ebikonomics

Six ways e-bikes deliver great value for investment

E-bikes are a case study in strong value for investment, delivering both tangible (financial, time, health, environment) and intangible benefits (enjoyment, freedom) for the time, effort, and money you put in. Right now, with higher fuel prices and supply uncertainties, that value looks better than ever.

Backstory

An early adopter, I bought my first e-bike in 2015 with no business case. I just wanted it.

I loved it; it was powerful, well-engineered, and its rear hub motor provided an always-on, silent tailwind. But like a lot of e-bikes at the time, it only had a small battery and not enough range. Eventually, I realised this was just my gateway e-bike. It now has a happy new owner.

One fine day in Vancouver I rented a Specialized Turbo, and from that moment on I wanted one of my own.

Not long after, they released a new model and I was there with the readies. Here’s a photo when it was brand new and the rear tyre had just blown out when I was seeing how fast it would go 😶

This bike is now eight years old and still feels new. Lesson: quality remains long after price is forgotten. Value for money does not come from buying the cheapest.

A wise friend taught me that the right number of bikes to own is N+1 (he is not a VfM expert, but he does know a lot about bikes). In a weak moment, I took his advice to heart when I realised an e-gravel bike would make my life complete. To make room for it, I sold my regular pushbike, which I was no longer using anyway; e-bikes are simply more satisfying.

In case you need to justify your purchase on more rational grounds, I can offer the following six cases for e-bikes offering good value for investment. After eleven years and three e-bikes, here’s how the value stacks up.

1. Return on effort

A simple qualitative cost-benefit analysis (CBA) explains the first VfI case: On an e-bike, the benefit (speed and distance) for a given cost (physical exertion and time) is greater than that of a regular bicycle.

You still have to pedal. The bike multiplies the effort you put in, providing a positive return on exertion.¹ The more you put in, the more you get out. It responds instantly and proportionately - just as Specialized used to advertise, “it’s you, only faster”. It incentivises and rewards effort, increasing enjoyment and encouraging you to ride more, which is at the heart of the value proposition: more reward for a given level of effort.

2. More exercise, better health

In case you haven’t heard, cycling is exercise, and exercise is good for you. For example, this systematic review found that cycling has benefits for cardiovascular health and all-cause mortality. It’s a magic pill. It turns out that e-bikes may even lead to more net exercise than the old pushie (or “acoustic”), making them an extra-strength magic pill.

According to this research, e-cyclists put in less effort per kilometre than acoustic riders, but still maintain a moderate intensity heart rate and oxygen consumption, consistent with beneficial exercise.

Meanwhile, the increased enjoyment of more speed for less effort may nudge you into getting more net exercise. I can attest that I’m spending more time on a bike than I used to. What’s more, a good hard sprint on an e-bike is sensational and depletes glycogen just as well as a pushbike.

Incidentally, exercise is good for the brain too. Some of my best problem-solving moments have happened on rides. I thought up this article while hurtling along on two wheels and thumbed the first draft into my phone when I got home, under the influence of dopamine (does it show?).

If e-bikes incentivise enough of us to ride more, there’s a population health benefit.

3. The financial case

According to this calculator, the ride I do most often instead of driving saves me about $30 per trip (NZD). It’s only a rough estimate based on averages, but the underlying point is valid: the savings can stack up. You really need to run your own numbers because everyone’s case is different. Here are a couple of ways to approach it:

1. Having an e-bike instead of a car: This can save significant money from day 1. Both e-bikes and cars have a wide range of prices, and those ranges overlap - but on the whole it’s fair to say you can get a good e-bike or cargo bike for less than a car of equivalent quality. If you can switch out your car (or second car) for a bike it’s a financial no-brainer: lower purchase/finance cost, lower maintenance costs, lower running costs.

2. Having an e-bike and keeping the car: Even if you still need a car, an e-bike can pay for itself over time by reducing how much you drive. It depends on individual factors like your choice of vehicles and how you use them.

Let me give you a case example. I live in Auckland, a sprawling city with the beginnings of decent cycling infrastructure. The bike paths don’t always go where I need to go (neither does public transport), and there are times when it doesn’t feel safe or convenient to cycle. As much as I’d love to ride everywhere, the fact is I have chosen to keep my car, so the bike costs are extra.

Still, every time I use the bike instead of the car, it saves on running costs. What would it take for those savings to cover the full cost of the bike?

To work that out, we first need to estimate the marginal cost of driving versus cycling: the amount I pay to drive one extra km or save by cycling that km instead. The marginal cost ignores the fixed costs of ownership and counts only the extra bit I pay to use the vehicles, given that I already have them - mainly fuel/electricity, plus that little bit closer it brings me to needing new tyres, brake pads, etc.

I have estimated that the marginal cost of driving my car is about 38 cents per km, and the marginal cost of taking the e-bike is 0.1 cent per km. So every km I travel on the bike instead of the car saves me a net 37.9 cents, gradually (very gradually) offsetting the cost of the bike.

On that basis, to fully recover the costs of owning and running an e-bike, I would need to reduce car usage by around 60km per week for ten years (note: it’s not enough just to ride that distance - these have to be km that would otherwise have been travelled by car).

That seems achievable. It is a satisfying mind-game and a mild extra incentive to ride more, because every time I ride instead of driving it makes the bike a little bit cheaper and brings me closer to breaking even (getting the bike ‘for free’ in the sense that I would otherwise have spent the same amount of money on petrol).² There is also comfort in knowing that a chunk of my local travel runs on a small battery and a standard power socket, whatever is happening in global oil markets.

4. The environmental case

When you swap out a car for an e-bike trip, you’re incrementally reducing both your CO₂ emissions and the fine particles that end up in everyone’s lungs and our waterways. Road traffic particulate pollution comes from two main sources: exhaust from internal combustion engines, and non-exhaust sources like small pieces of tyres and brake pads that wear off as we drive any vehicle. Those non-exhaust sources are becoming an increasing share of the problem as vehicle weights increase, and recent studies in big cities suggest they already account for most traffic-related PM10 and a large share of PM2.5.

E-bikes help on all of these fronts. When your car stays home, so do the pollutants. A bike plus rider weighs a tiny fraction of a car, so there is far less energy to shed every time you slow down, which means far fewer brake particles and less road and tyre wear. Multiplied across many trips and many riders, there’s a meaningful reduction in the fine dust that worsens respiratory and cardiovascular disease, especially in dense urban areas.

The more you ride, the more you amortise the one-off emissions from producing the bike and its battery, so each substituted car trip makes the environmental return on your e-bike a little bit better.

We can estimate monetary values for these environmental benefits. Add them to the population health and financial benefits, and the bike is even more likely to pay for itself.

5. The congestion case

E-biking is often quicker than driving for the routes I choose to cycle. I can say that with confidence because I compared stats back in 2016, tracking my average speeds over a few weeks on comparable trips. The bike computer showed an average speed of 28kph while the car computer showed 16kph for trips with the same origin and destination. If I updated the comparison, I would expect to see an even greater difference because the newer bikes are faster, while Auckland traffic is more congested than ever.

Time is money, and we can work out a monetary value of getting places quicker by e-bike. Add that to the financial and environmental case and the bike’s benefits just keep on growing. Our transport planners do this all the time when justifying new roads.

But travel time is more than just money, as I explored in an earlier article: a study found each hour on a bike to be more worthwhile travel time than an hour in a car, in terms of the average value people place on it. Nice to know it’s not just me.

There’s a mild altruistic argument too: e-bikes aren’t practical for all people’s needs, but each person on a bike instead of in a car slightly reduces traffic congestion for everybody else.

6. The happiness case

Happiness is partially factored into each of the cases above. That surge of electric torque always brings a smile. Riding makes me healthier, and a healthier me is a happier me. I’m also happy that I incrementally reduce the cost of the bike every time I take it out instead of the car. Sitting in congested traffic is no fun, but I must confess that riding alongside a motorway during rush hour and overtaking lines of cars brings a unique kind of happiness.

But if I’m brutally honest, the five cases above are rationalisations. In VfI terms, they are valid, but not decisive. I could use those arguments to justify my decisions to others, but they don’t really explain why I have an e-bike. To understand that, there’s a sixth, more intangible and more important case we need to take into account. Above all of the rational analysis is the happiness factor. An e-bike just is a happy place to be, even if (especially if) I have no particular place to go. That everyday joy gets to the heart of the e-bike’s value to me, hard though it may be to include in a spreadsheet.

In summary

E-bikes give an instantaneous positive return on effort, make you smile more, live longer, get places faster, and (if they substitute for car trips) their cost decreases with each pedal revolution. How’s that for good value for investment?

Thanks for reading!

This is a refreshed version of a post from two years ago. If you’re a long-time reader, thank you for sticking around, and I hope the second ride was still worthwhile.

There’s a huge variety of e-bikes to meet different needs and I recommend taking your time to understand the different options, go for lots of test rides, and choose one that meets your needs and budget. You don’t have to spend a fortune on an e-bike but it’s worth paying for quality - cheapies can be unreliable with uncertain supply of parts and service. Here’s one website to get you started.

1. There are different power modulation setups. My bikes have a torque sensor which means the harder I push, the harder the motor pushes. It’s very intuitive and feels like having bionic legs (probably). In some countries like UK and Australia, the motor is only allowed to assist up to 25kph. Happily, we don’t have that rule in NZ and my bikes can keep up with city traffic. Some other e-bikes have a cadence sensor instead, which engages power based on the speed of pedalling rather than in proportion to your effort. It feels more artificial and less satisfying in my experience, but some people like them. A third type has a throttle on the handlebar so you don’t have to pedal at all, just hold on and enjoy the ride as you deliver Uber eats around town. Each to their own.

2. Based on a 10-year time horizon at a 5% discount rate, NZ$12k present value of e-bike costs (purchase, insurance, and maintenance) divided by marginal fuel savings of 37.9 cents per km = 61km per week. This estimate is principally sensitive to car running costs - as fuel prices increase, the financial case for e-bikes gets stronger. Taking an e-bike out instead of a car always produces a saving, but those savings have a wide range depending on your circumstances. To illustrate, if you drive an EV, you’d have to cycle a lot further (over 600km) per week to break even on the 10-year cost of a similar e-bike, at a marginal cost offset in the vicinity of 5 cents per km. I’m sorry. I know that isn’t fair, but the numbers are just numbers, they don’t care. On the other hand, if that e-bike reduces your use of Uber rides, you’re in luck - you could break even at just 15km per week at a marginal cost offset of about $2 per km. YM, as they say, MV.