Three-wheel Elio Car Production Delays: When They Brag, it Drags

Few years ago, Elio Motors bragged about its three-wheeled vehicle that is fuel-efficient, highly affordable and incredibly safe. According to their website, The Elio is an American innovation at its finest because it is made in the US by American workers at Shreveport, Louisiana. It is designed to target 90% North American utilization and it is presumed to be a collaboration of the finest automobile suppliers in the world.

It claims that the vehicle will be able to achieve 84 miles per gallon and will only cost as little as $7,300 compared with high-end fuel-efficient automobiles.

It was originally planned to be on the road with the consumers in 2015. However it seems that the start-up company is having troubles with earnings and has a limited cash supply at the moment. Since the company has been founded in 2009, the production was delayed several times already.

It first unveiled its product vehicle at the Los Angeles Auto Show in November. Now, they recently featured its E1c engineering vehicle at the North America International Auto Show in Detroit. This time it featured upgraded interior and safety systems. The prototypes suggest an ability to produce a vehicle ready to be utilized on the road and it has already more than 60,000 reservations.

The total reservations earned Elio at least $300 million and they also raised $17 million last year through a small-investor crowd funding.

So far, the company has only been producing prototypes and its real product launch is stretched this time until next year.

The company confirms it will push the start of the series production in 2018, according to KTBS, a local news station in Shreveport, Louisiana. It is also where the Elio’s production plant is located which was initially by the General Motors.

Elio filed a report on the Securities and Exchange Commission stating that the delay was due to dire financial straits. Since 2009, there were zero revenues, no dividends to shareholders and had only produced five prototypes.

elio carAt the beginning of 2015, Elio has $6.87 million in cash reserves but as of September 30 2016, they only have $101,317. It collected $24.8 million in non-refundable customer deposits but the company also had current liabilities up to $30.7 million. It seems that there are more liabilities than ingoing cash flow from stocks and excited customers.

With its cash burn, Elio hopes on a $185 million loan from the Department of Energy’s Advanced Technology Vehicles Manufacturing (ATVM) low-interest loan program to continue its production.

ATVM loans are offered to carmakers and suppliers to build cars, upgrade their system that is fuel efficient with at least 25% higher compared to those they replaced. However since 2010, no company had been able to receive funding and with under Trump’s new administration, the future of the loans is still unclear.

If the ATVM loan does not push through for Elio, their funding will have to rely on customer reservations and selling debt. The company also said that if financing could not be secured, “we may have to curtail our business sharply or cease operations altogether.”

With their “I’m All In” and “I Want In” options for reservations, customers are already tired of waiting after multiple delays. “I’m All In” option features non-refundable deposit with a lock in of $7,300 while “I Want In” option allows the customer for a refund, both options promising exclusive first experience of the vehicle.

At least one reservation holder already sued the company to get a deposit back. If this operation further delays and with questionable funding, there might be more holders to sue the company if they won’t return their deposits.

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