VanMoof and Cowboy: 4 lessons from troubled pioneers in the e-bike market

Floris van der Pijl
Published on
May 4, 2023

As customers move towards more sustainable modes of transportation, the e-bike market has been experiencing significant growth. But two European companies, VanMoof and Cowboy, are leading the charge by setting themselves apart from their competitors through an innovative approach. Founded in Amsterdam in 2017 and Brussels in 2008, respectively, these companies steer clear of the usual e-bike segment by designing and producing most parts in-house, with VanMoof even starting production in their Taiwan factory.

But the road to success has been paved with obstacles for these e-bike pioneers. Both companies have faced financial and operational challenges that have made headlines – especially VanMoof. We are taking a closer look at the financial statements of these top e-bike companies and exploring the lessons that can be learned from their struggles and successes. We will use VanMoof's figures up to 2021 and Cowboy's unaudited 2022 figures to provide a comprehensive analysis.

VanMoof vs. Cowboy: Net sales and profitability
Figure 1: VanMoof vs. Cowboy: net sales and operational profitability

Lesson 1: VanMoof's and Cowboy's bikes are too cheap

VanMoof vs Cowboy: Gross margin (in % of sales)
Figure 2: VanMoof vs. Cowboy: Gross margin (in % of sales)

Both VanMoof and Cowboy have been selling their bikes at a loss in 2020 and 2021. For VanMoof, troubles began with the launch of their S3 model, which was priced at €2,000 in the early stages, resulting in negative margins for each unit sold. This was a deliberate choice made to fuel growth, as their higher-end S2 model (sold for €3,400) yielded positive margins in 2019-2020. Cowboy faced similar challenges during this period.

While Cowboy's management openly admitted that their previous pricing strategy was flawed, they were able to restore gross margins to pre-Covid levels thanks to their current pricing approach. This is a remarkable statement as the company did not post a positive gross margin in its annual report in these years (the % gross margin is not available due to the company’s small size).

Contrary to popular belief, generating profits in the e-bike industry is possible. Stella E-Bikes, a Dutch company known for its affordable models, achieved impressive margins of 40-50% per bike in their recent sales period. The difference? Stella’s simple electronics uses proven parts from established names like Shimano and Bosch that are produced at scale and they sell at similar prices to VanMoof and Cowboy. In conclusion, Cowboy and VanMoof should have been twice as expensive during this period.

Lesson 2: Expanding a faulty product is expensive

Since the launch of the S3, VanMoof has received negative press coverage in the Netherlands for issues related to its customer service and faulty products, as many customers reported multiple malfunctions and long repair waiting times. VanMoof's operational costs significantly rose to 79% of their net sales due to the expenses caused by this release. This rise was largely driven by an increase in staff costs, which accounted for 42% of sales (compared to 26% in 2020) and was mainly due to the hiring of 316 additional support staff.

In short, VanMoof sold faulty products at a negative margin and then had to build an organization around it to solve the problems that arose while also still trying to exponentially increase the sales of their faulty product. This lead to a strong burden on the organization.

VanMoof: total operating expenses (in % of sales)
Figure 3: VanMoof – Total Operating Expenses (in % of sales)

VanMoof: staff by function (in full-time equivalent)
Figure 4: Van Moof – Staff by Function (in full-time equivalent)

Lesson 3: Peace of Mind for the customer but potential headache for VanMoof

In 2020, VanMoof introduced Peace of Mind, a subscription service focused on theft protection and maintenance. This revenue barely surpassed the repair and maintenance revenue realized in 2020. While a lot of the repairs were probably still under warranty, it is still quite remarkable that revenue remained stable while adding the theft protection service. Although this seems like a great deal for customers, it is anything but profitable for VanMoof.

Figure 5: VanMoof – Revenue split per service category

Lesson 4: bankruptcy is mainly a risk for the customer

Over the last months, Cowboy and VanMoof have both been in the news with liquidity issues, driven by sustained losses (according to news reports, VanMoof realized similar losses to 2021 in 2022). The issues have temporarily been solved by attracting additional funding, but the climate for funding has significantly deteriorated recently, as seen in Cowboy’s recent capital raise at a 44% lower valuation. Both companies have therefore chosen to raise capital to ensure their survival for a few months, or at most, for a year. As a consequence, additional capital will need to be raised in the future unless the road to profitability is as steep as the road to losses was.

All in all, this means that VanMoof and Cowboy will have less time to become profitable. This is a big problem for customers as the parts are unique and difficult to find since they are designed and made specifically for these two companies. If VanMoof or Cowboy go bankrupt, customers may not be able to find replacement parts for their bikes. Last but not least, many VanMoof customers have a Peace of Mind Theft + Maintenance subscription, which may not be honored if the company goes bankrupt.

Looking forward: can these companies succeed?

In our opinion, the success of these companies is dependent on three key factors:

1. Improve their unit economics. This can be achieved by:

a. Increasing the reliability of bikes: both VanMoof (SA5-models) and Cowboy (4ST-models) have made a step in this direction with their newest models. Both go back to doing the basics well. Time will tell if these models can also stay reliable through the warranty period, although both have already shown promising improvements.

b. Increasing prices through more sustainable standards: both Cowboy and VanMoof have raised prices substantially. Both companies now charge €3,000 for their newest models and VanMoof has recently announced a price hike to €3,500 from May 2023 onwards. On these price levels, VanMoof realized a 23% margin on each bike in 2018. Will this harm the company’s growth? It might, as this price range has fierce competition and established brands with a more solid reputation.

2. Outpacing market growth: the market for E-bikes is expected to grow by around 10% a year towards 2030 (Inkwood, Statista). Therefore, it is not enough for VanMoof and Cowboy to grow along with the market. VanMoof (est 40,000 bikes per year) and Cowboy (20,000 bikes per year) still only sell a limited amount of bikes in a concentrated geographical area. More than 60% of VanMoofs are sold in the Netherlands and Germany, while Cowboy is only active in a dozen countries for now. The concentration of revenue could be viewed as a positive. However, it could also be seen as a negative since most expansions will not be cheap in their ecosystem due to the product’s nature, which requires local service. The question is how expensive will the exponential expansion be?

Figure 6: VanMoof – Revenue split per geography

3. Time and funding: due to the current funding climate, it is now harder for companies like VanMoof and Cowboy to raise capital. Hence, they will be given less time to grow into profitability and will need to make deliberate decisions on spending and investments to preserve capital. They will therefore have to show fast improvements in the underlying economics to increase the chance of raising a good funding round over the next months.

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