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

[Ekh]

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.

Now back to your original question -- keeping $6800 for all-in reservation holders up to date X, then jumping. They might do it this way. They're already terminating the 50% off for all-inners as of May 31. Thereafter it will be 25%. That might not last too long, if you're right! Alternatively, they might just increase the price some portion of the distance to their shortfall -- say $300 -- and make up the rest with "non-option options" as suggested above.

But they WILL have to do something, and fairly soon. They can't keep advertising a price they know they cannot meet.

 

[Maurtis]

I find it highly unlikely that if they are selling enough units at $7,600 to hit 250k that they would then drop the price down to $6,800. Unless sales are sluggish, I really do not see that happening. I could see them instead maybe adding popular features like TPMS and cruise in standard, but not lowering the base price.

They could simply say "When we started this journey in 2008 $6,800 was our target price. Now, almost a decade later in 2017 to keep up with rising costs that target base price has blossomed to $7,600, still well below the least expensive four wheeled new cars."

 

[John Painter]

That will be a tough choice for EM -- they have built their entire identity on $6800 / 84 mpg. They've been "softening" that for a year (some might call it weasel-wording), but haven't backed away from t entirely.

I think that rather than give up on $6800, they will add "options" that are really necessities at inflated prices -- e.g., automatic tranny. Industry wide there's about a 2-4% "take rate" on standard transmissions -- due to a variety of factors including never teaching 2 generations of drivers to use the things. So if in essence 95% of EM's potential market NEEDS an automatic transmission, that might be where EM can make up the $800 bucks they're short in today's base price. Of course the price they'll pay for doing that is make the car less affordable to the people who constitute a major market for the vehicle -- the "clunker" market.

Other options -- windshield washer. Hood release. Gas-strut to hold the trunk lid up. Interior light. All these, except for the windshield washer, are in today's base price -- i don't know the current status of the windshield washer. But since they aren't called out as specifically included, they could easily wind up as extra-cost "options," to the annoyance of many. If all that stuff added up to $100, it would make a difference to EM, but less of one to the individual customers.

What do you think of this line of reasoning?

Interesting.

Maybe they could get away with something like Apple is doing with their new iPhone SE? Some things are scaled back somethings are more robust than what an iPhone 6s has, and ultimately the final price is less than iPhone 6. EM could call these models you describe as the "new base" model and everyone would believe their getting a good deal?

Or maybe EM could just milk this and say reservation holders will be getting a $6,800 vehicle and once they end the reservation period the price is going up as part of a marketing blitz, and they'd get a bump up in new reservations? This is basically the dynamic PE described to potential investors earlier this Spring.

 

[John Painter]

Now back to your original question -- keeping $6800 for all-in reservation holders up to date X, then jumping. They might do it this way. They're already terminating the 50% off for all-inners as of May 31. Thereafter it will be 25%. That might not last too long, if you're right! Alternatively, they might just increase the price some portion of the distance to their shortfall -- say $300 -- and make up the rest with "non-option options" as suggested above.

But they WILL have to do something, and fairly soon. They can't keep advertising a price they know they cannot meet.

I agree, and it will be interesting to see how they maneuver through this.

 

[Elio Amazed]

John, my only kvetch with your argument is that Paul Elio is not Elon Musk, with all those billions behind him, and a massive public presence that makes the world take him seriously. If WE were landing re-usable rockets on barges, I'm pretty sure Paul's public persona and credibility would be greatly enhanced!

And made $230M as his (co-founder?) share in the sale of Paypal to Google.

 

[Ekh]

I agree, and it will be interesting to see how they maneuver through this.

Maybe they could just jump to $7,600 and include more things ... cruise, for instance, and the windshield washer. Stuff that makes the car look much better equipped but costs very little to do ...

 

[Elio Amazed]

Maybe they could just jump to $7,600 and include more things ... cruise, for instance, and the windshield washer. Stuff that makes the car look much better equipped but costs very little to do ...

I think the most positive of Elio lovers will be Pssst if a windshield washer ends up being a extra cost option.
Who the heck makes, and expects to sell, a car without a windshild washer? Feels like bait-and-switch to me.

 

[Sethodine]

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.

 

[John Painter]

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.

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.

 

[HonestTex]

If the base price does go up to $7600, I won't be too upset. With the $500 bonus, and the extra 15% for being in line so long, I'll only end up paying $6950. I'll make up the rest in gas savings before the second year Elios come out.