By on May 9, 2017

paul-elio

As TTAC reported recently, Elio Motors disclosed in its most recent annual report to the Securities and Exchange Commission it needs an additional $64 million to begin series production of its first vehicle at a former General Motors assembly plant in Shreveport, Louisiana. This is on top of the $312 million it previously stated it required to bring the high-mileage trike to reality.

That isn’t the worst news.

In the filing, Elio Motors announced it was laying off sales and engineering personnel to conserve resources as it focused on securing more financing, primarily through the sale of stock and taking on more debt. An unnamed vendor is also in a payment dispute with Elio Motors, and the company is running a $100+ million deficit.

“Sure, there’s bad news,” Elio said on a phone call with TTAC, “but there’s also good news in the annual report that people are ignoring.”

Elio Motors’ success is looking increasingly bleak. However, there is a pattern. Each time Elio makes some kind of financial report or the topic heats up locally, journalists take note, write about the problems, and Elio’s stock price drops.

The latest financial news comes on the heals of local politicians in Shreveport complaining Elio has tied up a facility that could’ve been leased to going concerns.

By now, Elio’s publicly traded stock has dropped from a steady $20/share to below $7, making it even harder to find financing.

$100 million in the hole

“All startups have a deficit. Have you looked at Tesla’s deficit lately?” Elio answered.

Tesla has a large deficit on the books and isn’t yet profitable. The bonds it recently sold as part of the $1.15 billion it raised through equity and debt (the same way Elio hopes to raise a smaller amount of cash) have been described by Forbes as “junk”.

However, unlike Elio Motors, Tesla has built and delivered tens of thousands of cars, Paul Elio pointed out, whereas his own firm hasn’t yet even finished the 25 final engineering prototypes it must complete, let alone a single production vehicle.

Unpaid vendor and committed suppliers

Elio wouldn’t identify the unpaid vendor, but he said the amount in dispute was “relatively minor” compared to the financial commitments to the project made by some very large vendors in terms of engineering and equipment costs.

For example, Aisin, which will be supplying the Elio trike’s five-speed manual and automated-manual transmissions, committed $36.6 million to the project. Linamar will be in charge of engine assembly at the Shreveport plant and has said it will provide $45 to $50 million in general manufacturing equipment to support production. And Hyundai DYMOS will supply seats from a satellite assembly line in the Shreveport plant. That supplier has committed $1.8 million for needed equipment and renovations.

Primary investor doubles down

Elio pointed to another section of the annual report that stated Stu Lichter — the company’s primary backer, real estate broker, and holder of the lease on the Shreveport factory — “advanced” Elio Motors over $6,250,000 since the start of 2016.

Additionally, Lichter recently purchased $200,000 worth of Elio Motors common stock at $5.98 a share.

None of that reduces the $376 million Elio Motors needs to raise if it has any chance of starting production by the end of 2017, a date pushed back so many times that many of Elio’s 64,000 or so reservation holders simply don’t believe it anymore — or any of Paul Elio’s other promises.

Marked for death?

It may be time for an Elio Motors Death Watch, but it won’t be because Paul Elio is a scam artist.

Instead, Paul and his associates, for all their previous experience in the auto industry, may have simply failed to accurately estimate how long it was going to take to develop their vehicle, and how much money it was going to take to get it to series production.

One could understand it if Paul Elio threw in the towel, but he’s not giving up on his three-wheeled dream just yet.

Get the latest TTAC e-Newsletter!

Recommended

32 Comments on “Paul Elio Wishes Folks Would Look On the Bright Side...”


  • avatar
    sirwired

    When you need an additional $64M beyond the nearly-unattainable amount you already knew you needed to raise, pointing out that somebody just bought $200k of cut-price shares does not make people feel any more confident.

    • 0 avatar
      highdesertcat

      In an era where the SUV/CUV is trending, how many of these Elios will they be able to sell. And what is their break-even point?

      If this ever comes to pass, and they’re actually for sale to the public, I think we have the makings here of an instant orphan, like DeLorean, Tucker, et al.

  • avatar
    doublechili

    Should have never branched out from frozen pizza to vehicle manufacturing. What were they thinking?

  • avatar

    Elio forms great lecturing stuff as a business case how to start a startup (and how not to) in one of the most competitive, capital-devouring and risky businesses around.

    • 0 avatar
      highdesertcat

      I agree, but Elio’s three-wheeler is not unique nor unprecedented.

      There was the Reliant Robin that tried very hard to become accepted, but didn’t quite get there.

      Nor the Borgward Isabella, although it had two wheels in back, closely-spaced together.

      IMO, better to buy a Yaris, or a Fiat 500 or some other cheap tiny four-wheeled car.

  • avatar
    seth1065

    I doubt the public will ever see one of these on the roads, to have a death watch you need to live first, well he may or may not be a scam artist it seems his business case is not sound, say what you want about Elon ( and I do not see Telsa as a stand alone company in the future) but he has cars on the road. Everyone loves the under dog but most times they do not make it.

  • avatar
    JimZ

    what is the “bright side” here? you’re laying off the people you need to design, build, and sell your product. How is that a path to success?

    • 0 avatar
      SCE to AUX

      I strained to see a bright side, also. These laid off people are soon going to find work elsewhere, making the light at the the end of this tunnel very dim indeed.

      • 0 avatar
        FormerFF

        When I saw that headline, I immediately thought of the song “Always Look on the Bright Side of Life” at the end of Monty Python’s “Life of Brian”.

        The bad news for the Elio crew is even if they manage all the technical challenges and produce a usable product, I really, really don’t think they will find nearly enough buyers to keep the doors open.

  • avatar
    dukeisduke

    I’d never buy one, but still, I’m hoping they’ll make it. How are drivers licensed for this thing? Do you need a motorcycle license?

    • 0 avatar
      JimZ

      it’d be the same as for a Polaris Slingshot.

    • 0 avatar
      SCE to AUX

      A similar question has always dogged the Segway. If you can’t define what the vehicle is, then it is regulated into oblivion just to be safe.

      • 0 avatar
        JimZ

        no, most states- if it has fewer than four wheels- it’s considered a motorcycle. The Slingshot, despite having two regular car-style seats, has no seatbelts. there’s even a disclaimer on their site which says “Slingshot® is a three-wheeled motorcycle. It is not an automobile, it does not have airbags, and it does not meet automotive safety standards.”

        as far as the law is concerned, vehicles like the Slingshot and Elio’s thing are no different from a Harley trike.

  • avatar
    SCE to AUX

    I’d like for Mr Elio to explain why his vehicle *must* have only 3 wheels and *must* have outriggers.

    Without those oddities, I think Elio Motors might have had a chance at producing a nice little runabout, even if it only carried two passengers.

    • 0 avatar
      JimZ

      “I’d like for Mr Elio to explain why his vehicle *must* have only 3 wheels”

      because then they don’t have to deal with pesky things like crash standards, airbags, and they get to play under looser emissions standards.

      • 0 avatar
        redmondjp

        And, if you travel on a Washington State Ferry, you get to board first, even if there are three boats’ worth of cars lined up waiting.

      • 0 avatar
        SCE to AUX

        I suppose that makes sense.

        The follow-on question then is: By bypassing those pesky rules, are you also willing to bypass 99% of the market potential for your company?

        The entire business plan hinges on the desirability of the product… and this design is *not* desirable.

        • 0 avatar
          JimZ

          weeeeellll, it’s not quite the same. Elio has an enclosed interior with climate controls and other niceties, so it’s not as much as a niche idea as the open-cockpit Slingshot or a motorcycle-based trike.

  • avatar
    Middle-Aged Miata Man

    Personal experience has demonstrated that seeing company executives reach out to proclaim, “wait, there’s good news too!” is usually an excellent harbinger of impending doom.

  • avatar
    aaronstein

    Elio has been around even longer than they want to admit, at least in some prior form. they displayed at the NY auto show about 6 years ago. now they deny they are the same company. whatever. they are vaporware.

  • avatar
    C6jerry

    Elio started in 2009 and there are videos and articles dating back to 2010 showing him with the car and promising production dates. It was supposed to go into production in June 2014.

    “may have simply failed to accurately estimate how long it was going to take to develop their vehicle, and how much money it was going to take to get it to series production.”

    That’s an understatement. They let the public know three years after they were supposed to go into production that they need $376M and 76 more weeks (depending on if they get the $376M. I guess the end of 2017 production start he told the Caddo Parish at the end of October 2016 then two months later tells CNBC that you’ll be able to buy your Elio in 2018 doesn’t send up any red flags? I assume 6 months from now when the next SEC filing comes out that it’ll be $410M to start production and a 100 week lead time.

    Again, what is the good news?

  • avatar
    fred

    The bright side? Life is still wonderful, whether or not Paul Elio builds his fantasy trike.

    Paul was/is more of a scam plodder than a scam artist. He’s been not only promising the impossible from the beginning, but knowingly doing so. He has known that his dates were impossible, and that the financials never worked.

    He repeatedly made claims that were never backed up in metal, plastic, and rubber. Until he was forced by SEC rules to start disclosing the financial position of the company, he shaded and spun the facts, and hid the realities of the situation.

    His “final” act was poisoning the well by creating a “locked-in price” that would guarantee that no investor would ever touch the project.

    The bright side is that this scam plodder will be out of the scam business soon.

    The dark side is that the good idea of a cheap, fun, gasoline-powered trike is far less likely to happen, because of the goodwill that he has destroyed.

  • avatar
    watersketch

    Sounds like a good time for someone to buy in at fire sale prices. Maybe Bob Lutz can come in as a strategic investor?

    • 0 avatar
      indi500fan

      Not sure there’s anything to “buy” except a lot of unpaid bills. It doesn’t appear there are much of any assets, what little does exist is probably leased or tooling in the hands of suppliers.

      The cost numbers were obviously bogus back in 2009 and are more bogus 8 years later. Elio might have been able to sell a few of these at 10 or 12 grand if gas went to 6 bucks a gallon. Today I paid $1.92 for BP “top tier” regular.

  • avatar
    arach

    I’m not convinced its a scam.

    Now is it going to work? no. Are people going to get screwed out of money? Yes.

    To be a scam, paul would actually be trying to use the company not to succeed, but to take their money.

    I think Paul IS trying to make the business succeed, but he’s just not doing a great job of it and its going to fail.

    I think thats a BIG difference. I don’t think his core intent is to screw people over.

  • avatar
    FWD Trikes are stupid

    Come on now! 140+ million dollars spent. No corporate assets gained. No competed product development. They don’t even have a factory, just tied up a empty building, borrowed money to buy machines that were left in it, sold some of that, and has yet to pay rent. All “Elio” vehicles are none functioning display models that they bought from custom car maker. That much money spent, still nothing to show for it. They will let you sit in a display model! Show you videos of display model puttering around at slow speed. That is the best they can do with only 140 million dollars. Elio never wanted to make a vehicle, if they did they would be making testable prototypes. Not buying display models. Elio is a great salesman. He went from broke to being a millionaire. Didn’t do much more than talk.

  • avatar
    C6jerry

    Elio is not a scam at all. You have to remember 2008-2012. We were in the midst of the mortgage crisis, people were losing their jobs, GM was bankrupt and the price of gas kept going up. The current situation and peoples feelings that the US was going into the dumper, all manufacturing and jobs were leaving and everything had some sort of “fuel surcharge” on it. So, with that being headline news, day in and day out, Elio used that as an opportunity and leveraged on it heavily.

    It should have worked for getting the funding because it had all of the right answers at the right time. Breaking the poverty cycle, fuel efficient and American jobs. Once they got into it, it’s obvious the funding that they were looking for went elsewhere. Then you see where they are today. I don’t blame they guy for trying to make it work but the Elio should have been produced in 2014. Even on a limited scale and for more. Then today it would make sense to compare with Tesla because they could still be in debt but at least they would be producing something and thus we’d have the Elio model 2 by this Christmas.

    Lesson learned, don’t over promise. When you do, everyone will hold you to those promises. When you don’t deliver on them, get ready for the firing line. There’s no one to blame but yourself.

    • 0 avatar
      arach

      I want to jump on here.

      I actually bought a property to manufacture budget electric motorcycles. Gas was shooting up, money was at a premium… This was in about 2013 when we were getting ready to bring to market. “Gas prices were going to keep going up forever” of course.

      In my case, we actually had the prototypes rolling and could spit them out at a market price of $4800, which is the low end of motorcycle pricing and where we saw the market would be. Our low volume manufacturing cost was $3600. While those are thin margins, we knew as we could ramp up volumes, and forecasted we could get our pricing down to about $2400 per unit for 50% margins (slightly less including warranty costs and fixed costs)

      But then something happened. Things started changing. First people were feeling better about the economy… spending more.

      THEN gas prices started dropping.

      The window of opportunity had closed.

      So we did what any self-funded startup would do.

      We washed our hands of our losses, celebrated the engineering feats, and went on with our lives in new and interesting places (although we can always pick it back up if things turn down again…)

      But Elio was in too much debt, and he couldn’t walk away when he needed to. He was too goal driven. While these can be good traits, they can also be destructive.

      The traditional entrepreneurship model is to give things everything you have until there’s nothing left. The max out every credit card, every loan, every grant… until you either succeed or go bankrupt.

      Still few entrepreneurs recognize the importance of timing and opportunity costs. They fail to recognize sometimes the best thing you can do is walk away.

      But Elio wasn’t an awful idea in the ’09-13 time frame. In fact it could have worked…

      He should have gotten something small to the market quickly, like tesla did with the roadster… maybe even smaller.

      They should have produced an initial version that was microproduced, even if the price was $15,000+.

      They shouldn’t have tried to go all in from the get-go.

      But they insisted.

      And they failed to walk away when they realized the light at the end of the tunnel was out. The opportunity had passed. they missed it.

  • avatar

    Let’s face it. If Musk had his mind set on bringing three-wheelers, the whole venture would have been further. In many respects, what Musk did, is much more difficult.

  • avatar
    wumpus

    Has he considered exporting to Germany? There’s some sort of set of regulations that make it worth converting Golfs into three-wheelers. Might work if you need margins.

    $100M in the hole, before tooling up? I suspect you were paying consultants as fast as you could.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • PandaBear: Yaris and XLE doesn’t belong in the same model, just like you wouldn’t make a Lexus with CE or...
  • highdesertcat: That’s what I had in mind when I wrote my comment. Know of one instance where Dex-Cool...
  • PandaBear: They are probably either #1 or #2 AC manufacturer in the world. Never heard of Lennox outside of the US.
  • Inside Looking Out: It is like my wife. She often scares my into hitting brakes.
  • Inside Looking Out: It is like my wife. She often scares my into hitting brakes,

New Car Research

Get a Free Dealer Quote

Who We Are

  • Matthew Guy
  • Timothy Cain
  • Adam Tonge
  • Bozi Tatarevic
  • Chris Tonn
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber