Communist charm

East German nostalgia e-scooter firm to roll into stock market

Muenchen Haidhausen Elektro Schwalbe in der Breisacher Strasse Strom Fahrzeuge auf dem Vormarsch
A touch of East Germany in Munich. Source: Imago

Electric vehicles are a hard sell in Germany. The government has all but given up on its ambitious goal to have 1 million e-cars gliding along the country’s roads by 2020. Sales remain anemic as the Germans stubbornly cling to their diesel and gasoline-using cars, oblivious to the pollution that chokes their cities.

But one little-known company is bucking this depressing trend. Riding a wave of enthusiasm for iconic East German products, Govecs revived the Schwalbe, the GDR’s answer to Italy’s Vespa, with a line of electric two-wheelers. The Schwalbe, German for swallow, is on the road in Berlin and a different model, the Go!, is available in San Francisco, Paris, Amsterdam and other European cities.

Though the firm is based in Munich and not in the east as one might expect, its retro e-scooters are selling like hotcakes. And now Govecs is about to go public at the Frankfurt Stock Exchange to shift into higher gear.

Profit still out of reach

The subscription period runs until September 27 and CEO Thomas Grübel is hoping to raise €60 million ($71 million). That’s not bad for a firm with 217 employees that achieved €15 million in sales last year —twice as much as in 2016 — although it did book a loss of €5 million. This year’s revenue could skyrocket to €28 million, with a profit still out of reach.

But Mr. Grübel is unperturbed by the losses. His priority is to grow first, and the floatation, scheduled for October 2, is going to help him do exactly that. The entrepreneur has a clear idea of what he’s going to do with the proceeds from the IPO. He wants to launch a new model on the market every year. He’s also planning to expand the Govecs factory in Wroclaw, Poland and the company’s flagship store at Berlin’s famous Alexanderplatz square. And the company will set up a new warehouse for the scooters and spare parts.

“A small capital injection wouldn’t have been enough for us to leverage all growth options,” Mr. Grübel said. Govecs’ current main shareholder is Dquadrat, a family-owned investment company based in Baden-Württemberg. Mr. Grübel owns another 10 percent of Govecs’ shares.

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The original Schwalbe. Source: Mauritius Images

The firm is heavily dependent on a handful e-scooter sharing companies. Four major customers bought a whopping 97 percent of Govecs’ electric two-wheelers in the first half of the year. As city dwellers happily rent shared electric scooters for their daily commute, brands like Emmy, Ecooltra or Cityscoot are becoming ubiquitous across the congested cities of Europe, North America and Asia. And with the expected windfall from its stock market debut, Govecs wants to grow its sales with B2B customers but also with private customers.

Govecs says it has sold more than 10,000 units since its founding in 2009. In Paris alone, more than 2,500 mopeds weave their way through the city’s traffic jams. And the Munich-based firm adds another 30 scooters to the streets of the French capital every day. Most of them are emblazoned with the colors of Cityscoot, a local startup.

Fondness for East German classics

But in its German home turf, where its sales are soaring from Munich to Berlin too, the Schwalbe scooter isn’t just any eco-friendly vehicle. “We’re seen as a cult alternative to the Vespa,” Mr. Grübel said. The retro-looking scooter bears a striking resemblance to the original Schwalbe, a two-stroke moped manufactured in the Socialist GDR from the 1960s until 1986. Over two decades, the Simson factory in Suhl produced more than one-million Schwalbe scooters.

The fondness for the classic moped echoes Germany’s newfound taste for other iconic East German products, from the Trabant car to the Bautzen mustard brand and the ubiquitous traffic lights for pedestrians at nearly every Berlin crosswalk. And so Mr. Grübel has secured the naming rights to the legendary brand for 30 years.

But it’s already a crowded market out there and competition is fierce. Piaggio, the manufacturer of the timeless Vespa, started production of its all-electric scooter Vespa Elettrica. Competitors from India, China and Taiwan have already made inroads in the German market. And Govecs has to contend with domestic rivals too, including BMW’s electric scooter C-Evolution and Emco, a Lower Saxony company that introduces itself as “Germany’s largest provider with the most models.”

But CEO Mr. Grübel is upbeat. The roadshow — from London to Zurich or Copenhagen — is promising and he has already raised more money than ever before. If everything works out as planned, Govecs will be listed on October 2 in Frankfurt for the first time. But there will be no time to relax after that: The Intermot motorcycle fair starts in Cologne the next day.

Joachim Hofer covers the sports, leisure and IT sectors for Handelsblatt. Jean-Michel Hauteville also contributed to this report for Handelsblatt Global. To contact the author: hofer@handelsblatt.com

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