BUSINESS:

Software prospects fuel manufacturer of high-end electric motorcycles

SAN FRANCISCO -- Entrepreneurs trying to capitalize on growing consumer interest in clean, green transportation typically build cheaper and lighter vehicles to serve as entry points to the new carbon-constrained marketplace.

Not Mission Motors.

The Bay area startup, formed in 2007 by mechanical engineers in a Mission District garage, is placing a big bet on high-end performance. The company's first-edition prototype electric motorcycle is selling for $68,995, with the first 50 bikes set to be delivered this year.

Bucking a global movement toward cheap, electric Chinese two wheelers, the Mission One is no scooter. The single-speed bike has been clocked at more than 160 miles an hour and tops out at a relatively stable 6,500 rpm. And it is powered by a lithium-ion battery that recharges in a 220-volt outlet in less than two hours.

Mission's business model is a virtual photocopy of Tesla Motors, the Silicon Valley-based carmaker looking to sell high-end electric sports cars to wealthy auto enthusiasts worried about their carbon footprints. Like Tesla, Mission intends to roll out at top speed, at the upper end of the market.

The goal, Mission executives say, is to reinvent the modern sports bike without alienating riders used to tailpipe rumbling and speed. The Mission One is less eco-toy than a new way to appeal to adrenaline junkies who demand acceleration to 100 mph in less than five seconds.

So says Mission CEO Jit Bhattacharya, whose top-line Google search result is still his profile on the Stanford University Ultimate Frisbee team. Yet Bhattacharya, 31, who recently took the company's handlebars from Mission founder Forrest North, said the company is not in business for fun and games.

"We wanted to build a vehicle that is going to sell, that is going to get riders excited, and not just because it's green," Bhattacharya said. "You get a riding experience that is unlike anything you can possibly get on a gasoline motorcycle."

It's the software, stupid

The Mission One may be the fastest electric bike ever clocked at Utah's Bonneville Salt Flats, where it topped out at 161 mph, but Bhattacharya admits the company does not expect to corner the high-end motorcycle market just yet.

As earnest as Mission Motors is about its sleek, whiz-bang bike, the company -- like many Bay area startups before it -- appears to be banking on component and software development to cash in and reward its investors.

Mission has raised a relatively thin $2.5 million from venture capitalists and angel investors since forming in 2007, making it an unlikely competitor with motorcycle giants like Honda and Yamaha. But competing with Honda, which sells the most motorcycles in the world, is not the point, Bhattacharya said.

The advantage of experimenting with electric drive trains and the software that makes them run in two wheelers is the vehicles weigh a lot less than cars, which reduces costs in chassis development and materials. Two wheelers also require fewer components or safety tests and can more easily skirt government regulations.

Bhattacharya said Mission is pragmatic: profitability will follow if the company manages a breakthrough on the electric drive chain or, more likely, the software that lets it communicate with the rest of the bike. That component could then be snatched up by a big bike manufacturer, Honda and Yahama among the candidates, or even attract carmakers less able to drop big research and investment dollars into drive-train experiments.

"We have been approached by car companies that are very interested in our power-train technology," said Bhattacharya, who refused to provide specifics on interested companies, other than to say his engineers are focused on software development "that drives motors, that drives batteries."

Mission is currently negotiating with a leading Chinese engine manufacturer, Chongqing Zongshen Power Machinery Ltd., that could result in a cash infusion and springboard the company into the realm of component/software development for a larger company. Zongshen is better positioned to profit from China's obsession with cheap scooters and electric bikes because the company is known for low-cost two wheelers.

Bhattacharya also says a number of other industries have expressed interest in the company's garage-shop technology, including lawn-garden equipment manufacturers and recreational outfits that dabble in three- and four-wheelers.

"The goal of Mission Motors is not to be the company that sells 100,000 motorcycles in five years," Bhattacharya said. "The reason it's not our goal is because it takes a lot of money."

E-bike boom in China

Major manufacturers, meanwhile, have until recently been content to watch and wait as companies like Zero Motorcycles, Brammo, Quantya in the United States and a host of Chinese companies have tinkered with low-end electric motorcycles and scooters, nearly all of which retail under $10,000 and, in China, often for far less.

But that seems ready to change, with Honda saying it will release an all-electric bike and a hybrid model sometime next year, and Yamaha looking at later this year for a new product release.

The focus in this sector is on countries like India and China, where commuters under pressure from local governments to cut fossil-fuel use have turned to e-bikes and scooters en masse. Chi-Jen Yang, a technology expert at Duke University, says 120 million e-bikes, scooters and -- to a lesser extent -- motorcycles are now on the road in China.

Yang said the common perception is that the spike has been driven mostly by e-bikes, but he contests that all the vehicles on the road there are real bicycles. Many are more like scooters or small motorcycles with pedals attached to fool the overseer.

"Pretty much all electric scooters/motorcycles in China are technically classified as electric bicycles," Yang wrote in an e-mail, explaining that pure electric scooters and motorcycles are often banned in Chinese cities because they are unsafe. "They are all equipped with pedals to qualify."

Pointing to pictures of scooters equipped with pedals in his e-mail, Yang said the pedals are often for show, not human pedal power. "These vehicles ... are obviously too heavy to pedal," he said.

As for the Chinese market for scooters and motorcycles, Yang said the demand for e-bikes -- which by some estimates could exceed 200 million vehicles within five years -- has the major motorcycle manufacturers interested, but with the price point so low, the dynamic is more complicated than a layman might assume.

Most of the leading e-bike makers in China, Yang said, are Chinese, which makes it tough for foreign competitors.

"My guess is that the entry barrier for the e-bike market is relatively low and therefore the market is very competitive (which means very low profit margin)," he said. "Such conditions probably put international competitors at a disadvantage."

Eye on policy

As for government's role, Bhattacharya believes the focus should be on infrastructure development and helping consumers finance batteries. The cost of the batteries, he said, is coming down but not to the point where electrics are competitive with gasoline-powered alternatives.

For batteries, the consumer pays up front in an arrangement that means lower fuel costs over time compared with petroleum. The internal combustion engine, Bhattacharya points out, is the reverse model, with gasoline costs spread over time to such an extent that drivers take them for granted.

"We kind of forget about paying for gas," he said. "It's just something we do."

Policy could be employed to address the financing aspect of batteries, to spread that cost over a longer timeline, he said. Bigger picture, Bhattacharya is hoping for a price attached to carbon on the federal level and continuing pressure on automakers to raise efficiency standards.

In the meantime, the wunderkind is focused on launching the first 50 units of the Mission One. Who's buying? Bhattacharya isn't saying.

"The list is still confidential," he said, with a laugh.

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