The Gogoro vs. The International Market

The Gogoro vs. The International Market
Photo Credit:Maurizio Pesce CC BY 2.0

The Gogoro’s main issues do not lie in Taiwan, but in the international market. A lot of people believe that due to high salaries provided overseas, the price for the Gogoro is relatively low. They think it is easy for the scooter to enter the international market and make a considerable profit.

If that’s what you believe, then you’re underestimating the difficulties of managing an electric scooter business.

(Gogoro announced that each scooter will cost NT$128,000. http://www.appledaily.com.tw/appledaily/article/headline/20150618/36615476/)

If an electric scooter, like the Gogoro, wants to do well on the international market you have to establish an ecosystem. There’s more to it than exporting the scooter and selling it abroad.

What does it entail then? It means the more localized a product is, the better chance of success it has.

Why does it require localization? The keys lie in battery change and maintenance.
Imagine buying a scooter only to find the entire country has merely 20 gas stations in major cities. This means you won’t purchase the vehicle unless you happen to live in one of those cities and won’t leave the area.

Let’s take a look at the situation more sensibly. Forget about other cities for now; don’t students in Taipei ride their scooters up Yangmingshan for the night scene? Aren’t there people who travel the entire island on their scooters?

From this point of view, you will understand why scooters that require a power source depend largely on charging stations. In other words, if people ride longer distances, then the charging stations need to be more widespread, meaning the costs will also be higher. There are areas in which riding is more economic and efficient, but if you exceed that range, the marginal costs for battery exchange will increase.

This means either you need to sacrifice certain riding experiences, like going up a mountain, driving to the beach or to watch night views, and use it for mere transportation, or you need to pay more money for installing battery changing stations in remote areas. Working with local traders is also an alternative. Choosing to sacrifice experiences might initially seem like a strategic decision, but it will ultimately limit the number of potential buyers.

People who have experience purchasing a scooter will know that maintenance is an inevitable problem. Perhaps a new scooter only requires regular check-ups for the first few years, but as it grows older, the higher maintenance costs will rise.

With this in mind, wouldn’t it be inconvenient if there weren’t any repair shops close by? In the end you would have to drag your bike all the way to a maintenance shop far way. And how would you get home afterwards? How would you get to work if your scooter is in the shop? It’s a very irritating process.

So maintenance and battery change are the two main reasons it’s difficult to export and sell electrical-powered scooters like the Gogoro. If the scooter wants to break into in the U.S. and European markets, it requires building a complete ecosystem and business model. The required labor, resources and costs are beyond imagination.

We have established that selling the Gogoro on the international market calls for localization. But there are other issues that follow, such as competition between local dealers and whether or not local governments will draw up protection policies.

Electric-powered vehicles will most likely become a trend in the future. If they are able to shape a highly profitable market, it will undoubtedly attract investors. But as mentioned above, engaging in the electrical scooter business is not like selling a mobile phone. You can’t simply find a few telecom companies to help you sell it. It needs a more relatable approach, which makes it hard to compete against local dealers.

When you want to create this type of ecosystem in a country, the first thing you need to face is the local government. Other concerns are political business relationships, vested interests and struggles between various groups and organizations. Frankly speaking, if there’s a local trader currently dealing in the same type of product and is equally capable, the entire governmental administration process might drag on for about one and a half years. After going through the entire procedure, the local dealer may have already established its place in the industry, which is very commonly seen.

Moreover, if a foreign brand wants to set up a close-service network in a local region, then just like how the Gogoro in Taiwan connected with chain companies such as the Formosa Petrochemical Corporation and the Taiwan National Petroleum Corporation, you have to reach out to other companies for your product to expand faster.

The problem is, how can a novel brand negotiate with these big companies and come to beneficial terms for expansion? Or is sacrificing profit necessary before reaching a consensus? This is where one’s ability of executing a business model is crucial.

We have only talked about problems concerning batteries up to now and haven’t reached to ones regarding maintenance yet.

Last but not least is the concern of competition. Imagine if the largest franchisee network in a location overseas invests in electrical scooters or directly collaborates with a local brand. There would be many battery changing stations and maintenance shops available and the consumer’s choice would be easy to differentiate.

Photo Credit:Maurizio Pesce CC BY 2.0

Photo Credit:Maurizio Pesce CC BY 2.0

All of this doesn’t mean that the Gogoro has no chance of succeeding. It merely explains that breaking into the international market is not as easy as we imagined. To solve these problems you simply need to be fast.

As the Chinese saying goes, “In the world of martial arts, only the swift is invincible.”
The single way you can establish your place in the industry is taking the European and American markets now when there aren’t many competitors.

But all dealers are smart; they know they need to be fast. In my opinion, the most important internal issue is if the business model you choose delays the speed of you making your mark in the industry. The main external issue is the need to establish an ecosystem. So it all comes down to finding a way to speed things up.

If the external environment is like this for every competitor and your business model is slowing down your own progress, then it turns into a gamble of whether or not people are using a new business model to reduce the internal drag. Even if you are a step or two ahead of your competitors, it will lead to a huge difference as time goes on.

I will not dismiss the accuracy of people believing the Gogoro is only on a trial run in Taiwan and its main market is in Europe and America. But analyzing it from the standpoint of a realistic business model, the Gogoro’s testing phase in Taiwan might take up to two years. The changes within these two years are unpredictable, and foreign competitors that are even stronger and faster might emerge by then. But only then will you be able to move abroad. It’s not that you are destined to fail, but the costs and potential risks are much higher.

Some people say that the price of the Gogoro reflects the decline of salaries in Taiwan. But in my opinion, you shouldn’t look at the price of the Gogoro to compare Taiwanese incomes with the rest of the world.

In reality, the setback of Taiwanese salaries is nothing new. If officials want to have the Gogoro to do trial runs, they will have to consider the problem of localization. They shouldn’t tell us that the person unable to afford the Gogoro is not their target audience, for this means they seriously underestimated the costs and price of localization.

Regardless, Taiwan has the Gogoro, and it is our pride. We expect our brands to be very successful and envision the Gogoro to become a revolutionary product. As friends have revealed, they have great ambition and high hopes that Taiwanese products will have a place in history. They want it to boost the confidence of Taiwanese people and for everyone in the industry to enjoy a high salary and status. They genuinely wish to realize these hopes and visions.

The Taiwanese are smart and enduring, but building a brand isn’t something that happens overnight. There’s a lot of labor involved. Breaking existing barriers and launching yourself quickly into the international market will be crucial in the future.

The News Lens has been authorized by IDEAX to repost and translate this article. The original piece was published here.

Translated by Sarah Grasdijk
Edited by Olivia Yang