To be honest, I had never heard of Electrameccanica Vehicles (NASDAQ:SOLO) until July when some of my InvestorPlace colleagues started writing about SOLO stock.
Based in Vancouver, B.C., the company makes a one-seater commuter car that’s fully electric, can go 0-60 in 10 seconds, has a top speed of 80 miles per hour, a 100-mile range, and can be fully charged in 2.5 hours. All of this for just $18,500.
Rather than try to be everything to everyone, Electrameccanica has focused on the commuter crowd. According to the company, 119 million North Americans commute each day using their own personal vehicles and 88% of them do it alone. And despite the addition of high occupancy vehicle (HOV) lanes, they prefer to travel alone.
Interestingly, during the novel coronavirus, the City of San Francisco has seen carpooling in HOV lanes restricted to two people per car, defeating the purpose of carpooling in the first place.
That’s good news for Electrameccanica, whose SOLO one-person car makes the ideal commuter car. However, if people continue to work from home post-Covid-19, it’s possible that the allure of a one-person car becomes far less attractive.
So, can Canada’s contribution to electric vehicles make a dent in the market? Here’s a look at both sides of the argument.
SOLO Is a Solution to a Problem
To me, I think it’s impossible to ignore the data. People don’t like to travel to work with other people in the car. If all of us drove electric vehicles, that might not be a problem, but a big chunk of Americans drive gas-guzzling SUVs. And even though these vehicles are far more fuel-efficient than they were a decade ago, they’re still not ideal for establishing a zero-emissions world.
The SOLO provides consumers with a realistic solution to a significant problem. How many automotive products can accurately claim this feat? Not many.
However, I think my InvestorPlace colleague, David Moadel, put it best recently:
“[M]ost of Tesla’s electric vehicles look fairly normal and can hold multiple passengers. In contrast, Electrameccanica’s vision with the Solo vehicle is almost otherworldly. It’s either too bizarre for mainstream adoption or a brilliant idea whose time has come,” Moadel wrote July 13.
That’s the issue for investors to decide when it comes to SOLO stock. Is this a case of a mad scientist or a business that really understands the issue of commuting and what drives someone to spend two hours each day getting to and from work.
As my colleague suggests, it’s not so that Electrameccanica will have trouble convincing customers a one-seater vehicle is suitable for commuting, but rather to convince them to spend almost $20,000 on something that looks so darn weird.
Electrameccanica Is Barking Up the Wrong Tree
The biggest issue the company faces is a future workforce that doesn’t commute, opting to work from home, eliminating the need for a one-seater car.
UBS chief operating officer, Sabine Keller-Busse, said in June that she could see one-third of its employees permanently working from home. Her company is still assessing which roles will return to the office.
A recent survey said that 75% of American workers would like to work from home at least once a week, post-Covid-19. One-third of Americans want to ditch the office altogether. If those employees get their way, how attractive is the SOLO going to be to them?
“[I]f that 32 percent of workers got its wish and went fully remote, it could remove as many as 48.1 million cars from American roadways every single workday (assuming all of those workers previously drove to work alone, and all of them secured one of the 37 percent of positions that can be done entirely from home),” stated Streetsblog USA recently.
“And that’s before you factor in workers who won the right to work from home for just part of the week.
I suppose you could still use the SOLO to drive to your local gym but beyond that, it could be a tough sell for Electrameccanica. The company has got to hope that the world returns to a place where offices are an essential part of the equation.
The Bottom Line on SOLO Stock
In fiscal 2019, Electrameccanica lost 30.7 million CAD on 777,821 CAD in sales. On the top line, sales were flat to 2018. Its losses, on the other hand, were almost three times as high as a year earlier.
Roth Capital analysts recently reiterated a $7.50 target price and a buy rating on hopes Electrameccanica releases Tofino, a two-seater electric roadster, that’s scheduled to be released in 2023. Further, it has made 64 SOLO’s to date in 2020 with as many as 1,000 deliveries in 2021.
“We are updating our model and valuation to bring our methods in line with the consensus approach for market leaders. One consequence of this analysis is the relative importance of the Tofino roadster for valuation, where past success with the Inter-Meccanica roadster suggests a sound engineering foundation,” Roth analysts Craig Irwin and Andrew Scutt said in a note to clients.
As investments go, I wouldn’t bet on Electrameccanica, but that doesn’t mean you shouldn’t.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.