After the launch: Josh Hon of Tern Bicycles talks business, folding bikes and the genius of In-N-Out Burger

Tern Verge Duo with two-speed SRAM Automatix coaster-brake hub. Photo by Tern.

Josh Hon, for nearly 20 years the vice president of sales and marketing at Dahon, recently announced a new, independent folding bike company: Tern Bicycles, focused on “bicycles for urban transport.” I asked him how he planned to connect with customers. (My questions are in bold.)

Starting a new, global bicycle brand in the second decade of the 21st century seems like a pretty optimistic thing to do. What gives you optimism about Tern’s prospects for success?

It’s not just me starting this new company. It’s also my mom and the entire Dahon Global team. We’ve got an incredibly talented and committed team and without this team we wouldn’t be able to do it. Very simply, we believe in the future of the bicycle as a solution for many of the issues we face in urban transport. Petroleum-powered cars being the default for urban transport is not sustainable. Sustainable transport will need to be based on high usage rates of mass transit like subways, re-thought urban planning where walking is possible, alternatively powered cars and, of course, bicycles. We also have an incredibly experienced and deep team of folding-bicycle designers, engineers and advocates. Collectively, our management team has well over a century of experience doing nothing but folding bicycles.

So you’re in charge of Dahon Global but without control over the Dahon brand. Do you have access to Dahon factories? If not, what is your production strategy?

There are three Dahon entities: Dahon Global, Dahon China, and Dahon North America. These three companies have always worked together on the Dahon brand. Dahon Global has always handled all sales, marketing, product development and a majority of manufacturing. Dahon China has manufactured a majority of Dahon frames and a minority of complete bikes. In the early days—more than five years ago—it did a lot of the engineering for Dahon bikes. Dahon North America handles distribution for the North American market. My mother and I together own 100 percent of Dahon Global, a Taiwan-based company. So the press release from Dahon China reporting that I have “left” Dahon is not accurate since I continue to work at Dahon Global, and this company will continue to operate. My father manages Dahon China and Dahon North America. For the global market, we’ve always had five factories assembling Dahon bicycles: one in China (Dahon China), one in the Czech Republic, two in Taiwan, and one in Macau. Going forward, all of these factories, with the exception of Dahon China, will build Tern bicycles. None of the assembly factories will continue working with Dahon China next year. In short, our supply chain is set up and already running.

What existing intellectual property does Tern own/control? What does that control mean to the Dahon brand?

Tern will have rights to use all the intellectual property owned by Dahon Global. And that includes most of the technology coming out of Dahon within the last five years. That includes a lot of stuff that is either patented, trademarked, or copyrighted. Dahon China will not have rights to use this intellectual property. Tern will not use any intellectual property owned by Dahon China. And Tern has some good new technology to show off. We’ve already filed for eight new technology patents this year.

With so many people having joined Tern from Dahon, it’s not exactly like you’re building a bike company from the ground up. How important is it that Tern goes on to be a different kind of bicycle company? And what does that mean outside of the obvious need to differentiate your brand in the marketplace?

We did quite a lot of things well at Dahon. But there were also some things that we didn’t do well enough, and in fact, some things that we did poorly. At Tern, we want to improve on the things we did well. But we’re going to really focus hard on the things that we didn’t do well. The single area that needs the most focus is service. I think many Dahon dealers would tell you that getting parts for service was pretty difficult and/or slow. We agree wholeheartedly. And that’s why we’re setting up service centers in Europe (Germany), Taiwan and the U.S. These service centers will stock all of the key custom components that are found on our bikes. Dealers who need to service a bike should order parts from the local distributor, but if the distributor doesn’t have the part available for whatever reason, we’ll be able to airfreight parts out within two days from any of the service centers. Service will also be a lot easier because of the streamlined product range. We have a lot fewer SKUs and custom parts. If there is a custom part, it’ll be used across the range. So, for instance, we’ve only got two types of frame joints and handleposts across the entire range, so stocking these parts will be much easier. It’s the In-N-Out Burger analogy: if you only offer hamburgers and cheeseburgers on your menu, it’s much less likely that you are going to run out of ingredients. As for differentiation, we’re not too concerned with that at this point. Anybody who rides one of the new Tern bikes will know how we are differentiated. We are that confident.

Seems like the split between Dahon and Tern is also a family split, with you and your mother working on Tern and your father and uncle working on Dahon.

It’s a very unfortunate situation to be sure. But I think that working in different companies will actually allow us to work things out for the better. I received a very good education because my parents both worked and sacrificed a lot. They don’t drive nice cars, have very few nice things, and don’t even go on vacations unless my wife and I invite them. That’s why I left a good job in Silicon Valley 19 years ago to move to Asia and help out my parents when things were tough.

As the leader of Tern, what do you spend most of your time doing?

We’ve got a lot of people all doing critical things and it’s cool because we’ve got strong people in all of the important positions. As a leader it’s important to know what you are not good at and to get strong people where you yourself are weak. I tend to be a bit less organized for example, and Matt Davis, Director of Sales and Marketing, is super organized, and he regularly jumps in to push things along. In addition to the management stuff, I spend most of my time on product development, sales and marketing.

Back in the early 1980s, I asked a bicycle shop owner about carrying a folding bike. He said he wasn’t interested, that the product was too specialized and he couldn’t afford to carry it on the books for the length of time it would take to sell it. How has the market for folding bicycles changed since then, and what needs to change to continue to enlarge the market?

I hear you and I’ve run into that exact same experience many times. I’d start by saying that in the early 1980s the bike market in the U.S. was really focused on recreational cycling. And a folding bicycle is largely a utility or transport bicycle. But the market has changed and there’s now much more focus on cycling for transport. We’ve seen a big change in the last few years in markets like New York, Chicago, San Francisco and Seattle. Bike suppliers, too, have sensed this change, and you see much more of an emphasis on internal hub gears, fenders, and panniers. You also see Specialized with Globe and Civia making super cool utility bikes. And with gas getting close to U.S. $4.00 and only going higher in the future, we’ll continue to see this trend towards cycling for transport. Now we just need more cities getting serious about funding some cycling infrastructure. We’ve seen time and again, in cities around the world, that even small investments in infrastructure typically yield big gains in cycle usage.

How do you appeal to people interested in bicycles but unaware of folders?

To grow the demand for folding bicycles, we have to make good bicycles. In other words, if a folding bike looks a bit weird, doesn’t ride well, and flexes in all the wrong places, we will have a hard time getting customers no matter how well it folds. So we need to work on the design of our bikes, to make them aesthetically pleasing, and sexy even; we need to make sure that our bikes ride really well when compared to a non-folding bike. Our bikes need to be fast, efficient, and stiff. When we can do all of these things, and keep costs reasonable, we think that there’s a big part of the cycling market that will appreciate the convenience of a highly portable bicycle. We also think that there’s a lot more innovation to be had in making bicycles more suited to urban transport. Innovations in lighting, power, luggage carrying—there’s lots to be done here, and we’ve got some pretty cool new technology in these areas as well. We’re not just designing a folding frame and slapping on standard bike components. We’re also innovating on the component side.

How important are independent retailers to your marketing strategy?

Indispensable. Bicycles are complex machines and they need to be tuned and adjusted and serviced. Period. Dealers also serve the critical role of guiding customers to the bicycle that is best suited to their needs. So we’ll have a Pro deal program for dealers who have a Bike to Work program. Our simple view is that if the staff at bike shops are getting to work on our bikes, and enjoying the ride, they’ll be much more knowledgeable about the product and more likely to recommend our product to customers looking for a commute bike.

What about Internet sales?

The Internet is a great way to communicate to a larger audience, but we are against predatory pricing when it puts our dealers with bricks and mortar stores at a disadvantage. This is a problem we’ve had in years past which we will fix with Tern. In our brand portfolio, we also have the BioLogic brand of accessories for urban cyclists, and we’ve done a pretty good job avoiding predatory online pricing.

You mentioned Bike to Work. Tell me about Tern’s internal Bike to Work program.

We will give a free bike to anybody in the company who commits to riding to work. The catch is that the more days you commit, the higher the value bike you can choose. If you commit to riding one or two days, you can only choose from our entry-level bikes, up to about U.S. $600. But if you commit to riding all five days a week, you can choose from any of our bikes, up to the U.S. $3,500 Verge X20.

Tern’s website mentions that your bicycles are designed to work as an intermodal solution when paired with mass transit. Yet your initial offerings don’t seem to include any bicycles with wheels under 20 inches, which seem like they’d fold even smaller. Why?

We wanted to streamline our offerings and focus on the most popular models. Again, it’s the In-N-Out Burger philosophy: do fewer things but do them really well. Sixteen-inch-wheel bikes just aren’t as popular. But that’s not to say we are out of this category—we’ve got some interesting ideas that we are exploring.

I like the enclosed chain on the Dahon Bullhead. Seems like a good way to build a bike with a simple fold that protects people and property from chain marks (especially on mass transit). Any other approaches to chain management on the horizon?

Thanks. We’ve been looking at belt drives for a while now. But we’re still waiting for one that works properly and comes in at a price that the average person—i.e., not the guy who can afford a Ti hardtail singlespeed—can afford.

What’s Tern’s attitude toward proprietary parts? Is your focus on using standardized parts wherever possible to simplify repair? Or parts that might not be as readily available, but which make a compact fold more possible?

In general, we try and stick with standard bike parts because obviously that makes servicing much easier. But, if a customized component can really add a lot of function, and by that I mean a more compact folded size, less weight, or more strength, we’ll go that way. We’re always searching for ways to improve the function of our bikes. For example, wwe use a super-oversize 34mm seatpost. That size gives us more strength per unit weight and that’s important for folding bikes. In a nutshell, our philosophy is to go with standard parts as a default, unless going custom has enough benefits that will far outweigh the disadvantages of a non-standard part.

I’ve always wondered why the Dahon Bullhead uses a non-standard front hub; doesn’t seem like a 100mm hub would noticeably increase the bicycle’s folded size.

Our custom 74mm hub gives us an advantage in folded size, strength, and weight. A 26mm reduction in width may not seem like much but when you calculate the dimensions of the bike carton, and can reduce the depth of the carton by 26 mm, that adds up to a lot. Imagine being able to load an additional five cartons into each shipping container, and then multiply that by 1,000 shipping containers per year. We’re always looking to maximize the amount we can pack into a container—both for selfish cost-savings reasons and also for more altruistic intentions of reducing the amount of the earth’s resources we use shipping our product around the world. In terms of strength, using a 74mm hub with a 20-inch wheels gives optimal spoke angles. A 20-inch wheel is substantially stronger when using a 74mm hub. A 100mm hub is designed for 26-inch and 700C wheels. In terms of weight, our Kinetix Pro front hub weighs in at a feathery 58 grams. That’s among the lightest hubs in the world. Because folding bikes need to be lifted and carried at times, weight is pretty important to us. And as a bike designer, I can tell you that there are very few times you can find a component that is both lighter and stronger, and which isn’t much more expensive.

Parents love all their babies. That said, do you have a favorite Tern?

I can tell you that all the product guys are conflicted, with several favorites. Lunches are often spent debating which bike we want first. My first choice is a bike called the Eclipse S11i, which is a 24-inch-wheel bike that rides really, really well but still folds to a size only slightly bigger than the typical 20-inch wheel folding bike. It’s got an Alfine 11 hub, a super cool BioLogic dynamo hub that can be turned on and off, integrated lighting and some really cool KlickFix-compatible front and rear racks. I’ll have my BioLogic ReeCharge Case for iPhone hooked up to the dynamo hub so I’ll be able to recharge my iPhone any time I ride. My second choice is a bike called the Verge Duo which is a 20-incher with a two-speed SRAM Automatix hub. The cool thing about the hub is that it shifts automatically – no cables needed. And because the bike has a coaster rear brake and no front brake (legal in some markets) the bike is entirely cable free. So it’s super clean and simple. And it’s all black so it looks kind of stealthy. This is the bike for hopping on and off the subway line.

How do you make sure your initial mix of bicycles and parts is right for the market?

Well, we’ve been selling into the North American market for years. And we know what dealers like and don’t like. And we’re going out now to talk to these dealers, and they are telling us exactly what they want.

Where do you want Tern to be in five years?

We want to be making great bikes that are part of the transport solution. Five years from now, we want to be able to walk or ride around any major city and see our bikes being used for getting around.

Visit Tern Bicycles at www.ternbicycles.com.