Originally Posted by
Revoltingest
I bet that Helix is offering an initial low price to raise capital to get off the ground. And with a new company's associated risks & delays, a lower price is necessary. Once up & running though, I predict the Helix will cost more. But with their greater use of automation, their production costs could be lower than Burke's.
Peter is no expert in automation. If anyone would have the expertise to automate, it would be the Lynskey family (creators of Litespeed, Lynskey, and other category-defining titanium bikes. Also creators of the Burke). They have the capital, production expertise, supplier relationships, and distribution relationships to make something like that work. But, their cheapest price for a titanium folder is 7,000 CAD.
Also, businesses don't 'raise capital' by committing to a product that loses ~2,000 CAD / Unit. If I wanted to raise capital for a titanium folding bike brand, I'd take a bank loan with a 5% interest rate.
Let's say it takes 4 million dollars of parts and labour to fulfill the first 2 million dollars of sales for the Helix (actual cost 3,000 CAD, sale price 1,500 CAD). Then, where does that leave you after selling 1,300 bikes?
a) 2 million dollars in debt
b) Sitting on top of a spoiled market. Consumer price expectations are pegged to the 1,500 CAD price, so when you increase the bike to 4,000 CAD (with a slim 25% margin) you have anemic consumer demand.
In the slim chance that Peter fulfils the original Kickstarter orders, how long does it take to recoup his debt?
Over the past three years, Peter has presold 1,300 - 2,000 Helix bikes. That's with a jaw-dropping, loss-leading discount.
Let's estimate that he can make a 4,000 CAD / bike. Unless he has some distribution magic (and he won't without a proper margin) it will take triple the time to sell 2,000 bikes at the 4,000 CAD price. That's nine years to sell 2,000 bikes, with a margin of ~1,000 CAD per bike.
Even then, he's only covered the initial 2 million CAD debt from the Kickstarter.
So! It takes a total of twelve years to produce ~3,300 bikes, with no sliver of profit in sight!
I'm all for the success of the Helix project, but running a napkin business projection, I can't begin to guess at his long-term strategy.
Am I missing something?