Seat Warmers

Keegan Brown, Rae’Chelle Lee

Trevor Holowaty, Veronica Cousino
Zach Ineson

Feasibility Statement

Description of Core Market Opportunity

There are two core market opportunities upon the release of the Elio. We have split these
markets into two potential target market segments: the sports/hobby car market and the
economy commuter. By developing two separate but distinct target markets, the possibility for
expansion higher returns on investment will be reached.

Market One: Sports/Hobby Car

With the current success of the Polaris Slingshot and the Morgan Three-Wheeler, Elio could try
to make a name for itself in the sporty 3-wheel vehicle market. The benefits of the Elio
compared to these companies is not only the price, far cheaper than either of the
aforementioned vehicles, but also the drivability. With proper modifications to the standard Elio,
this product could prove to be a hit for those looking for affordable fun-having machines.

In order to find out the most likely target segments for the Elio sports car, an extensive
demographic search was performed on Simmons Oneview. Gender, race, income, and
generational cohorts were ran against sports car ownership and automobile club membership.
Once the chart was produced, further research was done on new car buying trends and interest
in sports cars. One study showed that 93% of 60-64 year olds had a driver’s license, up 10%
over the last 18 years. Also, 62% of all new cars that are purchased in the United States are
being bought by Baby Boomers. An analysis was performed in order to narrow down the target
and secondary market for this vehicle.

The analysis of the simmons data shows that the individuals most likely to own a sports car are
white males, 55-69 years of age, and with a yearly household income of $100,000-$250,000.
While higher incomes also showed heavy sports car ownership, there was a significant drop
compared to those in upper-middle class. This will define our target market. White millennial
females with household income of $60,000-$75,000 also showed high involvement in auto
clubs. This market is largely untapped, and offering an easy to drive sporty car with sleek design
is something that could appeal to these women interested in cars (Appendix A).

Market Two: Commuter Elio

This market segment was developed for the males and females that commute to work between
the ages 28-50 and have a medium income of $50,000. Majority of the population commutes,
making this market ideal. These people would be the ones driving to and from work as well as
someone that might be a traveling salesman. The vehicle would be affordable and save money
on gas.

This market is for the commuters that have an average drive time of 26.1 minutes in the United
States. 76.3% of the commuters drive alone, so they would need a comfortable vehicle that was
dependable. From the last census only 5.1% of workers used public transportation and only
4.6% of workers worked from home. By running data on Simmons, we looked at which
generation would be more likely to drive conventional vehicles, and the income they obtain.

After viewing the results on Simmons, the results showed that Gen Z (18-20) was 26% more
likely to drive conventional vehicles than the rest of the generations. Millennials (21-39) were
5% more likely than the other generations. Males and females were to close to consider
anything to be significant. When it came to income, household incomes of $75,000-$99,000
were more likely to drive conventional cars by 15% followed by $50,000-$59,000 which was at
10% (Appendix B).

Product Modifications Needed for Markets

Sports/Hobby Car: The major product modifications needed for this target market would be the
flattening of the roof of the Elio to fit a roof rack and the addition of a trailer hitch on the back of
the Elio vehicle for pulling purposes. Both of these modifications deal with the adding of space
for two travelers so they have no hesitation of purchasing due to the minimal space when two
people are in the car.

Commuter: This market would need comfortability and a car that would get many miles per
gallon. A cup holder would also be a great installment to hold their coffee in the morning. The
single seat would be ideal, but the back seat would also work for ride alongs or carpooling.

Market Potential in Dollars and Units

There are currently over 60,000 unit sales per year within the three wheel vehicle market. The
Elio Nomad is targeted at males and females that commute to work between the ages 28-50
and have a medium income of $50,000. With this information we foresee 12.3% of this market
to consider the Nomad and 8.13% to purchase. This will result in 65,000 units sold at $7,999 per
unit totalling $519,935,000.

The Elio T13 is targeted at white males, 55-69 years of age, and with a yearly household
income of $100,000-$250,000 and white millennial females with household income of
$60,000-$75,000. With this information we foresee 10% of this market to consider the T13 and
9.06% to purchase. This will result in 15,000 units sold at $13,599 per unit totalling
$202,485,000.

Competitive Structure / Analysis

The Elio Nomad would fit into the industry of commuter automobile manufacturing. The Nomad
would be entering a mature industry. The main competitors in this industry consist of General
Motors, Ford, Toyota, Honda, and Nissan. The major products provided in this industry are
compact cars, mid size sedans, large cars and luxury cars. This industry gains about 94.8 billion
in revenues and 2.8 billion in profit. In 2017, 84% of the market purchased compact and midsize
sedans, which would be ideal for the Nomad.

“Material costs for the industry are anticipated to fall over the next five years. The largest input
for producers is steel, and the price of this critical input is forecast to decline at an annualized
rate of 4.3% over the five years to 2022. As a result of falling steel prices, which lessens overall
purchase costs, profit margins are expected to improve. Moreover, a major area of investment is
automation, which is intended to reduce the industry’s reliance on manual labor. As a result,
wages are expected to grow slightly slower than the previous five years, rising at an annualized
rate of just 0.5% to $7.1 billion over the five years to 2022” (IBIS, 2016).

The level of technology change is high, which would be perfect because Elio would release a
product that was newer to the market, with newer technology. When it came to fuel economy,
Obama’s administration introduced a regulation that automobiles must average 37.8 mpg. In
2017, Trump’s administration listened to concerns from automobile manufactures and was said
to review the regulations and perhaps reverse the standards, which would shake up the
industry.

The Elio T-13 would fit into a newer industry. The closest current industry that the T-13 could fall
under would be the ATV manufacturing industry. Though the T-13 is not considered an ATV or
have four wheels, this industry does include high performance vehicles. The biggest competitor
in this industry would be Polaris. This rest of the information could not be obtained on IBIS
World.

Industry Standards / Regulatory Issues

The Elio or a three wheel vehicle is legally classified as a motorcycle but currently aiming to be
classified as an autocycle. An autocycle is a three-wheeled, enclosed vehicle that’s essentially
part motorcycle and part car. Currently, these three-wheeled vehicles are classified as
motorcycles by the National Highway Traffic Safety Administration, and there are all kinds of
conflicting laws across the country that regulate them. David Vitter (a senator from Louisiana)
created a bill [Autocycle Safety Act (S. 685)], which was adopted by 26 states, that aims to set a
single standard for all three-wheeled road vehicles, hopefully making it easier for companies to
bring autocycles to mass market.

The issues with the classification of the three wheel vehicles is that the government cannot
figure out how to regulate them. They are so much like a motorcycle, however even more like a
car. Motorcycles and automobiles have similar yet very different road regulations. To be eligible
for the new classification of autocycle, the vehicle must qualify as meeting Federal Motor
Vehicle Safety Standards. These standards are not limited to, but including most standards for
passenger vehicles under 10,000 lbs.

Some of the requirements will be seat belts and seat belt anchors, child restraints, roof crush
and meet upper interior impact standards. Autocycles must also have front and side curtain
airbag protection. In addition to numerous car safety standards needed for qualification,
autocycles must meet motorcycle standards and regulations as well.

Two New Model Concepts for Target Market

Introducing the Elio T-13
“The pinnacle of low-cost performance.”

The T-13 is an affordable hobbyist vehicle with the purpose of providing a uniquely exciting
experience both on the street and at the track. This car retains comfort and modern amenities
while providing the looks and feel of a sports car. Using a small body with a 3-wheel setup has
resulted in a vehicle that is not only efficient but also has incredible handling. The vehicle itself
will have a larger engine than other Elio vehicles and features a turbocharger as well. A 5-speed
manual transmission is standard with rear-wheel-drive set up. With a power to weight ratio that’s
better than a Mazda Miata, this car can hold its own against many cars commonly seen on
track.

T-13 Model Features: 1300cc turbocharged 3 cylinder provides sports car performance while
maintaining an average of 35 mpg. 0-60 mph in 5.9 seconds. Available in Black, Silver, Brick
Red and Cobalt Blue exterior colors.
 Introducing the Elio Nomad
“Taking you further for less.”

The Nomad is the ideal vehicle for the average work commuter. Not only is it comfortable for the
driver and passenger if needed to carpool, but it also gets 84 miles per gallon. The Nomad is
smooth on the road and will be able to handle weather conditions such as snow and rain
because of the front-wheel-drive setup. This vehicle will be equipped with specs that every
commuter car should have: fold up cup holders for coffee, energy drinks and etc., seats with
heating and cooling, automatic starter, and Sirius Radio.

Nomad Model Features: 900cc 3 cylinder engine provides low-cost maintenance while
averaging 84mpg. 0-60 mph in 8.4 seconds. Options for the Nomad are: 1.) Upgraded interior
with leather seats in Black, Brown, and Tan. 2.) Dash Lighting and charging station each costing
in additional $1000. Available in Black, Silver, Brick Red and Cobalt Blue exterior colors.

Distribution Channel Strategy

To better engage the typical car buying audience, the Elio Nomad and Elio T-13 will be
manufactured in the already developed manufacturing warehouses. Once ready to be shipped,
they will be shipped to actual Elio dealerships and marketed by each of the individual
chained/franchised Elio-branded dealers.

By utilizing actual brick-and-mortar dealerships, that may be required by law for selling new
vehicles off of the lot from a direct manufacturer, more and more people will see the Elio’s
similarities to other niche brand type of vehicles who have created dealerships such as Tesla.
Trained sales individuals will have the ability to market the strong capabilities of the Elio models
for the cost, which will lead to more sales. Although indirect, dealerships need to be built in
major commuter cities and neighboring cities such as West Chicagoland, the Bay area of San
Francisco, and the Texas Trio of Dallas, Houston, and Austin. Starting in large, high-context
commuter cities will generate a great deal of “buzz” for the Elio models, which will then lead to
the expansion into smaller, more modernized cities such as Grand Rapids, Sacramento,
Louisville, and Detroit.

Manufacturer → Warehouse → Dealership → Purchase → (a few years) → Expansion

Critical Success Factors

The Elio models have multiple aspects that will be critical to the success. One key factor being
the price, Elio is priced extremely well. The low pricing is something that differentiates them
from competition, with the initial model having a base price of $7,450. Competitors average
prices of cars being around $23,000, makes Elio much more cost efficient. Another benefit to
consumers is the 84-mpg standard. These two aspects together in the Elio make it tough
competition for current commuter cars, this makes it a great car for people who commute.

The Elio is classified as a motorcycle, which places the Elio into multiple industries. It is one of
the first to try and break into the cost effective, road commuter rather than just a “toy”. This
makes it a vehicle than can appeal to consumers for more than one use. It can be used as a
daily car for commuting to work, while also being fun to drive like other trike products. The Elio
T-13 would fit into a newer ATV industry, making an impact for how different it is to what is
currently being produced. The Elio Nomad would fit into the industry of commuter automobiles,
it has a competitive advantage on price and mpg.

Proforma Financials

With this being the first year of the Elio models’ release, expenses are high and sales units are
lower than production capacity. Outlined below are the planned unit sales, expenses, and profit
for the Elio Nomad and T13 models being released July, 2019.

Elio Nomad
- MSRP: $7,999
- Year 1 Units: 65,000
- Expected Sales: $519,935,000

Elio T13
- MSRP: $13,499
- Year 1 Units: 15,000
- Expected Sales: $202,485,000

Total Revenue Year 1: $722,420,000

Expenses
- Cost of Goods Sold (60% of Sales): $435,452,000
- Overhead (25% of Sales): $180,605,000
- Marketing Expenses (8% of Sales): $57,793,600

Profit
- (7% of Sales): $50,569,400

Total capacity for producing both of these vehicles is 135,000 units. In year 1, Elio motors
expects to sell 80,000 units. Innovators and Early Adopters will be the purchasers of these
vehicles in year 1. Heavy marketing will be implemented in order to spread the Elio name and
gain support for the brand. As processes are developed and refined, overhead will be initially
high which is why the overhead costs will occupy 25% of sales. This leaves profit at 7% of
sales. Year 1 is about growth and learning from experience. Unit sales are expected to increase
as Elio gains brand recognition in the coming years and improves upon the vehicle designs.

Recommendation

After all of the background information done on each of the possible target markets for the Elio
Nomad and the Elio T-13, the best way to market these two cars is to first develop various
product modifications that will be able to suit the miscellaneous needs for the consumers of both
the Sports/Hobby car market and the Commuter/Economy-type car market. Once this is
completed, distributing these vehicles to Elio branded distribution/dealership centers will be the
most direct-to-consumer way to sell the vehicle through trained Elio salesman and dealership
employees.

Elio must take into account the various marketing effort and product development costs for the
Elio, but there would be a much less shortfall with regards to bottom line profit if the Elio is
marketed quickly and efficiently. We recommend that the plans for the Elio launch of January
2019 go forward.

Appendices
A. Sports Car Demographics
B. Commuter Vehicle Data (Simmons OneView)
C.

https://www.census.gov/acs/www/about/why-we-ask-each-question/index.php
https://www.brookings.edu/blog/the-avenue/2017/10/03/americans-commuting-choices-
5-major-takeaways-from-2016-census-data/

D.
Gaille, B. (2017, January 13). 17 Important Car Buyer
Demographics. Retrieved February 23, 2018, from
https://brandongaille.com/17-important-car-buyer-demographics

E. IBIS World
http://clients1.ibisworld.com.ezproxy.ferris.edu/reports/us/i
ndustry/default.aspx?entid=816