The Small Electric Car Maker that Could Challenge Tesla

Tesla TSLA has long been one of the biggest talking points in the electric vehicle industry. The innovation and product quality that CEO and tech entrepreneur Elon Musk has produced at the company has garnered significant support from the public and investors, although some of this has faded in recent years.

As the EV market expands and becomes more lucrative for companies, more and more auto companies have started developing electric offerings. Some of the largest automobile producers such as Volkswagen VWAGY, Hyundai HYMLF, and Renault Group RNLSY have made significant efforts to enter the market. Yet, so far, few other companies have been able to match Tesla’s quality and range.

Next Tesla?

Electra Meccanica SOLO burst onto the EV scene recently. Based in Vancouver, the company is devoted to developing fully electric cars, with multiple styles. The company didn’t have any sales of its electric cars as of March 2019, primarily because it only came to existence in 2015 and then went public in 2017.

Electra Meccanica was co-founded by Henry Reisner, who is the current COO. Reisner is the son of Frank Reisner who founded Intermeccanica in Torino, Italy in 1959. Intermeccanica is now a subsidiary of Electra Meccanica and both companies work on developing Electra Meccanica products.

The SOLO

Its flagship car, the SOLO, has not yet gone on sale, but potential customers can reserve one for a refundable deposit of $250. The microcar is a three wheeled, single passenger car that is ideal for short-range commuting. The SOLO has a range of 100 miles with a three-hour charge time. Although these numbers are much less impressive than Tesla, it shows how the SOLO is targeted to a specific market. The small EV could be highly successful in dense urban areas.

Mass production of the SOLO is expected to start in the second half of 2019, with deliveries to follow. Electra Meccanica had received refundable deposits for 962 SOLOs, as well as non-binding letters of interest for around 23,264 corporate orders, most likely dealerships, as of March 29, 2019. The SOLO has an expected MSRP of $16,250, making it a great budget option, and even more appealing when factoring in money saved at the pump. Many have concerns about the size of the car. But Meccanica is marketing the SOLO for crowded cities.

The Others

Electra Meccanica’s second car that can be reserved is called the Tofino. The two-seat sports car is essentially a modernized take on Italian-made sports cars from the 1960s. The car starts at $50,000. As of March 29, Meccanica had received 66 individual orders and 41,063 corporate orders. The Tofino appears to be a significantly cheaper alternative to Tesla’s new Roadster, which has a base price of $200,000, although it’s important to note the performance of the Tofino is nowhere near that of the Tesla Roadster and doesn’t bear much resemblance either. The Tofino has an estimated range of 250 miles, compared to the Roadster’s 620 miles. The charge time has not been released, but, based on the other cars, it’s reasonable to think it would be around 7.5 hours.

The third and final car listed on Meccanica’s website is the eRoadster. The eRoadster is based off of the Porsche 356. The eRoadster is said to have a range of 200 miles with a charge time of 6 hours.

Outlook

Although the Tofino currently has more orders than the SOLO, the Tofino is outperformed across the board by Tesla’s Model 3, which can be purchased for a similar price. Therefore, the SOLO’s utility in an urban area, along with its relatively low cost, could be very appealing to consumers and help the company stand out.

The company started SOLO production earlier this year, but has yet to start mass production. Which is expected, per company executives, to start in the second half of 2019. Meccanica has a contract with a Chinese manufacturer to produce 75,000 SOLOs in the first three years of production.

Company executives are also interested in using the car for commercial purposes. As explained in the company’s Q1 earnings report, “From carshare to delivery opportunities, the commercial possibilities for the SOLO are enormous.” Electra Meccanica’s ability to roll out its SOLO for commercial use could prove to be a winning strategy as Uber UBER, Lyft LYFT, and tech giants all race to play their part in the autonomous and electric vehicle age.

Meccanica’s stock jumped over 35% on Tuesday after a Roth Capital analyst started covering the stock and added a few bullish notes. YTD, SOLO is up 179.8%, and with the company’s first sales coming this year, it could continue to add to those already significant gains if it outperforms expectations.

It is important to note that SOLO currently trades around $3 with a market cap of around 108 million. Having such a low stock price, small market cap, and small trading volume, the stock is inherently riskier than stocks that have a higher price, larger market cap and are more commonly traded.

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