Past the half-way mark, 2020 has so far been a good year to be an investor in electric vehicle (EV) shares such as Electrameccanica Vehicles (NASDAQ:SOLO). Year-to-date (YTD), SOLO stock is up almost 70% while the SPDR S&P Kensho Smart Mobility ETF (NYSEArca:HAIL) has posted an 8.7% gain.
According to recent research led by V.J. Thomas of University of the Fraser Valley, Canada, “if we look at the history of the automotive industry in North America (the leading market for passenger vehicles), hardly any start-ups have survived in this highly competitive market place over the past century … Thus, it is very unusual to note the emergence and growth of Tesla Motors, an alternative energy start-up which has grown into a significant manufacturer of battery electric vehicles in North America.”
Indeed, many market participants are well aware of the success of share of three other EV manufacturers — Tesla (NASDAQ:TSLA), Nikola Motors (NASDAQ:NKLA), and Nio (NYSE:NIO) stocks. YTD, they are all up around 270%, 425%, and 270%, respectively. And in recent weeks, trading activity in Canada-based Electrameccanica Vehicles has also increased. Therefore today, I’ll take a closer look at whether SOLO stock may deserve to be in long-term portfolios.
How SOLO Stock Makes Money
EVs, which use electricity stored in rechargeable batteries to power the motor of the vehicle, are fast becoming a hot topic among consumers and investors alike. Yet, Electrameccanica Vehicles sells a vehicle that is somewhat different than the ones offered by other EV manufacturers. If you have seen its flagship car, the Solo EV, you’d have noticed that the front looks like a regular car. But at the back, you’d see only one wheel. In effect, it is a reverse trike.
The Solo is a single-passenger three-wheeled, battery-powered electric vehicle. The company markets it as a short-range vehicle for commuting. It has a range of 100 miles and a charge time of two and a half hours. And the retail price tag stands at $18,500. According to ElectraMeccanica, “119 million North Americans commute using personal vehicles — and 105 million of them commute alone.” And the group would like to capture a big portion of those commuters.
ElectraMeccanica reported first quarter 2020 financial results in May. Quarterly revenue rose to 116,831 CAD ($86,027) from 101,404 CAD. Net loss in the first quarter of 2020 was 1.9 million CAD, compared to a net loss of 20.7 million CAD in the same year-ago quarter.
CFO Bal Bhullar confirmed that given the uncertainty regarding the novel coronavirus pandemic, the company would observe conservative cash management practices. Management also announced the ramping up of production in the second half of the year and development of new SOLO mobile app. The technology will likely offer a range of remote vehicle monitoring capabilities.
The Bottom Line on SOLO Stock
Most investors would agree that the COVID-19 pandemic is fast changing how we live and work. It is likely to have affect on how we drive as well. And all these developments will likely alter how investors compose their long-term portfolios. If you believe EVs will continue to gather drivers’ attention, then you may want to keep SOLO stock on your radar. The compactness as well as the price tag of the vehicle will likely appeal to a wide range of consumers.
ElectraMeccanica Vehicles plans to build a manufacturing site in the U.S. In early June, management announced it “has narrowed its list to the following five states (in no particular order): Arizona, Colorado, Florida, North Carolina and Tennessee.”
CEO Paul Rivera has also recently said: “To continue to build awareness and meet consumer demand, we are pleased to announce that we are accelerating our expansion into key markets — Arizona and Oregon. Our updated plan to open new direct-to-consumer retail locations at high-traffic retail centers in EV-friendly cities provides a unique opportunity for potential customers to learn more about ElectraMeccanica and the SOLO.”
The company’s proposed expansion plans into the U.S. are likely to bring more investor attention to SOLO stock. ElectraMeccanica may also become an acquisition target in the coming years. Therefore, I’d look to buy the dips, especially if there is a pullback toward the $3.50 level or below.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education, including a Ph.D. degree, in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.