Why Vectrix is teetering on bankruptcy, pt. I covered the general reasoning concerning the source of Vectrix’s corporate woes. Part II relates the story told by the financial filings, and part III goes into nitty gritty details. The Vectrix corporate financial reports tell an interesting story of expensive missteps and an expensive business model. This is not the first time a company was launched with high hopes and aspirations, only to meet struggles, difficulty, and financial collapse. What makes this story different is the special feeling many Vectrix owners have for their bikes. A similar special feeling years ago led EV1 lease holders to the Don’t Crush campaign during which some were arrested protesting outside a GM facility, and which led to the documentary Who Killed The Electric Car. There is something about electric vehicles that incites passion one wouldn’t have for other products like razor blades.
At this time Vectrix has not filed for bankruptcy and there is a possibility of a buyout. However the financial reports paint a grim picture.
The first and most critical fact in this story is cash. On Sept 30 2007 Vectrix had over $44 million in unrestricted cash, on Sept 30 2008 they had $11.5 million, and by December 31 2008 the cash had dwindled to $3.3 million. The preliminary results filing of Jan 22, 2009 contained a statement that they were in critical need of additional financing and an obvious possibility they would be unable to go on as a viable entity.
The second is there were several decisions made which cost a lot of money. These include a strategic change in direction, replacing the CEO and CFO, and a failed research project into lithium battery technology. Maybe these expensive missteps would have left Vectrix with more money today, or maybe they would have provided more rope with which to hang themselves anyway.
The third issue was create a globe spanning sales and service organization and to focus sales efforts on markets unlikely to buy scooters at all much less electric ones. Also there were product quality issues which seem to have required a lot of service efforts. This led to a high cost structure, reflected in the financial results. The high costs meant each bike sold cost far more than the revenue they received. This core problem dooms Vectrix even if they receive further funding, unless they find a way to rein in the costs.
Countries like Italy seem like a natural environment for an electric scooter like the Vectrix to do well. Their climate makes for a nice and long riding season, and the people are already acclimated to riding scooters as primary transportation. Indeed it’s understood the store in Rome sold a lot of bikes until it was shut down. But they shifted from an Italy-centric sales strategy “to focus on North American dealer development”. The U.S. market is not accustomed to scooters as primary transportation, and the spread-out nature of American cities makes the range disadvantages more prominent.
Details are presented in Why Vectrix is teetering on bankruptcy, pt. III.
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