EuroSports revs up growth with EV venture

The group’s luxury automotive distribution business has remained relatively stable over the years. More recently, we have also seen rising demand for our luxury automobile as funds are diverted from travel to fancy cars. Thus, we are optimistic that this segment will continue to grow and provide revenue stability to the group.

To enhance EuroSport’s profitability, we may expand our distribution network to overseas markets as well as secure distributorships or dealerships for new ultra-luxury and luxury automobiles.

We believe that EuroSports is equipped to participate in the rising trend of electrification in the automotive industry. Governments and regulators are starting to invest in the necessary infrastructure and encouraging the public to adopt electric vehicles (EV).

The group also has immediate access to the Southeast Asian market size with some 200 million motorcycles and annual sales of 15 million units.

2. Who are some of the group’s major customers?

In the luxury automobile distribution business, our major customers are mostly high net worth individuals residing in Southeast Asia.

3. Last November, whollyowned subsidiary EuroSports Technologies raised funds for the electric vehicle brand, Scorpio Electric. Can you tell us more about the plans for the business?

Part of the US$6.3 million ($8.4 million) funds raised will be used for the software and hardware development of Scorpio Electric’s first electric motorcycle. This will include numerous prototypes that will undergo quality testing and checks according to international standards.

We plan to stay focused on developing a homegrown, next-generation, high-performance electric motorbike — the first in Singapore’s history. The group unveiled the X model prototype in January. This will be the first of many prototypes that will pave the way for the series of electric motorcycles that will be fully built here. The bikes are expected to be on sale by end of 2021.

4. Do you have an investment and divestment strategy? If so, could you elaborate?

We believe that a strong brand image will influence current and prospective clients’ response to our products and services. Thus, our investment strategy focuses primarily on brand-building.

Luxury brands, which possess strong brand equity, can continue to cement their brand position by adopting new technologies and differentiating themselves from competitors. EuroSports strives to be a global brand in the luxury automobile industry and a technology innovator by investing in the EV segment.

5. Do you see any changing consumer preferences due to Covid-19? How does the group plan to ride on these trends?

The group’s sales and operations were affected during the lockdown but we have noticed an increasing demand in the past couple of months as consumers diverge their spending to luxury automobiles. Looking ahead, we plan to actively seek new dealerships and expand not just in Singapore but also into the region. Covid-19 also turned consumer’s attention to the need for greener and more sustainable technology. We believe that addressing tailpipe emissions is a step towards creating a greener future.

6. What are EuroSports’ competitive strengths in the EV industry?

High-performance electric motorcycles are currently unavailable in the industry. Therefore, we aim to redefine the concept of electric vehicle and bring about a new era of transportation by combining art with technology to create a high quality smart electric motorcycle. Scorpio Electric’s differentiating factor lies in its use of AI and data analytics when developing the bike.

7. How do you think the EV market will evolve in Singapore and the region? How do you plan to tap on these trends?

The EV industry is a fragmented market, especially in Southeast Asia. Governments across the region are just beginning to invest in infrastructure and encouraging adoption for sustainable mobility. Thus, we believe that this is an opportune time for EuroSports to penetrate the EV industry.

As part of Singapore’s effort to encourage the adoption of green vehicles, the government relaxed rules on electric motorcycles in April 2020, allowing bikes with power ratings of more than 10kW to be on the roads. The Singapore government has also unveiled several measures in Budget 2020 to spur electric vehicle adoption, as well as plans to phase out the use of internal combustion engine vehicles by 2040. This also includes plans to deploy at least 60,000 EV charging points in public car parks and private premises by 2030.

Global EV sales have been increasing, mainly due to governments’ push for carbon removals, improved charging infrastructures and enhanced battery technologies. According to a McKinsey report, the market for two-wheel EVs (E2Ws) and three-wheel EVs (E3Ws) was valued at close to US$97 billion (or 4% of global auto sales), and by 2022, could reach US$150 billion. The electrification in the scooter and light-motorcycle segments is projected to accelerate, especially in emerging markets.

Recently, the group signed an MOU with Strides Transportation, a wholly-owned subsidiary of SMRT Road Holdings, to develop, market and supply smart electric motorcycles for commercial and corporate clients.

8. What notable developments can shareholders expect from the group for the rest of 2021 and into next year?

The group will continue to expand on our two main business lines — the distribution of luxury automobiles and the new electric motorcycles segment.

We anticipate that our luxury car distribution segment will remain on its growth trajectory as we continue to cultivate and deepen relationships with our customers. We expect a steady demand for luxury automobiles shortly and brands that actively engage their customers while investing in their brand image should lead the way. For our EV segment, we remain focused on developing our first EV under the Scorpio Electric brand and target to commence sales by the end of 2021.

The partnership with Strides Transportation leverages EuroSport’s designing and manufacturing expertise to develop and supply a smart electric motorcycle ecosystem (SEME). The SEME will encompass the development of electrified small-format mobility, E2Ws and E3Ws. The SEME will be equipped with smart riding features and supporting systems such as in-house charging stations.

9. Globally, governments have been committing to a green economy. What are some ways EuroSports is working towards supporting a sustainable economy?

The group believes that internal combustion engine vehicles will eventually be displaced by more sustainable alternative solutions. Motorcycles, which are disproportionately more pollutive than their four-wheeled counterparts, will face the same push towards electrification.

We believe that EVs are just the beginning and the world will adopt other alternatives such as hydrogen fuel cell vehicles or even nuclear-powered vehicles.

10. What do you think investors may have overlooked about EuroSports’ business?

Investors might turn away due to the perception that EuroSports is a loss-making company with no growth prospects. However, our main business — the luxury automobile distribution business — is still performing well and growing. Our recent losses were mainly due to investments made to develop sustainable mobility solutions through the production of Scorpio Electric bikes. Excluding the investment in the development of electric bikes, we would have recorded a profit.

We believe that the group is wellpoised to tap on this trend and to turnaround soon.

Candace Li is a research analyst with the Singapore Exchange