Rob Croson
Elio Addict
These suggestions are so ridiculous that even contemplating them is pointless.
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Atvm News - 2018 Fed Budget Proposal
- Thread starter airforceguy6
- Start date
Jeff Bowlsby
Elio Addict
Tell that to Elon Musk. He's got to be doing something right.
Elio Amazed
Elio Addict
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Ah, the numbers man does not lie.
But... That's talking about the dollar amount of sales.
If we can, for a moment, assume that all other factors level the playing field to an actual average of $1000 x 65,000 reservations = "profit".
$65M right? Consider EM's already got a $137M in obligations. Add another $300M = $437M. $437M - $65M = $372M. Which means, theoretically...
That EM would then still have 372,000 vehicles to go to get close to breaking even and paying a true dividend with no debt.
That is one whopping risk for investors and an even bigger risk for bureaucrats. At least from my perspective
Especially for a company that spent 8 years and $137M...
And couldn't come up with a production-ready vehicle or real-world-verified stats..
Honestly, I looked at the numbers in 2014 and felt they didn't add up.
But... I allowed myself to believe in the urban legend being perpetrated.
The EM "secret sauce" as it were, and I joined up anyway.
Because I wanted to believe. And I not only wanted an Elio, I wanted everyone to have the opportunity to have an Elio.
I think I'll go cry now. So sad.
But... That's talking about the dollar amount of sales.
If we can, for a moment, assume that all other factors level the playing field to an actual average of $1000 x 65,000 reservations = "profit".
$65M right? Consider EM's already got a $137M in obligations. Add another $300M = $437M. $437M - $65M = $372M. Which means, theoretically...
That EM would then still have 372,000 vehicles to go to get close to breaking even and paying a true dividend with no debt.
That is one whopping risk for investors and an even bigger risk for bureaucrats. At least from my perspective
Especially for a company that spent 8 years and $137M...
And couldn't come up with a production-ready vehicle or real-world-verified stats..
Honestly, I looked at the numbers in 2014 and felt they didn't add up.
But... I allowed myself to believe in the urban legend being perpetrated.
The EM "secret sauce" as it were, and I joined up anyway.
Because I wanted to believe. And I not only wanted an Elio, I wanted everyone to have the opportunity to have an Elio.
I think I'll go cry now. So sad.
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raptor213
Elio Addict
I agree with the basis of your financial points for the most part. But I believe what Samalross was referring to were profits whereas you're referring to revenues.
Let's argue that there are in fact $450M in tangible revenues to be generated by producing and selling the first 65,000 reserved Elio's under the parameters you've outlined. Without drafting my own spreadsheet, I'll assume your math is correct.
However, it has been reported previously that Elio only sought to profit around $1000 per vehicle sold (before non-refundable reservation deposits and bonuses), and expected to upgauge the cost of accessories and add-on's (including automatic transmissions) by 20%.
So you'd need to determine the profit margin of each and every Elio sold, appropriately accounting for the reality that non-refundable deposits have already been spent and count as a liability against the profit margin just as deducting reservation bonuses do.
If their current MSRP is suggested to be $7450, providing the company the cushion they need to still profit ~$1000 per sale after accounting for higher than expected development and bill-of-materials costs, then let's assume that $6450 is the break-even figure.
Then you subtract $1000 that will not be new revenue since it was already spent as a non-refundable deposit into the company coffers, and subtract a 50% match of $500, and subtract $450 to account for the early reservationists that opted to Lock-In at a base purchase price of $7000.
Ultimately, you end up with a base purchase price of $5500, equating to a net loss of $950 per vehicle sold under those conditions, which is a significant chunk of All-In SIL holders. In order to make up that loss value of $950, the company's only hope is that they can upsell you on $4750 or more in extras and accessories, 20% of which would make up the difference to at least break even.
I hate to say it, but the way the basic math breaks down, the company is positioned financially to lose money on likely the first year's worth of production and sales. Until Elio's are sold to purchasers who never placed a non-refundable deposit, who never benefited from a matching reservation bonus, and who never locked in at a lower than optimal base price, the company stands to lose money.
If I were a lending guarantor or underwriter, and you clamored about your hundreds of millions of revenues waiting to be collected but had no viable solution for bleeding red on your financial cash-flow statements, I wouldn't lend you anything either.
Let's argue that there are in fact $450M in tangible revenues to be generated by producing and selling the first 65,000 reserved Elio's under the parameters you've outlined. Without drafting my own spreadsheet, I'll assume your math is correct.
However, it has been reported previously that Elio only sought to profit around $1000 per vehicle sold (before non-refundable reservation deposits and bonuses), and expected to upgauge the cost of accessories and add-on's (including automatic transmissions) by 20%.
So you'd need to determine the profit margin of each and every Elio sold, appropriately accounting for the reality that non-refundable deposits have already been spent and count as a liability against the profit margin just as deducting reservation bonuses do.
If their current MSRP is suggested to be $7450, providing the company the cushion they need to still profit ~$1000 per sale after accounting for higher than expected development and bill-of-materials costs, then let's assume that $6450 is the break-even figure.
Then you subtract $1000 that will not be new revenue since it was already spent as a non-refundable deposit into the company coffers, and subtract a 50% match of $500, and subtract $450 to account for the early reservationists that opted to Lock-In at a base purchase price of $7000.
Ultimately, you end up with a base purchase price of $5500, equating to a net loss of $950 per vehicle sold under those conditions, which is a significant chunk of All-In SIL holders. In order to make up that loss value of $950, the company's only hope is that they can upsell you on $4750 or more in extras and accessories, 20% of which would make up the difference to at least break even.
I hate to say it, but the way the basic math breaks down, the company is positioned financially to lose money on likely the first year's worth of production and sales. Until Elio's are sold to purchasers who never placed a non-refundable deposit, who never benefited from a matching reservation bonus, and who never locked in at a lower than optimal base price, the company stands to lose money.
If I were a lending guarantor or underwriter, and you clamored about your hundreds of millions of revenues waiting to be collected but had no viable solution for bleeding red on your financial cash-flow statements, I wouldn't lend you anything either.
I had Fly The Road Club Forum discussion with Chip Stempeck, EM's Marketing VP, during EM's 2008 "Hello Elio" Marketing Campaign. 2 years later, after no Elio progress updates, FTRC Forum members that had been anticipating test drives, began to think Elio Motor's was dead and the Elio was vaporware, Chip posted this 2010 comment on that Forum:
Fast forward 7 years, not much has changed at EM. Chip is still VP of Marketing, no Elio build/testing/validation, and I'm still waiting for my Elio test drive opportunity.
I credit Chip Stempeck for his award winning marketing strategy.
Fast forward 7 years, not much has changed at EM. Chip is still VP of Marketing, no Elio build/testing/validation, and I'm still waiting for my Elio test drive opportunity.
I credit Chip Stempeck for his award winning marketing strategy.
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RSchneider
Elio Addict
A few other things to consider.
1. Startup costs for the first year are much higher as opposed to the running costs. So, Elio has never built a car before, thus there's no way that they will get it right for a while (existing car companies had a hard enough time with this, let alone a new one). Add into that, training costs. You have to literally teach everyone that will be building these cars initially. That doesn't come free.
2. Rework costs. This is something that hits every new complex item that is built. You can't expect everything to be 100% perfect.
3. Warranty costs. The chance that those will be zero is not being realistic. For initial products, it's much higher as opposed to down the road.
4. Recall costs. This is something that is a risk because the chance of having a recall is quite high.
5. Sales numbers. Elio is using 250K/year for their math. There's no way they can predict how many will sell when the reservations are up. What if only 50K are sold by year two? What happens then?
6. The 60 showrooms need to be outfitted and leased. I doubt Elio has already leased a bunch of office space all around the country. They don't even have their own headquarters or R&D facility.
7. Parts distribution. That costs money even if you farm it out. Can't build a bunch of cars and not have parts to fix the cars.
8. Pep Boys training. You'll have to train people to work on then and process things like warranty and recalls.
In addition to what is stated above, there's even more risk that lenders will want to know what the game plan is when these things happen (because they do in the real world) or how they are going to be implemented.
You can see, that $300M that Elio needs to get going is not all based on just the plant in Shreveport but all of the other things that will need to be done.
1. Startup costs for the first year are much higher as opposed to the running costs. So, Elio has never built a car before, thus there's no way that they will get it right for a while (existing car companies had a hard enough time with this, let alone a new one). Add into that, training costs. You have to literally teach everyone that will be building these cars initially. That doesn't come free.
2. Rework costs. This is something that hits every new complex item that is built. You can't expect everything to be 100% perfect.
3. Warranty costs. The chance that those will be zero is not being realistic. For initial products, it's much higher as opposed to down the road.
4. Recall costs. This is something that is a risk because the chance of having a recall is quite high.
5. Sales numbers. Elio is using 250K/year for their math. There's no way they can predict how many will sell when the reservations are up. What if only 50K are sold by year two? What happens then?
6. The 60 showrooms need to be outfitted and leased. I doubt Elio has already leased a bunch of office space all around the country. They don't even have their own headquarters or R&D facility.
7. Parts distribution. That costs money even if you farm it out. Can't build a bunch of cars and not have parts to fix the cars.
8. Pep Boys training. You'll have to train people to work on then and process things like warranty and recalls.
In addition to what is stated above, there's even more risk that lenders will want to know what the game plan is when these things happen (because they do in the real world) or how they are going to be implemented.
You can see, that $300M that Elio needs to get going is not all based on just the plant in Shreveport but all of the other things that will need to be done.
slinches
Elio Addict
What business start up is ever in the black after their first production run? Tesla is still accumulating operating defects in the billions each year as they build out the battery factory and Model 3 production line.
Elio Motors isn't a business designed to sell 65000 vehicles and then close up shop with a nice profit. They want to sell millions and I have no doubt there's a market to support that. But that market only exists with a low up front price. That means high volume production which, in turn, means a huge initial investment in production facilities and tooling. EM will either get the funding for that or not. If they do, we'll see Elios as every third car on the road in a few years. If not, the company will fold and we'll have to wait until battery tech improves enough to bring the price of something like the Solo or SRK down close to where the Elio is now (maybe 2025 or later?)
Elio Motors isn't a business designed to sell 65000 vehicles and then close up shop with a nice profit. They want to sell millions and I have no doubt there's a market to support that. But that market only exists with a low up front price. That means high volume production which, in turn, means a huge initial investment in production facilities and tooling. EM will either get the funding for that or not. If they do, we'll see Elios as every third car on the road in a few years. If not, the company will fold and we'll have to wait until battery tech improves enough to bring the price of something like the Solo or SRK down close to where the Elio is now (maybe 2025 or later?)
Frim
Elio Addict
I may me delusional, but I am not paranoid. I still believe, I just don't expect to get run over by an Elio anytime soon.
gottemfeathers
Elio Addict
I'm looking at the profitability numbers tossed around that have dire predictions of failure and I wonder how many of the SIL owners who are writing them would be willing to take 10% on the dollar for their $1000 reservations. The way I read it a fair number of those folks would look at it as $100 of "found money" instead of losing all $1000. When it comes to information I agree we are being treated like mushrooms and I see the frustrations of many on this forum. I just think some of the folks should take a deep breath and come in off the ledge...
RSchneider
Elio Addict
The car business is different because you have lots of expenses that have nothing to do with building the car. In addition to that, you need a national network to be able to sell them and the way Elio is intending to do it (not franchising dealers), that just adds into their costs. As for Tesla, they have cash flow because they have product to sell. Elio has no product to sell and at this point, it doesn't look like that will be happening anytime soon.
It's great to think that Elio will be a blockbuster hit, but until the car actually gets out on the road in peoples hands, we will never know if it'll be a flop or not. All it takes is for one flaw and the press will be all over it. The chance of having a few flaws is pretty good in the real world.
Elio can't count on that people will be clamoring for the car, ordering them online, going to Shreveport to pick them up and will drive them around without any need for service because they can do it themselves. You can count on 1% of the people doing that but then there's the other 99%. This is not like selling a product on Amazon and shipping it to you. If it breaks, you send it to the manufacturer and they fix it. One of the big problems when the Delorean came out was that when it did break, you were waiting a month for the parts. Most dealers had no training and it was just a learn as you go. There were many other problems with Delorean but they completely left out the service and warranty after the sale. My brother bought one new and Delorean went out of business while his car was at the dealer waiting 2 months for parts. In 10 months of ownership, it sat for 4 months over various times waiting for parts. Thus, he sold it.
It's great to think that Elio will be a blockbuster hit, but until the car actually gets out on the road in peoples hands, we will never know if it'll be a flop or not. All it takes is for one flaw and the press will be all over it. The chance of having a few flaws is pretty good in the real world.
Elio can't count on that people will be clamoring for the car, ordering them online, going to Shreveport to pick them up and will drive them around without any need for service because they can do it themselves. You can count on 1% of the people doing that but then there's the other 99%. This is not like selling a product on Amazon and shipping it to you. If it breaks, you send it to the manufacturer and they fix it. One of the big problems when the Delorean came out was that when it did break, you were waiting a month for the parts. Most dealers had no training and it was just a learn as you go. There were many other problems with Delorean but they completely left out the service and warranty after the sale. My brother bought one new and Delorean went out of business while his car was at the dealer waiting 2 months for parts. In 10 months of ownership, it sat for 4 months over various times waiting for parts. Thus, he sold it.