When the topic of electric cars comes up – as it increasingly does – the first company named is Tesla (NASDAQ:TSLA). Tesla has probably done more than any other company to bring electric cars into the mainstream. And it’s become the world’s most valuable auto maker along the way. What about ElectraMeccanica Vehicles Corp (NASDAQ:SOLO)? Haven’t heard of the Canadian manufacturer of micro electric cars? Probably not. But with SOLO stock priced at around $3 (and up 37% in 2020), it’s a cheap entry into investing in the electric car market.
Yes, $3 is far more affordable than the $1,489.77 a share in Tesla will set you back. However, before making the leap it’s important to realize that ElectraMeccanica Vehicles is no Tesla.
Will Buyers Pay for 3 Wheels and a Seat?
ElectraMeccanica’s first production vehicle is the Solo, which is due to be released later this year. It comes with a U.S. starting price of $18,500 which is a bargain price for any new car – let alone a fully electric model. That’s just a bit over half the starting price of Tesla’s most affordable Model 3.
Sounds great, but potential buyers are comparing Apples and Oranges.
The Solo is a three-wheeled car (there’s a single wheel on the rear axle), with seating for a single occupant. There’s a small rear trunk, but space is tight. There’s heat and AC, a heated seat, an AM/FM/Bluetooth stereo, and an LCD instrument cluster. Buyers have a choice of red, white or black paint. Compared to most modern vehicles that sport touchscreen displays with Apple CarPlay, leather seating options, and a suite of safety and convenience features, the Solo is pretty spartan.
As InvestorPlace contributor Josh Enomoto points out, the micro car’s estimated 10 second zero to 60 mph time of 10 seconds is downright pokey. That’s slow for a minivan. For a single-seat electric car? Winter is also an issue, especially with rear-wheel drive and a single rear wheel. ElectraMeccanica says the Solo performs best when driven in dry or damp conditions, above 41 degrees. It suggests:
“If there is ice, heavy snow or very heavy rainfall out there, let your Solo take a break!”
And then there’s battery range. EV manufacturers are pushing past the 400 mile range at this point. Entry level EV’s with smaller batteries are hitting in the 150 mile range. The Solo’s range is estimated at “up to” 100 miles.
The Competition Isn’t Tesla
ElectraMeccanica may be counting on some of the Tesla halo effect around EV’s, but the Solo clearly isn’t competing against Tesla cars. The plan is that will come later, with the company’s Tofino and eRoadster models.
The Solo is going to face a tough slog against electric cars in the non-luxury segment. Take the Nissan Leaf. In production since 2010, it holds the crown as the world’s top-selling electric vehicle. It’s not as small as the Solo, but it’s still a compact that’s ideal for driving and parking in urban environments – the Solo’s intended area of operation.
In the U.S., the latest Nissan Leaf has a starting price of $31,600. For that price you get a proven electric car with 149 mile range, four wheels, seating for four, advanced safety systems including automatic emergency braking, a touchscreen display plus remote app access, Apple CarPlay and Android Auto integration, zippy acceleration, and the ability to drive in any weather conditions. Plus, you can have the Leaf serviced at any of Nissan’s 1,000-plus U.S. dealerships.
The Solo costs $13,000 less than the base Nissan leaf. But the Leaf is still affordable enough (especially with incentives that can bring its price down to $24,100) that the many compromises just don’t seem worth the savings. And it’s not just Nissan. Virtually every automaker is getting into the affordable EV game.
Bottom Line on SOLO Stock
SOLO stock was trading near $15 in 2017, shortly after the SOLO EV micro car was first unveiled. The excitement quickly wore off and it dropped to penny stock status just a few months ago.
With the launch of Solo imminent, shares in ElectraMeccanica have popped and are now priced about $3. They could go higher as launch hype ramps up. After all, the company can lay claim to offering the most affordable EV car in the U.S. market once the Solo hits the streets. However, if the micro car lands with a thud – and it has a lot of strikes against it – SOLO stock is likely to drop, and quickly.
Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015. As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks – How to Profit Without Getting Scammed