Because we’re in the crazy season of electric vehicles, it’s extraordinarily difficult to decipher which company is the real deal and which one is just going along for the ride. Adding to this problem is Electrameccanica Vehicles (NASDAQ:SOLO). At first glance at its flagship Solo EV, you might be tempted to laugh off SOLO stock.
However, the tricky part is that the business concept behind Electrameccanica makes perfect sense. According to the company’s website, 119 million North American worker bees commute to their cubicles in their personal vehicles. The vast majority of them go solo. Essentially, you’re leaving a lot of automotive real estate to waste. Hence, SOLO stock is an investment in vehicular and environmental efficiency.
Unfortunately, I’m not really sure if the idea of a three-wheeled, one-person car will catch on, EV or otherwise. You’re just exposing yourself to multiple fundamental questions. Nevertheless, at the end, I’ll show you why SOLO stock isn’t a name to ignore.
For now, let’s take a look at why conservative investors should write off Electrameccanica Vehicles.
Fast-Charging SOLO Stock Is Hampered by a Slow Product
First, no question exists that SOLO stock is a hot commodity. From the beginning of June to July-end, shares gained a whopping 177%. That doesn’t include the fact that at one point, SOLO hit an intra-day high of $6. Now that’s what you call a fast mover!
Unfortunately, we can’t say the same about the Solo vehicle. According to the company’s statistics, its flagship EV accelerates to 60 miles per hour from a standstill in only 10 seconds. As a car guy, take my word for it – that is painfully slow.
I’d also argue that it’s dangerously slow. Electrameccanica bills itself as a commuter vehicle. Thus, it’s geared toward the city slicker. But that requires a car that accelerates quickly. For instance, try driving in Los Angeles. With tons of traffic and several streetlights that force you to make left turns on a green light, you’ve got to be aggressive.
Not having a vehicle with adequate acceleration is a bummer. And that could eventually hurt SOLO stock. Because keep in mind that its eRoadster is also rather slow for what it is, with a 0-60mph time of 6 seconds. While we’re at it, the company’s Tofino sports car isn’t blowing doors off at 5 seconds.
Pricing Is Whacky
There’s no way around it – with an MSRP of $18,500, the Solo’s pricing is absolutely whacky.
Let’s be real. Although the Solo has 75% of the wheel count of a regular car, it only has about a third of the usability of a normal vehicular platform. Yes, it gets you from point A to point B, so let’s give credit where it’s due.
But what if you wanted to give your work buddy a lift to an offsite corporate event? Obviously, you can’t accommodate with the Solo. Plus, with the backend of the vehicle sharply condensed, you don’t have much cargo space. Certainly, you’re going to have difficulty with odd-shaped objects.
Having said that, the Solo does make sense – at the right price. I’ll argue that whatever that price is, it’s not $18,500. Take a look at the 2021 Toyota (NYSE:TM) Corolla. Starting at $19,825, it’s only a little more than 7% higher than the Solo’s price tag.
Granted, the Corolla isn’t an EV, so it doesn’t save the environment. But asking to pay such a premium for a clown car just so you have the smug satisfaction of contributing one-trillionth of a percent of improvement toward the environment is a huge ask, especially in this economic environment.
No Clear Demographic Target
Invariably, cars reflect the personality of their owners. Therefore, the reason why Toyota makes safe, sanitized cars is that these vehicles are safe. They will attract a very wide user base. Hence, it doesn’t pique my curiosity when Toyota runs advertisements featuring actors of both genders and of diverse backgrounds.
It does, however, cause me a double-take when a company like Electrameccanica does the same thing. Again, let’s be real – this car will be controversial. With three wheels and a comical chassis, it’s not going to appeal to everyone. So, what is the company’s core demographic?
Because of the diverse actors used in its marketing promotion, I don’t think Electrameccanica knows. And that’s a problem for me, especially if you’re selling a limited-purpose car. For example, you don’t see General Motors (NYSE:GM) marketing its Chevrolet Corvette to tree-huggers. Instead, the company is spending its advertising dollars in areas where they’re most effective.
I don’t see the same evidence of targeted marketing from Electrameccanica. Thus, I’m concerned about the longer-term viability of SOLO stock.
But Don’t Sell It … In Fact, You May Want to Buy It!
Despite everything that I just wrote, none of these things may matter in the nearer term. Strangely, I’m quite confident that shares will move higher within the next few weeks.
As I mentioned earlier, we’re in the crazy season of EVs. Thus, anything with “electric” on its name is liable to give bears a good short squeeze. Further, we cannot ignore the Robinhood phenomenon. All it takes is a piece of good news – or failing that, a self-aggrandizing frenzy – to drive SOLO stock. Frankly, I’m not willing to bet against such enthusiasm.
So, if you can handle some risk, go ahead and take a shot. Just be prepared to leave at the right price.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.