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.  On the financials front, on March 23, 2021, ElectraMeccanica posted its latest results showing that it ended 4Q 2020 with a healthy $129.5 million in the bank to power its SOLO US rollout in 2021. The company reported total 4Q revenue of $224,000, compared to $238,000 in the same year-ago quarter. The decrease in revenue was primarily attributable to a decrease in revenue associated with the sale of custom-built roadsters, according to the company. For the full financial year, ElectraMeccanica posted revenue of $569,000 compared to $586,000 in 2019. The company's net loss for the quarter was $41.1 million as a result of increased G&A and R&D expenses as well as a change in the fair value of the company’s warrant derivative liability. On the personnel front, on April 13, ElectraMeccanica announced the appointment of Kevin Pavlov as its new chief operating officer (COO) with effect from May 1, 2021.  Pavlov, who will be responsible for overseeing operational growth as the company ramps up commercial production with a focus on enhancing profitability and efficiency, brings over two decades of automotive experience to ElectraMeccanica with an accomplished background and domain-specific expertise working with Original Equipment Manufacturers and globally recognized Tier 1 suppliers. Prior to joining ElectraMeccanica, Pavlov most recently served as the COO of Karma Automotive. He has held various other senior leadership roles in his career, most notably at Magna International where he was, at different points in time, the COO of its E-Car joint venture, global president and general manager of Magna Electronics, and executive vice president of Magna’s Services, Ventures, and Innovation Group. Inflection points: Develop Mesa facility Open additional SOLO retail dealership locations What the broker says: Stifel GMP initiated coverage on ElectraMeccanica in December 2020 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: In a statement with the company's fourth-quarter and full-year 2020 results, ElectraMeccanica CEO Paul Rivera said: “2020 was a transformative year for ElectraMeccanica, one that began with the launch of our first retail locations and ended with the arrival of the first production SOLO EVs onto US soil." He added: “In a relatively short amount of time, we have expanded our geographic presence across soon-to-be 20 locations in five US states and made great progress in building our order book to support our long-term scaling efforts. We’re also close to breaking ground on our new US facility in Mesa, which, when complete, will dramatically increase our technical and production capabilities while creating hundreds of new jobs for the local economy.” Contact the author at jon.hopkins@proactiveinvestors.com