Cars are a costly form of transportation and they have not been engineered in the manner most used. According to  a 2017 survey conducted by the Federal Highway Administration, 75% of all trips taken are less than 10 miles from a person’s home. And about 50% of all urban trips involve fewer than 3 miles driven. Even so, cars have been engineered — particularly in the US — to be large and capable of driving hundreds of miles on one tank of gas. In addition to this mismatch between design and usage, combustion vehicles are also inefficient, noisy, and significant contributors to pollution. There is plenty of room for improvements in everyday transportation.

The founders of Eli Electric Vehicles have come to recognize the problems plaguing modern transportation. Instead of working to make existing cars more efficient or developing a vehicle-sharing business like other entrepreneurs, these founders decided to reinvent the car altogether. The end result: the Eli ZERO. According to management, the Eli ZERO is a small electric vehicle (EV) meant for urban drivers. The small car was designed for drivers who navigate busy, congested roadways on short trips. 

The Eli ZERO takes about five hours to charge from any accessible outlet — or about two-and-a-half hours to charge from a Level 2 charging station. The device gets about 50 miles per charge, while the upgraded Eli ZERO+ gets around 70. The Eli ZERO is around half the size of most average cars and it’s 30% smaller than the Smart Fortwo — a leading microcar. Like most small EVs, the ZERO does seat only two passengers. The car is meant to appeal most to environmentally conscious drivers. Those who typically drive short distances in urban settings and who don’t mind limited space will likely love it.

Management touts that the cost of driving one of its vehicles is incredibly low. They estimate the price for every 70 miles is just $1. The initial purchase price for the Eli ZERO starts off low as well. Models in the US are expected to start out at $11,990, and models in Europe are likely to cost 10,999 euros. At present, Eli plans to begin production on both continents in the fourth quarter of this year. This will be made possible through its network of manufacturing partners. It will also permit sales of the vehicles to hit both the US and select parts of Europe simultaneously. In the US, sales will be made directly to car dealers, while in Europe the firm will work through established distributors. No direct-to-consumer sales are planned at this time.

In addition to selling the vehicles, Eli has plans to create other revenue streams as well. In time, it expects to have its own fleet of vehicles that it can rent out or offer to end users on a subscription basis. Autonomous transport services are a natural extension of this once the technology is perfected. Management also cited other offerings down the road, though the full extent of what this would entail has not been explained. The company also claims that sharing operators, dealers, college campuses, and other organizations have expressed interest in buying from them. The company could also benefit from offering original parts, warranties, and select services down the road.

Eli Electric Vehicles has been a company long in the making. Management has been working on the technology for around five years now. Even so, its financial history is rather limited. In 2018, the business generated nothing in terms of sales, and it saw no expenses either. In 2019, revenue of just $2,448 was more than offset by costs that brought the company’s net loss to $1.65 million. Operating cash outflows for that year totaled $1.42 million.

To operate as it has, Eli Electric Vehicles has had to take on a significant amount of debt. Total loans listed under long-term liabilities amounted to $4.21 million as of the end of last year. The company also had current liabilities of $1.04 million, but this was more than offset by nearly $2 million in current assets. For investors thinking that the road forward will be easier for the company than its past has been, it’s best to think again. The car industry is known to be low-margin in nature. To see this, we need only look at Tesla. Although the company’s financial condition continues to improve, Tesla’s accumulated deficit as of the end of its second quarter this year totaled $6 billion. More likely than not, Eli Electric Vehicles will have significant capital needs before it can reach a point where it’s profitable and cash flow positive.

It’s really difficult to know precisely what space Eli Electric Vehicles belongs in. On one hand, it’s an electric car company. On another, it represents a niche within a niche known as the micromobility market. The forecasted growth for the electric car space looks appealing at face value. According to one source, there are around 22 million electric vehicles on the world’s roads today. By 2030, this number is expected to grow beyond 250 million. This will result in significant sales growth over time. But it’s important to remain cognizant of the fact that the car industry is notorious for being low-margin.

If, instead, Eli can dominate its piece of the micromobility market, then upside could be greater. Estimates vary wildly regarding the size of this space. One forecast pegs the market at $10.33 billion today. By 2027, with an annualized growth rate of 11.95% expected, micromobility should reach $31.93 billion in size. Surprisingly, though, this was one of the more bearish views on the space. A report by McKinsey thinks that by 2030 the market between the US, Europe, and China will be between $330 billion and $500 billion.

The largest slice of this opportunity resides in the US. Here, forecasts call for the micromobility industry to range between $200 billion and $300 billion. In Europe, the space should grow to between $100 billion and $150 billion, while in China it should range between $30 billion and $50 billion. These disparities may seem odd, but it’s not a reflection of consumer adoption so much as it is a reflection of price. Micromobility technologies in Europe are priced at about half of what they are in the US. In China, this figure is only 20%. 

At this time, there are three key members behind the Eli Electric Vehicles team. The first individual is Marcus Li, the company’s founder and CEO. Prior to starting the business, Li served at Greenman Machinery Company as the Principle Design Architect before becoming the OHEV R&D Director and Chief Architect. His job immediately prior to that was as an Assisting Site Architect for Steven Holl Architects. The next major member of the team is Sabrina Yuan. She is Eli Electric Vehicles’ Senior Vice President of Business Development and Strategy. Previously, she worked as a VP for Stanford Angels and Entrepreneurs. Yuan was also the co-founder and COO of SecuritAI Inc. Her prior roles include serving as a Partner for Esiberg Solutions and as COO for Redrock Capital. The last key member of the Eli Electric Vehicles team is Allen Wang, the company’s Head of Supply Chain. Wang’s experience includes 14 years in supply chain management and quality assurance. He also served as the VP of Procurement for Yogomo.

Based on all of the data available, our team has rated Eli Electric Vehicles as a Neutral prospect. The company’s product design is appealing. Its business model is also interesting if you take it from the micromobility angle. Certainly, it’s not hard to imagine the business gaining traction in major metropolitan areas. It’s also a positive that the firm sees itself getting to market later this year and that it’s able to hit both the US and parts of Europe at the same time. Its valuation, for where it is developmentally, is also not unreasonable.

This is not to say that there aren’t problems. The company’s limited operating history and high debt should be focused on by investors. More likely than not, the firm will have to raise even more capital down the road. As Tesla has shown — and as other car companies have demonstrated over decades — the vehicle space is a tough space to be in. This will likely lead to a material amount of dilution for investors down the road. Yes, the industry is attractive from a growth perspective, but it’s also important to remember all of the competition that’s out there. In addition to traditional EVs, the company is putting itself up against car-sharing networks. Other competitors include various micromobility providers like electric bikes, e-scooters, and more. That’s a lot of competition to bite off. Weighing all this together, Eli Electric Vehicles is a Neutral Deal.