Elio Motors Says It Will Sell 100 Pre-Production Prototypes to Fleets, Delays "Consumer" Production Till 2017

In a move that has already generated criticism from disappointed deposit holders, Elio Motors announced that production of its enclosed tandem three-wheelers will be delayed, yet again, to an undisclosed date sometime in 2017.

In a statement issued on Friday, Elio Motors said, “the bulk of the consumer launch will have to be moved into 2017 at a date to be determined, as the company continues to seek additional funding.”

Ironically, that delay was made public as the company appeared to make progress towards getting at least some vehicles built in Shreveport later this year. Founded in 2009, Elio had previously announced production dates of 2014 and more recently the end of 2016.

In a previous filing with the Securities and Exchange Commission in connection with their recent Reg A+ stock offering (which raised about $17 million), Elio had said that they planned to build 100 pre-production validation prototypes in the Shreveport factory in the fourth quarter of 2016. Elio Motors disclosed to the SEC that those prototypes would be used internally by the company for testing purposes. The company now says that those prototypes will indeed be built in Shreveport by Dec. 31, 2016, but that in order to provide more real world testing and produce a better developed vehicle, those trikes will instead be sold to one or more fleet customers. The 100 validation prototypes to be built in Elio’s own factory are planned to follow the 25 “E series” prototypes Elio is currently having fabricated by its prototype supplier, Technosports Creative, of Troy, Michigan.

Elio Motors still needs at least $200 million in financing before it can start production. One reason given for the planned sale of the validation vehicles is to generate “additional revenue,” the amount of which doesn’t make sense. The Elio reverse trike has a “target price” of $6,800. At that MSRP, 100 vehicles would only generate $680,000 in revenue, and I assume there’d be some kind of fleet discount. In light of Elio Motors’ need for hundreds of millions of dollars, that revenue wouldn’t help much. I suppose that it would give Elio the opportunity to set up its own fleet and commercial sales and service departments.

My guess is that they’ll make a deal with Pep Boys, the auto parts and service chain that has contracted with Elio to provide Elio owners with maintenance and repair service, and that the Elio prototypes will be used as parts delivery vehicles. Elio’s business plan doesn’t involve traditional dealerships but rather factory owned sales and delivery facilities that will be supplied by a small number of regional fulfillment centers. Those centers will add options and accessories. By making every car the same at the factory, save for choice of automatic or manual transmission, the company hopes to cut costs while still allowing customers to personalize their vehicles.

The news about the 100 validation prototypes comes after Elio had previously announced a couple of significant steps towards reaching production. In February, the company released to its suppliers approved designs for the space frame and engine cradle to be used in the E series prototypes. That means the vendors can finalize the designs for the rest of the vehicle. Based on conversations I’ve had with company founder Paul Elio, I’m assuming that the cradle and frame, like much of the E Series vehicles, will be close to production designs.

Toward getting that production design set, Elio Motors also announced last week that Roush will be in charge of engineering the production Elio trike. Roush, which supplies a broad range of engineering services to automobile manufacturers, will provide Elio with support for engineering, testing, prototyping and assembly. Presumably, that last point will be coordinated with Comau, which is supplying Elio Motors with manufacturing engineering for its assembly lines and body shop.

The continued production delays may cost Elio Motors a lot more money than they’d generate with the sale of those 100 prototypes. Elio is getting the use of the Shreveport factory, which had recently been updated by GM, by subleasing the real estate from its primary backer, real estate investor Stuart Lichter. Lichter’s firm leased the facility from Racer Trust, the corporate entity that held assets that GM had shed in its bankruptcy and bailout.

Part of the agreement with Racer Trust was Elio Motors’ pledge to create 1,500 new permanent full-time jobs in Caddo Parish, Louisiana. The agreement stipulated that if Elio had not created those jobs by February 28, 2016, the company would have to pay Racer Trust $5,000 for each job below 1,500 not staffed. Since a total of zero jobs have so far been created in Caddo Parish by Elio, that means, theoretically, that they owe Racer Trust $7.5 million. Elio Motors had been trying to renegotiate those terms but, as yet, there’s been no report from either Elio or Racer Trust about missing the deadline.

Adding a twist to Elio’s financial matters has been some buzz over the news that after those Reg A+ shares started trading in the over the counter stock market Elio and soared to over $60/share, Elio Motors at least briefly had a market capitalization of more than a billion dollars. The stock, which was first offered at $14/share, is still trading at close to $40. Interestingly, Elio Motors, which hitherto had hoped to get a $200 million loan from the U.S. Dept. of Energy’s Advanced Technology Vehicles Manufacturing (ATVM) program and staking much of its future on that financing, hasn’t said a thing about the government loan since the stock offering.

[Image: © 2016 Ronnie Schreiber/The Truth About Cars]

Ronnie Schreiber edits Cars In Depth, a realistic perspective on cars & car culture and the original 3D car site. If you found this post worthwhile, you can get a parallax view at Cars In Depth. Thanks for reading – RJS