Will Arcimoto Survive (video)

[Kepesk]

His timeline and numbers are a little off, but it's an interesting video anyway.

[jimball]

He's making a lot of predictions and assumptions while lacking fundamental knowledge about the product, the target market, and the customers holding reservations.

[Kepesk]

For the record, Mark's response to the video:

Galileo, thanks for the continued coverage of the endeavor! A few notes:

* Yes, the company is a small company. We were 20 people in a bodega design studio 15 months ago, we're 75 people today, in a factory we believe is capable of cranking out 10k+ units/yr. Yes, small three-wheeled vehicles are not the norm on the road today. The road today is overrun with ~4,000 lb. gas guzzlers taking one or two people a short distance with a small amount of stuff, which is dumb, even if that giant vehicle is electric. Our "losses" are investments in R&D, tooling, inventory, testing, etc., which is what any startup moving from prototype mode to manufacture mode would experience. Still, ours are a tiny tiny fraction of what other players in the space have burned.

* It might not have been entirely clear from our press releases, but we raised $1.5M in November (right before Thanksgiving, almost entirely from insiders and prior investors), and another $4.5M in December, for a total of ~$6M raised in Q4. That second investment matched the insider round at the same $3/share price, and also included a $3M note with warrants priced at $3.50/share. The holiday deal closed when the market price was ~$2/share.

* ~$50M in orders for a ~$50M company is "really exciting stuff," as you say. Also, we're not advertising -- new orders are coming in from word of mouth and earned media.

* "The ramp is proving slower than anticipated, and more difficult" - uh, where've we heard that before? Oh yeah, EVERY SINGLE EV STARTUP EVER. In Arcimoto's case, we aimed for end of 2018 for semi-automated manufacture of our first retail customer vehicles, and now we are aiming for Q1 2019. Slower, yes. More difficult? Not really. We've always thought this endeavor was going to be exceptionally difficult.

* Inventory - this is the pain point we are feeling currently, but it's largely absent from your analysis. We had to stock up to build vehicles in Q1 and Q2. When we sell those vehicles, we'll recoup those costs... but!! We'll have to buy more stuff for Q3, Q4, '20Q1, etc. Yet once we are generating predictable revenue, there are better financing tools for growth...

* Dilution - you talk a bit about dilution, but dilution from a raise ought be framed in terms of what the company expects to accomplish when it expands the shareholder pie. In this case, a ~10% hit to go from not producing vehicles for retail customers to producing vehicles for retail customers is something we see as a big win.

* "they should have raised $10M or $15M to really do this the right way" - see above. If the raise of $6M in Q4 gets us into market, with hundreds of vehicles in customer driveways, multiple rental outlets open and rolling... would that not position us better for future growth capital acquired with less dilution for our shareholders?

* We welcome you to take a test drive. I drove mine three times today - once for brunch and twice to the grocery store. All three times it was way better than taking a (any) car. Quicker, more efficient, more fun, more engaged. If you shift your view of the market from "car buyers" to "go-thing users", you might find a few more use cases than vacation spots. Please let me know when you are ready for a tour and some tire-kicking!

Cheers,
Mark

[jimball]

quote: "Also, we're not advertising -- new orders are coming in from word of mouth and earned media."

Necessity will force that to change. It's one thing to have the capacity to build 200 a week, but Arcimoto will need to generate 200 units a week in sales. I also predict that they will be rethinking the "direct sales" model and will be setting up stocking dealers around the country. Like Mark said. People want to kick the tires and take a test drive, and they will want to do it on their schedule.

[Kepesk]

And a video response:

[Rickb]

quote: "Also, we're not advertising -- new orders are coming in from word of mouth and earned media."

Necessity will force that to change.  It's one thing to have the capacity to build 200 a week, but Arcimoto will need to generate 200 units a week in sales.  I also predict that they will be rethinking the "direct sales" model and will be setting up stocking dealers around the country.  Like Mark said.  People want to kick the tires and take a test drive, and they will want to do it on their schedule.

The sales model includes rental locations.  Potential customers can kick the tires, rent the FUV for half a day, and order their personalized  FUV.  I like the custom build to order manufacturing model with no excess inventory setting around. A formal ad campaign will likely follow the launch of retail sales, but my gut feeling is Arcimoto will limit advertising and focus spending available revenue on production scale. Word of mouth and people seeing greater numbers of FUVs cruisin the streets will generate a lot of sales.

[jimball]

The sales model includes rental locations.  Potential customers can kick the tires, rent the FUV for half a day, and order their personalized  FUV.

How many locations can Arcimoto operate?  They'll need to show a profit.  If franchised to local owners, profit is paramount.  Those rental locations will, by necessity, need to be near tourist destinations.  That leaves a lot of the country out of luck.

I would be outraged if told that the only way I could get a test drive was to pay to rent one for a few hours.  Maybe...and that's a big maybe...if the rental fee was refunded if I bought one.

That's not the same as walking into a showroom with models on display, choosing what you want, signing the papers & driving it home - like nearly every other vehicle choice in the US.  As a society, we are very much into instant gratification.  Shopping online is the new big thing, but few people buy their transportation that way.

[Rickb]

I would expect a no cost quick test drive and or a 1/2 day rental credit if I bought the vehicle.  I’d be happy to order a custom FUV either on-line or place the order at the Rental Location near me after a test drive.  The way people shop is a changin.  Perhaps partnering with an establish auto rental chain like Enterprise for rental space as a quick and efficient ‘nationwide’ rental location roll out option or the COSTCO Auto Program.  My guess is Arcimoto has their production scale, rental, and servicing roll out plans under control.  My only personal issue is servicing after the white glove delivery of my FUV.

[Kepesk]

Yeah allowing a no cost 10 minute test drive would seem to me to be a very favorable (and necessary) idea. Trying to sell something by asking people to pay to try It out just doesn't make sense.

[Rickb]

My hope is when Arcimoto “premieres” their initial 185 retail “Pilot” FUV offering to the OR, WA, and CA area reservationists...............the pricepoint is within Arcimoto’s target MSRP price range and the on-line configurator is up and running so reservationists can choose their options.