There has been some mystery surrounding how Elio Motors would be getting the massive amount of funding required to start up their assembly plant in Louisiana in order to build the Elio car. When we talked about the hokey financials laid out by Elio last year when they were convincing the Caddo parish council to buy the $7 million plant for them. Having successfully done that, they are now seeking the funding to get the car built, which is likely a far more arduous task.
Arduous because Elio’s plans are to make slim profit margins on each car, which means that it would be years, perhaps a decade or more, before they could pay off any loans they’ve taken to get the car rolling. With roughly $200 million required and $250 in total loans and funding given and a mere $1,000 per unit in profit.. the math is easy to do. What entity would be willing to loan that kind of money for that long a period on a car that may or may not sell well for the long term?
Ahh, yes. Government. Elio just announced that they’ve completed the first review phase for an Environmental Protection Agency (EPA) loan for $185 million under the government’s Advanced Technology Vehicle Manufacture loan program.
So let’s do some more math. This time, we’re going to do a little algebra involving finding “X.” Let’s assume that the EPA does approve the Elio loan. X is “actual production starts,” by the way.
X = (TimeToGetBureaucratsToApprove + TimeToPurchaseAndReceiveParts) + Road&RealWorldTestingOfVehicle
Keep in mind that Elio wants to start production in 2015 and has had a tendency for several years now to repeatedly use the phrase “18 months away” when describing plans for producing the car.
I’m sure Elio proponents will point to the “35,000 reservations” for the car that the company claims. They may have those, but that’s not proof that the car will be built. Nor is it proof that the car will be profitable. It’s not even proof that 35,000 of them will be made. It’s just proof that 35,000 people may think that the car will be built and are interested in acquiring one. At a cost, it should be noted, that does not profit the company as the discounts given for early reservations negate any profit margin the car might have had.
We here at CarNewsCafe would love to see the Elio built and would love even more to own one (I’ll take orange, please), but are dubious about the business plan for the vehicle as it’s been presented thus far.
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