Borrow $240 Mil, Or Borrow Alot Less And Start Out Slow?

[pistonboy]

The economy of purchasing large lots of parts has been accurately pointed out. It is also true with worker cost. The same number of people are needed to staff the assembly line if they are putting out 10 vehicles per 8 hour shift, or 500 vehicles per 8 hour shift. The labor cost for those 8 hours is the same.

 

[WilliamH]

The GM plant can spit out one vehicle every 52 seconds though we ran the line to spit one out every 54 seconds. The line didn't stop for breaks as those were planned for. There was 8 hours of production per shift... 553 per day. It doesn't take long AT ALL for the average assembly line worker to get up to speed. Since Elio will be using existing suppliers, they should well be able to support production as well. The way I saw it, other than the first few, and I mean few, Elio's will come off the line just about as fast. But to be fair, I'll say 60 seconds per vehicle. So that line would produce 480 per day instead of 553. The GM plant would shut down for a couple weeks every year but I'll say the Elio plant will shut down for 8 weeks... an extra hour here or there during the year and 2 weeks for general maintenance that can't be done in the 16 hours a day the plant is NOT operating.

48 weeks (remember, they aren't producing for 4 weeks) * 5 days a week * 8 hours a day * 60 minutes an hour = 115,200 Elios in the first year.

Add a second shift and they could easily get up to 230,400 Elios without doing anything extraordinary.

(At full speed, they'd put out 128,000 using one shift for the year or 256,000 per year using 2 shifts. This is in line with Paul's proclamation that they want to get up to 250,000 Elio's per year.)

When I talk about 2016, I'm looking at about 6 months. From about June to December.
This is not the old GM line.
This is the new Elio line. It will take some time to work out kinks in the process.
And that's a bunch of new sub lines. ex. did GM do frames there or ship them in?
I'm basing it on Elio will work along side of IAV until they learn and then IAV will watch Elio till IAV phases out.
Was there an engine line there under GM?
Maybe the line will get up to 480 or more per day, but that won't be on day 1, or week 1, or month 1. As a result, I think first year production won't be as high as we would like it to be.
I'm not being negative on this. I want it as bad as anyone else on here.
I am however trying to level set my expectations at a reasonable point.
Incidentally, Is Elio building the frame/roll cage or outsourcing that phase?

 

[goofyone]

When I talk about 2016, I'm looking at about 6 months. From about June to December.
This is not the old GM line.
This is the new Elio line. It will take some time to work out kinks in the process.
And that's a bunch of new sub lines. ex. did GM do frames there or ship them in?
I'm basing it on Elio will work along side of IAV until they learn and then IAV will watch Elio till IAV phases out.
Was there an engine line there under GM?
Maybe the line will get up to 480 or more per day, but that won't be on day 1, or week 1, or month 1. As a result, I think first year production won't be as high as we would like it to be.
I'm not being negative on this. I want it as bad as anyone else on here.
I am however trying to level set my expectations at a reasonable point.

I asked this of VP Jerome Vassallo directly and received what sounds to me like EM has a very reasonable ramp up planned. The production ramp up plan as I understand it is to average about 150 per shift in the first month which would mean under 3000 vehicles produced in the first month. They expect about 250 average per shift in the second month which is about 5000 vehicles that month. During the third month the line is expected to average 350 per shift which is about 7000 vehicles per month and the current plan is for the line to stay at this level through the reservation build period. The full production goal is 500 vehicles per shift which is over 10K per month at full volume per shift. There will only be a single shift at first working Monday through Friday however the plant can easily accommodate a second shift running each day thereby reaching the 250K expected vehicle production total per year.

The obvious reason for slower assembly at first is to allow the workers enough time to become proficient at their assigned tasks however another reason, which is less obvious to most people, is the amount of the pre and post build inspection which will occur on these vehicles as they move down the line and after they are completed. The way this process has been described is that vehicles built during the first month are alpha builds and during the second month will be beta builds. The terms alpha and beta are not really indicative of engineering changes but instead denote how much pre and post build inspection will occur on these vehicles as they move down the line and after they are completed. These first vehicles will be checked numerous times for quality control purposes and minor tweaks to how things are assembled will be occurring during this period to improve line efficiency, resolve any build issues discovered, as well as develop the standardized post-build checklists which will be used after this initial period.

Incidentally, Is Elio building the frame/roll cage or outsourcing that phase?

Elio will build the chassis at the Shreveport plant by adapting the existing robotic chassis assembly and welding area to their needs. Once the chassis is complete it will then take a series of baths to apply an anti-corrosion coating also using existing infrastructure within the Shreveport plant.

 

[TCBronson]

So the first 1000 hand built cars would be sold at a lost, but I think once the public saw that production had begun that they would feel comfortable placing orders, lots and lots of orders. Just a thought.

 

[goofyone]

So the first 1000 hand built cars would be sold at a lost, but I think once the public saw that production had begun that they would feel comfortable placing orders, lots and lots of orders. Just a thought.

I do not believe you, or the many others who have mentioned similar ideas, have truly thought these suggestions through and as a result have not realized their full ramifications. The fact of the matter is that low volume production is extremely expensive as compared to mass production and this is on top of the fact that it is very expensive to set up a production facility even if intended for low volume.

EM needs $30 million to complete vehicle development regardless of what happens after that. Let's say in small scale production it costs EM $15,000 for the materials, parts, and labor to build each of the 1,000 vehicles. This estimate may even be low as the engine alone would cost EM several thousand each even if buying them from another manufacturer who would of course be making a profit on the deal. Production facilities are anything but inexpensive so let's say for only $60 million EM could set up a temporary production line with the required equipment, custom tooling, recruit workers, hire workers, train workers, and cover overhead for the plant and corporate functions. All this adds up to just under $100 million, and this truly is a conservative estimate, which EM would have to raise while admitting to potential investors that all of this will be done to sell a limited run of vehicles at a loss as some kind of marketing ploy meant to increase order numbers so EM can raise an even larger sum of money for mass production.

 

[RUCRAYZE]

More cash is always better however thanks to the reservation system EM has found a way around this common problem faced by many start-ups. The reservation system means that EM will already have a signed contract to sell every vehicle they build before they even order the parts and materials to build each vehicle for at least the first year. EM will have the proceeds from these sales within at most a couple of weeks of each vehicle rolling off the assembly line and thanks to just in time production EM will not have much excess inventory which does cost money. The only cash EM really needs is to pay any bills which may come due within this short several week window.

Parts and materials will be delivered just in time, with payment due net 30 or longer, so by the time the bills are due for parts and materials a happy reservation holder will have already completed their vehicle purchase and EM will have the funds to pay the bills. The OEM suppliers are used to being paid this way and they will extend EM this credit, despite EM being a 'risky' start-up, because it will be safe for them to do so as they will know EM has pre-sold these vehicles. This even works for a lot of overhead costs such as utilities, which are postpaid, and I bet EM even floats worker salaries this way. Worker salaries are easy to float for several weeks by paying workers every other week with a two week delay for processing as a result the time from when a worker first begins working on the line to when they receive their first pay check is four weeks.

The more time I take to consider the benefits of the reservation systems the more I am amazed at just how many benefits EM derives from this system.

"EM will already have a signed contract to sell every vehicle they build before they even order the parts and materials to build each vehicle for at least the first year. " ????
I thought we beat the crap out of the (it's not a) contract, i.e. they are under no obligation to sell, and by definition we are under no obligation to buy.
There have been folks published here who could no longer wait for their E
There are a heap of folks who could walk away with their money refunded.
There are heaps of folks with $100.00/ 250 who too might just walk away
Is this an inside line you have that we will soon be contracting an agreement for our units- i.e. from reservationists to contracted buyers? Sounds great for me, i.e. I'd be on the class action list should this go under, with a chance to possible secure a small percentage of the 1k

 

[RUCRAYZE]

So the first 1000 hand built cars would be sold at a lost, but I think once the public saw that production had begun that they would feel comfortable placing orders, lots and lots of orders. Just a thought.

add to the mix- the incentives for the all-ins, I think if we keep an eye on when they close the incentives, there will be an accompanying announcement

 

[goofyone]

"EM will already have a signed contract to sell every vehicle they build before they even order the parts and materials to build each vehicle for at least the first year. " ????
I thought we beat the crap out of the (it's not a) contract, i.e. they are under no obligation to sell, and by definition we are under no obligation to buy.
There have been folks published here who could no longer wait for their E
There are a heap of folks who could walk away with their money refunded.
There are heaps of folks with $100.00/ 250 who too might just walk away
Is this an inside line you have that we will soon be contracting an agreement for our units- i.e. from reservationists to contracted buyers? Sounds great for me, i.e. I'd be on the class action list should this go under, with a chance to possible secure a small percentage of the 1k

@RUCRAYZE you must read the things I write more carefully. What I wrote was not that Elio Motors currently has a signed contract for every vehicle but instead I wrote that they will have a signed contract for every vehicle they build for at least the first year. EM will be contacting reservation holders about 60 days before each vehicle is produced to finalize the vehicle orders by selecting the color, transmission choice, and options. As part of this order finalization process reservation holders will be required to sign a legally binding purchase agreement. Thus EM will have a signed contract in place for every vehicle they build during this period and this contract will be signed 6-8 weeks before the vehicle is produced.

 

[RUCRAYZE]

@RUCRAYZE you must read the things I write more carefully. What I wrote was not that Elio Motors currently has a signed contract for every vehicle but instead I wrote that they will have a signed contract for every vehicle they build for at least the first year. EM will be contacting us about 60 days before our vehicle is produced to finalize our orders by selecting our desired color, transmission, and options. As part of this order finalization process we will be required to sign a legally binding purchase agreement. Thus EM will have a signed contract in place for every vehicle they build during this period and this contract will be signed 6-8 weeks before the vehicle is produced.

my bad.-
"Thus EM will have a signed contract in place for every vehicle they build during this period",-- too be clear
EM might not have a signed contract in place, if vehicles produced out- number buyers i.e. lag of not yet contracted sales

 

[eddie66]

@RUCRAYZE you must read the things I write more carefully. What I wrote was not that Elio Motors currently has a signed contract for every vehicle but instead I wrote that they will have a signed contract for every vehicle they build for at least the first year. EM will be contacting reservation holders about 60 days before each vehicle is produced to finalize the vehicle orders by selecting the color, transmission choice, and options. As part of this order finalization process reservation holders will be required to sign a legally binding purchase agreement. Thus EM will have a signed contract in place for every vehicle they build during this period and this contract will be signed 6-8 weeks before the vehicle is produced.

I'm thinking, if and when that ever happen, we will all be surprised how fast our our "spot in line" numbers move up the ladder. Given all the folks that are no longer interested, and have moved on.