In the mid-2000s, entrepreneur Scott Colosimo found success making parts for his motorcycle company in Cleveland, China. This is the story of how the problem of intellectual property theft swept through the business, prompting Colosimo and his team to start from scratch and move production back to the US.
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Scott Colosimo, founder of Land Energy: I flew to China and visited all the factories, how many and how quickly. It has so much spark, so much life and so much freshness. That’s fine, but as we got bigger, we started to expand into other factories, and that’s where intellectual property theft really started to take root. Every motorcycle factory copies each other. This dog eats dog. I mean, if you don’t make money, you will starve. The feeling is real, starting a new company and doing it the way we want. I said we should reload it ashore. We must return it.
Brent Donaldson, Editor-in-Chief, Modern Machine Shop: Welcome to Made in America, Modern Machine Shop’s podcast that explores some of the most important ideas shaping American manufacturing. I’m Brent Donaldson
Peter Zelinski, Editor-in-Chief, Modern Machine Shop: My name is Pete Zelinski. When we launched the show a few years ago, we focused on discussing the key themes of American manufacturing, the collapse of our manufacturing workforce in the 2000s, the automation controversy, the supply chain issues caused by COVID-19. What we see specifically in this last point is a shift in awareness and understanding. The supply chain challenges we have faced over the past three years have been very instructive. To many people outside of manufacturing, it became obvious why the United States needed a strong manufacturing base. We need production to withstand crises. We need it to provide jobs and boost our economy. We need self-sufficiency in production and we have a long way to go as a country. But we see that the phrase “Made in America” becomes a call to action, which has not been in generations.
Brent Donaldson: That’s why we decided to do it again. Only this time we’re taking a different approach. In the lessons in this series, you’ll hear first-person accounts of people making the crucial choice to either bring production back to the United States or start production here first. So over the past few months, Pete and I have traveled around the country to meet people who have committed themselves to developing American manufacturing. These people work for start-ups, well-known OEMs and machine shops, and they have a variety of different incentives to keep manufacturing in the country, often when they have access to cheaper offshore options. Of course, “cheaper” is relative here, as we’re going to learn about a guy named Scott Colosimo and his electric motorcycle startup Land Energy from our first story.
Peter Zielinski: After high school, he went to the Cleveland Institute of Art and got a degree in transportation design. After graduating, Scott worked for several large companies, eventually getting a foreign vacuum cleaner and power tool company that sourced many parts from China. He introduced the possibility of manufacturing in China. Today Scott and his company Land Energy are back in Cleveland, where Scott is from. Scott described the Lands bike as a software-defined electric vehicle. The battery pack is replaceable. The same bike can be used as an ebike, ebike, or ebike, depending on which program mode you set it to. Scott said the vast majority of Lands parts come from the United States, but that’s not the case with Cleveland CycleWerks, Scott’s former motorcycle company. While working for Cleveland CycleWerks in the mid-2000s, Scott moved to China for almost two years, working with manufacturing suppliers and overseeing the production of hundreds of parts needed for a bike. Then he changed course. As you will now hear, he was largely unable to continue because differences in business and work culture caused his company to really struggle. What is it like to be made in China? What are its attractions, what are its disadvantages? Scott tells the story like this.
Scott Colosimo: A lot of it is naive and young. correct? For example, knowing things that I know now, I look at things that I don’t know, and I think this is so stupid, but what I see is the cost of components, just to make a small volume motorcycle, we can make affordable bikes. American made and retailed for about $5. up to $10,000, the whole industry is looking at what I call a bike mortgage, they’re looking at $15,000+ and it’s all Japanese tech or big V-twins. Many of them are dedicated to racing. A lot of this is focused on being the top 1% of people. Mind you, I entered the competition, yes, so I really like it. I still love the Ducati, I really love the Ducati, I have as much fun with the 620 monster as I do with the superbike. Monster is old air-cooled technology. It’s not a very complex machine. Then you buy a huge 4 grand, 749,999, our starting price is 22,000. So I started looking at all of this and said that there is an opportunity to build fun and affordable bikes instead of focusing on racing. You don’t focus on advanced technologies, you just focus on them. I mean, I thought it was a good idea at the time. But I went to so many factories that they just told me to get out, right? Or, for example, people asked where my father was or who Scott Colosimo was, and I was 24-25 years old and I went to the factory and told them that I was going to start a motorcycle company, and it did not resonate. . Mind you, this is the Great Recession of our time, right? The whole country sucks, no one has a job, no one has. No innovation going on, well I’m trying to get started, look, isn’t Cleveland CycleWerks that innovative? correct? You just have to look where the gap is and focus on that gap, like $5 to $10,000, an affordable bike that feels good to ride. I thought it was a good idea, I called the big V twin and thought, hey, I want to make something affordable like a 600cc made by American Motors. For example, I think they made an X-shaped wedge, which was something like the largest V-twin or something like that. So the matter went unnoticed. It’s frustrating. So for six months we tried and we tried and tried and tried. All we get is no, no, no, no, no, no, no, no, no, no. You know, well, well, if you pay millions of dollars in fare, we can make some details for you. The reason I haven’t heard this is the reason I think so. One of them, we are a startup. Secondly, we are coming out of this massive recession, so there is not much capital. I don’t think a lot of people gravitated toward innovation or the term “entrepreneurship” which was unheard of in Cleveland at the time. I look young. I tell people I’m going to do a big thing. And what I’m trying to do requires millions of dollars, and I don’t have any. Like, six hits, more than three for me. Cleveland is a city without bulls. There are many figures here. You have to do it, you have to prove yourself, and I haven’t proved it yet. At that time I had all these connections in China. So I opened MSN and said, hey, I’m trying to make these bikes in the USA. Can we do it in China? Each of them is like: yes, fly in, fly in. Come to China So, we studied China, Korea, Taiwan, Southeast Asia, India. I look everywhere. But I have a huge network of contacts in China. So I think at the time it hit me too hard to really let anything happen here. On the contrary, when I fly to China, for each factory I visit, how much and how quickly? For example, how much do you need and how quickly do you need it? At that time, China was a manufacturing economy. Now she’s trying to turn it into a service-based economy, right? Higher value jobs, but manufacturing was the main focus in China at the time. And there is a vacuum of ideas, no ideas, but a staggering amount of production. When I enter a factory in China, there is a need and a need. I need someone to make things and they need someone to design things. So this is the actual relationship. I sit across from my peers. So I’m sitting across from over 20 engineers or MBAs who run factories and make millions of things. I think it’s a great equalizer. Because many of these Chinese were educated in the UK and the US. They all leave, get educated and come back with all these new ideas. And I think they’re in this depressed space and this old Chinese manufacturing economy that was very dependent on manual labor. These people are buying robots, they are buying brand new equipment in the US and they need to do something with it, right? They were buying, and CNC press brakes were new at the time, there was no laser to deal with, but they made a deal with it. They invest in technology. So this is different. I say this, and I think that’s what America was like during the industrial revolution, because we literally went to some factories with dirty floors and brand new Haas machines, a wall and a roof. correct? Basically, it’s a factory outside. You look back three years later and they have a brand new steel building, a state of the art building right next to where they started. Fully automated. It was a time of rapid change. I mean, this spirit every time I fly to China is very exciting because there is something new. We visited two or three factories every day for about two months. But I was young, I just jumped on a plane and thought, let’s get started. Let’s see if we can do it.
We landed at three different factories. Please note that we do not have production experience. We have no experience of communication with the Chinese. Everywhere there are inexperienced people. So we were sitting there trying to figure out how to do it, and one of my partners at the time was like, “Fuck it.” Let’s, let’s distribute this design to all Chinese factories and let everyone produce. I thought, oh, this is a surefire way to make sure we never make any money, right? Because I think they all start successfully. This is not the idea of the Chinese, is it? The idea is that a lot has changed in a short amount of time, but at that time, again, as in a creative vacuum, every motorcycle factory copies each other, right, so it’s like a Honda Copy of that copy, and then the Chinese will make a copy of this copy and then it will make a copy of that copy, and then it will make a copy of that copy. It’s like removing six steps, they just make so many bikes they can’t get enough of the idea. So we actually found a factory where there were several factories that were producing quality products that we could accept ourselves, and they had at least a basic ISO system. They have at least some basic checks and balances. I said, well, I rejected the idea of putting all the designs in every factory, and I said this factory in Wushi will make this bike, this factory in Guangzhou will make this bike, the Thai factory that will make it. bike intends to make this bike. This whole remains independent, so if the factory screwed us up, at least we had something to produce. But you know, you have to feed the beast, you have to produce 1000 bicycles. This is what happens all the time. In fact, I had to move to the factory. The first factory we cooperated with, boss, we became very good friends. He is the most dedicated factory we have ever had. The first one we landed never weakened us, never underestimated our highest qualities. It’s always getting better. Very good. But then, as we got bigger, we started expanding into other factories, and that’s where intellectual property theft really started to creep in. The reason I had to move to China was because we were manufacturing and supplying parts. It is the same. Maybe they captured 80% of what we expected, but it was always 20%. I don’t know if you’ve ever looked at a replica and thought something was wrong with the proportions or the weight, or if you just thought something was wrong. But, especially on motorcycles, there are little things you can do wrong that are just plain wrong. So make sure the design is right, they are designed right. We use the right metal, we use the right aluminum with the right process, we even have some stuff that needs to be forged and they’re like, well, it’s cheaper to cast, so we’re just going to cast, well, can’t do it for such rigid structure like yours. You have to fake it, right, you can’t be cheap, that’s all this nonsense, I’m trying to manage from the USA, but I don’t think I can. I live in a factory floor in Ningbo, a small town, and have been producing parts for about a year and a half. This is a need, right? I figured if I didn’t move there and do it, it would never get done. Or at least it was never done right. So I remember we made a very bad decision very early on, we went to a frame shop and they just couldn’t get the quality chassis we wanted. It’s an old school American buoy with welds like snot, right? Just cracked, not enough heat, not enough, just awful welds. That’s the equivalent of $180,000 of mistakes I made in the months after starting the company. Huge mistake. In fact, our first factory came out and said, “Hey, we know you guys don’t have the money for this.” We don’t want the project to fail, we want the project to work. Well, if we pay for new tools, we’ll move them to a factory that we know can build your chassis. Not everything is so bad. I still have a few very good friends in China, some we still make with him, and in general, intellectual property theft happens all the time.
So in a way, China is making ridiculous money. Because loans are not always real. They don’t always need to be rewarded. A big part of it, if you are a Chinese manufacturer, you are proud to support the Chinese people. Some of them are only meant to keep people busy. Some government producers never need to make money. So no margin negotiation. When you really try to detail the actual cost of this part, it can get pretty vague. Now it’s a little different. But how much did a stamp cost in those days? 2.50. So we know it’s not 2.50 because we can get it for 15 cents at this factory. So what’s the real cost? Okay, we’ll give you 14 cents. I thought, wait, we know what the tonnage is, and we can roughly calculate how much it will cost. How did you come to the original 2.50? Well, based on that, you can never get to the bottom of it. What I’ve learned over the years is really, it was a few years ago, it’s really about job creation. We quickly realized that the reason every manufacturer wanted to work with us was our export orientation. At that time, exports were very profitable in China. It’s really fun, the kind of education you get in the field. Everyone said yes. When I say that I think this is what the Industrial Revolution looks like here, I really mean it. There is so much spark, so much life and so much newness, and this push, this dog eats dog. I mean, if you don’t make money, you will starve, right? The feeling is real. As far as I remember, we work 24/7. I eat at the canteen of the company, where we are all the time. At 2:30 in the morning I drew a new part that we need on a piece of cardboard and said that we need a shock absorber, we need it. We don’t have any material, no. And one of the workers. It’s like a CNC shop next to a noodle shop across the street. Like honey, I thought, let’s go there in the morning, no, now let’s go and knock on the door. It’s a storm door, boom, boom, boom, boom, and the guy is sleeping in a cot above his CNC machine. he lives there. All his family lives there. We said, hey, we need these parts tomorrow, because we have a lot of them. We need to make sure everything fits. He’s like that, okay. He’s like, they’ll be ready by 4:30 in the morning. It’s 2:30 am now. So I thought what? He’s gone, I’ll do it now. He’s gone, you pay in cash. I thought, yes, we’ll pay in cash. He’s like, how much? He’ll be done in two hours. Reminder. It’s like a small piece of cardboard, hand-painted. While we were sitting there, he was programming in G-code, as if he were there. He looked like it would be done. no problem. So, all of you like it, okay, let’s go home, sleep for a few hours, and then come back, and we can go back to the office, where there is a box of parts. There he waits for his money. This is hunger. I will say that I admire it. I mean, I feel like there’s a kind of American ingenuity, and that spark is there. And if you slam like communist rhetoric or something like that, it’s just people starving, which I really appreciate because of the speed. When I was in China and then returned to the US, it was like slow motion. This is what I was looking for when I worked in the automotive industry, I was looking for that spark of life. This dichotomy in China is simply a cultural difference. I would go to a factory where the factory owner would show his entire R&D department to his friend who also owns the factory and he would show his competitors the cutting edge projects he was working on, to me that was downright ridiculous. He demonstrates one of his main rivals, his competitive advantage, it’s just a cultural difference. So this idea, it’s mine, I created it, it’s mine. This is different. So the point is not that the Chinese are just trying to screw everyone up, the point is that this is still an intellectual vacuum. In terms of production, they are superior to their weight. If it’s a dog eating a dog and you’re trying to survive, you’re trying to keep your factories going, you’re doing whatever you need to do to produce new things. Cleveland CycleWerks would not exist without the help of the Chinese. We have made millions of bikes, made thousands and thousands of bikes, and I would never have made it without my Chinese partners. But they took their pound of meat. That is, they take our intellectual property and give it to their brother’s factory, or they take our brand and change the name a bit and start selling products under our brand. We even have a Chinese factory with CCW copyright instead of Cleveland CycleWerks. They started selling bikes under CCW, which was our own brand, and we had our own factory in China, which shut us down. One of our Chinese factories took our product and went to one of the clients we were trying to install in Spain and then sold our product for less than we could because they made it for our own client and killed the whole country for us. They just changed its branding. The Spanish dealers don’t care, they get the bikes cheaper than we sell them and they agree with that. We have our own bikes that are sold under different names in our protected country. It’s constant. When you’re trying to build an honest and valuable brand and suddenly someone sees the same product being sold under a different name in the same country for a lower price, most customers don’t really care. I realized that most customers don’t care, so they buy.
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Brent Donaldson: I’m Rosemary Coates, Executive Director of the Reshoring Institute. Prior to joining the Reflow Institute, Rosemary worked as a management consultant in China for many years, where she learned a lot about how to mitigate potential risks for US companies that outsource production to China. When I spoke to Rosemary, I told her about Scott’s experience at Cleveland CycleWerks.
Rosemary Coates, Executive Director of the Reshoring Institute: Of course, this is an intellectual property issue. When companies move to China, or even purchase goods from China, it may simply be parts, kits, or other goods that they bring back to the US. In the meantime, you’ve probably shipped your schematics, tools, and dyes to China to help with the assembly line. You taught the Chinese how to make your product, what are the quality standards, where are all your sources, do you buy from other companies in China, they know where you get your parts from. They have all the ingredients to make it on their own. Many times this is exactly what happens. So maybe someone’s cousin or uncle has a store down the street and around the corner, and they make exactly your product, just renaming it something else. In other cases, when companies do leave China, they wind down production and leave China, think about what you are teaching them, how to make your product, where the parts come from, what are the quality standards, etc. So instead of going to bed at night and forget all about how your product is made, when you close the doors, the manufacturing batch continues to make it and often competes with you in the global market under a different brand. Another important thing to consider is that if you have a product that the Chinese government wants to produce in their country, they won’t let you go. This is not America where you can close the door, turn off the lights, set the alarm and leave. It’s not the same in China, you have to apply for a permit that may never come, you have to work with the local government to lay off staff, essentially lay off people, most employees have some kind of employment contract. So you have to pay until the end of the employment contract. These are the things you must consider. If not, I mean, of course, you can take the next plane back to the US. But if that’s the case, they’ll never let you back in, so they might restrict your visa. They can take over your production base. I mean, if you don’t follow the law, all sorts of bad things can happen.
Peter Zielinski: This is Scott Colosimo talking about his decision to leave the country and start a new electric motorcycle company in Cleveland Land Energy, and he decided to source as many parts as possible from the US, and even better, he said, because as close to home as possible. city.
Scott Colosimo: I can’t say anything is right or wrong, I can say I won’t take it again. I will no longer work in this situation. It was, it was hard lessons for me, it’s a 12 year journey that I’ve been here. But when starting a new company and making it the way we want it, I’m just saying we have to move it. We must return it.
So, starting around 2014 in the Eevee area. It starts like everything else. Thanks to Cleveland Cyclewerks, I started doing bike customization in one shop. I just started setting up some e-bikes. It is so simple. So I started building again what was essentially a powerful lightweight bike. Think back eight years ago when my son was two years old and I cut and assembled my first e-bike by hand. So it’s about proper scheduling. Then I put it on the shelf because the battery wasn’t very good. They were very, very expensive, and at that time there was nothing better than natural gas for electricity. I kept making gas bikes and saw this huge growth. Chinese government please note, I’m still 100% Cleveland CycleWerks, I’ve shuttled back and forth between China to the US and the Chinese government, it’s just that gas is illegal in every major city and you can’t ride gas bikes anymore. So they start with bicycles. In just a few months, we saw how the entire economy switched to electricity. That’s when I started to say, wow, it’s getting bigger. So 2015, 2016 and 2017 are still in their infancy. It’s 2019 and here comes Evan Paner, one of my young designers with a passion for e-bikes. Stupid child with wide eyes. He insisted and insisted, so in 2019-2020 we are really starting to get serious about building some prototypes. Then in 2020 I said that I made a mental shift and you have to look at things from two perspectives. I look at things as an amateur, but I also look at things as a business professional and also as a manufacturer. In 2020 I said I can’t, mentally I can’t keep producing gas while I’m promoting electricity because they’re so different. But then I keep coming back to that legacy, right? Okay, we need parts ordered from China. Okay, we need this. So I thought, “This is, like, made in America.” Then the Cleveland CycleWerks kept dragging me back to China. And I am. We are moving into the future. We went back to gas, and then I switched all my developers to electricity, and none of them wanted to go back to gas. For example, we cannot do this mentally. There’s so much new out there that when you’re driven by innovation, you have to go back to the old ways. Everyone here is thinking, when are we going to end this?
Brent Donaldson: So, at a bad time, Scott and his team relaunched a Cleveland CycleWerks bike called the Falcon in March 2020, at the start of the pandemic. They ended up posting the video live on Facebook after their event venue closed. But it was at this time that Scott and his team realized that if he wanted to build an inexpensive electric motorcycle in this country, he would have to start from scratch. No more Cleveland CycleWerks and its catalog of over 1000 parts. So when Scott and his team went on hiatus, he sold Cleveland CycleWerks and founded what would become Land Energy, a company that makes electric motorcycles with swappable battery packs that can be easily removed and used as a generator. , the beach, anywhere the batteries are the size of an oversized lunchbox, 25 to 60 pounds each, and they have USB C ports so you can plug devices and other small electronics into them. The idea is that when a battery runs out a few years later, battery technology will have improved by then and the next battery will last longer. This has always been at the heart of Land’s philosophy.
Scott Colosimo: The pandemic has really brought attention to the fact that this idea of a global ideal supply chain running 24/7 is a complete fallacy. It’s so naive and unrealistic. For 10 years, anywhere in the world, I was able to make anything out of print, like clockwork, in 15-30 days. If it takes 45 days, some kind of catastrophe will happen. We ship bikes in 20-30 days for 10 years, which is crazy. Or we get an order where we can collect over 200 parts from multiple suppliers in one place and ship within 30. This is crazy. This is crazy for a very small company. We can then ship a $3,000 container anywhere in the world within 14 days. It’s just crazy. Even then we thought we were living in a golden age, that’s crazy. I don’t think it will come back. I really do not know. First, I think Americans understand that if we don’t produce something, we will end up in a world that hurts. From the local to the federal level, there is recognition that we have dug a deep hole, and industry and government must work together to dig us out. And from the supply chain, mining, manufacturing. The whole system has been destroyed in the last 30 years and we need to restore it. So now we really understand that we need to restore it, we can’t make a living with containers worth $12 to $30,000. it’s out of the question. So, we are lucky again that we have an idea. We saw where the market is heading, and what I tried to do in the US 12 years ago is working today. There are also many manufacturers here that are investing in high tech that we didn’t see 10 or even 12 years ago, all the high tech factories I’ve been to are in China and the Chinese keep and keep having fully automated factories inside of you. Where to invest. and I don’t see it here, you would walk into a GM or Chrysler plant in Detroit and they look the same as they did in the 60s. They will restructure them and do something. But it was nothing like the factories I went to in China. So we’ve seen the government, we’ve seen the industry, we’ve seen big investments in the industry. 4.0, by the way, I will give empty quotes, this is a buzzword that everyone likes to say. But Industry 4.0 has become even smarter. Use robotics, use additives, and apply different methods more intelligently. And then I think we’re going through an energy transition in the United States. So we see that, but we also see governments globally recognizing that if they don’t participate in this energy transition, they will be left behind. When I saw him, he seemed to me more than a car. There’s a whole revolution going on and we as a country need to come together and push it as far as possible. Because if we don’t, we will import all these technologies.
Land was indeed created in 2020 as a limited liability company, and then we transformed into C Corp. We started raising capital to really scale. So the transition is very fast. Being in such a stressful environment with a group of people who are so focused on R&D, we are very fast and use the product intensively. Every time we do 3D printing or CNC machining, or every time we make a part, we go out and use it. As manufacturing has evolved, at least in terms of the small volumes we’re in, there are still plenty of stamping plants out there, which makes sense when you’re making millions of parts. But in fact, there are many small producers in the Midwest in Cleveland who are looking for a middle ground. We’re talking thousands of pieces. But we’ve seen prices drop drastically, and some of those little undercarriages can even put together an $8,000 tool, which doesn’t make sense if you’re only using 100 pieces. I think this is a shift in the industry as a whole. The US is doing what the Chinese don’t like to do, which is small and medium manufacturing, which we will live in for the next two years. A lot of people were just looking locally to solve problems that we were trying to solve globally before and that narrowed down the heartburn because it was nice to know on Friday, my engineer and my fabricator drove up to our robotic welded frame factory in the morning and solved one question, they come back here and we work together in the afternoon. Like we can’t do it. If we don’t do it locally. I think it’s just smarter. Much easier to do on the spot, or rather, in the village, due to logistical problems, the cost of logistics and the instability of everything now. We believe that two wheelers, or what we call small vehicles, will usher in a golden age. We see it as if mobile payments or vehicles should live within the current generation. The current generation is a technological frontier. Some of them understand that you can use them for more purposes. This is where the energy part comes into play. So the battery has a plug and a USB port, USB C. You can use them to control everything. If the power goes out, you can use these things as a small backup battery in your home. When you go camping or say you’re going to the beach, you carry a power bank with you. You know that a technologically advanced consumer or a technologically advanced rider doesn’t want to be tied down. So now you can get off and stay longer. The idea is that you can work from anywhere. This is a concept, not a new way of life, but a way to get rid of the need to live in an office. You don’t have to be in one place. This is the highest form of rebellion. This is a free car.
Peter Zielinski: Today, the company’s bikes contain about 80 percent American-made parts, Scott said. The exceptions are mostly castings that are still hard to find in the US for small batch production, expensive components, bodywork, chassis, controls, software, all of which are sourced in the US. Scott said the company has about 150 suppliers, some of whom are looking to become contract manufacturers for his company, which is a good sign for the scale of its production. Recently, Luneng finally made its official debut. The Land electric motorcycle was unveiled at the recent Consumer Electronics Show in Las Vegas. You can view Land models for yourself on Land.Bike, including districts and district scramblers.
Brent Donaldson: Made in America is a Modern Machine Shop artwork published by Gardner Business Media. The series was written and produced by Peter Zielinski and myself, who mixed and edited the show. Pete also appears on our sister podcast on 3D printing or additive manufacturing. No matter where you get your podcasts, you can find AM radio. Our final title song is sung by The Hiders. So if you enjoyed this episode, please leave a good review. If you have comments or questions, please send a US made email to gardner.com or visit us at MS online.com/madeintheusapodcast.
Episode 1 of the Made in America podcast focuses on manufacturing issues related to trade policy, global supply chains, education, automation, and our ability to produce skilled workers.
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Post time: Feb-22-2023