ElectraMeccanica aiming to create a fun and environmentally friendly driving experience

Designer and manufacturer of electric vehicles Building flagship SOLO, a three-wheeled single-passenger EV Expanding SOLO retail footprint in Colorado, Washington State, California, Arizona, and Oregon What ElectraMeccanica does: ElectraMeccanica Vehicles Corp (NASDAQ:SOLO) is a designer and manufacturer of electric vehicles. Its subsidiary, Intermeccanica - a custom coachbuilder founded in Italy - has successfully been building high-end specialty cars for 60 years, including the Roadster, a replica of the 1959 Porsche 356 convertible. ElectraMeccanica’s goal is to revolutionize the way people commute, aiming to create a fun driving experience that is efficient, cost-effective, and environmentally friendly. The Vancouver-based firm is developing the innovative, all-electric SOLO, a single passenger vehicle, as well as the Tofino, a high-performance two-seater electric roadster sports car. The SOLO is a three-wheeled single-passenger car that boasts a top range of 100 miles and speeds of 82 miles per hour on a 17.3-kilowatt-hour battery pack, The SOLO features front and rear crumple zones, side-impact protection, roll bar, torque-limiting control, as well as power steering, power brakes, air conditioning, and a Bluetooth entertainment system. It sells for $18,500 – around half the price of a Tesla. The vehicle was included in a Forbes list of the “coolest new cars” for 2020, amongst names like Aston Martin, Cadillac, and Tesla. The company has produced over 40 SOLO vehicles at its first manufacturing facility in Vancouver and delivered them to customers in the US and Canada. These vehicles were delivered to paying customers and potential customers in efforts to conduct pilot tests for commercial use, as well as for use in Global Compliance testing, such as crash tests. ElectraMeccanica is in a manufacturing agreement with Zongshen Industrial Group, China’s largest manufacturer of motorcycles and motorcycle engines, which reduces the Canadian firm’s risk and the need for capital expenditure. Zongshen owns 10.6% of Electra Meccanica common stock. The Chinese manufacturer has already constructed the SOLO manufacturing line and started making the vehicles in August 2020.  Zongshen is contracted to produce 75,000 vehicles over a three-year period. How is it doing: During the past few months, ElectraMeccanica has been preparing for SOLO’s commercial rollout in the western US.  The company recently announced that it broke ground on its new US Assembly and Engineering Technical Center in Mesa, Arizona. Sitting across 18 acres of land near the Phoenix-Mesa Gateway Airport, the car maker’s 235,000 square foot facility will include an assembly and manufacturing plant, a research center, 22,000 square feet of office space and 19,000 square feet of lab space. When fully operational, the company said the facility is expected to create up to 500 new jobs and will be capable of producing up to 20,000 SOLOs per year. Altogether, it will feature both a light vehicle assembly plant, along with a state-of-the-art engineering technical center, including multiple labs to support comprehensive research facilities, as well as vehicle chassis, battery pack, and power electronics testing workshops.  The new facility is expected to generate second-order effects that will positively impact the local and state economies. In addition to strong consumer interest in the SOLO, the company has seen growing interest in commercial fleet and utility applications. Beyond efforts to address commuting and traffic congestion challenges in the region, the company intends to work with local municipalities to initiate a future pilot SOLO share ecosystem in the Mesa and the greater Phoenix region. ElectraMeccanica is also expanding its retail footprint with direct-to-consumer retail centers in its first locations in Colorado and Washington State, as well as additional locations in California, Arizona, and Oregon. Seven new locations are set to open in May and June in traditional, high-end malls and town centers.  All told, the company will soon have 20 locations in 10 major metropolitan areas within five states.  The company is also ramping up its Drive SOLO marketing campaign aimed at educating consumers on a new way to drive efficiently. The campaign involves an aggressive rollout in eco-conscious cities where the SOLO has an existing retail presence and will feature almost 300 billboard and digital mall displays along with social content.  On the financials front, on May 14, 2021, ElectraMeccanica posted its latest results showing that it ended 1Q 2021 with a healthy $260.4 million in the bank to power its SOLO US rollout. The combined cash on hand figure roughly doubled from $129.5 million as of December 31. Net cash increased by $130.9 million, thanks to financing activities of $147.6 million, offset by cash used in operating activities of $14.9 million and net cash used in investing activities of $1.7 million.    On the personnel front, on April 13, ElectraMeccanica announced the appointment of Kevin Pavlov as its new chief operating officer (COO) with effect from May 1, 2021.  Pavlov, who will be responsible for overseeing operational growth as the company ramps up commercial production with a focus on enhancing profitability and efficiency, brings over two decades of automotive experience to ElectraMeccanica with an accomplished background and domain-specific expertise working with Original Equipment Manufacturers and globally recognized Tier 1 suppliers. Prior to joining ElectraMeccanica, Pavlov most recently served as the COO of Karma Automotive. He has held various other senior leadership roles in his career, most notably at Magna International where he was, at different points in time, the COO of its E-Car joint venture, global president and general manager of Magna Electronics, and executive vice president of Magna’s Services, Ventures, and Innovation Group. Inflection points: Finish construction of Mesa facility Open additional SOLO retail dealership locations What the broker says:   On May 14, after the company reported its first-quarter results, Roth Capital Partners reiterated its Buy rating and $12.25 price target. “Financial results for 1Q21 were in-line with our model as mgmt makes preparations for 2H21 commercial deliveries of the SOLO vehicle,” the firm wrote. “We expect deliveries from Zongshen [China] to ramp starting in August, barring any component availability issues.  “Progress with the Arizona manufacturing site and retail distribution channel likely provide the more important near-term trading catalysts, and potential fleet trials could also be a positive. We would be buyers for growth visibility exiting 2021.” ElectraMeccanica reported cash on hand of $260.4 million at the end of the quarter, which Roth said is expected to “fund both short-term production ramp and R&D efforts into the next generation of vehicles.”   What the boss says: In a statement with the company's first-quarter results, ElectraMeccanica CEO Paul Rivera said: " In the first quarter of 2021 we continued making progress on several major initiatives, including finalizing customer-ready designs, increasing production throughput, optimizing logistics and supply chain management and taking additional steps towards realizing our US assembly facility and engineering technical center,” CEO Paul Rivera said.  “With the addition of our new COO Kevin Pavlov, we have begun to lay the groundwork for scaled operations for the coming years with a continued focus on enhancing profitability and efficiency. Looking ahead, our company is in its strongest-ever financial position, which will allow us to invest confidently for our long-term growth plans.” Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com Follow him on Twitter @andrew_kessel