Elio hits all the right buttons: it’s cheap, it’s efficient, it’s to be made in America using American-sourced parts, and it’s unusually fresh. All of these things play into our list of reasons the 3-wheeled Elio is poised to deeply change the automotive industry.
The Elio is a three-wheeled car that its designer Paul Elio says will sell for less than $7,000 while achieving 84 miles per gallon with nothing but a standard gasoline powertrain. The car itself is pretty innovative and would answer the needs of thousands, perhaps millions, of commuters and solo drivers around the nation. That is if the car ever goes to production. The major controversies surrounding the Elio are not its design, but are rather about its financial feasibility and continual delays to production.
The Elio as a car was conceived in 2008, when the automotive industry was at its lowest in decades. Since then, the car has perpetually been “18 months away” from production; and still is, we assume, as no firm production date has been set beyond a vague “next year.” Most of the problems have been funding. The company needs around $250-300 million to get started and has less than a quarter of that on hand right now. They may have found a solution for that, and if so, we expect the automotive industry will begin to change substantially over the next few years.
Here’s how the Elio is causing the disruption that will bring about those changes.
Innovative Customer Involvement and ‘Fan Base’ Building
As we hit on earlier, the Elio as a car and concept hits a nerve with many people through several buttons. People have noted that with inflation and regulatory costs continuing to build upward, the cost of vehicles has also risen. The average new car now costs about twice what it did just two decades ago. Most mid-level cars sell in the $30,000-$35,000 range today. Many families are finding that they cannot afford a second car, a commuter for work, or a third car for their children. This makes a sub-$10,000 car very appealing. Add in the “Made in America by Americans” and 84 mpg claims and the Elio really hits home.
This has meant that the Elio as a car and concept has become a sort of rallying point with fans and potential customers who’ve turned very loyal. We see a similar trend at Tesla Motors, bearing out that this is the way many new automakers and, potentially, new car models could begin marketing. If the vehicle appeals to enough people in a visceral enough way, it will gain die-hard fans that not only buy the car, but also promote it to others fanatically, building a fan and customer base at a low marketing cost for the automaker.
Elio’s secret seems to be in promoting the car’s virtues, rather than its specifications. At the same time, the virtues extolled are not vagueries like “drive dynamics” or through lifestyle-filled commercials, but are instead on the car’s core principles. Alternatively, Tesla has done similar marketing through the sheer personality of its CEO, Elon Musk. This is not a new way of marketing, of course, it’s just new to automotive. Musk and Elio are doing the same thing for their vehicles that Lee Iacocca did for the Chrysler brand itself back in the 1980s. To this day, the best-selling minivan is the Chrysler Town & Country and we have Iacocca to thank for that.
Building a fanbase for the Elio has lead to another innovation that will rock the industry.
Crowd-sourced Funding for Car Manufacture
Elio recently experimented with a new federal regulation that allows businesses to raise funds from investors without entering the stock market. This new idea, which has several restrictions, but which appeals to low-level investors and small companies like Elio, allows for a sort of crowd funding of the company by selling shares in it to investors without requiring the costs and effort (and risks) of going public on the stock market. Elio recently launched a test pilot of this, aiming for about $25 million in new investments from small investors in non-binding agreements. These agreements basically say the investor meets criteria and is interested in investing in Elio, but isn’t actually doing so. It’s a sort of trial balloon to see if interest is out there and Elio proved that there is, indeed, interest. A lot of it.
That interest came from serious investors, but also from Elio fans, who didn’t just clamor on to try to become investors, but who promoted the investment opportunity to those who did qualify. Again, free marketing often means sales.
To go with that, Elio has had several opportunities for those interested in the three-wheeled car to put up money in the form of deposits so that they can get in line to buy the first cars when they roll off the manufacturing line. This has been the company’s greatest source of income outside of major initial investments.
If Elio has any sort of success, even if it’s just to build a few cars and become a manufacturer before ultimately failing, the company will change the automotive industry. The two points above, which play hand-in-hand, are two things that the industry as a whole largely lacks. Aside from a few enthusiast vehicles – which most manufacturers will quickly admit don’t actually make a profit – the industry has a distinct lack of “fans” as a consumer. Some segments, such as pickup trucks, have brand loyal buyers, but even they aren’t always fanatics and they are beginning to fade in terms of percentage of buyer.
For an automotive brand to do well, it will have to begin to build fans as well as buyers. Subaru, of all the current brands, is probably the most poised to do so as it’s gone a long way towards building loyalty among its customer base. Other brands, especially smaller ones like Mazda, are equally in a position to build a fanbase as part of their marketing.
Add in the idea of crowd-funding and low-level investing and we might begin to see more and more automotive startups that go beyond the dreamy phase and into the manufacturing arena. An example there is Local Motors, another automotive startup that is making waves in the industry by innovating beyond the norm.
Whatever happens, we’re about to see some big shifts in the automotive industry. Finally.