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Unicorn Leaving the Cradle of Subsidy: Will Gogoro Become the Next Giant Baby of Taiwan?

published: 2020-04-29 18:30

The sales of electric scooters are on a downward sloping trend as the government reduces its subsidy, and now Gogoro is once again on a battery tariff battle with its users, with its reputation hitting rock bottom. Will this unicorn that flourished from government subsidy become the next giant baby of Taiwan?

At the end of 2019, the National Development Council announced that Gogoro (Gogoro Taiwan Limited) is estimated at US$1 billion of market value, and became one of the first unicorns in Taiwan. However, the initial imperious momentum of electric scooters hit rock bottom in sales due to the reduction of government subsidy.

Having already adjusted the content of services in mid-year last year, and revoked partial bargains regarding free maintenance, Gogoro is now once again head-to-head with consumers from the commercial dispute over unlimited monthly fee for battery, as the company played a hardball by announcing no leniency since May 10th, which stirred a backlash. Has Gogoro become a dictator from being unable to replenish the void of subsidy due to the predicament of reduced government subsidy?

 “A NT$299 monthly fee is considered a sin in Taiwan, yet Spotify also charges more than NT$200 per month, when Gogoro is a scooter capable of replacing batteries.” As expressed by Horace Luke, CEO of Gogoro, during an interview with a print media recently, a strict policy on commercial behaviors protects the rights and fairness for users on battery usage, and the company will continue doing the right thing in the future.

To Luke, it might be hard to understand the habits of the users, though to consumers, it is even harder to define the definition for the so-called commercial behavior. Gogoro expressed in its recent open letter that users, who have been confirmed with conducting commercial behaviors, despite the traveled distance, will be converted to the commercial rate, with penalty imposed.

Such approach has angered many Gogoro owners, since the phrase “commercial behavior” has a very extensive meaning, despite the insinuation on food delivery. For example, does it include commuting, business trips, or even post-delivery and police patrolling? This imparity clause in the contract requires further consideration of Gogoro, regardless of its legal basis.

The Higher the Subsidy, the Lower the Product Value

Gogoro has been maintaining a positive image through its modern design and intelligent performance, together with a successful online marketing strategy, which also enhanced significant values to its affiliated products, yet the high prices that are reflected on the products have always been a problem.

 “Industrial subsidy distorts market values, and manipulates consumers into believing that price-performance ratio equals demand; anytime when the subsidy is reduced, the product is then brought back to its initial appearance.” As pointed out by Ding Xue-wen, General Manager of Kymco Capital, enterprises that lose money every year under government subsidy is essentially an operation of Ponzi scheme, where the enormous government subsidy is used to pay back the debts from the past. Nevertheless, financial reports and cash flow are swords and knives that are incapable of lies, and they will slash open the resplendent curtain eventually.

Gogoro receives subsidy on one hand, and sells scooters in high prices on the other, whereas the profit is used to support the operation of the battery replacement network, for which the predicaments of expansion difficulties in battery replacement stations, as well as batteries that are not fully charged within a specific duration, are starting to become even more severe as the government subsidy shrinks.

Cultivating the development of an industry is not an easy task, though there had been multiple government subsidized cases in the past 50 years in Taiwan, where none of them managed to blossom, and all became blood-sucking "giant babies" at the end. Over the past decade, Gogoro started from scratch and grew from countless obstacles under the anticipation and adoration of the Taiwanese government and people, and has managed to acquire almost 300K scooter owners today. Perhaps the first and foremost task for Gogoro right now is not to ponder on how to catch violating users, but to figure out how to maintain its product competitiveness subsequent to the gradual withdraw of subsidy, along with fulfilling the actual needs of consumers, in order to not disappoint the government and the people for their subsidy and nourishment over the past decade.  

 (Cover photo source: Pixabay)

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