ElectraMeccanica Vehicles Corp. (ECCTF:OTCQB) was founded on February 16, 2015, under the laws of British Columbia, Canada. The company is engaged in the planning, developing and production of individual electric vehicles. Electra Meccanica is not a typical start-up, as it recently acquired famous car manufacturer Intermeccanica. Intermeccanica has more than 57 years of automobile production expertise and has produced award-winning and high-quality replicas of Porsche and Roadsters. The combination of Electra Meccanica's reliable, efficient electrical battery with its automotive know-how led to the creation of the company's flagship electric vehicle the SOLO. Currently, the company trades on the OTCQB under the ticker ECCTF but the company recently applied to elevate its shares to the NASDAQ Capital Markets.
Electra Meccanica offers investors a unique opportunity to invest in the clean, renewable and sustainable transportation market. Carbon pollution and climate change are creating irreversible damage to our planet. Electra Meccanica is an emerging leader in the field of non-polluting, energy-efficient modes of transportation. The company's first product is the SOLO, a single passenger vehicle with a 100-mile range and a zero to sixty time of eight seconds. The car is sold globally, including in the U.S., for the equivalent of US$15,500. Electra Meccanica shares will likely appreciate if the company can deliver on its production targets, with investors in high-growth equities generally willing to overlook profitability in the short term for longer-term free cash flow generation.
Industry Insights
Electra Meccanica has built an innovative, single passenger all-electric vehicle, with the single passenger electric vehicle market expected to experience dramatically increasing demand in the coming years. The company is also developing an electric two-seater roadster called the Tofino, with a 250-mile range. We view Electra Meccanica as ideally positioned to capture market share in the Canadian market given its showroom and factory locations and familiarity with the market. Electra Meccanica also has a large opportunity internationally including in China, United States and Europe.
Electra Meccanica has been receiving increasing preorders for its various models. "The numbers do not lie: there is tremendous confidence in our products, from both the corporate and consumer standpoint," said Jerry Kroll, CEO of Electra Meccanica and chairman of the board, in a Nov. 14 announcement. "Electra Meccanica is truly at the threshold of unleashing the next generation of affordable electric vehicles." With the recent manufacturing agreement with Zongshen Industrial Group Co. of China to produce 75,000 SOLOs over the next three years, we expect ECCTF to secure increasing corporate orders. With cars with a plug expected to account for a third of global cars by 2040, there is a lot of room for Electra Meccanica to grow.
Competition
The global market for automobiles, specifically for electric vehicles, is extremely competitive, and as Electra Meccanica expands production, competition in the market may become even more intense. Many large car manufacturers have entered the electric car market; over the next ten years there will be an increasing number of small and large competitors in the sector. Electra Meccanica is increasing its budget (the company's research & development budget increased about 471% from 2015 to 2016) to develop more effective, advanced electric vehicles to compete with other companies. We expect Electra Meccanica to compete on price, style, manufacturing efficiency, marketing, and technological innovation, to secure market share.
Valuation
In order to value Electra Meccanica, which is a very early stage business, we projected vehicle sales (SOLO, Super SOLO, and Tofino) based on the released order book with reasonable margin assumptions. Our model indicated a fair value of $10 per share, which is significantly higher than the current share price, but we acknowledge our model is heavily dependent on the implied assumptions including anticipated production volumes.
Recent news
In line with the growing demand for environmentally sound, energy-efficient vehicles, Electra Meccanica Vehicles Corp. recently announced a $4 billion order book for their SOLO and Tofino Models. We believe both the corporate and consumer markets provide a large market for ElectraMeccanica to expand its order book.
ECCTF announced that it had applied to have its ordinary shares listed on the NASDAQ. "As the Electra Meccanica story improves, the NASDAQ Capital Market listing is expected to increase trading liquidity of our common stock, broaden our shareholder base and raise our profile in the investment community," said CEO Kroll. We similarly believe the company successfully listing on the NASDAQ will increase the company's exposure and increase the number of investors who can purchase their common shares.
The company also recently announced it will be showcasing its SOLO at the consumer electronics show (CES) taking place in Las Vegas in January 2018. The company will highlight the vehicles technical specifications and its appeal for environmentally conscious daily commuters.
Hunter Diamond, CFA, is the CEO of Diamond Equity Research, which is a global small capitalization equity research firm. Diamond Equity Research was created to assist small-capitalization issuers with reaching retail and institutional investors and providing these companies the same distribution abilities large-capitalization issuers take for granted, thereby helping smaller corporations achieve a fair valuation. Diamond brings experience working in investment banking and equity research at Griffin Securities and National Securities; both emerging growths focused brokerages. While an investment banker, Diamond was involved in financings and mergers and acquisitions for emerging growth companies. After working in investment banking, Diamond founded Pathjump, which he scaled to thousands of users across the country. He holds his undergraduate and MBA degrees from Cornell University.
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1) Hunter Diamond: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. Diamond Equity Research LLC is being compensated by ElectraMeccanica Vehicles Corp. for producing research materials regarding ElectraMeccanica Vehicles Corp. and its securities. Payment is made in cash and is billed one time and upfront for an annual subscription. As of 11/20/2018 the issuer had paid us $17,500 for our services, with services commencing on 10/13/2017. Additional fees may have accrued since then. I determined which companies would be included in this article based on my research and understanding of the sector.
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