Before you read on, please be aware that the analysis below is my opinion only and may include flawed assumptions and inaccuracy of logic; therefore, caveat emptor applies here. Furthermore, all emphasis (color-coded, boldness, and underlined) on the excerpts are my own.
Every once in a while, I’ll come upon a company with a fundamental story that I find exciting. Per my 2 cents, one of the essential ingredients to get me excited is that it has to have the potential to make a paradigm shift with the possibility of throwing off the existing and established trend.
This week, I came upon $SOLO due to its breaking news, “Electra Meccanica Announces Vehicle Pre-Orders Now Exceed 64,000 Units.” My first impression upon seeing the Solo model was “where is the other half of the car?” as echoed by many people in the feedback column. And that the look wasn’t that appealing. However, there is something about the single seat vehicle that makes a lot of sense. I began to realize that this is where the future is heading- it’s visionary! I believe the technology of an all-electric design is what makes single seat vehicle a viable EV. I close my eye and imagine a future where the single-seat vehicle is everywhere. I can see it. In fact, modern medicines and technologies extend human life to such an extent that population explosion necessitates the need for single seat vehicles when most of the people commute to work drive alone. In fact, I believe Electra Meccanica’s Solo is just the beginning. The Solo we see today will eventually morph into a much more attractive and desirable single-seat EV in the future. And Electra Meccanica will have the first mover advantage over the competition.
One of the alluring factors of driving the single-seat EV is the feeling of entering into a cockpit of a fighter jet plane. It invokes the fun factor. In fact, Electra Meccanica did market research and found the following as presented in slide 23 of Electra Meccanica Investor Presentation- October 2018:
Fun to Drive got the most vote along with the attractive price. Imagine when the Solo begins to evolve into an even more racy looking model. Below is some possibility of the future version of the Solo as presented in Slide 25 of the presentation:
The Super SOLO will probably give you the best feeling of entering into a fighter plane cockpit while the SOLO Twinn will allow the passenger sitting behind the driver to feel the same! Haha! I believe the market research hit the perfect tune- its FUN!
I can already see “doubters” proclaiming that single seat vehicle is a joke and will not sell. My 2 cents is that this is a normal reaction because we grew up in the time when the full-size passenger car is the norm. But when I think about it (aka my 2 cents), single seat vehicle takes full advantage of the technologies behind the electric vehicle. Not only is it environmentally friendly, but you also save electric bill by not having to charge a full-size passenger EV battery. Hence, not only are we saving in cost per vehicle but in the electric bill as well. You may think the electric bill is so cheap that charging a full-size EV compared to single-seat EV will not make a difference. I beg to differ. Once EV becomes the norm, you can bet that electric bill will be much higher than we see now when gasoline car phased out completely.
One more thing about the Solo. I believe it will be a favorite car in the get-go for businesses that required a fleet of vehicles for any kind of delivery- from pizza to people offering personal service (e.g., cleaning, cooking, therapeutical massage, etc.)
In fact, per the excerpt below from the article mentioned above,
Imagine what happens to the stock price of $SOLO if 7-Eleven signs a deal with $SOLO for a fleet of the Solo EV.
Aside from my 2 cents that the single-seat vehicle will become a popular choice in our future, what really causes my attention is the Tofino two-seaters roadster Electra Meccanica plans to roll out in 2020 if not 2019. Mine oh mine! When I saw the Tofino in the picture, I want one! In fact, I’m going to buy one when I take some profit from $SOLO in the future.
Below is an excerpt from the same article mentioned above:
While the deposit ($1,000/vehicle) for the 41,124 pre-order are refundable, I doubt the refund will be requested because most of these pre-orders came from dealers. Below is from slide 9 of Electra Meccanica Investor Presentation- October 2018:
Notice that pre-order for the Tofino has gone up from 39,914 @ June 18, 2018 to 41,124 @ October 22, 2018. At $50,000 a pop, 40,000 units will represent $2 billion worth of sales when shipped.
Take a look at the picture of the Tofino below from the article, “Electra Meccanica takes the wraps off of the Tofino electric car development chassis.” I don’t know about you, but I think the Tofino is a beauty! It’s almost like buying a $200K sports car for $50K!
The risk of owning $SOLO will be that the company fails to deliver the Solo and Tofino as expected. However, from slide 13 of the Electra Meccanica Investor Presentation- October 2018, Electra Meccanica has executed a manufacturing agreement with Chongqing Zongshen Automobile Co., China’s largest manufacturer of motorcycles, including electric motorcycles.
Per the above slide, 75,000 vehicles represent over $1.1 billion in Solo sales alone. I’m sure we will hear soon enough about the next manufacturing agreement in relating to the Tofino ramp up. In fact, slide 17 of the Electra Meccanica Investor Presentation- October 2018 showed that the company expected the manufacturing of the Tofino to begin in Q4 2019.
Now, let me summarize the “potential” revenues streams based on pre-orders information from October 22, 2018, per the recent press release, “Electra Meccanica Announces Vehicle Pre-Orders Now Exceed 64,000 Units.”
- 23,030 units of Solo x $15,500 MSRP = $356,965,000.00 ($357 million)
- 41,124 units of Tofino x $50,000 MSRP = $2,056,200,000.00 ($2 billion)
That is a whopping $2.357 billion in sales which can be realized within five years or earlier depending on the speed of the manufacturing process. Although the pre-orders are cancellable, I do not think they will be due to the uniqueness of the one-seater Solo and the appealing factor of the Tofino. In fact, I believe (aka my 2 cents) most of the dealers do NOT want the refund but really want Electra Meccanica to execute the plan flawlessly so they can take delivery of the Solo and the Tofino. I suspected giving the larger pre-order of the Tofino, the dealers will REALLY want the Tofino to be delivered ASAP.
Well, how do we know these pre-orders will not shrink as time passed? We won’t know until progress reports are released in the future; nevertheless, I expect these pre-orders will increase instead of decreasing as time passes.
Giving the massive potential revenues streams from the Solo and the Tofino, I like this bet very much giving that electric vehicles are in our future. And with the market cap of about $100 million as of Friday close, I believe $SOLO is a very worthy speculative play with a low risk/high reward that I have to include in my portfolio. As we see progress developing and the sales number in the U.S. market becomes more visible, I don’t think $SOLO will remain under $10 for long.
I’m actually grateful for $SOLO to come back down to current level due to profit-taking. I’ve bought $SOLO as well as the $SOLOW (warrants) and plan to accumulate more if the price drops further.
Don’t forget that all the above is my opinion only!
My 2 cents