Ayro Stock Has Risk but Is an EV Niche Entrant With Potential

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Potential EV investors are curious to know more about AYRO (NASDAQ:AYRO) and AYRO stock. The company is only a few years old and produces low-speed electric vehicles.

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According to AYRO’s website, their focus is sustainable vehicles for campus management, last mile delivery, urban commuting, and campus transport.

AYRO’s vehicles are not aimed at chipping away at Tesla’s (NASDAQ:TSLA) market share. However, AYRO is aiming at a segment of the EV market without a clearly defined brand champion. 

Products and Utility Underpinning AYRO Stock

Ayro produces two vehicles, the AYRO 311 and the Club Car 411. They also list a power sports, 4-wheel, all-terrain vehicle which is a concept not in production. It is similar to Nikola’s (NASDAQ:NKLA) NZT and Reckless vehicles, but designed with off-road logistics in mind. In any case, concept vehicles from both manufacturers won’t likely drive growth should they eventually see production. 

Just as Nikola will be defined by its tractor trailer vehicles, AYRO will be defined by its 311 and 411. The AYRO 311 is a 3-wheel, 2-seater vehicle. The company designed it with parcel delivery, public safety, cargo, food delivery, and parking enforcement in mind.

The Club Car 411 is a small cargo van, or flat-bed truck type of vehicle. AYRO designed it with maintenance/construction, hotels, stadium, and campus logistics in mind. The company will look to sell to organizations with similar fleet needs looking to drive down costs and be more sustainable. Its niche will be places like airports, hospitals, campuses, and government buildings. 

AYRO’s Busy Few Months

AYRO has been very busy since the beginning of June. The company has undertaken three separate registered direct offerings of common stock shares. AYRO raised $5.5 million in its first such offering on June 19, issuing 2.2 million shares of common stock at $2.50. 

AYRO conducted a second registered direct offering on July 6, raising $15 million through shares at $4.75. Roughly two weeks later, on July 2, it undertook a third offering of $5 shares, raising $9.25 million.  

With the initial $5.5 million, AYRO tripled its manufacturing capacity in its Austin, Texas facility. The company now has the capacity to manufacture 600 vehicles monthly, up from 200. Its facilities were expanded from 10,000 square feet to 24,000 square feet.

Management suggests that the company is well-aligned with the EV space by dint of being in Austin. Tesla has plans to open a gigafactory in Austin, but whether that benefits AYRO remains to be seen. For now, the flurry of financing activity and increased capacity look promising. 

The company also announced a hospitality-focused configuration of its Club Car 411 in early July. Two weeks later, it announced a $584,000 order for those food trucks. The configuration can be seen here.  

How Are the Vehicles Priced?

Finding this information took a bit of digging. The company doesn’t list an MSRP on its site, or at least not anywhere I could find. Ultimately, I found that the AYRO 311 costs between $10,000-$14,000, and the AYRO 411 starts at over $21,000.

Frankly, I thought it was a lot of money upfront. Although AYRO makes some claims regarding their vehicles’ ability to diffuse cost and justify the investment, I’d like to see some real data. Fleet managers and other bulk buyers are certainly going to need that kind of proof. If AYRO is to make a name for itself in this niche, cost reductions on a fleet scale will be paramount. 

Should You Invest in AYRO?

I’m interested to see its 10-Q earnings report on Aug. 14. However, I can’t see any compelling reason to invest in this company right now.

Investors are also curious to understand what happened with its Dropcar merger less than a year ago, and what it really means. There has been speculation that this is a pump and dump scheme. The flurry of financing activity does certainly raise eyebrows and add to that suspicion. None of this even takes into consideration that AYRO’s markets are getting thrashed by the pandemic. 

But if the upcoming earnings report can allay those fears, investors could have reason to give it another look. As with all companies, revenue generation, sales, and the ability to produce a quality product will be determining factors in AYRO’s success. Look for information indicating these factors in the upcoming 10-Q.

The company did warn that it is having going concern difficulties in its previous report. So, it is far from established and represents significant risk.

As of this writing, Alex Sirois did not own shares of any stocks mentioned above.

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