"Three-Wheeling" into the future: Elio Motors

"Three-Wheeling" into the future: Elio Motors

Founded by Paul Elio in 2009, Elio Motors was awarded the best Automotive Startup of 2015. With a base price of 7300 USD (subject to restrictions) and a touted efficiency of 84 MPG, the Elio could revolutionize the American Automotive industry.

Elio started his company after working for automotive supplier Johnson Controls. Since then, he’s secured more than $22 million in private and public funding. He currently employs about 20 employees in Michigan and lives in Phoenix.

The company applied for $180 million from the Advanced Technology Vehicles Manufacturing program. This is the same Department of Energy loans that financed Fisker and VPG.  Both of these failed, but Elio insists he’s running entirely under his own power. He mentions other defunct auto startups, like Aptera and Visionary Vehicles, as examples, he doesn’t follow.

In the following article, we'll explore the man and machine in a little detail. We'll also explore some of the concerns for investors, local communities and customers for the proposed vehicle. Is all the hype around the Elio well founded? Will the project actually make it to production? You will see that Paul Elio is certainly confident in his new vehicle but can he deliver on his promises?

So without further ado, we present, Elio Motors and the Elio.

So what are Elio Motors offering?

The new aerodynamic three-wheeler vehicle has features such as power windows, power door locks, cruise control and air conditioning. Built with safety in mind, the Elio sports multiple airbags, anti-lock brakes, traction control, steel unibody frame and crumple zones. The vehicles will be built at the former general motors site in Shreveport, Louisiana.

It is not clear whether this vehicle will cause a seismic shift in the automotive industry. But the vehicle’s founder and designer, Paul Elio, isn’t building it for the average buyer. “We would get our ass handed to us there,” he says about competing with established automakers. Among used cars, however, “I’d think we’d play very well.” As used-car inventories swell in response to record U.S. car sales and Americans keep their older vehicles running longer, Elio thinks he’ll be able to swoop into this segment and “literally give cars away.”

We wonder if it was inspired by the Reliant Robin, albeit sexier and in reverse, made famous by "Only fools and horses". The Elio certainly looks the part, but will it be resigned to the annals of popular culture or is it a viable mass production vehicle?

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[Image Source: ElioMotors]

Under the hood of the Elio

Elio motors want to build the new three-wheeler vehicles with an initial price tag of 7,300 USD (for the first batch of 65,000 reservations). Advertised as being able to achieve 84 MPG extra-urban and 49 MPG urban, the Elio intended as low-costs, alternative for the savvy driver. The vehicle currently has five prototypes and three validation models. These will be extensively tested for safety, aerodynamics and durability. Once testing is complete the company intends to build 100 pre-production models at its facility in Shreveport, Louisiana.

The Elio will come as standard wit RedDot air conditioning, AM/FM radio stereo, power windows and door locks, cruise control, no less than three airbags, steel roll cage, intrusion beams, stability control and ABS. Continental has also taken the liberty of creating a custom tire for the Elio.

The Elio's design includes a curb weight of 610kg, inline 0.9 litre three cylinder, 55 horsepower engine with front wheel drive. It is touted as having a top speed of 107mph with an 0 to 60 of 10.8 seconds.

The Elio will have a boot, trunk to our American cousins, with dimensions of 0.69 by 0.36 by 0.25 meters. Hardly spacious but sufficient for a carry-on bag or golf bag is the rear seat is reclined.

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[Image Source: ElioMotors]

Elio Motors - Have it your way

The company also has ambitions for its logistics. Elio believes his new ordering systems will be as popular as his new three-wheeler. They envisage a "just-in-time" production schedule whereby they could ship a custom-spec vehicle the next day. Sales VP Jerome Vassallo quoted around 250 to 300 cars a day jumping up to 1000 later in production.

The company says that the cars' optional equipment will be installed, piece by piece, just like distributors do for accessories. These options will include leather seats, infotainment, advanced driver assists and other electronic hardware. So long as it only needs a USB port and a power outlet.

Elio envisages suppliers potentially using Elio as a test bed for the latest technology for other entrepreneurs. He believes that startups will be able to offer features at a fraction of the cost of traditional automakers today. If the customer isn't satisfied “we’ll take it off and send it back to the supplier.”

When talking about technology, Elio compares Elio Motors to Wal-Mart or a retailer. He explains that they won't shoulder the costs of development or integration of the equipment within the cars. This idea came to Elio after years of buying cars with features he didn't want or need. He gives the example of vanity mirrors which he was always forced to buy because they came in the bundle for the car.

“I don’t put on makeup. I don’t care what I look in the mirror,” he says.

Elio Motors - I am the law!

As the Elio is a three-wheeled vehicle, under US Law, it needs to meet motorcycle standards. This will impact on the final end user who is likely to need to wear and crash helmet and other safety gear. They will also potentially have to have a motorcycle endorsement on their licenses. Elio has been attempting to lobby the government to amend the regulations given Elio's apparent exemption to the current regulations.

Elio Motors Production

Based in Phoenix, Arizona with production scheduled at Shreveport, Louisiana, Elio Motors plans on employing 1,500 employees directly. The production facility will use part of the former General Motors 3.2 Million ft2 facility. Elio Motors also forecasts indirectly creating a further 1,500 jobs associated with corporate, sales and after sale services. Once under full production, Elio Motors also foresees an additional 18,000 jobs created nationwide through its supply chain. Elio Motors is targeting 90% North American content on its vehicle.

Elio has a supply chain in place which should allow quick "ramp-up" when the actual production line opens. 100 pre-production units were scheduled for completion, Paul Elio, however, has announced that this is now to be delayed until late 2017. Supply chain partners include AISIN, Roush, Comau, Continental, Cooper Standard, RedDOT, Hyundai DYMOS, Henkel and IAV.

Buy now, pay later for your Elio

Elio obviously wants to sell his vehicles directly to consumers, just as Tesla does. Since, however, the vehicle is technically a motorcycle, the National Automobile Dealers Association hasn't been roused, for now. Elio's sales pitch is, however, leaps ahead of owning stores. He imagines a customer walking in, paying nothing up front and leaving with a unit and a credit card.

The customer will use the card to pay for fuel and Elio will triple the amount to act as a car payment. The vehicle owner will, however, be required to make minimum payments in case the vehicles fuel efficiency means refills are few and far between. Elio's vision is to see owners of older, gas-guzzling, cars like a 1998 Volvo, to get into the Elio and let their fuel savings make the payments.

“It’s hitting people over the head with the value equation,” Elio says. We'd be interested to see which banks are willing to underwrite his ambitions on this front.

Haters 'gonna' hate

Elio motors have continuously extended the pre-production of the vehicle since 2015, moving to 2015 and now to 2017. Clearly, this has analysts concerned about the company's ability to deliver on their promises. Elio has applied for a Department of Energy Loan and Elio is offering advanced reservations for potential buyers at the advertised base price of 7,300 USD (originally priced at 6,800 USD).

Their website does state that if you reserve and promise to purchase the car on production you can lock in the price at 7,000 USD. There is, however, a limit for this offer of 65,000 units.

Elio Motors has yet to provide proof that their vehicle can meet the mileage criteria for the loan, or show that their operation can finance itself without the loan, both of which are criteria clearly stated in the requirements.

Investor confidence also seems to be a bit shaky with a market crash in stock price in February 2016, though it should be noted that a market-wide bear market occurred at the beginning of 2016.

Is Elio Motors' future in doubt?

The company keeps delaying delivery of its three-wheeler street car. Even with its cheap price that seems almost too good to be true, it may never actually get to market. Although this is always a concern for any startup Elio himself says that they have about $100,000 in the bank but $123 million deficit.

That's a "healthy" deficit of over a thousand times the amount money they have in the bank.  Recent filings with the U.S Securities and Exchange Commission were sifted through by Louisiana news outlet KTBS. They found that the company had $101,317 in the bank and $123,212,431 in accumulated deficit since September 2016. This is a change from $6,870,044 in cash and $2,325,036 deficit as of December 2015.

Granted this project has a lot of Research and Development costs and this kind of deficit is not overly unusual. There have always been questions about the Elio and its viability from the very beginning. That hasn't really changed in recent years, the price of the car has, however. The Elio was originally touted as $6,800 but has risen steadily with a base price now over $7,300 (under special circumstances).

Delays after delays

As previously mentioned, Elio moved its production to Louisiana to an old General Motors factory in Shreveport at the start of 2013. Elio Motors have said that production will begin in 2014 and would hire around 1,500 workers. This was to be a blessing for the area hit hard after GM layoffs. Elio's car has had continuous delays since and KTBS reported that it has "yet to create a single job or dollar of revenue for the area."

These delays have constantly pushed the release back from 2014 to 2015, 2015 to 2016. Here we sit now, in 2017, with still no cars to show for it. KTBS have recently commented that Elio's facebook page now declared 2018 as the new target date for the Elio. However, when you reserve an Elio you are required to deposit between $400 and $900 and you need to agree to their terms and conditions.

"While maintaining my present place in line for delivery, I understand that currently there is no definite date set for production or delivery of my vehicle."

It is reported that Elio has 50,000 people with reservations for their new three-wheeler. Elio Motors have also sold some of their prototype testing models to some of those who have reserved a unit.

"Three-Wheeling" into the future: Elio Motors

[Image Source: Pixabay]

Shreveport Mayor Glover has his reservations about Elio Motors

Shreveport Mayor Cedric Glover has also weighed in believing that the area is waiting for nothing. KTBS reports that Glover has said that those with purchased reservations with Elio should probably write it off as a loss.

Glover notes “Going into the fourth quarter this year, they only had $101,000 in cash on hand. So when you think about the actual amount of money that they’ve been expanding, Paul Elio with a salary of over 250 thousand,”

Glover places much of the blame on Racer Trust. Racer Trust is the company charged with putting the GM plant to the best use for the area following bankruptcy. Mayor Glover believes the company had an obligation to bring new jobs to the facility following this. Despite interests for the site from Deacon Air Conditioning and Land Rover the site is still reserved for Elio Motors.

“If you look at Paul Elio from 2009, certainly by the time you get to 2011 and 2012, it’s clear that what he is, in fact, a dreamer and a schemer. It leads one to ask, what was the actual motivation behind committing these facilities, this equipment to Paul Elio and the Elio operation,” Glover further said.

What do Elio have to say about the delays?

Meeting with the public during a meeting in the Parish of Caddo, Lousiana, Paul Elio addressed their concerns. The meeting was held in November 2017, Paul attempted to explain the delays and challenges that Elio Motors has had to overcome to get to this point. Mayor Glover took the opportunity to grill Elio and the Racer Trust over the till empty building at the GM site. Glover also addressed his concerns over the wasted opportunities of another potential project for the site "Project Pheonix".

As we previously mentioned, RACER Trust came into being after the U.S. Bankruptcy Court decided to help redevelop GM properties after they went under in 2009. The Trust put the Shreveport facility on the market for three years with no interest. Thankfully for RACER Trust, Elio Motors showed their interest in 2012. Elio notes that "Project Pheonix" didn't show any interest until Elio did. The current deal for Elio means they don't have to pay any rent for the space until production begins. A very generous arrangement indeed and this helps to explain the delays thus far.

Elio went on to explain the difficulties they have had raising capital up to this point. Hedge funds, private equity and venture capitalists showed little interest in supporting a startup that wouldn't make any money for at least two years.

“They want to give $2 million and get the next Facebook,” said Elio explained. Most private investors would probably share their desires for high return on investment.

Bankers to the rescue

Elio Motors, once they went public, received 61,000 reservation for their proposed car. At this point, bankers' interests were peeked.

“12 months ago they wouldn't return my calls and now we're having meetings,” Elio explained. Elio Motors need about £300 million before they can start making cars and currently only have about $120 million. Granted most of this is debt. “I feel like we're over the hump,” Elio explains.

The Startup has forged a new relationship with Oppenheimer and they believe this could help get the ball rolling, from a financial point of view. Elio notes that he feels confident for the next round of funding negotiations.

By way of comparison, Tesla Motors has sold about 163,000 cars since the Roadster went into production in 2008. Tesla faced similar funding issues in order to get ready for manufacture. Tesla currently employs around 13,000 people and has a market cap of over $30 billion.

Mayor Glover is a hard man to please

Elio Motors has 23 test cars currently with the latest unveiled in November 2017 at the Los Angeles Auto Show. Elio said at the meeting that cars would begin production in the fourth quarter of 2017. Clearly, this was still rather ambitious.

Mayor Glover did admit that Elio's plan and vision was very enticing. He wasn't, however, convinced that Shreveport hadn't been taken advantage of. For instance, Elio Motors had the option to sell off the old GM plant equipment and pocket the cash. Glover feels that the parish should have benefited from such a sale. The Mayor was also concerned about the lack of taxes being paid by Elio Motors. Mayor Glover did not shy away from his view that they had "hitched their wagon" to Elio. He would have preferred to join up with "Project Pheonix" who are said to and $10 billion in annual revenue.

"Three-Wheeling" into the future: Elio Motors

[Image Source: Pixabay]

Not all bad news

Elio did have some good news for the public. He revealed that Hyundai Dymos would be making the seats for the cars in Shreveport. This, Elio explained, would bring an additional 80 full-time jobs to the area.

Understandably, Shreveport is upset by the continual delays. Elio tried to reassure the public by explaining that they could have chosen the Pontiac Site in Michigan instead. The old GM building was demolished and sold for parts. Interestingly, the former sites slab can't be broken up due to potential environmental issues and is now being used as a car hotel.

“Pontiac will never attract a billion dollar project to that site - ever,” reassures Elio.

Given Shreveport's concerns are certainly understandable. If Elio can make good on his promises and deliver cars, their patience will be rewarded. Elio will either be praised as a savior for the area of ran out of town. You know, business as usual. With so many hopes and dreams "on the line" we hope Elio can deliver.

Taxi for one?

With so many hurdles in the automotive industry and massive competition from established brands, not to mention the used car market, Elio's future is unclear. When Elio Motors make their first deliveries in the next year or two, the fundamental choice between a tiny, three-wheeled two-seater with enough trunk space for a small carry-on bag and a more practical use car like a Honda Civic won’t change.

As ambitious as Elio's vision is for his startup company it has many issues to solve even before getting to market. They have made quite a lot of promises, not only to investors and customers but also to local communities in which they wish to manufacture. Time will tell whether the positive rhetoric of Elio's founder will bear fruit. With dubious accounts, to some, and continued delays for others the next few years will certainly be interesting times for all concerned. Will they hit their 2018 deadline or delay once again?

If no investors can be found or deals with Oppenheimer fall through what will the company do with their facility in Shreveport? Will they start rolling out machines? What of all the promised employment? Will Mayor Glover's fears be realized? Should Shreveport ditch Elio and approach the "Pheonix Project" more aggressively? These are questions for the future, until then let's see what Elio can pull out of the hat.

None of that is deterring Elio of Elio Motors, “I’m all in,” he says. “If this doesn’t work, I’ll be saying, ‘Do you want fries with that?’

Sources: ElioMotorsJalopnikCarAndDriver

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