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3 Reasons to Pump the Brakes on ElectraMeccanica Vehicles

ElectraMeccanica Vehicles (NASDAQ:SOLO) wouldn’t be the first to attempt to succeed where others have failed. It’s just the latest. And in fairness it might have the best shot. Investors seem to think so. SOLO stock is up over 170% since early June.

Source: Shutterstock

Consider me skeptical. But then I would fit David Moadel’s label of a conservative investor. Solo vehicles are cool to look at, but a single-seat vehicle is not a new concept. And they have not sold in the volume required to become a mass market.

Every generation faces emerging trends that are going to change the established norm. These are usually trumpeted with the phrase, “this time it’s different.” However many of these trends are merely fads.

The novel coronavirus will create ripple effects in our economy for years. Some, like e-commerce and telehealth are accelerating more than they are emerging. But we don’t know what we don’t know. And before I’m willing to commit to SOLO stock there are some things I’m considering.

What If More People Don’t Work From Home?

The bullish case for Solo cars is based on an assumption that more people will work from home when the pandemic ends. And there are studies that support that assumption. I’ve written before about a study from Global Workplace Analytics that suggests 25% to 30% of the workforce will be working from home multiple days a week by the end of 2021.

The actual number that may work from home is anyone’s guess. I can see the arguments on both sides. City workers may opt out of a commute if available. And employers who currently rent expensive downtown office space may find the opportunity to cut costs too compelling to pass up.

However, the “death of the office” has been predicted before.  Management guru Peter Drucker claimed in 1993 that commuting to work was obsolete. Said Drucker:

It is now infinitely easier, cheaper and faster to do what the 19th century could not do: move information, and with it office work, to where the people are. The tools to do so are already here: the telephone, two-way video, electronic mail, the fax machine, the personal computer, the modem, and so on.

Yet prior to the pandemic, approximately half of global corporations prohibited remote work.

The Solo Car is Not Really a Car

Call me a stickler, but ElectroMeccanica’s car is not actually a car. It only has three wheels (two in the front, one in the back). That means technically it’s a motorcycle. And a motorcycle with an $18,500 price tag.

Who cares you say, it drives like a car, right? That may be true. However, because it only has three wheels, it t does not have to meet the same crash testing required by the National Highway Traffic Safety Administration. It does, however, have a seatbelt and an integrated roll bar.

Maybe that doesn’t mean everything, but my bet is that it doesn’t mean nothing.

We’re In the Silly Season

SOLO stock jumped 8% on the morning of July 23 on the news that it opened a new retail store in Portland, Oregon. This will be the company’s second store. But ElectraMeccanica has not made any sales yet. It also didn’t announce any new updates on revenue, profits, or sales numbers.

Sure enough the stock gave up all those gains, and more,

But that’s where the market is at. Companies don’t necessarily have to report real numbers. They have to report the potential of providing real numbers.

Should You Invest in SOLO Stock?

It’s safe to say that I believe SOLO stock is only for investors with a high risk-tolerance. Solo vehicles will initially launch in Los Angeles. They will follow along in other cities after that, presumably based on demand.

Investors may be thinking that the nation is ready for single-seat vehicles and that this time really is different. I’m not so sure that isn’t just wishful thinking. And that’s why I have no FOMO about passing on SOLO stock.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for Investor Place since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.

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