U.S. Markets closed

FUV: 3Q18 – Management Optimistic About Rental Model

By M. Marin

NASDAQ:FUV

READ THE FULL FUV RESEARCH REPORT

Green vehicle manufacturer Arcimoto (FUV) is preparing for the commercial launch of its efficient and economical product, the Fun Utility Vehicle (FUV). As the company positions itself to benefit from government mandates of lower car emissions and rising consumer interest in green automobiles, Arcimoto is ramping up its production and distribution capabilities and hopes to begin small scale retail series production by the end of 2018. The company expects to ramp-up Retail Series production in 2019.

The company believes that it has improved the production process as it moves up its production learning curve and also continues to integrate automation. Moreover, management strives to reduce construction time and increase production efficiency as the company moves towards mass scale production.

Rental Strategy

To enable prospective customers to test drive FUVs while simultaneously driving cash flow, the company intends to open in-market experience centers in certain markets. These centers are also expected to facilitate the company’s rental model and this rental model is expected to generate positive cash flow.

Through the rental model, the company expects to allow customers in certain markets to rent the FUV on a daily or weekly basis. Management anticipates forging partnerships with other companies to facilitate rentals. Arcimoto completed its first rental operation test in Eugene, Oregon and views this pilot as successful in helping it fine-tune its rental outlet strategy. The company plans to reopen the Oregon, as well as a San Diego site, once it has begun to produce retail FUVs for commercial sale and rental.

Recent Capital Raise

Subsequent to the end of the third quarter 2018, Arcimoto entered into an agreement with certain shareholders to offer 504,900 shares at $3.00 per share. Insiders also participated in the above-noted offering, underscoring their confidence in the company’s outlook. The company raised gross proceeds of roughly $1.5 million, before offering expenses. These funds shore up the company’s balance sheet and are earmarked to further advance Arcimoto’s commercialization strategy. Moreover, the company expects its cash burn rate will decline dramatically once it achieves commercial launch.

Preorders

Since the company first began taking online advanced reservations for the FUV in September 2009, the number of advanced orders has grown significantly, albeit off a low base. As of March 31, 2017, Arcimoto had 1,281 advance reservation deposits from third parties. This figure had reached 2,234 by December 31, 2017, and 2,660 by May of 2018 and 2,800 units as of June 30, 2018 and 3,018 as of September 30, 2018.

Management has indicated that these preorders represent over $45 million in future revenue if they are converted into actual sales. The company anticipates that pre-orders could accelerate as it opens the planned rental locations.

SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR. 

DISCLOSURE: Zacks SCR has received compensation from the issuer directly or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks provides and Zacks receives quarterly payments totaling a maximum fee of $30,000 annually for these services. Full Disclaimer HERE.