When I first wrote about Electrameccanica Vehicles (NASDAQ:SOLO) it was coming off a 15-month high. It turns out SOLO stock had further to fall. And that was even with the recent opening of its production facility in China.
SOLO stock is one of many electric vehicle stocks that are trying to capture the attention of U.S. investors. But before it can attract the attention of investors, it has to capture attention of consumers. And that’s no sure thing.
Electrameccanica is hoping to convince consumers to “Drive SOLO.” That’s the name of the company’s marketing campaign for the “purpose-built three-wheeled, all-electric solution for the urban environment.” It’s clear that the company is appealing to the environmentally conscious consumer.
According to CEO Paul Rivera, the Solo fills a niche between “last-mile, micro-mobility solutions and larger, under-utilized passenger cars.” Said Rivera, “we are changing the way people think about how and what they drive. When you’re driving solo, ‘Drive SOLO.’”
That’s good in theory, but I’m not so sure the company doesn’t have an uphill fight on its hands.
Is the Timing Right?
In a somewhat depressing way, I could say the novel coronavirus presents a perfect opportunity for the Solo car. After all, we’re all learning that there is less safety in numbers than there used to be. Taking social distancing on the road could have some appeal.
Then again, the fallout from the virus is causing an urban flight. To what extent this will take, we don’t fully know. What we do know is that the Solo car is targeting urban drivers. And that market is getting smaller.
Or is it?
I imagine Electrameccanica executives would fight with me on that statement. However, I just don’t see the Solo being a primary mode of transportation. With a battery range (for now) of just 100 miles, it’s definitely not designed for long trips. And going 0 to 60 in 10 seconds may make leave some drivers a little underwhelmed.
There just doesn’t appear to be a lot of utility to the car. You’re not putting a lot of groceries in it. You’re not hauling stuff from the home improvement store. Oh did I mention that a lot of millennials are fleeing the cities and buying homes.
And it’s not even a date night car. Ok, that was a cheap shot, but I think the concept is interesting. I just really question if the niche is too narrow.
The Bottom Line on SOLO Stock
What I like and don’t like about the Solo are the same thing. It’s going after a specific niche. I’m just not sure that the niche is as robust as the company believes it is. And that leads me to wonder what the niche really is.
Is it a starter car? Is it a car for the empty nester? The price tag of $18,500 would certainly support that. Is the Solo car a car that drivers are meant to grow out of, or grow into?
The company is only slated to produce 20,000 cars at its China factory. At a price point of $18,500, the company looks like it could significantly improve on its current market capitalization of around $170 million.
Luke Lango did some back of the envelope math and assuming Electrameccanica can sell 50,000 or more Solo cars by the end of this decade, the company would be generating $1 billion in sales. As Lango went on to say “A market-average 2X sales multiple on that gets you to a $2 billion market cap.”
Either way, my advice to investors is to wait on SOLO stock until it starts delivering vehicles. If the company is really changing the way people drive, you’ll have enough time to catch the stock on the way up.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.