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A Cool Vehicle Draws Stares, but Buyers Are Hanging Back
August 9, 2003
By ERIC A. TAUB
Robb Woldman was driving his new electric vehicle on a Los
Angeles sidewalk when a police officer tried to ticket him.
But Mr. Woldman was acting in compliance with California
law, and the law in 44 other states, which allows his
vehicle, the Segway Human Transporter, to be driven on the
sidewalk.
"The officer had to make four phone calls before he found
out that I wasn't doing anything wrong," Mr. Woldman said.
"He had never seen a Segway before."
That's not surprising given how few Segways have been sold
since they became available to consumers last November.
When it was developed and financed during the heady
technology boom, the Segway seemed like a sure thing with
its ingenious technology. Since then many dot-com era
ventures have failed. And Segway, though it survives, has
to prove that it can last as a real business, and not just
as a cool idea.
With 5 gyroscopes, 2 tilt sensors, dual redundant motors
and 10 microprocessors, the transporter, which can travel
at up to 12.5 miles an hour, is a diminutive object of envy
in an age of Hummers and Lincoln Navigators. Ride one, and
neighbors gather to try it and drivers pull over to watch.
But despite the device's appeal, industry observers and
Dean Kamen, Segway's inventor, agree that Segway L.L.C.,
which is privately held and does not release sales figures,
is not anywhere near selling the 40,000 units that the
company's factory in Bedford, N.H., is capable of turning
out each month.
The company began commercial production of the vehicle in
April 2002 and started taking orders from the public late
last year. By then, the economy was shrinking, unemployment
was up, and technology spending of all sorts was down.
In the last year, the company has sharply lowered its sales
expectations, hoping the market will grow eventually.
The almost $5,000 price tag is a factor in modest demand. A
somewhat cheaper, scaled-down model is due out shortly, but
its currently undisclosed price is expected to remain high
for most consumers.
And it is not just price that is keeping sales low, critics
argue. Rather, they say, while the machine is elegant and
fun, it does not provide a real nonpolluting transportation
alternative for the masses.
"I think of the Segway like a idsrc="nyt_ttl" value="97122">"Jeopardy"
question. What is the question to which Segway is the
answer?" said Herman B. Leonard, a professor of public
management at the Kennedy School of Government at Harvard.
For the Segway to be a success, he said, riders need room
to maneuver and confidence that the battery will not die on
the return trip. "Unless you are elderly or have limited
mobility, why wouldn't you use a bike?" he asked.
Yet the fact that bicycles have not flooded American cities
is a good indication that a new technology is needed, Mr.
Kamen argues. "People now use cars because they don't have
viable options," he said. "The Segway gives people an
alternative to contributing to a polluted environment
cluttered with automobiles."
Early on, investors whose expectations were driven by
boom-era optimism believed that the transporter would be a
huge seller almost instantly.
John Doerr, a venture capitalist, said in 2000 that the
Segway was "as big as the Internet, as far as making a
difference," Steve Kemper recounts in his book "Code Name
Ginger: The Story Behind Segway and Dean Kamen's Quest to
Invent a New World" (Harvard Business School Press, 2003).
Mr. Doerr predicted the company could earn $500 billion
three to five years after sales began, Mr. Kemper was told.
Segway received $88 million in private investment, with Mr.
Doerr's company, Kleiner Perkins Caufield & Byers, and
Credit Suisse First Boston Equity Partners, each investing
$38 million and other private investors putting in $12
million, according to Mr. Kemper.
But the company incorrectly positioned the product, said
Karl Ulrich, associate professor at the Wharton School of
the University of Pennsylvania and author of a textbook on
product design.
"By putting Segways on sidewalks, the company is saying
their transporter is just like walking, but better," said
Mr. Ulrich, who founded an electric bicycle and scooter
company that is now defunct. "That implies the device is
for one-to-two-mile trips. That is not a great market
niche."
"To feel safe, people will travel half the stated range of
a device, and users won't stand more than 10 or 15 minutes
at a time," Mr. Ulrich said. "There could be a good market
for the product if it cost $1,000, but there is so much
technology in the device that that could be impossible."
Using redundant computing and sensing systems to drive and
balance each wheel independently means that Segway's parts
alone cost the company at least $1,500, Mr. Ulrich
contends. "I don't see how they can charge customers less
than $3,000 for this design," he said, noting that simpler
alternatives like electric scooters could cost a third that
price.
While not commenting on his costs, Mr. Kamen agrees that a
substantial price drop is not imminent. The public should
think of the cost of Segway technology akin to that of a
car, rather than, say, that of personal computers.
"Electronics prices drop, but cars do not get cheaper," he
said. "Could we design and engineer a lower price point?
Sure, but this could take years."
Mr. Ulrich believes that considerable time will be needed
for success. "With the exception of Viagra, there are zero
instances of new technologies taking off in just three or
four years," he said.
Even with the company's modest sales, it can continue to
develop a less-expensive model for a worldwide market, said
Michael Schmertzler, a Segway director and chairman of the
Credit Suisse investment committee. "No one sees this
generation of product as a solution for emerging markets,"
he said. "Can we wait for several years for Segway to be a
financial success? Within reason, we can wait."
For now, early reports indicate that the Segway is well
received in some government agencies. Seattle water meter
readers have been testing 10 Segways since September. Based
on fuel prices and other factors, the cost-benefit ratio of
using a Segway compared with a standard gasoline-powered
vehicle is greater than two to one, according to Matt
Rathke, an engineer at the city's Fleets and Facilities
Department. "We do see benefits to using a Segway, and we
will buy five more," he said. "But we won't just throw
money to the wind by buying a fleet of them."
Since mid-July, the New York City Police Department has had
30 officers sharing 10 Segways to cover foot-patrol beats
in Coney Island, Central Park, Times Square and other
locations. "When it's not raining, it's ideal for the park.
The officers have been very positive about using them,"
said Inspector Michael Coan, a police department spokesman.
Segways are not legal on the sidewalks of New York for
private citizens.
In Los Angeles, the police of the Metropolitan
Transportation Authority have found the Segway useful.
"It's good for officers; standing on the Segway makes them
look eight inches taller, and they can cover two to three
times the area they could otherwise," said Robin Blair, a
transportation planner. "This is the first- generation
Segway; like the first PC, it's a nice toy and it can solve
some problems."
Later this year, the California Department of
Transportation will sponsor a rental test in Pleasant Hill,
a city in the San Francisco Bay area. Commuters will be
able to rent a Segway to ride to the BART train station in
the morning, leave it at the station for a commuter getting
off the train to use, with the process reversing at night.
Mr. Kamen says he continues to believe that his device
will eventually become a major part of the answer to
transportation problems, even if it takes longer than he
and others thought a few years back, when new technologies
and ventures seemed to be blessed by the gods.
"I'd like to think that the Segway will become a piece of
our infrastructure," he said. "Every new technology starts
out as a novelty, and then things usually turn out
differently than expected."
http://www.nytimes.com/2003/08/09/technology/09SEGW.html?ex=1061630598&ei=1&en=0edf4b4f56045060
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