“The chain is probably the only element of the bicycle that hasn’t changed in 150 years,” says Todd Sellden. Sellden is an engineer who has been with industrial giant Gates Corporation for 25 years and is now director of Carbon Drive Systems, which produces carbon belts for bicycles. In other words, he’s in a decent position to judge a perceived lack of innovation in bike parts.

Sellden and his colleagues have been trying to address that lack. The 101-year-old Gates Corp has long made belts for various machines from cars and industrial machinery to Harley Davidson motorcycles. Now it is promoting its Carbon Drive system, which revolves around a polyurethane belt that replaces the standard metal chain. The belt does not require grease or regular maintenance, and won’t rip a rider’s pant leg either. On paper, it sounds like any rider’s dream. But in practice, Gates will have a harder time mass-marketing the belts, which first appeared on bikes in 2007.

The bicycle business could use a boost from some new innovation. According to a National Bicycle Dealers Association report, U.S. bike sales dropped 18% in 2011, from 13.5 million to 11 million. That’s following a stellar year for the industry; the 2010 figure represented a 32% growth over 2009 sales. As for sales, the U.S. industry saw $6 billion in 2010—basically flat since as far back as 2003.

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The Gates belt is offered on models from giant brands like Trek and Specialized, but availability of those bikes pales in comparison to those with a standard chain and gear-shifting system. (The belt, initially used with single-speed race bikes, can only allow for shifting gears if paired with an internally geared hub, where the gears are in the back wheel, which limits the total number of speeds possible.)

The product has grown nicely, beginning with two brands and four bike models and now offered on 150 models from 68 brands, but it’s still scarce overall. Charlie McCorkell, owner of Bicycle Habitat in New York and a widely respected leader of the city’s bike scene, says that “almost never” do people come into the store asking for the carbon belt. “The early adopters like it,” he notes. “And personally, I like it. But the pricing is wrong.”

Indeed, the belt system is costly for both manufacturer and consumer. Where the average bike runs $600, a bike with the carbon drive system costs $1,000 or above. For high-end buyers, that’s fine, but the mass market consists of “non-enthusiasts” who could never imagine spending that much on a bicycle.

On the other hand, Gates has had huge success with the carbon drive system overseas, focusing on e-bikes, electrically assisted bicycles that sell well in commuter-heavy places like Europe. Even major auto companies are getting into the e-bike business: last spring, both Audi and Smart, maker of the SmartCar, revealed concepts for e-bike models of their own. “It’s crazy how many e-bikes there are in Europe,” says Sellden. “People use bikes for much more utilitarian purposes there, so the idea of getting to work without as much effort is appealing. I think in the U.S. we have a much more recreational mindset with bicycles. People question it, like, ‘Why would you want an electrically assisted bike, isn’t the whole point to get exercise?’”

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T.K. Malone, product manager for bikes at Swiss-owned brand BMC, partnered with Gates in 2010. He credits the company for advancing the belt system overall: “The early belt-driven bikes weren’t super reliable. They didn’t have carbon fibers running the length of the belt, they tended to stretch under pressure. If you really cranked hard, the belt would slip. Gates is just now offering enough different belt lengths and sizes that it makes it possible to do a full line of bikes where the gearing stays consistent and uses a belt.” BMC is using the Gates belt in three 2012 models, two of them the Urbanchallenge and one the Masschallenge, an extremely lightweight bike. Two of the three are already sold out for the year. BMC would not provide exact sales figures but said that it has sold three times as many of the pricier belt-drive Urbanchallenge bikes than of the cheaper Urbanchallenges that have chains.

For Gates, the obstacle is in achieving mainstream awareness. Jay Townley, of bike research firm Gluskin Townley Group, says it is the mechanics, or “shop rats” (he was one for many years) that hold the true power in any bike shop. As Townley puts it, carbon belts currently suffer from a “chicken and egg” situation tied to the price: the belt, for now, isn’t well received by the rats, so there aren’t as many of them in the market, thus the price is high. The scarcity also accounts for lack of awareness by buyers. And price will only come down with volume.

Gates knows the crucial role of the shop rats. Greg Vigil, VP of marketing and commercial services for Gates, says there are two consumer categories: “There are bike people, who read everything on the blogs, come in and know what they want. Then there are non-enthusiasts who walk into a bike shop and say they want an urban bike. So our target is reaching the bike shop employees and getting them on board so they mention it to that consumer.” Gates has also partnered with Urban Assault Ride, a roving marketing event that targets urban-minded riders. Gates brings samples to the big trade shows like Interbike, though it’s unclear how that would reach the casual consumer. “Our messaging,” says Sellden, “is just ‘get on it’ because once people actually get on the bike, they say ‘Wow, this makes sense. I don’t have to worry about grease, it engages so nicely, it’s super quiet.’” Notably, what Gates is not doing is putting much money into advertising, mostly due to the cost and limited availability.

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In 2011, there were 140 different bike brands sold in the U.S. But in contrast, there is major consolidation in componentry: two major global brands, Shimano and SRAM, combined provide the components for virtually all bikes on the market. (Sales of bike parts make up more than two-thirds of Shimano’s revenues, and Shimano parts are in more than half of all bikes globally.) Although Shimano and SRAM both offer parts that can pair with the Gates belt, according to a SRAM spokesman, “We can say that the difference between [sales of] chain and belt is very significant.” Sellers say that Carbon Drive is unlikely to replace the derailleur system. “We are not seeing a lot of adoption right now of the belt drive in the U.S. market,” says Townley. “For now, it’s chiefly in Asian and European markets. And e-bikes, which are big there, don’t have market acceptance yet here.” In short, the company’s product, sexy innovation though it is, has a tough road ahead.

There is a silver lining for Gates: burgeoning bicycle cultures in cities like Portland, San Francisco and New York. Despite 2008 bringing, as it did for most industries, a brutal fall for bike sales (McCorkell says, “people pulled old bikes out of their garage, they weren’t buying new”), those areas boast growing marketplaces with forward-thinking stores and owners. “There are progressive bike shops that are happy to sell a belt drive, happy to tell customers about that option,” says Townley. “And in the high-end commuter market, there are customers who are happy to pay $1,000 for a bike. They like the idea of paying for something that signals innovation.”

Correction: A previous version of this story incorrectly spelled Todd Sellden’s name. The text has been edited to reflect the correct spelling. Fortune regrets the error.