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Welcome to Flywheel, a weekly exploration of the used side of owned micromobility. Each newsletter will highlight an observation of trends emerging in the industry and feature five of the most interesting used vehicles being sold in the secondary market.

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The observation of the week explores the importance of the secondary market for vehicle subscription fleets with Kevin McLaughlin of Zygg. This week’s featured vehicles are an etrike, two Dutch commuters, a folding fat-tire ebike, and a best-selling budget escooter.

Observation of the Week

Exploring the importance of the secondary market for vehicle subscription fleets with Kevin McLaughlin of Zygg

There's a fascinating symbiotic relationship between micromobility subscription services and the secondary market. This week, I had the pleasure of exploring this further with Kevin McLaughlin, the founder and CEO of Canadian ebike subscription company Zygg.

After launching two succesful Canadian car share services, Kevin started Zygg in 2019 with a fleet of 45 Gazelle ebikes and 200 Ariv (GM's micromobility play) ebikes. Virtually all of their vehicles since the initial launch have been subscribed to for 2 years straight, with many of their customers being food delivery drivers. The fleet has since grown to 1100+ ebikes available for subscription.

Over the last year, Zygg started selling used ebikes from their subscription fleet, primarily due to a fleet refresh caused by 2+ years of usage of their existing vehicles as well as a need to get new types of vehicles that are better suited for the high utility needs of their most common users. However, Kevin noted that this initial exploration has uncovered two significant opportunities for vehicle subscription services like Zygg.

The first opportunity is that selling used ebikes improves their access to financing options for their subscription fleet vehicles. Lenders that have traditionally financed vehicles like cars have been able to rely on several decades worth of stable residual value models and quick liquidity options when determining the terms of their loans. However, given that these things aren't yet well established for micromobility, many financing companies assume extremely steep depreciation and virtually no liquidity for used ebikes and escooters. By selling their own used ebikes, Zygg has found that they're able to generate vehicle depreciation data and set up a pipeline for used vehicle liquidity that helps them negotiate better financing options with lenders.

The second opportunity selling used ebikes unlocks for Zygg is an interesting arbitrage that improves their vehicle payback period. If you're a small fleet looking to buy cars in bulk, it's challenging to get "wholesale prices" that are meaningfully cheaper than retail prices. OEMs have a fairly high minimum number of vehicles you need to buy to be able to purchase directly from them, and auctions are complex and often limited to those with a dealer license. This frequently leaves fleets having to purchase vehicles from dealers for only a few thousand dollars less than retail. On the other hand, it’s much easier to buy ebikes at wholesale prices directly from the manufacturers. These wholesale prices can be as low as 2/3 of the retail price. Given that the used vehicle price for a consumer is the retail price minus the depreciation, there's a margin (~1/3 of the retail price) that fleets are able to take advantage of to sell used vehicles to consumers for close to (if not more than) the wholesale price they paid. Zygg has been able to resell their used Gazelle ebikes to consumers for the whole sale price+/- $100, which has allowed them to payback the entire cost of a fleet vehicle before even accounting for the vehicle's subscription revenue.

Zygg offers a 3 month warranty for drive systems and a 12 month/5000km warranty for batteries with their used ebikes, terms which are quite generous compared to those of most other used ebike retailers. While they're still figuring out if these are appropriate warranty lengths, Kevin said that they haven’t had any issues yet with warranty claims being too expensive. Given that they regularly maintain their subscription fleets, they know the exact health/expected life of a vehicle and catch problems well before they become larger issues. Additionally, since they have a fairly large fleet, they have ample access to replacement parts inventory that further reduces their costs of servicing a warranty claim.

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Top 5 Vehicles of the Week

1. Emojo Caddy | $2,400 | LA

The Emojo Caddy is a class-2 etrike. It was originally designed as a golf cart replacement (hence the name caddy), but has quickly become a handy cruiser and neighborhood EV. The powertrain features an 80Nm Bafang front hub motor specifically designed for fat-tire ebikes and a 750Wh battery pack, giving the Caddy the ability to pull up to 300lbs in payload. There’s a series of design decisions that give the Caddy great comfort and handling, from suspension in the front fork and seat post to 4” wide tires where the front tire is 4” larger in diameter than the rear tires (for improved mechanical advantage). That being said, the Caddy surprisingly has a max speed of 20mph, which is dangerous for etrikes since they tend to tip when ridden faster than ~16mph. Additionally, the vehicle only has mechanical disc brakes, which don’t always feel strong enough for a vehicle this heavy (90+ lbs) moving at these kinds of speeds. A better alternative to the Caddy would be Lectric’s XP Trike. Although it has a weaker powertrain, it retails for half the price, has hydraulic brakes, has a dual rear-wheel drive, and can fold. This listing only been ridden for 8 miles and is selling for ~$600 less than MSRP. Listing can be found here.

2. VanMoof S3 | $1,800 | Santa Barbara

The VanMoof S3 is a class-1 commuter and the model that firmly established VanMoof ebikes as arguably the best urban ebike on the market. VanMoof is known for its vertically integrated design, which melds together hardware, electronics, and firmware to produce an exceptional UX. Its industry-leading software systems and services include anti-theft alarms/locks, stolen bike retrieval via bike hunters, remote diagnostics of vehicle health, and tracking of vehicle ownership. The powertrain features a 59Nm front hub motor and 504Wh battery pack, and is amplified by automatic shifting and a fun boost button to provide sufficient power and range for daily city riding. The S3 used to be VanMoof’s longstanding flagship model but was recently replaced by the S5. This latest model has a few incremental upgrades over the S3 (i.e. integrated phone mount, upgraded motor, torque pedal assist sensor), but retails for almost $1K more than the S3. This listing for an unused, unboxed S3 that hasn’t yet been registered is a great deal to get a new S3 with a full warranty for ~$750 less than MSRP. Listing can be found here.

3. Gazelle Easyflow HMS | $1,640 | Toronto

The Gazelle Easyflow HMS is a practical class-1 commuter. Manufactured by a 100+ year old brand that has been formally recognized by the Royal Dutch family, the Gazelle Easyflow balances high quality build and componentry with an affordable price point. It’s designed to be an accessible urban commuter, as can be seen from its step-through frame taken straight from the bike lanes of Amsterdam, built-in U-lock for theft protection, and medium-grade suspension in the front fork and seat post that help smooth out potholes. The powertrain features a 50Nm Shimano mid-drive motor and a 504Wh removable battery pack, and is paired with an 8-speed Shimano transmission. While this drive system doesn’t ride as smoothly as its Bosch counterparts, it is still reliable and can easily be maintained at many bike shops (although not at as many bike shops as the Bosch systems). This listing is sold by Zygg, and is for a vehicle that has been retired from their subscription fleet. It has a high mileage of ~2800mi, but it has been regularly maintained throughout its life by trained Zygg ebike technicians. Zygg even offers a 3 month warranty for the motor and a 12 month/5000km warranty for that battery. Listing can be found here.

4. Xiaomi Mi M365 | $250 | LA

The Xiaomi Mi M365 is a budget escooter. Launched in 2016, the M365 was frequently used by many of the shared scooter services and has since become an extremely popular owned vehicle. As one of the most complete budget scooters on the market, the M365 has been a best selling escooter globally ever since it hit the streets. Its powertrain features a modest 16Nm front hub motor and a 280Wh battery pack, giving riders a max speed of 16mph at a typical range of 15 miles and a max climbing grade of 10%. One of the M365’s standout features is its braking system, which includes a front regenerative brake and a rear disc brake. Both brakes are controlled by one brake lever, and the vehicle’s firmware automatically determines how to balance braking force between the two based on the vehicle’s speed, incline, etc. For context, most escooters in this price range have a front disc brake and a rear foot stomp brake at best. Given how popular the M365 is, it has a massive, active online rider community. In fact, many riders have even come up with performance improving firmware modifications and jailbreaks that you can easily find on Reddit and install yourself. The M365 is incredibly durable and stable, particularly when considering how affordable and light (26lbs) it is. Although it’s not a heavy duty workhorse, it’s a great entry level vehicle for those testing out whether escooters are right for them. Xiaomi has discontinued the M365 to focus on newer models, so this listing for an M365 in good condition (Flywheel estimates a mileage of ~222mi) is a rare find of a dying breed. Listing can be found here.

5. Heybike Mars | $850 | Seattle

The Heybike Mars is a budget class-2 folding fat-tire ebike. With a dual suspension system (front fork and seat post) combined with 4” wide fat tires, the Mars is great for off-roading but even better for city riding. Its drive system features a high-performance 500W (Flywheel estimates ~80Nm) rear hub motor, a 600Wh removable battery pack, and a 7-speed Shimano transmission. The folding mechanism is quick, intuitive, and stable, allowing riders to fold the Mars into a footprint small enough to stow in the trunk of most sedans. What’s most notable about the Mars is that it includes an impressive number of features (i.e. fat-tires, impressively large motor and battery) that are rarely found in this form factor or price range. The closest competitor to the Mars is the Lectric XP 2.0. While the XP 2.0 does have a smaller battery, thinner tires, and no seat suspension, Lectric has a better servicing reputation than Heybike. This listing is very lightly used (69.3 miles) and has only been ridden on paved trails and roads. Listing can be found here.

That’s it for this edition. Thanks again for joining, see you next week!

- Puneeth Meruva

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