Does The Elio *have* To Sell In High Volume To Succeed?

[Darren Cruse]

I'm excited about the Elio - would like to have one and am considering buying some stock... and I see a lot of positive and encouraging things about it and the people behind it - it looks like the real deal.

But (you saw a "but" coming right I don't know a ton about the car industry but I'm esp. concerned I've seen things saying their business *requires* a pretty high volume of sales (even after these pre-orders are filled) - in order for them to even stay in business?

I first first heard this about 7 minutes into this youtube review by Autobytel: https://www.youtube.com/watch?v=YYbprouVRIw#t=7m

And I see the section (others here e.g. John Painter have referenced) explaining their low price being dependent on high volume: http://pdf.secdatabase.com/2968/0001214659-15-007920.pdf

Additionally, the estimated $7,600 retail price is based on a 125,000 annual production volume and a BOM cost target of $5,654 that management expects to achieve at start of production. At 250,000 annual sales, we believe we can achieve the target $6,800 retail price due to lowered BOM costs (a target BOM cost of $5,132) resulting from economies of scale. Our management be

I'm wondering has anybody heard the Elio guys talk more modest numbers and what it means if it takes several years to hit this high a volume, or if sales level off and they *never* hit this high a volume?

And not knowing much about car production I'm curious: Would there have been any alternative? i.e. some way to have "started smaller" and not even done a full on "production line" in the beginning? Maybe without the Shreveport plant?

(I guess part of the answer would be they couldn't get anywhere near the $6800/$7600 price point without that production line?)

I was trying to understand if there are contingency plans - some way to still succeed - even *if* the government loan doesn't come through, and even *if* these high volumes of order don't happen right away.

 

[slinches]

Welcome, thanks for joining the Elio adventure and good first post.

First of all, in case you haven't seen, Elioowners is not affiliated with Elio Motors at all, so nothing here is official. It's just a gathering site for a bunch of people who are interested in following the Elio development.

As for the titular question, I think that high production volumes are required for success. Production volume sets the base price and that is a key part of the selling point: Low total cost to operate. The Elio fits in as a vehicle that is able to meet the daily driving needs of the masses with an extremely low operating cost at the lowest barrier to entry possible (EVs are cheap to operate, but cost a lot up front. Traditional 4-wheel cars are moderately expensive, but have higher operating costs. Motorcycles can be cheap to buy and operate, but they are not safe, only usable in good weather and require specialized training/licensing). If Elio started with low volume and a ~$12k base price, who would buy one? It would have to compete with commuter cars like the Nissan Versa, which is a much more versatile platform. Or if they stripped out features (AC/Heat, full enclosure, safety features) to keep the low price, it would have many of the drawbacks of motorcycles and be seen as nothing more than a toy (and one that has mediocre performance at that).

That being said, I think the production volumes needed are very achievable. The Elio would be the lowest cost daily drivable vehicle available and I think it should sell as well or better than the VW Beetle did in its prime.

 

[wizard of ahs]

The contingency plan is..................if there it no funding..........it's a BUST !!!!

 

[slinches]

That's true of everything, though EM is more dependent on startup funding than most. The ATVM loan is obviously a big opportunity/question mark, but Paul Elio himself has alluded to alternate funding options if that doesn't go through. But, to date, there's no details provided on what those options are exactly (for obvious reasons).

 

[bunchathrees]

That's true of everything, though EM is more dependent on startup funding than most. The ATVM loan is obviously a big opportunity/question mark, but Paul Elio himself has alluded to alternate funding options if that doesn't go through. But, to date, there's no details provided on what those options are exactly (for obvious reasons).

All of those other options involve dilution of the stock and/or loss of control of the company to some degree. There are no magic wands.

 

[Maurtis]

That's true of everything, though EM is more dependent on startup funding than most. The ATVM loan is obviously a big opportunity/question mark, but Paul Elio himself has alluded to alternate funding options if that doesn't go through. But, to date, there's no details provided on what those options are exactly (for obvious reasons).

Correct, there is no contingency plan against not getting any funding. But there are plans if the government loan approval does not go through. The government loan is preferable since it will impact Paul's control and stock dilution least, but there are other less desirable options available. I would not have bought stock in the company if that was their only avenue to success.

 

[Darren Cruse]

I really do like the Elio for myself, but I'm kind of an early adopter type I like new tech and unusual designs.

I was hopeful there was a way for the Elio to succeed first as a niche with people like me, but I'm a little doubtful it would ever reach "VW Beetle" like numbers, or if it did I imagine it might take years to get there. e.g. the VW Beetle was still a 4 wheel car - here the Elio really is requiring the buyer to accept a product quite different than anything they're used to.

But maybe this is why Elio Motors said they needed as much money as they did (I saw various numbers mentioned $185-$300 million not sure what was what). If you take the current number of reservations times the $5654 BOM "bill of materials" number that's just over $300 million. But maybe that's just coincidence? i.e. I assume they could/would produce a smaller number of vehicles and then take payment on those vehicles. This way they would only need money to cover the production of that initial "batch", and that could provide the revenue to pay for subsequent "batches". At least that was my thought. (it's probably *way* more complicated than this right.

oh well it's certainly interesting I'd like Elio to succeed (I was interested in Tesla for a long time and I've been kicking myself I never bought their stock back when it was real cheap!! I thought maybe Elio could be the next Tesla and I could be smart and buy their stock early this time!!)

My only other comment is - if the government loan never happens - I'll feel like in retrospect the Elio might have been easier as just one car from a bigger car maker that could have produced limited numbers from their plants along with their other vehicles. To adjust how many they produce in accord with the demand as it grows as people get used to seeing the Elio and hearing how cheap it is.

Like in partnership with an established company. Not trying to be negative (maybe the government loan will still happen), but I wonder if that's a possibile outcome as well? A partnership or a bigger company buying them out and taking the project over?

Otherwise it feels to me right now like things are boom or bust and not much in between. Either the government buys into this being the next VW Beetle and floats the loan, and the Elio becomes a runaway success and orders come in like gangbusters, or kaput.

 

[Maurtis]

Regarding the high volume for sales, yes, I am pretty sure they need high volume sales to stay in business if they are only building $1k of profit into each Elio (not counting upgrades).

 

[Darren Cruse]

Apologies wrote my reply above before seeing the two that precede it.

 

[Jeff Porter]

Welcome to the forum Darren!

To add to the excellent replies that have been posted above... Paul Elio could sell to a niche population, and not worry about hundreds of thousands of vehicles produced in a year, and not worry about thin profit margins.

But then the vehicle would get much more expensive, and the stated target market of folks that need a car but can't afford one would get smaller.

There's lots of stories of people that get into a car loan that they can't afford. That loan is 2 or 3 times the cost of an Elio with a few options.

Just some info to chew on. Again, welcome!