business perspective they had a complicated, cash intensive business model and their timing may not have been the best. Personally I have followed the company very closely for five years now so I have seen a fair amount of the adventures in business for Vectrix.

Vectrix was a start up with operations in Rhode Island and Massachusetts, They went through a hundred million plus in venture capital, had an IPO on the British market, and then ramped up into greater losses which was the begginning of the end.

Xerox Star
Xerox Star

My opinion is that in the future, Vectrix will be viewed as a seminal milestone, as they will serve as the proof of potential in defining a new category of products, they will be the Xerox Star that led to the Lisa computer from Apple that then spawned the mass hit Macintosh and Windows operating systems. If you haven't noticed, tens of millions of people are riding electric scooters in China along with electric bikes,  what can they aspire to? Just project incrementally what could happen with better batteries, lower costs, improved operations and you can see the future that the Vectrix so capably points to. In my due dilligence on potentially investing in the company I saw how they wanted to develop and control everything themelves, that is just too costly. They also wanted to pioneer a format that didn't exist in the US as a market, the mega scooter. With weight originally over 550 pounds and a cost over 10k they certainly weren't a player in the mainstream scooter market. They invested in a major plant in Polland right before the dollar took a dive, so their import costs were high.

There were few incentives initially, again they were a new category. They could see battery progress coming but as they were going for the top end performance they were caught up in very expensive energy packs, timing she said. If they came out with their latest design with the battery packs that are coming in two years, and a normal economy they probably could have done very well, outsource the production or at least much of it.

Meanwhile progress always comes on the backs of those who have gone before. Italy and Taiwan, arguably two of the top three producers of high quality scooters are preparing for breakthroughs in electric and hybrid near term. They are adding incentives, but aiming at performance and weight characteristics that are more achieveable. Piaggio was given over 300 million Euro from the government to advance the category. In Taiwan incentives are coming and the national government is supporting advancement of the category there also. Incentives have started and five firms with strong footprints in economic scooter production of high quality products are core to the model. You will see lighter products out of these two countries that offer much of the benefits of Vectrix for half the price or even much less.

Vectrix had to build channels, create incentives, import against the dollar, work with batteries that just didn't have the weight to power and price that the market needs.  People that rode a Vectrix, actually experienced it came away changed. They understood that if this became economic it would be a big thing, probably much like the people who first saw the graphical interface of the Xerox Star. The silence, take off power, simple plug in capability, all just made too much of an impression on people who experienced it.  So despite being skeptical of the business model and approach that Vectrix took, and their focus on the super heavy scooter segment which was also so costly, there was something magic in what Vectrix was showing as a way forward.

The scooter business grew something on the order of 68% in the US last year.  How excited would you be about a $10k Xerox Star now, well not very, but how about a $1.5k Macintosh that has a decade of refinement and so much lower costs? That obviously commands a change in the market. 

Who knows if Vectrix will get acquired. Stripped of debt out of bankruptcy, as a public company, they probably were just carrying too much debt for what was a realistic go forward. You can't swim with an anchor around the legs.  Look at the change of sensibilities that has come about during the lifetime of Vectrix to date, the oil price shock, the G8 emphasizing global warming, the Obama administration coming to power emphasizing cleaner energy, which was focused heavily on an electric vehicle ecossytem, and billions going to electric battery companies to advance the state of the art.

Timing is everything. Very capable, efficient firms (that was never a Vectrix forte, efficiency anyway) are now moving forward and leveraging the awareness and pioneering change of public perceptions that Vectrix pushed forward. If you haven't noticed Harley Davidson is laying off 1000 people this week, this is not a normal market.  What if Tesla bought Vectrix out of bankruptcy and outsourced production. They would have a complementary product to offer through all their dealerships, using the same battery pack technology that Tesla is advancing. Target the higher end motorcycle market where that weight and cost were not so exceptional (executive scooter buyers in the US are a non category in terms of volume, what marketing research was justifying that in terms of the Vectrix business plan)then succcess would be much more likely. Vectrix never got government money like Tesla, GM, or even Nissan, yet look how much they advanced the product.

So in the end, Vectrix may transform out of bankruptcy stripped of debt, the market they aimed at and the timing of their endeavors was just tough with too many obstacles to overcome alone. The followers will come in great numbers, with lower cost products and better power solutions, and just lower cost models of doing business.  But Vectrix was and is a breakthrough company, that led the way for others to take forward the market to a dramatically different level. So think of Vectrix as the prototype company that showed how electric two wheelers can perform, and as a prototype for the much more economic and advanced products to follow. Be it DVD players, or graphical interfaces, never underestimate lower costs and greater refinement in expanding and changing a market. So Vectrix took the arrows, it was an unlikely animal, a megascooter company started by a yachtsman, but the Tsunamai is coming soon.

The British IPO would not have been allowed in the US given Vectrix business plan viability. In the end, those restrictions were correct.  In 2009 and 2010 you will see very high quality products in the electric scooter segment and the market will begin to embrace them in volume. China, Taiwan, Italy, India, and Japan all have big near term plans for electric, but with governments now pulling for the path to success and supporting this market developing. Vectrix did not have the new battery tech or these advantages, but Vectrix was there first.

So in the end, I am glad I didn't invest in Vectrix, glad I recognized what they were proving to the market and anyone who experienced their products, sorry for their dealers who will certainly lose money and have some black eyes, but that may have gone up the learning curve on how to make things work when much better lower cost products come out.  Vectrix attempted to carry too much alone, that will not be a problem for those who come next. Vectrix was not a great business or economic model, but they were a great prototype of the potential of the future, and that is how it seems constuctive to think of them. As much as I had skepticism on their original model and ability to execute, I now have confidence that the collective muscle driving this forward will succeed and will become a market of major global importance.

Stay tuned.

Times Article Viewed: 8153
Published: 16-Jul-2009


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