In an age of subprime 2.0, where the next Big Short is
looking more and more like auto loans (http://dtn.fm/XfWR0) as delinquencies
hit a six-year high of around five percent (the highest level since September
2009), the idea of an American-made, ultra-high-mileage two-seater, sporting an
amazing 84 MPG highway and going for a targeted sticker price of just $6,800,
is a concept whose time has come. While the Elio, a commuter-focused piece of
three-wheel innovation aimed squarely at the 76 percent or more of Americans
who drive to work every day solo, may not win Daytona next year, it has already
won the hearts and minds of many consumers.
Driven by grassroots beginnings, a clear vision and exacting
product design, Elio Motors, Inc. (OTCQX: ELIO), whose manufacturing footprint
is based out of the former GM plant in Shreveport, Louisiana
(http://dtn.fm/A9AoE), is one of the success stories of the 2012 JOBS Act,
which was (in part) designed to assist new fundraising methodologies such as
crowdfunding. Elio famously got its jumpstart via a $17 million capital raise
using crowdfunding platform StartEngine in order to draw on a historically
untapped lending source for such efforts: unaccredited investors (who are
classed as having a net worth under $1 million and an income of under $200,000
a year).
The company’s following mini-IPO onto the OTCQX, subsequent
to the SEC’s effective splitting of Regulation A into two tiers (one including
non-accredited investors), marks a significant milestone for both the U.S. auto
industry and capital markets themselves. Regulation A+ allows up to $50 million
to be raised from even non-accredited investors and could prove to be a major
ramping strategy for future startups. In Elio’s case, the first equity-crowdfunded
IPO, the stock debuted around $16.50 after an initial pricing of $12.00 a share
and ran up to a $1.3 billion market cap close on Feb 29 after just a few days
of trading, before retreating back to around the $24.00 handle as of March 2 on
pressured selling driven by prospect skepticism. But the naysayers who complain
about $53.8 million in costs thus far and the company’s $30.7 million in loan
debt have obviously never tried to start a grassroots car company in 2016.
Elio is not just capitalizing on the three-wheeler trend
here either, which was sparked back in 2012 with the release of Morgan Motor
Company’s 1983cc ‘V-twin’ fuel injected Morgan 3 Wheeler and extended by the
entry of such players as Minnesota-based snowmobile maker Polaris (NYSE: PII),
with its recently-debuted 2.4 liter Slingshot. Elio is looking to completely
redefine the category with a quality vehicle that anyone can afford, but which
also has a comprehensive SMS (http://dtn.fm/5xLjx) (Safety Management System)
centered around a reinforced roll-cage frame (http://dtn.fm/EKv6p), beefier
crush zones that are 50 percent bigger than comparable vehicles, ABS brakes,
and three airbags.
While some have panned the concept as not ready for
primetime, the grassroots funding success of Elio laughs in the face of such
so-called established wisdom, and the motorcycle designation is being hurdled
(http://dtn.fm/7kRjT) with successful helmet exemption legislation already
passed (or on its way to being passed) in multiple states. To many, the idea of
needing to wear a helmet with such a vehicle is absurd, and lawmakers will
likely understand the folly of blanket vehicle type classification in this
regard as the news spreads about this roll-cage framed commuter marvel. The
underlying robustness of the Elio’s engineering pedigree can largely be chalked
up to such part and system supplier heavy-hitters (http://dtn.fm/Kr81G) as
renowned German vehicle developer IAV, which is praised for its powertrains and
electronic systems, as well as the involvement of auto industry titans such as
HyperWorks suite of CAE software products developer, Altair Engineering
(http://dtn.fm/bB68I).
To some, Elio Motors may look like just a run-of-the-mill
underdog in a world of Tesla (NASDAQ: TSLA) fanboys, but the robust design
specs and 95 percent or more North American part sourcing speak volumes about
how far pragmatic founder Paul Elio’s vision could carry investors. While Tesla
struggles to compete against major manufacturers’ electric and hybrid vehicles,
Elio has defined a niche market for itself that is both underserved and primed
for explosive growth. Investors should keep a close eye on the company’s Q4
2016 rollout target.
Learn more, visit www.eliomotors.com
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