Electric vehicle stocks are soaring off-late with Joe Biden’s U.S. election win and a healthy sales report from China. Short-haul electric vehicle company Ayro (NASDAQ:AYRO) continues to enjoy a massive surge in its stock price. AYRO stock gained a whopping 215% in November. The company has a considerable order backlog, and with key strategic partnerships in the sector, things are looking good so far. However, little can be concluded about its long-term profitability and the sustainability of its business model. Hence, despite it having tons of potential, Ayro stock is a speculative play at best.
Ayro went public in May, via a reverse takeover with DropCar, which failed in its efforts to list on the stock exchange. Its IPO was followed up with an array of direct offerings in raising new capital. The company essentially develops configurable and purpose-built EVs for short-haul purposes. Some of its applications include general transportation, landscaping, security, maintenance, and other related tasks. It is looking to ramp up production soon, currently producing up to 600 vehicles a month. The bull case for Ayro stock continues to widen, but it’s a little early to jump on its hype train.
With so many EV startups springing up in the past decade or so, it’s tough to distinguish between them. A few like Ayro are focusing on niche markets. The company is mainly targeting commercial customers rather than the mass markets targeted by Tesla (NASDAQ:TSLA) and other companies.
The main value proposition of buying one of Ayro’s cars is its significantly lower maintenance cost. Its models could potentially save maintenance costs by over 50%. Moreover, its compact sizes are ideal for specific areas such as industrial parks, universities, stadiums, and other related areas. It will be interesting to see how cost-effective Ayro can be in the long run. However, if it can effectively achieve its targets, it could lead to massive cost-led upgrades and interest from different segments of the economy.
Ayro is looking to ramp up its production after raising $30 million in equity raises in the past few months. Another $10 million went into their kitty through an investment from Karma Automotive, a luxury EV manufacturer owned by Chinese multinational giant Wanxiang Group. The initial funding has allowed the company to triple its production capacity to 600 cars per month and more than double its production area.
Positive Recent Developments
Ayro recently reported its third-quarter results where it generated revenues of $388,654 and a net loss of $3.1 million. Naturally, the company is still in its infancy and is still developing its product offerings and sales channels. From a liquidity standpoint, the company is in a solid position, with $27.9 million in cash and cash equivalents along with $241,399 in debt.
One of the main developments was the announcement of its partnership with Karma Automotive. It is the most significant strategic collaboration for Ayro as both companies expect to co-produce over 20,000 light-duty electric trucks. They expect to launch these trucks by the first quarter of 2021 and feel that the arrangement can prove to be highly successful in the long run.
Additionally, the company has received $584,000 worth of orders for its custom-built all-electric mobile food carts. The management believes that these food carts have massive potential for success in the foodservice industry. Moreover, the company also received a nine vehicle order from a military medical campus. This opens up the door for further opportunities from various military medical campuses across the country.
Bottomline on Ayro Stock
Ayro’s USP in an over-crowded EV sector is attractive. If it’s successful in bringing costs down to the aforementioned 50% target, it can have many chances for success. Its short-haul vehicles are already gathering momentum in various industries. However, it’s tough to comment on its long term profitability and sustainability. For the time being, investors may give it leeway, but it has to prove that its path to profitability in the long run. Therefore, you should keep tabs on Ayro stock but avoid investing in it at this time.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article