A Cool Vehicle Draws Stares, but Buyers Are Hanging Back

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.

By ERIC A. TAUB NY Times

"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 "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."