Securities And Exchange Commission Form 1-k - Filing Date: 2016-04-29

[Ekh]

In this latest SEC filing, it looks like EM has built in just under $2k of profit in each base vehicle (Lord only knows the mark up for options), but I have no question that the MSRP is just that, a suggested price.

I also think EM points out in the SEC filing that they get it... they know who butters their toast, that reservation holders, especially a core group, represents one of their largest funding sources. I do see the 80/20 rule applying, and it will be interesting to see if EM caters to that group to attract others.

As EM moves through, and out of the coming testing phase, how will they fan the flames to entice more reservations I think will be interesting.

If the test results are good enough, and they turn Road & Track loose with a surviving test vehicle, the flames will be self-fanning. Or maybe the fans will be self-flaming ... which ever!

 

[John Painter]

If the test results are good enough, and they turn Road & Track loose with a surviving test vehicle, the flames will be self-fanning. Or maybe the fans will be self-flaming ... which ever!

Good point. Then later in the year, throwing another 100 vehicles out there would only be dumping more fuel on the fire. It would be nice to know who that lucky fleet company will be.

 

[Rob Croson]

What do you think of this line of reasoning?

Quite honestly, I hate it. It sounds like greedy, devious trickery. If they try anything like that, I will be extremely disappointed.

In order for this to succeed, they have to be seen to be selling a viable vehicle that can compete on a nearly feature-for-feature basis with low-end four wheelers. Saying that essential features like wipers (and what next, a windshield? seats?) are "optional" is disingenuous. It will give the appearance that the Elio is a joke. That will doom it to failure.

Elio has to deliver on the promise of a viable, full-featured vehicle. It doesn't have to be a luxury sedan. It just has to work.

 

[Marshall]

I believe they can easily obtain an additional 100 vehicles by just using SIL numbers of those who are deceased or have gone off the grid.

Nobody loses - technically.

 

[Kuda]

That's what I'm thinking too. It will be interesting to see if at some point they actually do stop taking reservations and whether there is a price jump.

Why do I seem to remember
mention of a 60k cut off for
reservations? Was it a dream?
I wonder.....

 

[Ekh]

Why do I seem to remember
mention of a 60k cut off for
reservations? Was it a dream?
I wonder.....

Betcha $20 they don't cut off reservations, especially all-in reservations. The cash flow and book value are absolutely essential! Maybe at 100,000 or so ... by which time they'll be launched (or not)!

 

[Marshall]

Why do people expect EM to "honor" the $6800 price point for SIL/reservation holders? That seems entirely opposite of the cost breakdown of the vehicle.
If 1 Elio rolls off the assembly line, it will be $7600. If 250,000 roll off the assembly line, they will be $6800. This is not an arbitrary price point, but is entirely dependent on getting those economies of scale.

The Elio has $1000 of profit built-in to the cost of each one. So for a $1000 all-in reservation holder with 50% bonus, EM will only be making $500 per trike (less, actually, because the other $1000 has already been spent on daily operations costs). If they were to sell the SIL-holders $7600 Elios at $6800 each ($800 below-cost), they would be losing $300 on each of the 17,000 SIL-holders.

That's negative $5,100,000. And that isn't taking into account the fact that the $1000 reservation fee has already been spent, making the actual profit "losses" closer to $22,100,000.

No investor in their right mind would back a $22MM loss, when the contract Elio has already made with reservation holders guarantees them nothing in regard to final price.

If Elio can't reach 250k reservations (or close to it) prior to production starting, then the first people to get an Elio will be spending $7600-base. And the second-year buyers will be spending $6800 base. That is life.

I would jump at the chance to get in on a business that is PRODUCING and GROWING if the only drawback is a year of less profitability to pay back loyal supporters. Invest in the future, not the past.

 

[John Painter]

Betcha $20 they don't cut off reservations, especially all-in reservations. The cash flow and book value are absolutely essential! Maybe at 100,000 or so ... by which time they'll be launched (or not)!

I don't think Kuda had a dream on that, there was discussion on that topic back in '14, and PE did comment at last years NYIAS that he wasn't sure what to do with the time period when they transition from "reservations" to taking "orders".

 

[Marshall]

Quite honestly, I hate it. It sounds like greedy, devious trickery. If they try anything like that, I will be extremely disappointed.

In order for this to succeed, they have to be seen to be selling a viable vehicle that can compete on a nearly feature-for-feature basis with low-end four wheelers. Saying that essential features like wipers (and what next, a windshield? seats?) are "optional" is disingenuous. It will give the appearance that the Elio is a joke. That will doom it to failure.

Elio has to deliver on the promise of a viable, full-featured vehicle. It doesn't have to be a luxury sedan. It just has to work.

The first step is being taken by reducing the incentive to 25%.

The next step is eliminating it altogether which should come close to the start of production which would place the current order without incentive at less than a year's wait.

If the production starts and proceeds as planned to about 1,000 a day. The last of the discounted vehicles should end around the first of 2018 and profitability would be increasing as the target production of 250,000 will be in operation making those economies of scale increase the profit margin.

 

[Marshall]

The first step is being taken by reducing the incentive to 25%.

The next step is eliminating it altogether which should come close to the start of production which would place the current order without incentive at less than a year's wait.

If the production starts and proceeds as planned to about 1,000 a day. The last of the discounted vehicles should end around the first of 2018 and profitability would be increasing as the target production of 250,000 will be in operation making those economies of scale increase the profit margin.

I like the financials IF the production starts soon and the startup costs don't grow too much.

At 250,000 vehicles at $2,000 profit per vehicle, the profit would be $500,000,000/year. That's more than enough to pay back the loans, startup cost and the early investors. There is no doubt that the management would then exercise their options and get rich. But the other investors, even with their investment diluted, will be getting a lucrative return.
I'd love to have the money to invest. In fact, I may take the time to save up money I would have put down an upgrading into stock if it tumbles back to near $12.

I think selling the remaining authorized but unsold shares is a backup plan to loan approval. I actually prefer it.