Our paying subscribers make every word we type possible. In an era where great customer service has gone the way of the dodo, we believe it’s time to double down on accessibility and responsiveness. Anyone who pays our bills is a client, and consequently has access to our brightest – and sometimes sober – minds by simply clicking “reply” to any email. That’s what one paying subscriber did – let’s call him James – who emailed us about a firm called Aptera that he says is peddling the most sophisticated solar-powered electric trikes you’ve ever seen.
Our initial response was that we’d tear the company to shreds, just like we did recently in our analysis of Atlis Motor Vehicles, a company that’s waving more red flags than a DPRK military parade. But as our client pointed out, that’s hardly fair to the company.
It deserves an honest evaluation, and your support within the standards of objective journalism. I put myself through college working for a newspaper. I know the value of great public information.
Nanalyze Subscriber, James
Notice how James hustled like a champ to pay his way through college. He’s now a particularly articulate architect who spends his money on subscription services wisely, and passionately believes in Aptera’s product offering. But as we always say, a great idea and $4 might get you a cup of coffee at Starbucks, especially when the idea failed its first time around.
Electric Three Wheelers
Portland is weird indeed. The streets may look like scenes from the apocalypse as the city’s drug abuse problem stares every commuter directly in the face, yet a small number of people insist there’s nothing wrong. It’s a city in which you can actually smell the stench of American politics. On those same streets, you’re likely to see something else unique to the Portland area – a three-wheeled electric vehicle from a company called Arcimoto.
It’s been nearly four years since we wrote about Electrameccanica (SOLO) and Arcimoto (FUV), warning investors to stay away from investing in these companies, one which graduated from the OTC market and one which was peddling Reg A+ shares in hopes of making three-wheeled electric vehicles ubiquitous. (All Reg A+ offerings should be avoided like the plague.) Those who didn’t heed our warnings would have lost 67% and 76% respectively since our article was published, but that’s not considering dilution. With neither company managing to achieve meaningful revenues, the only way to come up with the mountains of cash they’re burning through is by issuing more and more shares.
When we factor in dilution, the returns are much worse. Shares of Electra Mechanica and Arcimoto have lost 75% and 81% of their value respectively compared to a Nasdaq return of +42% over the same time frame. A cursory look at the latest financials for these two firms shows that they’re in no danger of achieving meaningful revenues anytime soon.
As the bear market claws its way into everyone’s wallets, it’s unlikely these firms will be selling electric vehicles profitably when we check back with them four years from now. It’s equally unlikely that any of the other companies out there trying to peddle EV trikes will have become “the next Tesla.”
That brings us to the perhaps the biggest problem. No, it’s not the fact that these things will likely disintegrate upon impacting a Honda Civic, it’s that someone you know might see you driving one of these hideous contraptions.
The reason that so many three wheeled cars are being peddled to the masses is because they were meant to skirt the definition of a car. They’re not a car, they’re not a motorcycle, they’re something in between referred to as an “autocycle.” At the federal level, regulations around autocycles are vague following the Autocycle Safety Act which ended up going nowhere. Today, autocycles are regulated at the state level, and not overly popular because cars work just fine. That brings us to the topic du jour – the three-wheeled electric vehicle on offer from Aptera.
About the Aptera
On paper, this vehicle looks really slick. James said it best:
This is an “Edison Moment” when a needed new technology is arriving on the market. The Aptera could reduce our dependence on imported oil, which is being threatened. It is picking up where Tesla left off & is carrying the ball to the goal line. This car flies through the road-air like no other car before it (lowest coefficient of drag in history). This car can be afforded by a college student working his way through school; and by many other buyers. This car is truly “Off-Grid” (40-100 miles/day with no charge) changing our dependence on not just oil but also electricity.
Nanalyze Subscriber James
There’s every reason to believe everything that James has said, maybe aside from the price being affordable for college students who should be driving cheap used Toyotas and trying to avoid going into debt. The entry-level price for an Aptera trike is around $25,000, about the same as a new Toyota Prius.
Whether or not you find the futuristic design appealing, this vehicle is an engineering marvel based on everything we’ve read on their website. And for us, reading the company’s marketing collateral is something we never do. That’s because almost nothing about the likelihood of a company succeeding comes from learning about how great their product is.
Aptera the Company
This isn’t Aptera’s first rodeo. An article by Green Car Reports titled Aptera Collapse: How & Why It Happened details the company’s first attempt at launching an electric vehicle which largely surrounded attempts at pandering to the Department of Energy (DOE) over its advanced technology vehicle manufacturing (ATVM) loan program. Founded in 2006, the company started with three wheels and then pivoted to four when their loan application was denied. In 2010, they tried again with a four wheel vehicle and three wheel vehicle. After that didn’t work, the company shut down in late 2011 after trying to chase down the 5,000 people who plunked down $500 as a deposit for a vehicle that was never realized.
Today, Aptera tells us that back then wasn’t the time to launch an electric vehicle. “Funding didn’t exist for EV programs like it does today,” they say, which is hardly true. In 2009, Tesla and Fisker collectively managed to collect over $800 million from the DOE program Aptera was chasing. Now, Aptera is back trying to fund their operations via a Reg A+ raise (essentially, a larger scale form of crowdfunding) that doesn’t offer investors any liquidity for the shares they’re buying that value the company at an incredible (checks notes again) $783 million.
A company with a gamma version of their product that has less than $25 million in assets, and which spends its time on things like “brand ambassadors,” isn’t worth a fraction of the arbitrary valuation they’ve ascribed to themselves. It’s characteristic of Reg A+ raises we’ve seen before, and we’d avoid this like the plague. Still not convinced? Check out the $83 million in SAFE liabilities on their balance sheet arising from $2.5 million they took from investors. Issuing shares left and right, offering investors incredibly good terms on funding, and ascribing ludicrous valuations are all red flags which mean we wouldn’t consider Aptera for a second, regardless of what engineering marvel they’ve been wheeling out at trade shows.
Failing to launch an EV the first time around, and then coming back with one that’s even more complex, isn’t a compelling value proposition. Besides, it’s not the first time we’ve come across the solar-powered car pitch.
Promises of Solar-Powered Cars
Half a decade ago, we posed the question – When Will We Have Electric Cars with Solar Panels? In that piece we looked at two European firms trying to make solar cars a reality. Lightyear, a Dutch company founded in 2016, says it would deliver its first model, Lightyear One, in 2020. That time has come and gone, and the latest news last month was that they’ve built the world’s
most second-most aerodynamic car with a drag coefficient of 0.175 which plans to “start the first deliveries of the car in November.” (Marks calendar.) If that happens, they’ll have bested the other European company we talked about in that article, Sono Motors (SONO).
At that time, a European firm called Sono Motors had taken in 7,000 reservations for their solar-powered car that was to be released “as early as 2019.” They then raised 54 million euros (52.6 greenbacks) in one of the largest European crowdfunding raises ever, 75% of which came from reservation holders. A January 2020 piece by electrive.com announcing the funding said that “production of the first vehicles will be postponed until September 2021.” Now Sono says, “we intend to begin delivering cars in the first half of 2023 and thereby fulfill customer reservations.”
Following their IPO in November 2021, shares of Sono have lost 94% of their value. It’s just another example of how difficult it is to bring an electric vehicle to market using trickles of funding from retail investors around the globe who don’t seem to realize that they’re pissing their money away on risky EV companies that are simply trying to survive, not thrive.
A Fair Shake
It takes a while to realize that investing isn’t about finding great ideas. There is no shortage of great ideas being peddled out there by any number of publicly traded companies. Execution is what separates the wheat from the chaff. Perhaps the best rule we ever added to our tech investing methodology was that we don’t invest in pre-revenue companies. Also, having a living methodology document is critically important so you can remain objective when analyzing any given firm. Here are some of the red flags we’re seeing with Aptera:
- Seeking funding using Reg A+ mechanisms
- Previous track record of failure
- No meaningful revenues
When we evaluate companies, we apply the same methodology. Our skeptical tone comes from years of watching great stories never come to fruition as management teams pursue the ultimate goal of every business – survival. As risk-averse investors, we’re not here to fund feel-good pipe dreams, we’re here to realize a return on our capital. Our analysts said it best a few years back in our piece titled A Warning About Electric Vehicle Stocks:
Unfortunately, it’s quite common now to hear electric vehicle companies comparing their businesses to Tesla when they haven’t even broken ground on a factory.
An article by Electrek last month says the company “remains on track to begin ramping up scaled production in 2023.” When they’ve sold $10 million worth of these vehicles in a single year then maybe we’ll come back around for another look. Until then, this company should be avoided alongside every other aspiring autocar manufacturer out there, solar-powered or not.
Aptera is dabbling in an extremely capital-intensive and competitive niche which is littered with failures and bankruptcies largely consisting of companies that had great stories and little else. You’d have to have brass cojones the size of grapefruits to put down a real-money deposit on one of these contraptions, much less be seen driving one.
Investing in any electric vehicle company trying to peddle a three-wheeler to the masses is a bad idea, no matter how superior a product they’re trying to sell. Today, we reached the same conclusion as we did four years ago – it’s a David and Goliath story, and as prudent investors, we’re not interested in it whatsoever.
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