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An Early-Stage Electric Vehicle Manufacturer in an Extremely High-Growth Market

The Energy Report

Source: Streetwise Reports   12/22/2017

Hunter Diamond, CFA, founder of Diamond Equity Research, profiles a company that he believes offers investors a unique opportunity to invest in the clean, renewable and sustainable transportation market.

Hunter Diamond

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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Streetwise Reports Disclosure:
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.
2) The following companies mentioned in the article are billboard sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

( Companies Mentioned: ECCTF:OTCQB,
)

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About Louie Lewis

Louie Lewis
Successful forex trading starts with you first. Then comes the actual strategies and techniques. I have been involved with forex and forex trading for a few years now. It is a wonderful way to build wealth. The learning never stops and I want to help others along their journey into this wonderful market of opportunity.

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