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

[WilliamH]

I am confused. Is your point about range or power? There are already electric heavy construction vehicles (cranes, ore haulers, etc) but looks like most are hybrids for power generation or use heavy cables. So the electric motors are capable of the work, we just need to get better at batteries for an all electric mobile solution.

You are getting the idea.
Under current technology, BPVs (Battery Powered Vehicles) are limited.
Diesel Electric units like locomotives are definitely practical
Pure electric trains are limited to where the wires are but not as bad as BPVs..

 

[Ty]

A few years back, when the $6800 price point was already established, Paul was telling the media that he was very confident they could sell and produce 68,000 per year. I think that's likely above the lowest required volume.

Now that he's expecting more buyers than that, maybe the tooling or other methods have been up-scaled, and to support that technology maybe more are needed. In any case, I'm pretty sure 100k is more than adequate, since the major automakers make profits from lines that sell less than that with similar technology.

Up to now EM has established that there are more people willing to buy than the reservations indicate. But is the on-going yearly level they get, after the balloon of initial sales, going to be enough?

Generally, the replacement rate of cars is fully visible at 10years. That is when 90+% of privately purchased vehicles are now used, and those owners have gotten a replacement. Some replace with other car types(some in some out), and some get the same category, but generally at 10years sales rates are leveled out, no initial novelty purchasing left. Even so the first 5years are the focus of worry. If you can sell five, you'll sell at ten, if you keep the product technology and packaging advancing.

Given that the 55k reservationist are not exactly like normal buyers will be, what can we establish about normal buyers? We do know in the first year there will be a lot more than the reservationists. At least as many as the current volume reserved. Some few indications hint at 10x as many interested immediately after production starts. So 5x is not unreasonable, even if a bit unproven. However, EM confidence about sales allowed them to raise their estimate to 240k/first year. I think they have confidential data to back that up, and they have hinted to that effect too.

About to the year2+ sales, all I can say for sure is, if all year1's are sold as reservations (even if reserved just a few weeks before delivery), then year two will fully sell as well, even if by then many are purchased out-side the reservation process. Year 2,3,4 is where things get more suspect.

Best guess is, year-3-plus does not become scary to EM so long as that 68,000 rate is reached each year. If 240k are sold in year one and only 120k in year two, 68k looks pretty confident for later years 3 and up. And what rate do they need when their tooling is already paid for?

But quite possibly, 240k will sell year one, and capacity will be upped for year two, then capacity will likely start to come back down, settling a to some variable rate around year 5. That's the profile that Smart Car hit, but at a lot lower volume. Still those dynamics do translate.

Here's a super good question, Smart Cars sell well under 20k units each year at bottom dollar. Do they still make any profits? IS their technology relative to Elio's?

That's the rub... the article I posted said that SMART has lost $5B since they started selling in the US to the tune of losing $6,000 PER VEHICLE they sell. Here's another side of the production coin. Elio can eventually produce 500K per year working two shifts. Let's say demand is still there for that many vehicles. I don't see it but for the sake of argument, let's just say there is ongoing demand. If Elio limits production to one shift rather than two, it could keep the Elios in demand and perhaps would even prop up used car sales which would indicate the Elio is "worth buying" from a financial perspective. If it remains really cheap to buy a the Elio (I did that on purpose. If they are going to call it "the Elio", it'll make for odd sentences), the used the Elio actual worth could be like Yugo's resale. When people see the vehicle isn't worth anything after it's driven off the lot, they (as a group) would really be hesitant to buy new ones. This would seriously erode the demand. On the OTHER hand, limiting production a bit would limit their net income but would keep prices up in the used market which could drive the ability to raise the initial purchase price to a point where the profit on 250k would rival the net from 500K while utilizing half the work force. Of course, there is a limit to how much you can limit production and how volatile the price is but hey, I'm an engineer, not an economist.


I hope they don't call it the Elio.

 

[Rickb]

This discussion indicates to me that EM is not only currently struggling financially while developing the proof of concept vehicle, but will continue struggling financially years to come based on possible low market demand...........fewer than the max 250,000 units per year on which the business model is based. I don't think EM would consider and or need to artificially limit production. Key point: Paul Elio is an Engineer not an economist as well.

 

[AriLea]

That's the rub... the article I posted said that SMART has lost $5B since they started selling in the US to the tune of losing $6,000 PER VEHICLE they sell. Here's another side of the production coin. Elio can eventually produce 500K per year working two shifts. Let's say demand is still there for that many vehicles. I don't see it but for the sake of argument, let's just say there is ongoing demand. If Elio limits production to one shift rather than two, it could keep the Elios in demand and perhaps would even prop up used car sales which would indicate the Elio is "worth buying" from a financial perspective. If it remains really cheap to buy a the Elio (I did that on purpose. If they are going to call it "the Elio", it'll make for odd sentences), the used the Elio actual worth could be like Yugo's resale. When people see the vehicle isn't worth anything after it's driven off the lot, they (as a group) would really be hesitant to buy new ones. This would seriously erode the demand. On the OTHER hand, limiting production a bit would limit their net income but would keep prices up in the used market which could drive the ability to raise the initial purchase price to a point where the profit on 250k would rival the net from 500K while utilizing half the work force. Of course, there is a limit to how much you can limit production and how volatile the price is but hey, I'm an engineer, not an economist.
I hope they don't call it the Elio.

I'm making a subtle convolution of comparisons.
Just to get that detail in there, back when Smarts were selling for 26k+ they were making money. But the profit or loss now is only related to what their own pricing limits of the market are. The Smart profits are not directly related to what I was making a point about.

You see what cost do they NOW encounter by volume? Not related to the Elio since in Smartcars that's in the 20k and less range.

The analysis here for smart is mostly about predicting sales at what price. What volume can it sell? Even at 14k not much now, even though it was 26k earlier and they sold plenty. That's because of the nature of the competition and the novelty factor I was spelling out. Elio is now in that Novelty era, not the competitive pricing era, not yet anyway. The Smart was interesting for the way the sales rate changed over time. Not so much the actual amplitude.

As far as what cost per volume, I'm saying it's predictable in that technology. And other cars ARE indeed making money and using that tech at the Elio volume. But we can only go by Elio's promise they did correctly project a profit at the $6800-$7500 pricing at some unspecified volume level.

So what sales levels CAN we expect? Certainly better than SmartCars in the novelty period. Certainly better than our current reservations count.

 

[Jim H]

For those of us old enough to remember when the VW first came out it was priced around $1200. A year old used one sold for $1100. For a great number of years the price difference between and used VW and a new one was vary narrow. Elio might want to follow that example.

 

[Rickb]

For those of us old enough to remember when the VW first came out it was priced around $1200. A year old used one sold for $1100. For a great number of years the price difference between and used VW and a new one was vary narrow. Elio might want to follow that example.

I'm old enough. My first economy car a 1959 VW. Perhaps my last economy car a 2018 Elio.

 

[outsydthebox]

He pulled that number out of his ear back in 2007 for the Hello Elio test the waters marketing campaign. When I saw the dream back in 2008 I thought how is that possible and I still think it's impossible with inflation, engineering, and design changes over the years. Although, 8 inflation factored years later he is still marketing the impossible $6800 base which is puzzling to me.

Kind of like where you pulled your comment?

Cost of raw materials has gone down in recent years, which means many of their suppliers will be charging less for their parts and assemblies. This will directly effect EMs pricing....In a good way.
I have no doubt EM knows the cost of every single nut, bolt and washer.

 

[outsydthebox]

This discussion indicates to me that EM is not only currently struggling financially while developing the proof of concept vehicle, but will continue struggling financially years to come based on possible low market demand...........fewer than the max 250,000 units per year on which the business model is based. I don't think EM would consider and or need to artificially limit production. Key point: Paul Elio is an Engineer not an economist as well.

I'm surprised that you think this forum has any affiliation with Elio Motors. As for "this discussion"...It has no foundation in the real world.

 

[Rickb]

Kind of like where you pulled your comment?

Cost of raw materials has gone down in recent years, which means many of their suppliers will be charging less for their parts and assemblies. This will directly effect EMs pricing....In a good way.
I have no doubt EM knows the cost of every single nut, bolt and washer.

Yes, after the nut, bolts, and washers are specified, but certainly not back in 2007 when the ESTMATED base $6800 was tossed around for the Elio concept sketched on a napkin. The raw materials and labor costs of vehicles I've purchased since 2007 have not gone down.

 

[voyager]

Here is an overview of the Top 10 of European money-losing car models. Make no mistake, Smart is still hemorrhaging money. Until the last model appeared early 2015 an approx. 100 million euro each month. Daimler is adamant about being present at the bottom of the car market. Reason why it started its Car2Go program. IMO, Smart will never be able to make up for the cumulative losses that may be as high as 6 billion USD in the present day.

H