Elio Crowdfunding

[userexec]

Here's the thing. There is no mystery that EM is a start up. DOE could and would have immediately disallowed the application if that were an absolute barrier. Instead, they have sat on it for almost a year.

The number of paid reservations converts to 290 million in first year sales IF they can get the doors open.

SO EM does have a definite revenue stream, a decent amount of cash (counting the SE money), and a nearly ready to manufacture product.

Nowhere's near as risky as earlier ventures. So it's probably about crunch time. Get those prototypes out on the road and crash tested, and DOE might just say OK.

Those reservations are a really key point. Even if only a percentage of those reservations come through (though I think it will be a very high percentage), those pre-orders may very well tip the scales into considering EM financially viable and able to repay the loan. Of course, they (probably) need the loan in the first place to then tap into the eventual revenue from those reservations, and certainly only a small percentage of that will be money they can use to do the repayment itself, but it's all a pretty good indication that if things get rolling, the repayment won't be an issue.

I think this still really hinges on the P5 blowing people away in testing. To get that pre-order revenue, first they have to conclusively demonstrate that this product is ready. P5 won't be the true final draft, but assuming it works and hits even in the ballpark of the targets, I'd say that will be the domino falling that starts the chain reaction.

 

[JEBar]

I believe the main function for the the P5 be similar to that of the P4 .... that being on the tour for generating excitement and reservations .... since it will have the IAV engine so it can be used for various types of testing but crash testing will not be one of them .... they have stated the crash testing will be on subsequent "P's" that do not have the IAV engine .... I do expect it to be used more heavily for industry related media test drives .... it will be able to travel at interstate speeds which exceeds the capability of the P4

 

[Rickb]

The P5 should be very close to Elio's final design/engineering specs, with minor tweaks dictated by testing results.
I wonder how that P5 build is progressing, on, ahead, or behind schedule?

 

[satx]

The number of paid reservations converts to 290 million in first year sales IF they can get the doors open.

SO EM does have a definite revenue stream,

So it's probably about crunch time.

EM doesn't have the "revenue stream" to build 40K+ Elios. It sure looks like they don't have the cash to build 30 prototypes. We get a CAD image of the P5! LOL

EM gets $290M AFTER they deliver 40K+ Elios. and out of the $290M is the cost of operations, that's not $290M profit.

How do they finance the purchase of parts, labor, overheads to build 40K+ Elios?

Assuming they make $1000 per $6800, EM has to spend cash of $5800 to clear $1000 on Elio #1. So EM has to sell 6 more Elios just to cover the cost of the first Elio. cash flow zero. Then EM builds 8th Elio, a negative cash flow of $5800, etc, etc.

How many does EM have to deliver with a negative cash flow (cost of mfr exceeds profit margin) before it turns positive?

And EM can build 40K the first year, from standing start?

And how many of the reservation people finally not going to buy, esp as the inevitable problems in the first batches become known and media jumps on the problems, recalls?

Looking at all the 10Ms of recalls by the established car mfrs, US and Japan, you'd have to a true believer to believe that EM's first 1000 delivered Elios will be perfect.

"probably" crunch time now? it's been crunch time for a few years now.

 

[Ekh]

I think this still really hinges on the P5 blowing people away in testing. To get that pre-order revenue, first they have to conclusively demonstrate that this product is ready. P5 won't be the true final draft, but assuming it works and hits even in the ballpark of the targets, I'd say that will be the domino falling that starts the chain reaction.

I agree with you. That may be why DOE has been dragging it's feet.

 

[Charlie G]

Assuming they make $1000 per $6800, EM has to spend cash of $5800 to clear $1000 on Elio #1. So EM has to sell 6 more Elios just to cover the cost of the first Elio. cash flow zero. Then EM builds 8th Elio, a negative cash flow of $5800, etc, etc.

How many does EM have to deliver with a negative cash flow (cost of mfr exceeds profit margin) before it turns positive?

...what?
The target profit is $1000 per vehicle, which means it costs $5800 to make, and they sell it for $6800 - their cost is covered and there is 1k extra.
What they need is enough cash that they can operate at the scale where they can actually make a vehicle for $5800. To do that requires operating at scale, which means building thousands of Elios on an assembly line.

Say they have to operate at 125k (1/2 target volume) vehicles per year to hit that price point, that means they would need $725,000,000 in the bank just to guarantee production of them. But they don't need to operate that far ahead, so they need less seed capital. Let's look at this a month at a time. Imagine they can operate at full capacity from day 1, and let's stick with half the target volume for some leeway.
That would mean producing roughly 10500 vehicles per month. To pay for that first month of production at scale, they would need 60,900,000 to start. Let's assume they sell them all, that would put them at 71,400,000 - 10.5 million above where they started. The following month would take the same, then they would be up to 21 million. By the end of the year, they would have 125,000,000 in profit, which would cover that initial 60,900,000 loan that was required to get up and running.

That's a simplification, obviously. They need to pay employees and investors as well as buy and configure all the equipment and set up the assembly line etc.

 

[Ekh]

EM doesn't have the "revenue stream" to build 40K+ Elios. It sure looks like they don't have the cash to build 30 prototypes. We get a CAD image of the P5! LOL

EM gets $290M AFTER they deliver 40K+ Elios. and out of the $290M is the cost of operations, that's not $290M profit.

How do they finance the purchase of parts, labor, overheads to build 40K+ Elios?

Assuming they make $1000 per $6800, EM has to spend cash of $5800 to clear $1000 on Elio #1. So EM has to sell 6 more Elios just to cover the cost of the first Elio. cash flow zero. Then EM builds 8th Elio, a negative cash flow of $5800, etc, etc.

How many does EM have to deliver with a negative cash flow (cost of mfr exceeds profit margin) before it turns positive?

And EM can build 40K the first year, from standing start?

And how many of the reservation people finally not going to buy, esp as the inevitable problems in the first batches become known and media jumps on the problems, recalls?

Looking at all the 10Ms of recalls by the established car mfrs, US and Japan, you'd have to a true believer to believe that EM's first 1000 delivered Elios will be perfect.

"probably" crunch time now? it's been crunch time for a few years now.

There's a substantial glitch in your analysis, and that's your assumption that the average gross sales price will be $6800. As has been pointed out often enough, almost nobody buys a car at entry level. We love our options, and so do the makers because they are profitable. So what happens if the average sales price per Elio turns out to be $9200, instead of $6,800, and of that $2,000 is profit? Different ball game.

Another glitch, which supports your questions, is around operational overhead. Are you including operational overhead in your estimates? I'd add a solid 10% on the cost side for that... Elio may be lean, but there are marketing, admin, and legal costs that are going to increase sharply. That limits profitability. And you're right, debt service on the ATVM loan will eat up a big chunk. Still, I think that the car, if it gets made at all, will be very successful. The Board knows how to build and market cars -- especially into niche markets, which is where the elio will start.

All of these numbers are WAGs -- Wild *** Guesses. But I am quite certain the Elio Board is deeply aware of what it takes to sell cars, especially niche market cars, at a profit. These guys come into their own as we get closer to production. So bottom line, I think Elio will be profitable on a per-car basis in year one and will recover sunk costs by the end of year three. But that's a WAG!

 

[satx]

"The target profit is $1000 per vehicle, which means it costs $5800 to make, and they sell it for $6800 - their cost is covered and there is 1k extra."

you don't understand cash flow

 

[bowers baldwin]

 

[Hightech]

"The target profit is $1000 per vehicle, which means it costs $5800 to make, and they sell it for $6800 - their cost is covered and there is 1k extra."

you don't understand cash flow

Basic goal is sale units of 250k/yr $1,000/car yields of $250,000,000.00/profit

Production loans are not hard to come by with numbers like that. What Charlie said too, not all $1.5 billion ($5,800 X 250,000) is needed up front; just guaranteed purchase order agreements from vendors and Elio can easily work off a $100mill production loan of which wouldn't be needed after the first 100k units are sold, then the debt would be paid off in a year.

Sure thats perfect world numbers, but a 15% profit per $6,800 in sales is insanely good