Better Bikes Reducing pollution, one bike at a time Mashaiel Alnifay, Heather Goetz, Ben Kuethe, Emmanuel Taylor December, 2013 Social Entrepreneurship: Engineering for Humanity
Executive Summary Better Bikes is a service that provides two-stroke engine retrofit kits, training and community activism, for automotive technicians and mechanics in developing countries. Through our cost effective, educational, and environmentally programs, the transition to an efficient fuel injector will reduce emissions that cause air pollution. Problem/Market Opportunity As the developing world industrializes, energy consumption increases. The impact on air quality is the first thing affected by energy consumption due to the use of fossil fuels. Some developing countries are beginning to recognize the effects of air pollution and are enacting policies to correct the problem. Unfortunately, these urban populations have already invested in motorbikes, scooters, and rickshaws that do not meet the new requirements. Current costs to replace or convert these motor vehicles is high, but that is where our opportunity exists. Your Solution Better Bikes is targeting our technical consulting services to motor vehicle technicians in urban population centers in under-developed nations. Our goal is to build capacity in local areas by empowering technicians with new skillsets to install a fuel injection kit that reduce environmental emissions. The retrofit kits that we provide are capable of increasing fuel economy, and decreasing emissions, for two-stroke engine auto rickshaws and motorcycles in Sri Lanka [4]. Better Bikes leverages the supply chain and our partners to provide a retrofit kit at a price point that enables the compliance and conversion to efficient fuel injectors. Business Model Better Bikes is an incorporated non-profit organization that provides consulting services and supply chain assistance to mechanical technicians in developing countries. We have a small Executive Board that leverages the talents to provide our services at a low cost. We employ 3 program directors to guide training, communication, and supply chain efforts of our company. We also employ 4 trainers from our partnering cities to train technicians to install the conversion kits. Better Bikes makes a small profit on the kits but that filtered back into training and communication with the overhead financed through grants, loans and donations. Implementation Strategy Better Bikes has a threefold plan of engagement. We plan on hiring four local vehicle maintenance technicians to come to the United States to learn about the fuel injection systems. Their initial Business Name
training will combine the hands on information of replacing the existing carbonators with skills to train other technicians. Once trained, they will go back and teach classes to other maintenance technicians to install the retrofit kits. These two components are self-sustaining and continue to supply our company with qualified vendors to profit from our product. Better Bikes also plans to engage in local government to work with officials and agencies to ensure our presence is welcome in the community. Contact Information Mashaiel Alnifay, BS&E, Civil Engineering, maa102@pitt.edu Heather Goetz, MS&E, Civil Engineering, hmg23@pitt.edu Benjamin Kuethe, BS&E, Chemical Engineering, bfk4@pitt.edu Emmanuel Taylor, PhD, Electrical Engineering, ejt7@pitt.edu Dr. Alexander Dale, Executive Director, Engineers for a Sustainable World, atdale@eswusa.org Better Bikes
Background 1.1 Introduction As the developing world industrializes, energy consumption increases. The impact on air quality is the first thing affected by energy consumption due to the use of fossil fuels. These effects are either visible (i.e. smog) or invisible (i.e. Greenhouse Gases), which cause global warming Better Bikes is a service that provides two-stroke engine retrofit kits, training and community activism, for automotive technicians and mechanics in developing countries. Through our cost effective, educational, and environmentally programs, the transition to an efficient fuel injector will reduce emissions that cause air pollution. Better Bikes is targeting our technical consulting services to motor vehicle technicians in urban population centers in under-developed nations. Our goal is to build capacity in local areas by empowering technicians with new skillsets to install a fuel injection kit that reduce environmental emissions. The retrofit kits that we provide are capable of increasing fuel economy, and decreasing emissions, for two-stroke engine auto rickshaws and motorcycles in Sri Lanka [4]. 1.2 Sources According the Environmental Protection Agency there are many emissions that cause air pollution, which are associated with type of sectors. The transportation sector (as shown in Figure 1) is one of the largest emitters of Greenhouse Gases, due to the fossil fuels it uses for energy. Figure 1: EPA Statistic of Global GHG Emissions The top eight emissions released by the transportation sector are Carbon Dioxide (C 2 O), Carbon Monoxide (CO), Methane (CH 4 ), Nitrous Oxide (N 2 O), Sulfur Dioxide (SO 2 ), Ozone (O 3 ), Chlorofluorocarbons (CFC) and Particulate Matter (PM). Each one of the listed emissions has its own impact on the environment and therefore its impact will transfer on the health of the human race. Better Bikes 1
Through providing fuel injection retro fit kits, Better Bikes strives to affect the first four greenhouse gases (GHG) previously identified Market Opportunity 2.1 Value Proposition Better Bikes is a service that provides two-stroke engine retrofit kits, training and community activism, which are cost effective, educational, and environmentally conscious, for automotive technicians and mechanics in developing countries (such as Sri Lanka), and thereby improves local sustainability and reduces emissions by building local capacity. Better Bikes is unique in its low cost, locally recognized products, distributed by local technicians. 2.2 Clients & Channels Better Bikes is targeting our technical consulting services to motor vehicle technicians in urban population centers in under-developed nations. The Philippines for example banned two-stroke engine auto rickshaws for environmental reasons [4]. Legislation forbade their import and enacted a requirement to replace two-stroke engines with four-stroke engines [4]. The fuel injection retrofit kits provided by our organization can reduce emissions of two-stroke engines by 70 to 90 percent, while improving fuel economy by 30% [4]. At 20% of the cost of upgrading to a new engine, our kits provide a clear cost advantage [4]. An additional incentive for our technician s customers is the savings from increased fuel economy, enabling a typical payback period of one year [4]. Due to the quantifiable benefits offered by the conversion kit technology, and the prevalence of rickshaws on the global market, Better Bikes sees rickshaw drivers as being the end recipients of this technology. In order to encourage purchases, we will actively engage in public information campaigns, and will build relationships with legislative bodies responsible for environmental and public health policy. There are distinctions in the target markets for the various products and services that we provide. The target market for the kits is rickshaw taxi service providers. The target market for our technical consulting services, which involve teaching people to install, maintain, repair, and/or replace conversion kits, is local technicians in urban portions of developing nations. Examples areas include Dhaka, Bangladesh; Antsirabe, Madagascar; Colombo, Sri Lanka; and Havana, Cuba [6, 7, 8, 9]. The target market for our educational and outreach services is the public, policy advocates and lobbyists, and legislators. Better Bikes 2
2.3 Market Analysis Our current business strategy is to introduce the fuel injector conversion technology to the metropolitan area of Colombo, Sri Lanka. Estimates in 2007 placed the number of two strike rickshaws (known locally as tuk-tuks) at 280,000; with an additional 40,000 new tuk-tuks added annually [2.3.1]. An updated estimate in 2010 stated that the number of tuk-tuks on the road was closer to 450,000 [2.3.2]. In 2007, legislation banned tuk-tuks from Sri Lanka, due to their failure to meet emissions requirements [2.3.1]. Motorcycles or trikes are required to limit their emissions of hydrocarbons and carbon monoxide. Testing for smoke opacity enforces the emissions limit [2.3.3]. Table 1 shows the emissions requirements for diesel automobiles in Sri Lanka. Table 2 shows the standard for petrol (gasoline) vehicles. Table 1: Vehicle Emissions Standards for Diesel Vehicles, Sri Lanka Type of Vehicle Smoke Opacity at Instant Acceleration K Factor (m -1 ) Diesel Vehicles 8.0 Table 2: Vehicle Emissions Standards for Petrol Vehicles, Sri Lanka S.No Type of Vehicles Carbon Monoxide CO (% v/v) 1 Petrol Vehicles other than motor bi-cycles and motor tricycles 2 Petrol motor vehicles and petrol motor tri-cycles Hydrocarbon HC (ppm v/v) Other Matters 4.5 1200 Both idling and 2500 RPM with 6 9000 no load To reduce emissions, an existing kit converts petrol- and diesel-powered tuk-tuks to run on compressed natural gas (CNG) [2.3.2]. However, the cost associated with this conversion is between 40,000 and 45,000 Sri Lankan Rupee (LKR), ($305 to $345 USD) [2.3.2]. The retrofit kits from Better Bikes changes the current fuel injection system in the bike to a more efficient nozzle injector. These kits cost the consumer between 32,665 to 36,000 LKR ($250 to $275 USD) [2.3.4]. The Ministry of Environment and Renewable Energy sets and regulates the emissions standards in Sri Lanka [2.3.3]. This division of the government would be our focus for lobbying efforts. Our goal is to have our kit technology recognized and permitted for use in accordance with the appropriate environmental standards. If approved, tuk-tuk drivers, most of who are sole proprietors, would need to be aware of the technology. Drivers can be identified through their membership in Samastha Lanka Three Wheel Riyadurange Sangamaya (All Sri Lankan Three Wheel Drivers Association) [2.3.2]. This is a forum to promote awareness of our technology. The targets of the kit sales are the automotive mechanics - the skilled technicians who would install the kits as a part of their technical service offerings. Better Bikes 3
Technical training is regulated through the Department of Technical Education and Training [2.3.5]. The National Certificate in Engineering Craft Practice Motor Vehicle Mechanic, consists of a two-year, full-time educational program at an approved college [2.3.5]. Three are 29 educational institutions in Sri Lanka that offer two year training programs in automotive technology, as shown in Table 3 in the Appendix. Our technical consulting services would be geared toward these institutions. Our goal would be to form the partnerships required to offer kit installation and maintenance costs through the existing framework for technical education. 2.4 Unique Approach Operations 3.1 Resources 3.2 Activities 3.3 Partners Better Bikes initially wanted to work with ENVIROFIT, a social enterprise that designed a two-stroke engine retrofit kit [4]. After their initial design, they chose not to distribute this product. Our company plans to purchase the patent or the patent rights to have this device manufactured. Once we have the rights, we anticipate collaborating with large cycle corporations (Harley Davidson, Honda, Yamaha, etc.) to leverage their buying power. Their partnership will enable us to provide the kits at a price point that meets the needs of our technicians in Sri Lanka. Better Bikes also considers the local government officials and agencies as partners. Their support and advantage will enable us to provide our services to the local mechanics. Additionally, our partnership can enable a communication effort to drive business to rickshaw companies and tuk-tuks that have made the conversion to a fuel injector. Better Bikes wants to collaborate with the technician schools listed in Table 1 in the Appendix. Their partnership allows us to draw from a pool of skilled craftsman who can take training to install our kits. Additionally, their education indicates a commitment to training and advanced techniques. Better Bikes 4
Management 4.1 Structure Better Bikes has a small structure that leverages our consulting and supply chain services to the developing nations that need access to cost effective and sustainable fuel-injector conversion kits. We anticipate an executive board structure to be small but effective. Our board will contain the founding members of the organization as well as experts, who can provide finance, investment, human resources, and technical advice. We anticipate these additional members to come from the community, investors, and governments. Better Bikes has a few main roles within the company. We have a Chief Executive Officer, a Chief Financial Officer, and 3 program directors. Of these positions, our initial design team will take four roles. The remaining role will be hired based on fair unbiased interviewing process. We have determined that to reduce overhead, we will outsource Legal, Payroll, and Human Resources to focus on the core of our business. 4.2 Team Better Bikes has a small team of core people. We want to keep close watch as the business develop and expand where necessary. Based on that concept, we have 2 main executive positions, 3 program director positions and 4 technician trainers. As program director, the individuals in these roles will be responsible to developing our core areas, Technician Education, Government Communication, and Supply Chain. We initially plan to employ four trainers from Sri Lanka to train other technicians. If our company grows, this number is flexible to meet our customer s need. 4.3 Cost Structure Better Bikes investigated the transportation market of Sri Lanka specifically looking for what the common sources of funding are in the region and how that could benefit our organization. Like many social enterprises, we will pursue revenue from a wide variety of sources including public and private grants, donations, and business loans [10]. Our plan doesn t contain as many sources of funding for the organization shown in Table 3, we intend to seek funding from loans and grants. Better Bikes 5
Table 3: Main sources of funding for social entrepreneurs Better Bikes is going to have to rely heavily on federal grants and donations to cover the majority of our overhead. Current estimates indicate that a large percentage of those funds will come from grants due to Better Bikes non-profit standing, but also have a steady income of monthly donations from individuals, corporations, and fundraising events. Better Bikes is expecting a small profit gain from the actually retrofit kits and services, which helps offset some of the outside funding and grants. The revenue generated from the service is $1200 per month of estimated sales. Our plan expects to sell 15 retrofit kits per month (initially) to the automotive technicians at a profit margin of $80 per kit. Better Bikes is expecting to purchase the retrofit kits from the manufacturer at a bulk price of $100, sell to the automotive technicians at a price of $180, which then gives the technicians room for a profit margin of anywhere from $100-$125. Looking at expenses, Better Bikes will see the majority of expenses during its first year of operation due to training, travel, and startup costs. Salaries are going to be a large portion of the expenses, and those will be determined by the amount of revenue generated by multiple sources. A large part of the services provided is making marketing and advertising materials available for the new direct injection technology, which will need to be taken into consideration in the budget. Better Bikes 6
Revenue Estimates: Cost Structure Employment Salaries CEO $65,000 CFO $65,000 Technician Educa4on PD $40,000 Government Communica4on PD $40,000 Supply Chain/Retrofit Kits PD $40,000 Technician Trainers (4) $750/month $36000 total Translators (4) Hourly Wage $25/hr $2400 total for 3 day training course TOTAL $260,000 Travel Cost Flights Sri Lanka to PiRsburgh (4) $1750/traveler $7000 total Hotel Stay PiRsburgh (5 nights) $120/night $2400 total PD travel (1/quarter) $1750/traveler $21000 total CEO/CFO travel (1/year) $1750/traveler $3500 total Employment Stay Sri Lanka $80/night $5600 total *Assuming 5 night stay TOTAL $39,500 Manufacturing Costs Direct Injec4on Retrofit Kits *Number depends on demand $100(x) NOTES: Average salary of automo4ve technician in Philippines is $650/month PPP, we're offering $750 Assumed 8 hour work days Flights to bring technicians from Sri Lanka to PiRsburgh 3 PD traveling 4 4mes per year and staying 5 nights = $4800 2 Execu4ves traveling 2 4mer per year and staying 5 nights = $1600 Assuming we can buy in bulk straight from the manufacturer - We would sell kits to technicians for $180, and technicians can sell them for current market price of $250 - There are recorded approximately 320,00 tuk- tuk vehicles in Sri Lanka Better Bikes 7
Measuring Success 5.1 External Metrics Better Bikes efforts to improve air quality in developing countries by providing low costs retrofit kits for 2 stroke bikes, technician training, and community activis,; will be demonstrated by various metrics for success. Prior to the initial implementation of our products, outside researchers will conduct an air quality survey to provide an unbiased baseline of common greenhouse gas pollutants and particulate matter. Following our implementation, regular air quality surveys will occur to track progress. Through our community activism, we will seek out updates to indicate any other industrial changes that may affect these results. The local government and media receive data updates to promote further use of the conversion kits. As a part of the community education and communication, we plan to provide various communication materials to help spread awareness of the impact of emissions. The program is also monitoring birth rate, birth defects, infant mortality, and adult respiratory issues as a metric of success. 5.2 Internal Metrics Better Bikes will demonstrate success through key performance metrics. These metrics will demonstrate that kits are being installed and reducing pollutants in our target areas. These areas of success will not only identify success with the kits but also with our training and communication efforts. The first key metric is finance based. We will look at the number of kits sold and installed. This metric demonstrates a positive effect on the economy of the market as well as the environment. The second key metric is also finance based. We will strive to ensure that our fundraising covers the administrative overhead and does not affect the unit price of the kit. The third key metric is satisfaction based. We will survey our mechanics to ensure that the kits are meeting their needs and that they received the highest quality of training. Better Bikes 8
Future 6.1 Scale 6.2 Impacts 6.3 Sustainability Better Bikes 9
References [1] United Stated Environmenral Protection Agency. Global Greenhouse Gas Emissions Data. http:// www.epa.gov/climatechange/ghgemissions/global.html [2] Mauro, LEED AP Blog, Climate chane, Causes and Effects of Air Pollution, June 13, 2012. Go Green Academy. http://www.gogreenacademy.com/causes-and-effects-of-air-pollution/ [3] Susan Carpenter. Motorcycles and emissions: The surprising facts. June 11, 2008. http:// www.latimes.com/news/la-hy-throttle11-2008jun11,0,6054455.story [4] Claudia Herrera Hudson, Earthkeeper Hero: Envirofit, http://www.myhero.com/go/hero.asp? hero=envirofit_tech_2005, accessed October 11, 2013 [5] Auto Rickshaw, http://en.wikipedia.org/wiki/auto_rickshaw, accessed October 11, 2013 [6] "Police purge for Dhaka rickshaws". BBC. December 20, 2002. Retrieved 2011-03-22. [7] Madagascar Travel Guide (7 ed.). Lonely Planet. 2012. ISBN 1743213018. Retrieved 2013-04-13. [8] Bajaj Ready With 4 Stroke Autos for SL, The Economic Times, Jan 21, 2007, http:// articles.economictimes.indiatimes.com/2007-01-21/news/28491381_1_three-wheelers-bajaj-autonew-norms, accessed October 11, 2013 [9] Manu Verma, Agra, What is a Coco Taxi?, The Times of India, June 5, 2010, http:// articles.timesofindia.indiatimes.com/2010-06-05/open-space/28273612_1_coco-taxi-canopy, accessed October 11, 2013 [10] DATA: Is social emterprose ann financially viable venture? COPYRIGHT 2009 BEYONDPROFIT.COM - AN INTELLECAP PUBLICATION http://beyondprofit.com/tag/survey/ Better Bikes 1
Appendix Appendix A: Table 4: Technical Schools in Sri Lanka With Automotive Mechanic Programs Business Name 1