While it is true Tesla is way out in front of this space, it is worth noting that there are many competitors set to enter this portion of the auto sector. Of course, many of the biggest automakers in the world have plans to enter the EV market, with General Motors Co (NYSE:GM) already seeing strong sales, there are several upstarts of interest.
The applications for electric vehicles extend beyond the traditional four-door sedan or SUVs. We see entire sub-sectors rising in the auto industry. Autonomous vehicles and electric vehicles are the big two currently. While the excitement might be in Uber or Waymo or Telsa and the self-driving technology, the retail money, and small business dollars will likely focus on EV.
The reasons come down to practicality and cost.
The goal of electric vehicles should center around a low-cost vehicle with low-economic upkeep and fuel consumption. Sure, luxury is great, but why do you think Tesla CEO Elon Musk has been making such a big deal about a $35,000 Tesla?
Because that’s where real sales will start to hit the market. But if we cut that price point in half ̶ yes, in half ̶ that’s where we’ll find Electra Meccanica Vehicles Corp’s (Nasdaq:SOLO) first market offering.
Electra Meccanica designs and manufactures innovative electric vehicles. The company’s goal is to revolutionize the way people commute, aiming to create a fun driving experience that is efficient, cost-effective and environmentally friendly.
The Vancouver, Canada, company recently raised $10 million in a public offering of 2.353 million units consisting of one common shares at $4.25 per share and two warrants, exercisable at $4.25 per unit. With a market cap hovering around $90 million, it’s safe to say Electra Meccanica is one of the smallest names entering the EV market.
As a small, pre-production company, capital is essential; however, with the recent raise, Electra Meccanica can now press forward with its flagship vehicle: the SOLO.
The SOLO is a single-seat electric vehicle built with a high-performance electric drivetrain, lightweight composite body, and a low center of gravity. It can reach a top speed of 80 mph, going from 0 to 60 in just 8 seconds. The 17.1 kWh lithium-ion battery provides a range of up to 100 miles and fully recharges in only three hours using a level 2 charger.
Despite its small size, the SOLO successfully passed side-crush tests conducted by PMG Testing Labs in Quebec. The EV withstood more than 20,000 pounds of force against its door compared to the required minimum just under 3,000 pounds.
The target market for this EV is the commuter, but Electra Meccanica sees additional uses for a low-cost, cost-efficient EV. The company envisions commercial applications as well, specifically in local package delivery. Convenience store chain 7-Eleven is currently evaluating the possible use of the SOLO in that aspect.
The SOLO won’t be the only offering from Electra Meccanica. The company is developing the Tofino, a two-seat sportscar and the eRoadster. While the sportscar’s price tag will tip the scales at $50,000, the SOLO runs a budget-friendly $15,500.
Thus far, the company has received pre-orders for approximately 23,030 SOLO single-passenger EV and 41,124 Tofino’s two-seat roadster sports cars. According to the company, these orders represent $2.4 billion in potential sales.
The total domestic electric vehicle market should hit 840,000 this year, but that number could balloon to 17.5 million over the next two decades. Worldwide, the total number of EV’s on the road should top 3 million this year. With no current offering close to the price of the SOLO, the total addressable market is worth noting.
Currently, California generates approximately half the EV sales in the US, so it should be no surprise that the company’s first US SOLO singe-passenger EV dealership will be opened in the Studio City portion of Los Angeles, California.
There are six pending patents that protect the EV designs along with one issued design registration and two allowed design applications. These focus on the SOLO and its powertrain. The company intends to file additional patent applications for its technology and any patents issued should strengthen the company’s market position.
Given the capital constraints along with the high costs of production, Electra Meccanica’s manufacturing agreement with Zongshen, China’s largest manufacturer of motorcycles and motorcycle engines, reduces risk and the need for capex. For its part, Zongshen owns 10.6% of Electra Meccanica common stock, so it has a vested interest in seeing the company succeed and grow.
Zongshen produces 2 million units annually of two-wheeled and three-wheeled motorcycles, including electric motorcycles. The Chinese manufacturer has already constructed the SOLO manufacturing line and is contracted to produce 75,000 vehicles over a three-year period. Based on the $15,500 MSRP, that works out to $1.1625 billion in potential gross revenue over the next three years.
Electra Meccanica projects 25% gross margins once scale is reached, which would project to $300 million in gross revenue over the first three years of operation on the SOLO alone.
It’s unlikely to think the company will reach scale immediately, so gross revenue expectations should be somewhat tempered; however, remember this is only for the SOLO and does not include the Tofino.
With its low price tag and cost efficiency, it’s clear that Electra Meccanica wants you to go green, not spend a lot of green.