Don DiCostanzo has Fountain Valley’s Pedego Electric Bikes charged up to potentially hit the $100 million mark in corporate revenue this year, with an IPO under consideration in the not-too-distant future.
While the 2022 revenue goal is far above the $66 million Pedego achieved last year, it is doable given the company’s leading position in the rapidly expanding, but still fragmented, electric bike market, and an expanding local operational presence, the company’s CEO and co-founder says.
“In the original days, I think there were about 10,000 or 12,000 electric bikes sold in this country,” DiCostanzo told the Business Journal.
“Last year according to industry reports there were about 850,000 sold, and we sold 40,000 of those.
“It is a highly fragmented market with over 300 competitors. The average competitor sells less than 3,000 bikes per year,” he says.
The average price for a Pedego bike is a little over $3,000. Sales revenue is split between the company and its licensed retail dealers. Retail sales last year totaled about $150 million, according to DiCostanzo.
Branding Power
DiCostanzo says Pedego is probably the No. 1 electric bike company in the U.S. in terms of dollar sales, while in unit sales the company is likely No. 2. behind Seattle-based Rad Power Bikes.
The company’s secret sauce: branding.
“There’s nobody else that has branded stores in the electric bike space,” DiCostanzo said. “I like to think we’re like the Tesla of electric bikes.”
Many of Pedego’s competitors sell online, rather than at physical stores, he notes. That helps the local firm on the sales front, he believes.
DiCostanzo says that people can try out and rent Pedego bikes at the stores to see which one they really want.
“We believe that somebody should rent one before they buy one.” The bikes also come with a five-year warranty and service offerings.
Crazy, to Craze
The Fountain Valley company has come a long way since its founding in 2008.
“We started with one store in Newport Beach, next to the Crab Cooker,” DiCostanzo said.
The company at the time counted four competitors and faced an uncertain future, he said. “It wasn’t a craze back then. It was more like we were crazy.”
The company’s been profitable since 2011, he said, while expansion has grown rapidly.
“We now have about 210 dedicated retail outlets that have a Pedego sign out in front.”
“Each one of our stores is independently owned and operated,” DiCostanzo notes. The dealers operate on a license agreement, not on a franchise basis.
The long list of Pedego stores includes the following in Orange County: Huntington Beach, Newport Beach, Corona del Mar, Irvine, Dana Point, and Yorba Linda.
1st Inning
The company’s 2021 corporate revenue of $66 million was up from $38 million in 2020, and it is looking to reach $100 million for this year, according to DiCostanzo.
Pedego is no stranger to rapid growth: it was No. 5 on the Business Journal’s 2021 list of fastest-growing midsize private companies, with a two-year revenue growth rate of 180.5%.
Industry trends suggest more’s in store.
“The market has about a 20 times growth trajectory by everybody’s measure,” the CEO says. “We see this as just the first inning of a 9-inning game.”
Other local firms in the sector include Electric Bike Co. in Costa Mesa, which has also been among OC’s fastest-growing private companies, as well as rapidly expanding Super73 in Irvine.
The boost in gasoline prices due to the Ukraine conflict is expected to push even more people to buy electric bikes.
20K-SF Expansion
Pedego’s distribution center and administrative offices in Fountain Valley have 37 employees.
“We have a 40,000-square-foot building here. We just leased another 20,000 feet down the street.
“We design, manufacture and sell our bikes through our own distribution network,” DiCostanzo said.
The parts themselves are made in Vietnam, Taiwan and China.
“They’re pre-assembled offshore” and then go through the company’s distribution center, the Pedego CEO adds. “We get the bikes partially put together.
“The stores do the final assembly. They put the wheels on. They put the handlebars on. They put the pedals on. They adjust the spokes. They put the air in the tires.”
The much-publicized supply chain issues have presented challenges “but we have plenty of bikes,” DiCostanzo said.
IPO, Relocation
The CEO says a public listing is “always a possibility.”
DiCostanzo is the single largest individual shareholder in Pedego, while private equity firm Verlinvest in Brussels invested in the company last year.
DiCostanzo emphasizes the difficulties of doing business in California, saying the company’s future base of operations may be open to review, at least for some parts of the business.
“Real estate is very tight. The costs are very high. It’s getting increasingly challenging.
“We are definitely evaluating moving out of California at least some of the business operations,” he told the Business Journal, citing taxes, regulations and tight labor market.
“When our lease is up in two years, we’re going to take a hard look at going somewhere else, depending on what happens with the tax base.”
Rehabilitation Rides
Pedego Electric Bikes says that its products can be used not only as leisure tools, but as rehabbing devices for injuries or chronic physical illnesses such as Parkinson’s disease, multiple sclerosis, and stroke.
The claims are corroborated by ongoing studies at Oxford University, Flint Rehab and Science Daily, the company said.
Pedego reports receiving hundreds of testimonials from customers with different motor function abilities, who have improved their symptoms and mental well-being with motor-assisted biking.
“My muscle disease diagnosis took a toll on me since I have always been a physically active person,” said Kristen Pokky, a nurse of 25 years and a Pedego store owner. “My Pedego e-bike has been my savior and newfound strength. It has kept my disease at bay and I am thriving more than ever.”
– Audrey Kemp
