How ElectraMeccanica Makes Money

ElectraMeccanica (SOLO) is a designer and manufacturer of three-wheeled electric vehicles based in Vancouver, Canada and listed on the Nasdaq. As of Nov. 16, the company had a market value of nearly $484 million.

Leadership and Business Model

ElectraMeccanica is the brainchild of Jerry Kroll and COO Henry Reisner, the latter of whom used the knowledge he acquired at his brother Frank’s sports car company, Intermeccanica, to design and produce the company’s flagship vehicle: a single-seat three wheeled electric vehicle called the Solo.

Kroll and the Reisner brothers established the company three years later in 2015 as a subsidiary of Intermeccanica. After another three years, ElectraMeccanica filed for an initial public offering and began trading on the Nasdaq in 2018.

After Kroll and Henry Reisner, top shareholders include Invesco, Susquehanna International, and Morgan Stanley. 

Technically, the Solo is a motorcycle. However, it is fully enclosed and drives like a car with a steering wheel and foot pedals. It has just one seat, but is accessible with doors on both sides. It also has a trunk, Bluetooth stereo, air conditioning, and a backup camera. The vehicle has zero emissions and is able to travel up to 100 miles per charge at a top speed of 80 miles an hour. It recharges with Level 1 or 2 chargers for as little as 2.5 hours.

Early Days

Solo commercial production began on Aug. 26 in Chongqing, China in partnership with the Chinese motorcycle manufacturer Zongshen Industrial Group, which already makes about 3 million motorcycles annually. ElectraMeccanica has the capacity to produce 20,000 vehicles annually and Zongshen has agreed to produce a total of 75,000 Solos over a three-year period once ElectraMeccanica has begun full-scale production.  The New York Times reported that ElectraMeccanica plans to set up a North American assembly facility within two years, though the company has not disclosed a timeline.

The car is priced at $18,500 and is sold through shopping mall kiosks (similar to Tesla selling its vehicles through retail stores rather than dealerships). After launching in Los Angeles and Portland earlier this year, ElectraMeccanica plans to expand sales to Arizona and the San Francisco Bay area. CEO Paul Rivera told The New York Times that ElectraMeccanica plans to expand to the rest of the country over the next 18-24 months before going global.

Other car lines in the works include the Tofino and eRoadster, both two-seater convertibles. 

Slow Sales and No Profits (H4)

Like many young companies, ElectraMeccanica is not profitable and likely won't be for a number of years. The little bit of revenue that ElectraMeccanica has generated - including CA$300,000 for Q32020 - has been from the production of custom-built roadsters. Nonetheless, ElectraMeccanica has increased its losses with its operating loss for the third quarter jumping to CA$8.8 million compared to CA$7.8 million during the same period last year, primarily due to the increased SG&A expenses as well as increased stock-based compensation expenses, and net loss rising to CA$14.9 million compared to CA$5.3 million in Q3 2020 due to the fair market revaluation of the company’s warrant derivative liability.

Regardless, investors are excited about the prospect of this growth company, especially since it beat analyst expectations for the quarter. Analysts forecast that Electrameccanica would lose $0.11 per share in Q3, but the company posted a $0.19 per share pro forma profit. In addition, Electrameccanica increased its cash position by another $50 million, bringing their total cash and cash equivalents to above $100 million as of Sept. 30.

In a previous version of the article we misstated that ElectraMeccanica began Solo commercial production of 20,000 vehicles. In fact, the company hasn’t set a production target yet. We also misstated that ElectraMeccanica plans to expand sales to Seattle.