SOLO-ElectraMeccanica vs AYRO: Which stock is next big EV hit? – Idaho Reporter

Automotive

SOLO-ElectraMeccanica vs AYRO: Which stock is next big EV hit?

solo vs ayro

Electrameccanica (NASDAQ:SOLO) is an American EV manufacturer that wants to rethink the way consumers view cars. The company believes that the future of urban transportation lies in smaller and more personal vehicles. 

On the other hand, AYRO is an EV company with a very different focus compared to most EV companies. AYRO wants to focus on ultra-low distance and specific-use vehicles such as golf carts, food carts, campus vehicles, stadium vehicles, etc.

Background

ElectraMeccanica was founded in 2015 in Vancouver with the goal of disrupting urban mobility. The company went public via IPO in August of 2018 and raised $10 million dollars. Earlier this year, the company raised another $20 million from institutional investors. Over the past couple of years, the company has garnered significant investors and racked up billions of dollars of pre-orders. The stock closed nearly 20% up yesterday as the company announced that it has opened up six retail locations in the US and deliveries should commence by year-end.

AYRO is a Texas headquartered EV manufacturer that focuses on light-weight utility vehicles. Earlier this year, AYRO listed on the NASDAQ through a reverse merger. The company acquired the controlling-interest in Dropcar, which was a failed company and now trades under the AYRO name. The company believes that the light-utility commercial vehicle space is relatively untapped and has massive potential.

Business Model

ElectraMeccanica believes that independent motoring is the future of urban mobility. The company believes that smaller vehicles will be more convenient for drive, park, charge, and overall be a much cheaper and appealing proposition to millennials, especially in heavily congested cities. The company inaugurated its factory in China’s Chongqing in 2019. The company commenced production for its SOLO single-seater vehicle in August. The SOLO has a top speed of 80 mph, a range of 100 miles, and a charge time of just 3 hours. The SOLO starts at just $18500 dollars. The company is also preparing to put its two-seater Tofino model into production soon.

AYRO is looking at competing in the niche sector of light utility commercial vehicles instead of competing in the consumer space. AYRO believes the commercial light-utility space is a massive opportunity and will be worth $24 billion a year by 2026. AYRO has recently formed a strategic partner with Karma Automotive that will give the company access to Karma’s vast resources and manufacturing expertise. AYRO also recently completed a factory expansion at its Austin site, following which the company can produce 600 vehicles a month. AYRO offers two vehicles, the 311 and 411, that range between $10000-$30000 depending on the configuration.

Financial Performance

ElectraMeccanica has more than 23000 pre-orders for its SOLO vehicle and more than 41000 pre-orders for its Tofino two-seater. Although most of these orders are under a refundable deposit, it is a very impressive reception for a new and niche product. Sales should pick up more as the company announced six new retail locations in the US yesterday. The pre-orders correspond to $2B+ in sales. The company reported a net loss of C$12 million in Q2 and cash on hand of $51 million. The company expects deliveries to commence in late-November/early December.

AYRO recently formed a partnership with Karma Automotive to produce 20000 vehicles over the next 3 years corresponding to $300 million in revenue. The company also recently closed on an inaugural $600000 order for its 311 with Gallery Carts. Last quarter, the company raised an additional $24 million from institutional investors to weather the pandemic. The pandemic has been very harsh on the company as most of its products use cases have been halted due to social distancing. The company is expected to deliver on its inaugural order by end of the year and hopes demand will have recovered by then. AYRO claims that their proprietary manufacturing process can yield 20% gross margins on the 411 and 30% on the 311, very impressive numbers in the automobile space.

Conclusion

ElectraMeccanica is clearly a risky but high upside bet for investors at the moment as it is on the verge of commencing large-scale deliveries and has garnered significant interest from consumers. However, the investors should take into account the almost 18-month delay by the company in commencing deliveries. Going by the performance of EV stocks over the past few months, the stock should be a stellar performer if the company sticks to the schedule and racks up some good revenues.

AYRO on the other hand is a much safer and long-term play. Although the company is in a smaller market, it has low overhead costs due to cheaper to produce products, much lower marketing costs, and high margins. However, we will only understand the true demand for its products once the pandemic is over.

Share your thoughts

Theme by Anders Norén