L.a. Auto Show...gimme Input

[cantwait]

Here's the full quote from the Preliminary Offering Circular:

Cantwait, yours is the most pessimistic interpretation of that statement possible. Expecting the $6800 price point is certainly optimistic, but claiming that they are further off than they ever have been on price is pessimism that strains credulity. Actually, I'm amazed that they're predicting a BOM cost below the $6800 target at this point in the development process. EM is finally at a point where the vast majority of components have real initial quotes which usually come in a bit high, especially for sole source contracts.

I'm not sure how reading what they have written is pessimistic. If I were to speculate that the price will be higher than $7600 if they cannot produce and sell 125,000 units per year, you could say that would be pessimistic. It would also just be logical. As they state, their MSRP and costs will be affected by production and sales volume. We all know that. As volume goes up, per-unit production costs drop. But the costs drop slowly with volume increases, and rise quickly with volume decreases. That is simple economics and business, and has nothing to do with optimism or pessimism. Sales and production volume have long been acknowledged as one of the keys to achieving a low MSRP. Personally and professionally, it is my opinion that a higher MSRP would be more likely to ensure the survivability of the company than a lower one. They simply do not have the financial resources to sell the first year of production units below cost.

I'm not sure why my repeating what they have freely stated strains credulity. Are you saying that you don't believe them? They have been very transparent about the MSRP being a target, and how close/far they have been for some time now. This is nothing new. Well, the $7600 is new, but not surprising with normal cost increases. I'm not sure why this seems to upset you.

Of course BOM is less than MSRP. That is their direct cost of materials. That does not include labor, overhead or profit. To be sustainable, the MSRP needs to cover the BOM, the labor, the overhead AND a reasonable profit.

 

[cantwait]

No offense taken. Hopefully none was given by me.

From my point of view, Elio has been pretty consistent from the beginning. Good intentions, but things take longer and cost more than planned. So when they say "this is our best-case scenario", and "that is our worst-case scenario", I tend to focus more on "that".

I tend to be optimistic about how long things within my control will take, even though life always seems to throw curve balls. Maybe they take longer because I get too easily distracted by things like internet forums. LOL

 

[slinches]

We're good. I had just read back through and realized that what I said could be interpreted more strongly than I intended.

To clarify, what I was saying is that assuming the price will be $7600 is the most pessimistic interpretation of the statement in the offering circular, not that it wasn't credible. Assuming the worst case is certainly an appropriate way to approach things and is generally safer, but it rarely generates the most accurate predictions.

What I thought went beyond pessimistic interpretation is the claim that EM is farther off of the target than they were several months ago (PE's $500 over statement), or a couple of years ago ($300 over in 2013). We don't know exactly what went into the calculations for those numbers, so comparing them to the highest price in the range given in the offering circular is not really justified, in my opinion.

 

[John Painter]

Agreed, the message at this point seems to be that meeting the base price target is only contingent upon demand being high enough to support the full 250k first year production rate. I don't see why it wouldn't be with 20% of that already accounted for in reservations. I would expect reservations to double or more as production nears, which would mean that the 150k rate would almost be fully accounted for before the first Elio comes off the line. Add a few big fleet orders in and some general interest as they start to hit the roads and 250k seems very doable.

The first year production rate target commented on by Paul Elio is around 50k to 60k. He has been pretty clear that over the first several years they can and would build their way towards their total capacity of 250k/yr. PE did make a comment in NY this past summer that he thought they could handle 250k in the first year not that that is what they are shooting for.

 

[Rickb]

We're good. I had just read back through and realized that what I said could be interpreted more strongly than I intended.

To clarify, what I was saying is that assuming the price will be $7600 is the most pessimistic interpretation of the statement in the offering circular, not that it wasn't credible. Assuming the worst case is certainly an appropriate way to approach things and is generally safer, but it rarely generates the most accurate predictions.

What I thought went beyond pessimistic interpretation is the claim that EM is farther off of the target than they were several months ago (PE's $500 over statement), or a couple of years ago ($300 over in 2013). We don't know exactly what went into the calculations for those numbers, so comparing them to the highest price in the range given in the offering circular is not really justified, in my opinion.

...........and in 2008 it was $7500 which is way over the current $6800 target and closer to the recent over statement. We will pay what we pay and be happy to receive delivery particularly those that have an all in non-refundable deposit. I know I will and I'm at the refundable level.

 

[slinches]

Are they not intending to ramp up to the 1000 per day rate as soon as possible? I thought that was the plan as long as demand is high enough to support a second shift.

 

[WilliamH]

The first year production rate target commented on by Paul Elio is around 50k to 60k. He has been pretty clear that over the first several years they can and would build their way towards their total capacity of 250k/yr. PE did make a comment in NY this past summer that he thought they could handle 250k in the first year not that that is what they are shooting for.

I'm confused about this year issue. Year is typically time bounded. So are we looking at a "year ending" without knowing the starting point? Or was that "year ending Dec. 31" assuming a production start of July 1 in which case we are talking about six months. At the time of the NY show six months might have been a reasonable expectation for the "first year.
So until we, or someone, defines what we, or they, mean by year, there is no way to understand what was meant.
Not trying to fight with anyone, but lets get our terms straight before we do a "he said / she said" thing.
What does a year mean?

 

[slinches]

If it helps, my intent was to state that the 250k/year (aka 1000 per day) rate was achievable, not that 250k would be produced in the first 12 months.

 

[KD]

I'm confused about this year issue. Year is typically time bounded. So are we looking at a "year ending" without knowing the starting point? Or was that "year ending Dec. 31" assuming a production start of July 1 in which case we are talking about six months. At the time of the NY show six months might have been a reasonable expectation for the "first year.
So until we, or someone, defines what we, or they, mean by year, there is no way to understand what was meant.
Not trying to fight with anyone, but lets get our terms straight before we do a "he said / she said" thing.
What does a year mean?

Uhm, around 365/366 days as we know it here. Those days can count down, or up, starting at any arbitrary time. Doesn't mean it has to be tied into a "calander" year necessarily.

 

[WilliamH]

Uhm, around 365/366 days as we know it here. Those days can count down, or up, starting at any arbitrary time. Doesn't mean it has to be tied into a "calander" year necessarily.

OK. If Elio starts production on Oct 1, 2016, what's the first year of production?