[U31] Update: Arcimoto uses product positioning to drive its mission
Accelerating the transition to sustainable energy with viable alternatives to mainstream EVs
Dear Reader,
For this Update in Product | Strategy | Innovation I will revisit a company I covered in a deep dive just over one year ago. The company is Arcimoto (NASDAQ: FUV) based in Eugene, Oregon. The company’s mission is to catalyze the shift to a sustainable transportation system. But the mission includes a twist. Arcimoto believes this shift will be realized when we move away from oversized, overpriced, polluting vehicles to right-sized, ultra-efficient, affordable EVs.
Mark Frohnmayer is the Founder and CEO of Arcimoto. He founded the company after selling his software company Garage Games and decided to pursue the EV market with a smaller format vehicle design. The product strategy was to drastically reduce the weight of the vehicle to reduce the material and battery requirements. Key outcomes included greater energy efficiency and lower material costs. These would also lower the final retail price and the total cost to operate the vehicle.
The Fun Utility Vehicle (FUV) is a tandem 2-seater on 3 wheels in a reverse trike configuration to improve stability. Front-wheel drive, dual, independent electric motors. A low center of gravity and a curb weight of 1,300 pounds add further safety. The steel frame also meets the roof crush resistance standard for a passenger car. But just subtracting the bulk weight of a conventional automobile design helps improve the energy efficiency to 173 miles per gallon equivalent (MPGe).
The retail price target for the FUV starts around US$12,000 with scaled production in 2-3 years. But the current retail price with low volume production starts at US$17,900. The average retail price for 4-wheel EVs is around US$46,000 with more popular models like the Tesla Model Y starting at US$63,000. The FUV is well positioned as a more affordable EV option for short commutes and running errands around town as a second vehicle.
Arcimoto announced in January 2021 it was acquiring the Tilting Motor Works in Eugene, OR to use its patented tilting trike technology for new products focused on micromobility. Earlier this year, Mark Frohnmayer revealed a third generation prototype eTrike with tilting technology to improve maneuverability. Arcimoto calls this eTrike the Mean Lean Machine (MLM) with a target product launch in Q4 of this year (2022). The starting retail price for the MLM has not been announced yet, but using eBikes as a proxy, I estimate the price will range between US$4-7k depending on what is included in the base configuration.
I think the configuration and price will be carefully positioned to help sell more FUVs. The perceived value will be many more features on the FUV, but with a reasonable increase in price compared to the MLM. I don’t see the MLM being positioned to cannibalize FUV sales, but individuals in urban areas may really like the more compact design. The market will judge. And Arcimoto may be able to improve gross margins faster on the MLM than FUV as unit production ramps.
eBikes have grown in popularity in recent years with the majority priced between US$1-4k. But eBikes have constraints on battery size, range and stability with only 2 wheels. They are also much heavier than conventional bikes, but assist with climbing hills. Arcimoto must be predicting they can upsell consumers considering an eBike to an eTrike with more stability and range. The Arcimoto MLM will also include options to protect the rider from the elements and a tandem configuration.
Looking only at price, Arcimoto is doubling down on EVs with a range of options based on 3 wheels for consumers ranging from the MLM and FUV for consumers to businesses with the Deliverator and Rapid Responder. Fleet sales are also possible at popular travel destinations for businesses to rent FUVs. Deliverator fleets for brands like DoorDash, UberEats, Grubhub and Postmates enable rentals for the gig economy in key markets.
The figure above illustrates how the Arcimoto MLM (eTrike), FUV, Deliverator and Rapid Responder 3-wheel configurations address multiple applications with prices ranging from an estimated $4,000 to $35,000 compared to a $46,000 average price for 4-wheel EVs. Arcimoto estimates the materials and batteries used to make 1 GMC e-Hummer could produce 2 Tesla EVs, 8 Arcimoto FUVs and 100 Arcimoto MLMs. Until autonomous EV Robotaxis are readily available for scaled ride-sharing priced at US$1 or less per mile, Arcimoto accelerates what 4-wheel EVs can achieve at higher retail prices for the transition to sustainable energy.
Lithium-ion batteries and semiconductor chips will continue under supply constraints near-to-midterm while the demand for EVs starts an exponential ramp. Tesla has raised EV prices multiple times over the last year to help balance their supply and demand. That demand for EVs will likely further accelerate if gasoline prices continue to go up.
If supply constraints persist and prices continue to increase, the demand for material conserving and lower priced options from Arcimoto could increase. This means product positioning for 3-wheel, reverse trike EVs could be even more important to accelerate the transition to sustainable energy. The MLM could play a critical role to convert prospects who do not want to commit to the higher priced FUV, but are eager to adopt an EV for reasonable commutes that are beyond what they want to do on bicycle.
And the Deliverator provides a strong value proposition for branded EV fleets to serve the need for last mile delivery in urban areas. Food, groceries, medications, flowers, packaged goods and electronics are easily delivered with this EV configuration that disrupts conventional 4-wheel options. And the higher Deliverator pricing is supported by business use cases. The minimal form factor of the MLM helps support that more features on the FUV should cost more. And the higher priced Deliverator helps anchor the FUV to the current US$17,900 starting price until volume production can help lower the starting FUV price closer to the MLM price range. The MLM and Deliverator both work as bookends to support the pricing for the FUV.
Weather will be an issue in winter months for many geographies like the Northeast U.S. even with accessories to enclose the Arcimoto EVs. These EVs are not intended as a replacement for a primary vehicle for families with young kids or even individuals with long commutes. But Arcimoto EVs are a viable option for shorter commutes and as a second vehicle to run errands even for families. Arcimoto EVs are currently only available for sale in Arizona, California, Florida, Nevada, Oregon and Washington, but as Arcimoto scales production in its new facility, they will continue to expand sales to other states.
Arcimoto’s 3-wheel reverse trike EVs for 1 or 2 riders are a substantial pivot from the conventional 4-wheel coupe, sedan, SUV, pickup truck, van and sports car designs. But Arcimoto’s expanded EV product line ranging in price from an estimated $4,000 to $35,000 could drive revenue growth much faster at the right prices than the FUV design alone. And the Deliverator and Rapid Responder are really just a final configuration on top of the FUV chassis to help streamline a large portion of the EV production. This year will be important for Arcimoto to ramp production towards its target 1,000 FUVs (including Deliverators, Rapid Responders and other designs built on the FUV chassis) per week by 2025 at its primary factory.
Best,
Stephen
I’m long FUV and TSLA mentioned in this Update. Nothing in this post is intended to serve as financial advice. Do your own research.