What happened

Shares of Canadian electric-vehicle maker ElectraMeccanica Vehicles (NASDAQ:SOLO) were trading lower on Tuesday, declining for a second day after a prominent short-seller called its business and valuation into question.

As of 11:15 a.m. EST, ElectraMeccanica's shares were trading at $9.16, down about 10.2% from Monday's closing price.

So what

Investors excited about the potential for electric vehicles -- and mindful of the huge run-up in Tesla's shares over the last couple of years -- have bid up the stocks of quite a few electric-vehicle-related companies in 2020, ElectraMeccanica among them.

But on Friday, famed short-selling firm Citron Research lit into ElectraMeccanica, calling it a "complete joke" and setting a price target of just $2.

In a series of tweets blasting the company, which it characterized as "run out of an apartment building," Citron said that ElectraMeccanica's spending on research and development (just $6 million over the last year, it said) and tiny number of vehicles delivered will make it the "first to trade back to $2" when the electric-vehicle "frenzy" subsides. 

Why was the stock down on Tuesday morning? Because, to be blunt, there's a lot of truth in what Citron said.

A white ElectraMeccanica Solo

This is what ElectraMeccanica investors are betting on: the Solo, a three-wheel electric car with just one seat. Image source: ElectraMeccanica.

Now what

Here's my take: Auto investors looking for the next Tesla are probably wise to look elsewhere. ElectraMeccanica's product is a quirky three-wheel, single-seat car called the Solo; it's not exactly serious competition for a Tesla (or a Chevrolet Bolt, for that matter), and it's not likely to lead the company to the kind of sales implied by its market cap. 

I realize that won't dissuade some of you. As my fellow Fool Rich Smith pointed out when ElectraMeccanica reported third-quarter earnings earlier this month, the company lost three times as much money as it did in the year-ago period -- but the stock surged anyway, because it "beat estimates" with its pro forma numbers.

There are companies in the emerging electric-vehicle space that could emerge as long-term winners. As of right now, I don't see anything to make me think this will be one of them. Trade carefully.