Amid the bevy of electric vehicle (EV) start-ups, there's no denying that ElectraMeccanica Vehicles (SOLO +0.00%) stands out. The automaker's flagship vehicle has three wheels, has room only for the driver and no passengers, and bears the same name as the stock's ticker: SOLO.
To call SOLO stock a speculative investment would be quite an understatement. It remains to be seen whether even the most open-minded EV buyers will embrace these unconventional vehicles.
The stock has had some fluctuations: In the span of 15 months, the SOLO share price made a dizzying round trip from $2 and change to almost $10 and back. Still, risk-tolerant investors might salivate at the prospect of a turnaround in 2022. So, is it time to go YOLO with SOLO?
Image source: Getty Images.
Small cars, big losses
The company's corporate prospectus shows that there are some salient risk factors for the start-up EV manufacturer.Perhaps unsurprisingly for an EV start-up with a niche product, ElectraMeccanica has had losses so far. The company managed to incur a net loss of $11.6 million in the first half of 2021, and that was after posting a net loss of $63 million in full-year 2020. Still, ElectraMeccanica's bottom-line performance (or lack thereof) isn't far out of line with that of other EV start-ups. For instance, during 2021's first nine months, Lucid Group (LCID +4.35%) incurred a staggering net loss of $3.7 billion, while Fisker (FSR +0.00%) lost $109.8 million within that same time frame.
ElectraMeccanica's net loss of "only" $11.6 million in H1 2021 might suggest that the company's fiscal bleeding will continue to slow down, but don't get your hopes up. ElectraMeccanica has openly acknowledged that the company has "minimal revenue," anticipates "generating a significant loss" for the next alone in this regard. But then, this isn't very different from other EV start-ups that don't necessarily expect near-term full-production ramp-ups. Not to keep picking on Lucid, but that company has similarly incurred net losses each year since inception, and expects to "incur increasing expenses and substantial losses for the foreseeable future." Meanwhile, Fisker's most recently released business outlook mentions hundreds of millions of dollars worth of operating expenses and capital expenditures, but nothing about working toward a net profit
So, these EV start-ups are essentially in the same leaky boat. In any case, with a reported accumulated deficit of $122 million, ElectraMeccanica is going to have to sell an awful lot of those three-wheeled wonders just to make ends meet.
Continuing to execute?
As of late November, sadly, it's evident that ElectraMeccanica hasn't sold many SOLO vehicles.
Or at least, it's evident to pretty much everyone except the company's CEO, Kevin Pavlov. Pavlov actually proclaimed in a sales update, "ElectraMeccanica continues to execute, delivering 42 SOLO EV vehicles as of November 30th."
Bear in mind that those 42 deliveries include both ElectraMeccanica's reservation and fleet holders. Undeterred, Pavlov and company are forging ahead -- their persistence can't be denied, at least.
With disappointing sales figures abroad, ElectraMeccanica's stalwart shareholders will have to pin their hopes on the company's foray into the ultra-competitive U.S. EV market. How's that going, then?
Coming to America
At least we can acknowledge that the company has taken baby steps in its U.S. expansion. In mid-December, ElectraMeccanica announced that the 2023 SOLO EV was undergoing validation testing at a dedicated temporary testing facility Rochester Hills, Michigan.
With that -- and with self-confidence that might actually trump that of Elon Musk -- Pavlov declared that his company is "executing on all fronts." There is a pretty apparent theme here. In a press release wherein Pavlov used both "execute" and "execution," ElectraMeccanica provided a timely update on its Mesa, Arizona-based assembly facility.
Spanning an impressive 235,000 square feet, this facility will evidently have a production capacity of up to 20,000 vehicles per year -- "by Americans for Americans," as the press release emphasizes.
Of course, the ability to produce vehicles is entirely separate from the ability to sell them. Until some fresh and encouraging delivery numbers come in -- which might not happen for a while, since the facility's purpose is to assemble a 2023 SOLO EV model -- ElectraMeccanica's faithful investors might find themselves driving in the slow lane.
Three wheels and a dream
Ultimately, SOLO stock is an all-or-nothing gamble. Folks will either learn to love these solipsistic EVs or they won't.
Thus far, the financial and sales data don't support a long position in ElectraMeccanica. If the share price is to return to its prior peak, it will require more than the CEO's boundless optimism.
So, there's really no middle ground when it comes to SOLO stock. Unless you're absolutely smitten with Pavlov's vision of diminutive electric cars on the roadways, it's probably best just to leave ElectraMeccanica alone.
