Sono Motors Stock: A Solar-Powered Moonshot
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The idea of a solar-powered flashlight was supposed to be a joke until it wasn’t. In many emerging markets you’ll find cheap little solar-powered lamps that sit in the sun all day charging, then provide light at night. Not everyone has access to a store that sells batteries, so it’s a solution to a problem. Contrast this to solar-powered vehicles which sound more like a solution looking for a problem.
When Will We Have Electric Cars with Solar Panels? That’s a question we asked back in 2018 when we looked at several companies trying to bring consumers what some experts believe is impossible – a vehicle powered by solar energy. One of the companies we looked at was Lightyear which was supposed to deliver their solar car in 2020. The latest is that they’re expecting to deliver one of the ugliest cars known to man for the small price of $175,000 sometime next year.
The other company we looked at in our piece was Sono Motors based out of Germany. Here’s what we said:
If you can’t wait until 2020, then you might be able to score an electric car with solar panels as early as next year – and at a fraction of the cost. That’s when Germany’s Sono Motors expects its Sion solar-powered vehicle to hit European roads.
Credit: Nanalyze
That car has only been developed to a second-generation prototype and the technology hasn’t produced one red cent of revenues. One meaningful event that’s happened over the past four years is that they’ve raised 53 million euros in funding from what was said to be one of the largest crowdfunding campaigns in European history. Now, those investors are going to have some liquidity as Sono Motors – going under the name Sono Group – has filed for an initial public offering (IPO).
As of November 5, 2021, more than 16,000 reservations have been made on the Sion, with an average down payment of USD 3,000.
Credit: Sono Motors
About Sono Motors Stock
In taking a closer look at the 53 million euros the company raised, around 75% came from Sion reservation holders, some of whom were given incentives called Sono Points. A January 2020 piece by electrive.com announcing the funding said that “production of the first vehicles will be postponed until September 2021.” Back in 2018, Sono Motors had 7,000 reservations and was expecting a car “as early as 2019.” One wonders how those people must be feeling right now when the prospectus states:
We intend to begin delivering cars in the first half of 2023 and thereby fulfill customer reservations.
If these future customers don’t like these ever-slipping dates, they can just cancel without penalty. That’s only if Sono Motors hasn’t already used the deposit money trying to bring their car to market. (More on this in a bit.) Then, there’s this nothing sandwich:
In addition, we have recorded more than 15,000 pre-orders from business customers, for which no advance payments were made and no contractual agreements were entered into.
As other EV stocks have shown us, a pre-order with no advance payment or contractual agreement means eff all. When it comes time to produce their greener electric vehicle, Sono Motors plans to outsource the work to National Electric Vehicle Sweden (NEVS) in Trollhättan, Sweden. NEVS happens to be owned by a Chinese firm called Evergrande. Yes, that Evergrande.
The Sono Motors IPO plans to raise about $135 million, and they acknowledge it won’t be enough to bring their vehicle into production. From now until production is expected to begin, the company estimates they’ll need $410 million. Should the IPO actually happen, they’ll immediately need to start figuring out how to raise that additional $275 million which will probably result in significant dilution for existing shareholders. Then, they’ll need to worry about raising funding for the remainder of 2023 and after.
Why Solar Cars?
Solar power has made remarkable advancements over the past decade, but we question whether its use for a greener transport method makes any sense at all. What exactly are the benefits of slapping solar panels on a car?
Sono Motors expects the car seen above – the Sion – to have a battery range of up to 190 miles (305 kilometers) and “a weekly solar based range of up to 52 miles (245 kilometers).” They caveat this claim by stating these numbers are based on “current expectations and development targets” rather than proven capabilities. That’s probably a moot point because even with solar panels, their range sucks when compared to Tesla which tops out at a 400-mile range (643 kilometers). Probably the biggest concern we have surrounds the likelihood this company will ever be able to deliver a production vehicle, something that’s exceptionally difficult even with seemingly unlimited amounts of capital. As the delays continue, reservation holders are becoming more and more dissatisfied, and many will decide to cancel and take the money rather than continue to wait. But will there be any money left to take?
Should You Buy Sono Motors Stock?
We have no idea what you should do with your money as every investor should make decisions based on their own unique situation. For what it’s worth, here’s our thoughts. We wouldn’t touch this dog with a ten-foot pole. The whole high-risk operation screams of desperation to survive, all because of someone’s sacred cow that really should be put out of its misery. If this were an MBA case study, we might assume what happened as follows.
Since a solar-powered car will never be able to power itself, it’s largely a feature that adds expense and complexity for little gain. The Elon Musks of the world vetted the idea, and it had no legs. That’s why Sono Motors had a hard time convincing investors that their idea was worth funding, and therefore chose the crowdfunding/customer deposits route. While they say their business model also consists of licensing their technology, the absence of partnerships with any automakers leads us to believe they’re building a solution that’s looking for a problem. (They say they’ve shipped first pre-production samples to customers, but we’ll believe it when they actually sell something.) So, it only made sense for Sono Motors to pursue a direct-to-consumer business model and bring an entire car to market as opposed to just the solar technology. It was never a good idea in the first place, but enough people saw ads on Facebook about a solar-powered car that would be the next Tesla and funded the thing. And if this IPO doesn’t happen, those shares will be worth absolutely nothing.
Based on the cash position as of August 31, 2021 and our business plan, excluding any targeted proceeds from an initial public offering, as of August 31, 2021, the Group would become insolvent by December 2021 or shortly thereafter if no additional financing can be raised.
Credit: Sono Motors
Forget about the investors for a moment. If you’re someone who put a deposit down on this vaporware, how does the above statement make you feel? Not very good, which is why Sono Motors is trying to pacify existing reservation holders with “the option to convert parts of their advance payment into a lease arrangement for another electric vehicle at a discount until the delivery of the Sion.” Good grief. There’s also the convoluted notion of “Sono Points” which accumulate based on how much deposit you put down, and the company admits these “profit participation rights” may be worth nothing at all.
Not all customers who were previously promised Sono Points may ultimately receive Sono Points at the terms and conditions originally communicated or at all.
Credit: Sono Motors
It’s all detailed in the Sono Motors F-1 filing, a document that contains far more information than any crummy special purpose acquisition company (SPAC) would. At least Sono Motors went public the proper way.
Conclusion
Perhaps what’s most incredible is that 16,000 people plunked down a deposit on a solar-powered car with a mediocre range that’s still in prototype phase with a go-to-market date that’s always just several years away. Even if the vehicle had a superior value proposition, we’d never consider putting down a deposit if the likelihood exists that the company won’t be able to return it. As for investing in Sono Motors, that’s entirely out of the question. It’s not just because we don’t invest in companies without revenues, it’s because we believe this bad idea is going nowhere fast.
Should the Sono Motors IPO go through as planned, shares will trade under the ticker SEV.
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There is a company called Aptera developing a very efficient two seater autocycle. The 100 kwh version is being touted to have a 1000 mile range. It’s capable of producing enough energy from its rooftop solar panels the to produce 40 miles per day in San Diego sunny land…:)
They too wouldn’t be worth a look from an investment standpoint (no revenue and a previous bankruptcy), but they certainly appear to still be more credible than Sono motors. Geez…
Unsurprisingly, Aptera is also trying to raise money from crowdfunding. It’s hard to believe anyone would want to buy that hideous-looking contraption they’re trying to sell, but only time will tell if they can actually build the thing at scale. As you pointed out, they failed the first time around. What’s different this time?