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AZ Central – The Elio: A prototype and a dream

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SOURCE: AZ Central

 

Paul Elio has a dream and a prototype, an “accidentally cool” car and a factory in Louisiana where it might one day be built.

What he doesn’t have is any 84 mpg Elio three-wheelers for sale at the proposed price of $6,800.

Elio has raised more than $67 million since he first introduced the two-passenger mini-car in 2008, but the company has several hurdles to clear before any Elios roll off an assembly line in Shreveport, La., at his projected initial rate of 1,000 vehicles per day.

The company is about $163 million short of its $230 million financing goal, Elio said. And it has yet to build a complete prototype and put it through a federally mandated crash test.

Elio, 51, speaking at his Phoenix home about the autocycle he believes one day will fill high school and college parking lots, said he can’t guarantee the outcome.

“It may or may not happen,” Elio said. “Until it’s done, it’s not done.”

Since 2013, more than 42,000 people have put down between $100 and $1,000 each to reserve their own Elio, and the company continues to attract hopefuls. About 85 percent of the deposits are non-refundable, guaranteeing the customer first dibs once the three-wheelers hit the market, Elio said.

The company has raised $17.5 million in reward crowdfunding, using its website to give away “Bring the Heat” T-shirts and bumper stickers in exchange for deposits, Elio said.

The privately held company also is raising money through equity crowdfunding, in which investors receive equity for their funds. Elio is taking advantage of the 2012 federal JOBS Act, which allows startups to offer accredited investors the chance to buy into the company with a minimum investment of $15,000.

Elio has asked for $185 million under the U.S. Department of Energy’s Advanced Technology Vehicle Manufacturing loan program, which supports clean energy amd fuel-efficient technologies.

“It’s all surrounding the ‘F’ word, funding,” Elio said.

Elio spends 45 weeks a year touring cities across America with his bright orange autocycle, hoping to entice investors with the three-wheeler and his vision of churning out 250,000 cars a year.

Recent stops have included the Smithsonian Institution in Washington D.C., the Charlotte Motor Speedway in North Carolina and Independence Mall near Kansas City, Mo.

What’s it like to drive? According to reviewer Ronnie Schreiber in thetruthaboutcars.com, who drove the fourth-generation prototype in 2014, the Elio feels “pretty much like any other small front-wheel-drive car.

“At first you feel like you’re driving a cross between a small airplane and an open wheel track car, but fairly soon you start to feel like you’re just driving another car. Well, till you again notice people craning their necks and checking what you’re driving in their mirrors.”

Production timetable

Elio once hoped to have vehicles on the road by 2014. The current projected year for customers to drive off in a three-wheeler is 2016.

The timetable assumes the factory is up and running the first part of 2016, as planned.

Elio Motors has secured a 1.5 million square-foot former General Motors Hummer H3 factory in Shreveport. Elio owns the equipment, and one of the company’s major investors, Stuart Lichter, who is president and chairman of IRG LLC, controls the real estate, Elio said.

Despite the difference in size and components between a Hummer and an Elio, the plant equipment is adjustable, Elio said.

“We can use the conveyors, robots, liquid fill and other pieces,” he said. “A lot we can use exactly the way it is.”

One of the company’s milestones, he said, was working with IAV, a German automotive engineering company, to make over a traditional internal combustion engine for the car.

The Elio will have a three-cylinder gasoline engine with 55 horsepower and 55 foot-pounds of torque, he said. It will come equipped with three airbags, a reinforced roll-cage frame and anti-lock brakes.

“We have made tremendous progress,” Elio said about the vehicle’s development.

Elio is no stranger to car engineering.

A graduate of the General Motors Institute and the Engineering and Management Institute, now the Kettering University, in Flint, Mich., Elio has has held various patents, worked for Johnson Controls, and was a founding partner of Tempe-based ESG Engineering.

ESG, operating from Elio’s vision of a three-wheel, front-to-back seating vehicle, created the first version of what is now the Elio.

Elio Motors currently has about 20 employees but uses engineers from as many as 34 suppliers who work on the vehicle’s components, he said.

“It’s a much, much bigger team because of our model,” Elio said.

If all goes according to Elio’s wish list, the company will create 1,500 U.S. jobs at the Shreveport factory and another 1,500 U.S. jobs at its supplier companies, mostly based in Detroit, which will spur creation of still more jobs across the country.

He touts the American emphasis of the project: A car made in America that creates jobs in America and reduces dependence on foreign oil.

“This has become a movement as much as a company,” Elio said. “We need to build things in (Shreveport) again.”

Lichter, who so far has invested $20 million in equity and loans to the company, said the Elio appeals to his social conscience because he believes the company can help reduce poverty by offering the poor a car they can easier afford.

“One of the biggest causes of poverty is lack of mobility,” Lichter said. “How often do you get an opportunity for what is an incredible business venture that can also make a difference in the lives of so many people? I have been morally committed to trying to get it to work.”

In Elio’s business plan, buyers can get the car for free if they sign up for an Elio Motors credit card. Each time they buy gas, Elio charges them triple. For example, if they buy $20 in gas, they are charged $60, with the remainder going toward paying off the card, he said.

“As long as you drive up in a clunker, you monthly fuel bill will still go down,” Elio said.

Its appeal will extend beyond those struggling to own their first car to those who want to save wear and tear on their bigger cars, Elio said.

Elio calls it the “And” car, meaning people will make it their second car, similar to how people bought Sony Walkmans in addition to their home stereos.

Next up, he said, is putting the Elio through crash tests to prove that the vehicle is safe, although the timetable has not been set.

“We will build 25 prototypes and, sadly, destroy them,” Elio said.

After meeting with suppliers in Detroit this past week, he said the company has started building P5, or Elio prototype five.

Social-media focus

The Elio is “accidentally cool”: People have an emotional experience with it, as they did the Volkswagen Beetle, Elio said.

Tens of thousands of Elio fans and skeptics have commented on Facebook, and an Elio employee responds to many posts. The majority are from people eager to see the autocycle, but comments also abound from naysayers and those grown tired of production push-backs, such as the May 2 item from Sean Phillips:

“Is it just me, or do the words ‘CAN create’ convey a lack of confidence in this car’s ever being built? ‘WILL create’ would seem to me to be the words someone promoting a product they know they will be actually be building. Oh, look! Now they’re saying production will start in the first half of 2016. Hmmmm…what happened to the first half of 2015, or any of the other previously promised dates?”

“Just keep us quiet while you dupe a whole new crop of believers into (wasting) away their hard earned money for a promise of a T shirt and a spot in a virtual line to get a virtual car that will virtually be made but not in reality. Just like your Virtual claim on fuel economy and viryal crash test that has never been done becuase you never built a car. Try this on for size Elio make something or Shut up,” said Facebook poster William Manning.

Legislative matters 

Like Tesla, which makes premier, zero-emissions cars, Elio Motors is attempting to bypass the traditional dealership and sell the autocycle directly to the consumer.

It may get the go-ahead in Michigan, which is considering allowing the company to have direct sales, according to eliomotors.com.

The Federal Trade Commission opposes bans on direct sales, it said in a May 11 letter published on FTC.com.

“FTC staff supports the movement to allow for direct sales to consumers—not only Tesla or Elio, but for any company that decides to use that business model to distribute its products,” the FTC statement said. “Opening the door by a crack is a step in the right direction, and we urge policymakers in Michigan to take this small step.”

The FTC also described Elio’s business model as “innovative,” citing its service agreement with Pep Boys and use of marshaling centers, which are storage and distribution sites.

In other legislation, the company also has gained exemptions in 36 states from helmet and motorcycle license requirements, the Elio website says.

Elio’s enthusiasm seems to accelerate with each piece of good news. Even though most automobile startups fail, he believes his is different.

“This project matters,” Elio said. “It really moves the needle in America.”

Reach the reporter at [email protected]

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