Vancouver’s ElectraMeccanica Vehicles Corp (NASDAQ:SOLO) is the company behind one of the most buzz-worthy EVs of 2020: the SOLO. Will quirky, vegan-friendly, and above all, easy on the wallet translate into actual sales for ElectraMeccanica? The market seems convinced it will. Between the start of the year and November 20, SOLO stock went from $2.23 to $10.81, a 385% gain.
Shares have been slumping since then, but even the most recent close of $6.61 represents a very impressive showing for the year.
The current slump in SOLO stock also represents a buying opportunity — assuming you buy into the narrative that ElectraMeccanica is on the verge of hitting the big time.
Why the SOLO Is Generating So Much Buzz
The ElectraMeccanica SOLO has people talking. Why? There are four big reasons:
- Electric car stocks in general are hot right now. Despite low gas prices kicked off by an oil price war and falling demand, EVs are having a big moment in 2020.
- The SOLO’s price. The first wave of consumer EVs have been considerably more expensive than their traditional gasoline-powered counterparts. Some of the most popular are luxury vehicles that don’t even attempt to appeal to average consumers. The SOLO is priced at $18,500 — it’s cheap.
- It’s quirky. The three-wheel design with a vegan-friendly interior is photogenic and immediately appeals to those who hate trying to maneuver through a parking garage with an SUV.
- ElectraMeccanica ramped up an effective PR barrage starting in August. On Aug. 5, the company announced three U.S. finalist cities for its new assembly plant. On Aug. 24 there was the announcement of SOLO production, followed by a press release on Sept. 8 showing SOLOs rolling off a production line. ElectraMeccanica has put considerable effort into ensuring the SOLO remains in headlines — and that strategy has succeeded. The barrage of updates have helped assure investors that the SOLO is real and not just another concept, adding to the boost in SOLO stock through the fall.
The ElectraMeccanica SOLO story isn’t all roses, though. Despite the attractive price, the SOLO is going to face some challenges, especially in the U.S. market.
Americans are no longer fans of cars. They want trucks and SUVs. At this point, over 77% of passenger vehicles sold in the U.S. are light trucks (pickups, SUVs and crossovers). A tiny vehicle like the SOLO is going to face strong headwinds in this “bigger is better” market.
In addition, the SOLO is classified as a motorcycle and that has several real implications. For one, the SOLO won’t be eligible for many rebates that other EVs qualify for, including the Federal $7,500 tax credit. This reduces the SOLO’s price advantage over competing EVs.
In addition, that motorcycle classification means the National Highway Traffic Safety Administration (NHTSA) won’t be conducting crash tests. ElectraMeccanica emphasizes safety, including a safety cell, crumble zones and a roll bar. However, the lack of test results combined with its tiny size are going to raise questions about driving safety.
Bottom Line on SOLO Stock
An investment in ElectraMeccanica isn’t without risk. Even if the company is successful in ramping up production of the SOLO, there are big questions about whether actual sales will match the buzz. In the U.S. market in particular, the SOLO faces consumer hurdles including its diminutive size, short range, safety questions, and ineligibility for some rebates that other EVs qualify for.
On the other hand, there’s a lot to like about the SOLO, including that sub-$20k price. And I like the idea of the potential for modifications that could turn the SOLO into an urban delivery vehicle.
Will ElectraMeccanica become the next big story in EVs? I don’t think so. I mean, the SOLO is something I could see Ed Begley Jr. driving, and I think it has real potential to be a popular niche vehicle. But with that niche market and the potential for a SOLO or SOLO-like vehicle being adapted for urban deliveries, I think ElectraMeccanica stock has room to grow.
Investment analysts are in agreement. Those tracked by the Wall Street Journal currently have SOLO stock rated as a consensus “buy” with an average $12.14 price target. With an upside of over 80%, plenty of buzz and the SOLO approaching production, I’d probably take those odds.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.