Why SRAM Should Make Their E-Bike Integrations Open source.

In the current age of bicycles, SRAM offers some of the most compelling products for high-end bikes, which is why their position in the market is very strong. However, this chapter of the bike industry may be coming to a close, as the market is shifting more and more toward E-bikes, and SRAM has realized this too. They have been able to capitalize on their position by integrating their E-bike motor with their electronic drivetrain components. This integration allows SRAM to provide a number of useful and valuable features that not many other companies can offer. Two examples of this are, first, using power and cadence data to automatically shift gears for the rider, and second, being able to shift while coasting by using the motor to spin the drivetrain and perform the shifts. On paper, integrations like this are a smart strategy for SRAM to leverage its position as a leading drivetrain component manufacturer and find success in the E-bike market by offering a competitive total package.

However, this strategy only works if they can provide a compelling and competitive motor and battery to integrate into this ecosystem. This is where I lose some confidence in the strategy: it is unclear whether SRAM will be able to transition their expertise in traditional bike component manufacturing to battery and motor components. The performance of the motor is extremely important to consumers. Things like range and power play a big part in determining which products succeed, and the offerings in this space are already refined enough that it's challenging to create a product that can compete with what is already on the market. Furthermore, this space already has some strong players, many of which have more expertise in making these types of components. Companies like Yamaha, Bosch, and DJI are already finding more success in bringing compelling E-bike motors and batteries to market than SRAM.

Due to this fierce competition, it seems, at least to me, unlikely that SRAM will emerge as the market leader for E-bike components. In my assessment of the bike industry, the biggest threat to SRAM isn't missing out on selling E-bike components but rather losing dominance in drivetrain components. I view E-bike components as a completely separate vertical from their core business, and finding success in this vertical would require significant investment in R&D to develop a competitive product. At first glance, this level of investment might seem worthwhile, especially considering SRAM's dominance in the traditional bike component market. However, I argue that their position may not be as defendable as it first seems. The bike industry as a whole is undergoing a transition, and the path forward isn’t as clear as it once was. I’ve previously written about how internal gearboxes might be the biggest threat to SRAM’s drivetrain business. You can read about it here.

For this reason, I think SRAM should pivot. Instead of chasing success in a new product vertical, they should use the rise of E-bikes as an opportunity to further cement their position as the go-to drivetrain provider for bikes. SRAM could do this by making the integration of their drivetrain components open-source and low-cost for other E-bike motor components to integrate with their own E-bike products. This would ensure that SRAM continues to grow, no matter who emerges on top in the battle for market share of the battery and motor. The level of value added to the whole riding experience, with the type of integration that SRAM could offer, would make them an even more obvious choice for the rest of the components on the bike. This position as the first/best drivetrain supplier, capable of offering integration with a wide range of E-bike components, seems like a much more defensible position in the market compared to where they are now.