Sadly for Electrameccanica Vehicles, the Customer Isn’t That Gullible

With the latest developments in automotive technology, particularly as it relates to electric vehicles, the case for a three-wheeled car is really retrograde stuff. But Electrameccanica Vehicles (NASDAQ:SOLO) is hoping that you’ll ignore such “trivial” details. Instead, the company would rather have you focus on the positives, such as its exposure to the cheap commuter vehicle niche. But as much as management tries to dress up SOLO stock, it’s hard to see the potential here.

electric vehicles charging at a charging station
Source: Scharfsinn / Shutterstock.com

Over the last few months, I have consistently warned readers to stay away from Electrameccanica. Simply, the organization is taking advantage of the hype train surrounding EVs. While some contenders in this burgeoning market will invariably succeed, that leaves many that will also fail. And I firmly believe that SOLO stock belongs in the latter category.

With that said, let’s give credit where it’s due: there is some method to Electrameccanica’s madness. Though the three-wheeled platform comes off as a goofy gimmick, it does make financial sense. Because it lacks that fourth wheel, Electrameccanica’s flagship Solo car is technically a motorcycle. And that’s a crucial technicality because motorcycle manufacturers don’t have to submit their products for crash testing.

However, if the Solo utilized a traditional, symmetrical platform, the National Highway Traffic Safety Administration would have some terribly expensive demands. For starters, just one of those crash test dummies may cost up to $125,000. Further, the crash test itself costs $100,000 or more. That’s not including the costs of submitting vehicles for such tests.

Of course, the big-league automakers think nothing of these safety requirements. But for a company that only generated $590,000 in revenue last year, the crash tests are really out of the question. However, going the three-wheeled route would eliminate this necessity.

I don’t mean to sound macabre, but in a typical motorcycle accident, the rider exits the vehicle. Thus, it’s not the durability of the motorcycle that matters but rather, the helmet. It also means cost savings for the manufacturer, which is good for the manufacturer.

But as an argument for SOLO stock? You better think twice.

Automotive History Begs You to Avoid SOLO Stock

Naturally, Electrameccanica has drawn attention from curious passersby due to the novelty effect. We’re used to seeing four-wheeled cars on the road as an almost sacrosanct paradigm. Thus, it’s alarming to our senses when we see a car sans a wheel. I suppose though that there’s no such thing as bad publicity for a speculative outfit like SOLO stock.

But when you’re done gawking at Electrameccanica’s “innovation,” you should realize that three-wheeled cars are nothing new. In fact, automotive history is replete with manufacturers which have attempted to build and mainstream this platform. For the CliffsNotes version, there’s a reason why you don’t see too many three-wheeled cars today.

Not surprisingly, one of the biggest reasons why automakers attempted to go the contrarian route is to save on operational costs. But at the same time, the three-wheeled cars of yesteryear offered benefits for both the manufacturer and the customer. Typically, these smaller cars offered extra seating capacity, unlike the one-seater Solo. As well, the “delta” or “tadpole” platform facilitated significant gasoline mileage improvements, a big factor in decades past.

Aside from the EV platform’s inherent efficiencies, the Solo doesn’t bother attempting to replicate the convenience and capacity of normal passenger vehicles. Instead, it’s a commuter car, strictly designed for commuting and some urban-based errands.

Which is completely fine, except that SOLO stock will inevitably run into a pricing conundrum. By being a single-seater, the Solo basically operates at a quarter of the practical capacity of a sedan. But when you’re talking about a price tag of $18,500, this cost to play is not a quarter of the price of an equivalent four-wheeled economy car.

Given the constraints of this economic period, consumers will almost surely do a value-for-dollar analysis. Here, it’s better to spend a little bit more for a quality car (within reason) than it is to spend so much cash on a severely limited car.

The Market Wants Symmetry

In the early days of the automobile, manufacturers experimented with multiple platforms. But as the market got fleshed out, consumer expectations settled in. Overwhelmingly, consumers, especially modern ones, want symmetry in their vehicles.

As well, they love SUVs. This unmistakable trend will likely impact how EV manufacturers will design future innovations. But with Electrameccanica, the company is going completely against the grain, betting that you’ll want an impractical single-seat car with just three wheels.

Ultimately, the customer is always right. There’s no point in fighting the market and trying to impose your will on it. But that’s what Electrameccanica is selling here and that’s why I’m suggesting you avoid SOLO stock.

On the date of publication, neither Matt McCall 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.

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. 


Article printed from InvestorPlace Media, https://investorplace.com/moneywire/2020/10/gullible-customers-will-not-support-solo-stock/.

©2021 InvestorPlace Media, LLC