One of the most interesting electric vehicle (EV) plays is Electrameccanica Vehicles (NASDAQ:SOLO) stock. Founded in 2015, the Canadian automaker makes a purpose-built, single-seat three-wheeled EV called the SOLO. Normally, the concept is a bit out of left field. But the novel coronavirus pandemic makes the design interesting and worth exploring.
And the company is also making some great strides. It has more than 64,000 preorders for the SOLO EV in a total of $2 billion. Markets are also realizing the potential; SOLO stock is up 541.84% over the last six months. I believe the company offers a unique way to play the red hot EV market.
Novel Concept Puts SOLO Stock in the Box Seat
One of the major things in favor of SOLO is design. Before the pandemic, the car could be seen as an interesting anomaly in the EV market. A concept that would take a few years to catch on. But after Covid-19, there has been a major shift in attitudes, with people preferring single-seaters over traditional SUVs.
When you are on your own versus traveling in a four-seater with someone, the transmission risk is lower. There is also a shift that we are seeing to more environmentally friendly vehicles — the reason why the EV sector is so doing so well at the moment. One other thing that Solo has going for it is the price. It retails for $18,500, with a 100-mile range, and can reach speeds of up to 80 miles per hour. A Tesla Model 3, in comparison, is changing hands for over $30,000.
There is one thing that I should point out here. Although the Solo function for all intents and purposes is a car, it is not treated as an electric car for federal tax purposes. So, if you buy one, then you cannot take advantage of up to $7,500 in credit, usually reserved for a conventional four-wheeled electric vehicle. That’s because the vehicle is categorized as a motorcycle by the federal government.
But all things considered, I believe the company offers good value moving forward. Even before the pandemic, the vast majority of Americans travel to work alone in their cars. Over three-quarters choose to commute this way, with nearly identical numbers for both men and women. That translates into approximately 115 million vehicles transporting exactly one person each. And remember, these are pre-pandemic numbers. So, there is certainly a huge market to exploit here.
What About Valuation?
Now, this is the part where it gets interesting. Valuing a company like SOLO, is tough at this stage. That is primarily because there are few companies out there that are offering a product type that is similar in nature. Tesla (NASDAQ:TSLA) and other major automakers are concentrating more on conventional EVs. And to be fair, they have that market on lockdown, no pun intended.
I guess you could compare it to the Smart Fortwo from Daimler (OTCPK:DMLRY), a rear-engine, rear-wheel-drive, 2-passenger hatchback microcar. In 2019, that brand of the vehicle managed to sell 107,000 units worldwide. Over a three year period, if SOLO manages to get even a quarter of those sales, that will amount to revenue close to $500 million, giving you a price-to-sales of around 1x, very attractive by any standard.
However, we still have a long way to go. The company will launch in the U.S. this fall with two locations on the west coast in Los Angeles, CA, and Scottsdale, Arizona. But if the preorders are anything to go by, I believe the company will see a lot of traction when they launch.
Worth a Chance
When you look at the package as a whole, there is a lot to like when it comes to SOLO stock. As is the case with most companies in the EV space, the stock is a bit overheated. Still, Electrameccanica is moving toward production, set to launch in the U.S. in the fall, and there is only one way to invest in a single-seater.
Clearly, the best times are ahead for the company, which makes me think that this is the ideal moment to pour your capital into this one and take advantage of the upswing in share prices that will come after we start to see some revenues in the forthcoming earnings reports.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. He has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.