ElectraMeccanica aiming to create a fun and environmentally friendly driving experience

Designer and manufacturer of electric vehicles Building flagship SOLO, a three-wheeled single-passenger EV Expanding SOLO retail footprint in Colorado, Washington State, California, Arizona, and Oregon What ElectraMeccanica does: ElectraMeccanica Vehicles Corp (NASDAQ:SOLO) is a designer and manufacturer of electric vehicles. Its subsidiary, Intermeccanica - a custom coachbuilder founded in Italy - has successfully been building high-end specialty cars for 60 years, including the Roadster, a replica of the 1959 Porsche 356 convertible. ElectraMeccanica’s goal is to revolutionize the way people commute, aiming to create a fun driving experience that is efficient, cost-effective, and environmentally friendly. The Vancouver-based firm is developing the innovative, all-electric SOLO, a single passenger vehicle, as well as the Tofino, a high-performance two-seater electric roadster sports car. The SOLO is a three-wheeled single-passenger car that boasts a top range of 100 miles and speeds of 82 miles per hour on a 17.3-kilowatt-hour battery pack, The SOLO features front and rear crumple zones, side-impact protection, roll bar, torque-limiting control, as well as power steering, power brakes, air conditioning, and a Bluetooth entertainment system. It sells for $18,500 – around half the price of a Tesla. The vehicle was included in a Forbes list of the “coolest new cars” for 2020, amongst names like Aston Martin, Cadillac, and Tesla. The company has produced over 40 SOLO vehicles at its first manufacturing facility in Vancouver and delivered them to customers in the US and Canada. These vehicles were delivered to paying customers and potential customers in efforts to conduct pilot tests for commercial use, as well as for use in Global Compliance testing, such as crash tests. ElectraMeccanica is in a manufacturing agreement with Zongshen Industrial Group, China’s largest manufacturer of motorcycles and motorcycle engines, which reduces the Canadian firm’s risk and the need for capital expenditure. Zongshen owns 10.6% of Electra Meccanica common stock. The Chinese manufacturer has already constructed the SOLO manufacturing line and started making the vehicles in August 2020.  Zongshen is contracted to produce 75,000 vehicles over a three-year period. How is it doing: During the past few months, ElectraMeccanica has been preparing for SOLO’s commercial rollout in the western US.  The company recently announced that it had selected Mesa, Arizona, in the greater Phoenix area, as its new base of US operations. It will establish an assembly facility and engineering technical center to support its strategic plan to meet anticipated demand for the SOLO.  When fully operational, the company said the facility is expected to create up to 500 new jobs and will be capable of producing up to 20,000 SOLOs per year. Altogether, it will feature both a light vehicle assembly plant, along with a state-of-the-art engineering technical center, including multiple labs to support comprehensive research facilities, as well as vehicle chassis, battery pack, and power electronics testing workshops.  The new facility is expected to generate second-order effects that will positively impact the local and state economies. In addition to strong consumer interest in the SOLO, the company has seen growing interest in commercial fleet and utility applications. Beyond efforts to address commuting and traffic congestion challenges in the region, the company intends to work with local municipalities to initiate a future pilot SOLO share ecosystem in the Mesa and the greater Phoenix region. ElectraMeccanica is also expanding its retail footprint with direct-to-consumer retail centers in its first locations in Colorado and Washington State, as well as additional locations in California, Arizona, and Oregon. Seven new locations are set to open in May and June in traditional, high-end malls and town centers.  All told, the company will soon have 20 locations in 10 major metropolitan areas within five states.  The company is also ramping up its Drive SOLO marketing campaign aimed at educating consumers on a new way to drive efficiently. The campaign involves an aggressive rollout in eco-conscious cities where the SOLO has an existing retail presence and will feature almost 300 billboard and digital mall displays along with social content.  As of September 30, 2020, the most recent financial reporting period, the company ended its third quarter with more than C$101 million in cash, giving it plenty of runway for SOLO’s retail commercialization.    ElectraMeccanica has also begun the development of a new smartphone app that will enable remote-monitoring capabilities for SOLO owners. The app will provide owners with a connected vehicle experience with features that can tell whether the vehicle is plugged in and connected as well as providing a battery-charge status and length of time to complete a charge. Inflection points: Develop Mesa facility Open additional SOLO retail dealership locations What the broker says: Stifel GMP frecently initiated coverage on ElectraMeccanica with a Buy rating, noting that the Canadian company “has a compelling lead" in the high-growth affordable EV market.  “We see significant secular growth ahead for the short-range, commuter EV market, which is currently underserved by existing or imminent products.” the broker's analysts said in a note to clients “The SOLO is a highly-attractive platform for the high-growth e-commerce last-mile delivery market, as well as commercial fleet market, and expanding shared mobility market.” The analysts also pointed to other company strengths such as a strong management team, a less-risky manufacturing strategy versus industry peers, and a “reasonable production and product ramp” strategy. Stifel has a $9 price target on the stock -- based on the analyst's 2023 sales estimate of C$177.5 million. The company’s stock recently traded around $5.50 a share, well off its 52-week high of $13.60.  What the boss says: “Our ongoing retail expansion campaign aligns with our long-term strategic growth initiative to establish direct-to-consumer outlets that showcase the SOLO to eco-conscious consumers,” ElectraMeccanica CEO Paul Rivera said recently. “With the opening of these additional locations, we aim to create a personalized shopping experience, garner increased awareness of the SOLO brand and extend our geographic footprint into areas that are well-suited for a multi-use, urban ecosystem for personal, commercial, utility and fleet applications.” Contact the author: patrick@proactiveinvestors.com Follow him on Twitter @PatrickMGraham