I Have Given Up On Elio, Have You?

[Samuel Gompers]

Sorry David but I don't think we have been conned by Elio. If it were a real con, then they would be encouraging more reservations and showing the vehicle more. Perhaps the persons most effected would be the other company directors who have put up millions as investment. (Including their reputations.)

While there are several decent arguments that Elio was not running a con, the handling of reservations is probably one of the weakest. They still have their website and facebook and instagram pages. They are not discouraging nor turning down new reservations. They took reservations with a promised "sales price" below the minimal projected cost of building the car. They continued to actively solicit reservations well after the point of knowing that production would be impossible according to the projected cost and time schedules.

The best argument against Elio conning reservationists was the publication of the SEC documents. From the time of the first filing, the official filings showed the precarious state of the company, and the unlikelihood that production would be reached on time, if ever. Anyone reserving or investing after the first SEC filing could arguably have implicitly recognized the inherent risk involved.

 

[Watashiwah]

Paul and Hari did a masterful job of creating ‘Forward Looking Statements’ and putting out blogs, press releases, and videos. There were extremely creative campaigns such as the push to 65 thousand reservationists to sway the DOE to base their ATVM loan decision to ‘want’ vs. provable ‘merit.’ Pure genius! Other campaigns like selling 25 buck tee shirts, not so genius.

In the spirit of ‘Forward Looking Statements’, I propose we compile a list of ‘Rearward Errors or Omissions.’ It would also be interesting to notate how these ‘errors or omissions’ ultimately benefitted the marketing side of EM.

I’ll start the list:

New Engine Design
Complete Redo of Body and Frame Structure Concept

 

[Samalross]

Having a roofer with no successful business experience but a good marketer lead the company.

 

[Made in USA]

Having a roofer with no successful business experience but a good marketer lead the company.

It really depends on what you call successful. As the owner of Elio Engineering Paul made millions. However, the company itself started out with seatbelt patents and hoped to sell to the big automakers. That didn't happen. One source said they had up to thirty employees, but that number is probably down to one now. So for Paul, Elio Engineering has been successful. Another way to describe successful is if the company is profitable for the shareholders. Elio Motors is not successful under this definition.

 

[Samalross]

It really depends on what you call successful. As the owner of Elio Engineering Paul made millions. However, the company itself started out with seatbelt patents and hoped to sell to the big automakers. That didn't happen. One source said they had up to thirty employees, but that number is probably down to one now. So for Paul, Elio Engineering has been successful. Another way to describe successful is if the company is profitable for the shareholders. Elio Motors is not successful under this definition.

He made millions with Elio Engineering at the expense of Elio Motors. I would not consider that a success except for Harry Iyer and his person enrichment.

 

[RSchneider]

While there are several decent arguments that Elio was not running a con, the handling of reservations is probably one of the weakest. They still have their website and facebook and instagram pages. They are not discouraging nor turning down new reservations. They took reservations with a promised "sales price" below the minimal projected cost of building the car. They continued to actively solicit reservations well after the point of knowing that production would be impossible according to the projected cost and time schedules.

The best argument against Elio conning reservationists was the publication of the SEC documents. From the time of the first filing, the official filings showed the precarious state of the company, and the unlikelihood that production would be reached on time, if ever. Anyone reserving or investing after the first SEC filing could arguably have implicitly recognized the inherent risk involved.

The SEC filings explain it all. Here's an example from the stock offering to just 22 months later.

In November 2015 (for the stock offering), Elio had a $5,654 BOM for 125K units or $5,132 for 250K. All at a price of $7,600 but they were targeting $6,800. They were to build 25 prototypes and even spelled out that why they were not going the unibody route but with a tube frame and plastic panels. Plus, $247M to get to production for a 47 week timeline. Total reservations, $19.4M

In April 2016 (just over a month after the IPO), pretty much everything stayed the same except for the amount to get to production went up 26% to $311M and no mention of the 25 prototypes. $15.8M raised with IPO.

In June 2016, pretty much the same as the April report.

In September 2016, they need to raise an additional $300 million to fund the completion of prototypes, testing, tooling, facility fit-up and move into production. No mention of the 25 prototypes or chassis/body construction.

On May 1, 2017, the amount is $311M to get to production, no mention of the 25 prototypes or unibody construction.

On May 2, 2017 (a day later), the amount increased 21% to $376M and the time frame is increased to 76 weeks. Plus they need $33M to start reducing that 76 week timeline. The new sales price is now $7,526.

In August 2017, the amount increased 70% to $531M. This is the first time it explains how the $376M was calculated. Total reservations, $27.9M.

From there the last two are consistent from the August 2017 filing. I have not included the extra debt they took on, just looking at the vehicle itself. In two years of filings, the cost went up 115%, the timeline increased 61% and the structure of the car changed. During this period, Elio raised $8.5M in reservations and $15.8M with the IPO for a total of $24.3M, all while the cost to production went up $284M. The cost to production outpaced the money raised by over 10X.

 

[RSchneider]

Paul and Hari did a masterful job of creating ‘Forward Looking Statements’ and putting out blogs, press releases, and videos. There were extremely creative campaigns such as the push to 65 thousand reservationists to sway the DOE to base their ATVM loan decision to ‘want’ vs. provable ‘merit.’ Pure genius! Other campaigns like selling 25 buck tee shirts, not so genius.

In the spirit of ‘Forward Looking Statements’, I propose we compile a list of ‘Rearward Errors or Omissions.’ It would also be interesting to notate how these ‘errors or omissions’ ultimately benefitted the marketing side of EM.

I’ll start the list:

New Engine Design
Complete Redo of Body and Frame Structure Concept

I would add:
Poisoning the well with fixed pricing and discounts for most of the reservations

 

[Ty]

I can't count the evolution of the prototypes as errors since that is the point of making prototypes. Sure, it would have been great if they had known a new motor would be too much to bite off. Sure, it would have been nice to realize that a tube frame body, while cheaper to build single units, is more expensive when mass producing. Sure, it would have been nice to have brought in Roush in the beginning to get the suspension et. al. right. Sure, it would have been nice to prioritize getting the assembly line ready to build and, finally, it sure would have been nice to have been a LOT more frugal spending the money raised than they did. It just seems like the millions raised would have gotten more than just a couple of half baked prototypes...

 

[Samuel Gompers]

I can't count the evolution of the prototypes as errors since that is the point of making prototypes. Sure, it would have been great if they had known a new motor would be too much to bite off. Sure, it would have been nice to realize that a tube frame body, while cheaper to build single units, is more expensive when mass producing. Sure, it would have been nice to have brought in Roush in the beginning to get the suspension et. al. right. Sure, it would have been nice to prioritize getting the assembly line ready to build and, finally, it sure would have been nice to have been a LOT more frugal spending the money raised than they did. It just seems like the millions raised would have gotten more than just a couple of half baked prototypes...

All of your "sure's" were unforced errors. I'm not sure that the tube frame was an error, especially if they had focused on iterative prototyping. One of the biggest unforced errors was the failure to hire fabricators and build/buy a fabrication shop. They could have spent their limited resources far better on fabricating increasingly refined prototypes instead of the few half-baked prototypes, car shows, and legislative noise.

 

[RSchneider]

All of your "sure's" were unforced errors. I'm not sure that the tube frame was an error, especially if they had focused on iterative prototyping.

Let me put it to you this way. Name me one high volume company in the last 100 years that has produced a tube frame car. I'm talking about at least 100K/year. Then I ask you this. Why buy a massive sheetmetal stamping operation if you were never going to use it. I'm not just talking about the stamping, but the welding too. If you ever see a tube frame line, it's CNC benders, laser cutters and then a complex MIG welding system. Elio was going to have to sell off all of the GM steel stamping and welding equipment but only sold basic old stuff and not the big things (you had to see it on their ebay site many years ago). It seems odd to me that they just spent money buying equipment that they were never going to use, yet did buy it. On top of that, they were very animate on how their system was superior over a unibody and steel body up until just after they raised $16M. In 2016 alone Elio spent $26m in R&D and the major change was a complete redesign of the chassis and body. Elio pushed the tube frame from October 2008 to around April 2016. So it took them over 7 years to realize they made a mistake? When nobody does what they were doing, even for junker Indian cars that could never be sold in the US.

You have to look at the reality of the situation. Elio either knew they needed to make the car into a unibody (which I bet 100 people tole them up to that point) or there was a dream that a tube frame with a SMC body was the best way to go (if SMC was a good choice for the panels, then GM would not only use them on the Corvette but for the cheapest ones as GM is the master of saving cost).