Over the years, I have consistently pounded the table on groundbreaking technology firms. Collectively, we’re entering a period where multiple innovations are converging at once, sparking what I term the “Roaring 2020s.” Certainly, electric vehicles represent a vital cog in this gear. However, this does not include bizarre gimmicks like Electrameccanica Vehicles (NASDAQ:SOLO). Thus, I have a simple piece of advice: avoid SOLO stock.
Of course, I’m not naïve to what’s going on in our new normal. With many people still sheltering in place, they’ve got nothing but time on their hands. To get some excitement in their lives, several rookie investors have poured into speculative ventures like Chesapeake Energy (OTCMKTS:CHKAQ) or JCPenney (OTCMKTS:JCPNQ). Given this context, I understand why SOLO stock has attracted eyeballs.
To give credit where it’s due, Electrameccanica also has an intriguing story. Basically, the company is trying to solve the “last mile” problem for commuters. Most of us use our personal vehicle to drive to work. When we do, we usually drive alone.
But our cars don’t care whether we’re using them efficiently or not. Thus, when we hit the road, we’re always carrying the weight of unused space. Electrameccanica’s flagship Solo EV supposedly presents the perfect solution: why not get rid of that space when we commute?
In a way, Electrameccanica answers the same question posed to Uber (NYSE:UBER) but in reverse. With an ultra-compact, three-wheeled design, the Solo is a purpose-built EV for maximum commuting efficiency. Under this narrow definition, the platform is a cost-saving, environmentally friendly one, which also explains the bullishness for SOLO stock.
But when you look under the hood, you’ll realize that not all is well.
SOLO Stock Is Tied to a Solution No One Asked for
Although the idea of enhancing efficiency is a noble one, the execution is flawed. To be honest, I’m not sure if a market exists for Electrameccanica nor will it ever materialize.
As a three-wheeled EV, the platform has the worst of both worlds. Technically, the Solo is a motorcycle but lacks the convenience of one. Because the front of the car has two wheels, it’s too wide to sneak through tight spots. As well, it doesn’t have the basic functions of a normal car; for example, extra passenger capacity and practical cargo space.
Worryingly for SOLO stock, the underlying EV is an “inbetweener” that has partial elements of positive attributes of motorcycles and passenger cars but never satisfyingly fulfilling them. For instance, the Solo is easier to parallel park in spots which would be impossible for a normal-sized car. But how many times do you find yourself in this situation? Likely, you’re not going to pay $18,500 for the privilege.
Which brings me to another point of why I’m bearish on SOLO stock: who the heck thought it was a good idea to price this EV at over 18 grand? Just pay a little bit more and you’re in good shape to buy a new, subcompact car from Toyota (NYSE:TM) or Honda (NYSE:HMC).
Admittedly, you’re not getting an EV at this price point. However, with the new normal, people just aren’t driving that much. As well, combustion-engine vehicles have become very efficient. When the average commute for Americans is only 16 miles one way, the additional burden of buying a new car exclusively for commuting is a bit much.
With a normal car, you open its utility to other endeavors, rendering Electrameccanica and by deduction SOLO stock a gimmick.
Who Is the Solo’s Target Demographic?
Speaking of utility, investors should ask who the Solo’s target demographic is. With the design and the lack of oomph, it’s safe to say that Electrameccanica didn’t have men in mind as its core customers.
But then, this brings up a dilemma. According to Brad Smith, director of market statistics for Experian, “Women gravitate toward utilitarian-type vehicles.” Female drivers have jumped on crossovers and compact SUVs.
On the other hand, men prefer flash and dash. Thus, you see performance-centric cars dominate male drivers’ wish lists.
This again brings up the core problem that will plague SOLO stock. At best, Electrameccanica is delivering half-baked solutions. The Solo is neither fast, nor arguably sexy. It definitely isn’t practical. And that’s why I say there’s no market for this EV.
Who’d want to buy it?
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.