When a company starts a fundraising campaign for a yet-to-be-released solar electric vehicle (SEV) Sion with the hashtag #savesion, you know things aren't going that great.
Sono Motors has less than two weeks to get 1800 new pre-orders (or a nice chunk of investment).
Will it succeed?
It's not every day that a company admits its financial struggles and reaches out for help – it's not very "fake it till you make it".
Most financial troubleshooting happens behind doors, and we only really hear about them if a company is acquired or folks announce redundancies on LinkedIn.
But if there's one thing Sono Motors is known for, it's transparency and radical honesty. Who the fuck would share its financial pains on YouTube? Well, Sono Motors.
I spoke to co-founders and co-CEOs Laurin Hahn and Jona Christians to learn about it.
A perfect storm to run out of money
The last couple of years has been challenging for young automotive OEMs, particularly scaleups.
Take a look at Europe. Earlier this year, Lightyear – arguably Sono Motors closest rival – announced the suspension of the costly Lightyear 0 solarEV to focus on the €40k Lightyear 2. Three days later, its parent company Atlas Technologies BV announced bankruptcy.
In the commercial space, EV makers Arrival cut staffing by 50%. It shifted its core manufacturing focus to the US, dropping current plans for multiple vehicles to focus on the electric van already planned for US fleets.
And closer to Germany, Poland's autocycle brand Triggo has halted commercial operations.
The reasons are unsurprising – recession, the COVID-10 pandemic, inflation and interest rate rises, and an industry still reeling from supplier shortages and delays. Russia's evasion of Ukraine and rising energy prices causes further challenges.
While investments in renewable energy should be the logical way of the future, Hahn suggests that the financial challenges of late caused "investors to prioritise other asset classes, resulting in a funding gap for some startups in a growth-phase pre-revenue in climate tech.”
And despite raising about $350 million since 2016, Sono Motors needs more money to put Sion in production next year as planned.
In 2022 it looked like things were going ok. Car-hire company FINN signed up to reserve and purchase 12,600 vehicles to create a sustainable fleet.
In July 2022, the company launched the 'Solar Bus Kit'.
It allows subsystems like the HVAC to be partially powered by renewable energy. The Kit can save up to 1,500 litres of diesel and up to 4 tonnes of CO2 per bus per year from the ~1.4 kW peak installation with a total size of about 8 square metres of solar panels.
Bus fleet operators stand to see a potential payback time of approximately three-four years, depending on days in operation and fuel prices.
And there's strong B2B interest. Customers and partners include, Rhenus, Chereau, Scania (a subsidiary of Volkswagen), Mitsubishi Europe, and MVG, a German public transport authority.
Refrigerator truck company CHEREAU has also committed to purchasing solar technology for its fleet with the potential to reduce local CO2 emissions by approximately nine tonnes per year per vehicle compared to trailers with diesel-powered cooling units.
ÖPNV-Service Hagen has signed on to provide fast installation and maintenance of the solar bus kits, at a rate of around 4500 annually, with the capacity to scale throughout Europe and, with time, extend to other markets.
But despite the success of commercial offerings, there just isn't enough money to manufacture the Sion.
Sono Motors announced during its Q3 2022 earnings call that:
“Financial markets have experienced a negative downturn, with many tech companies losing up to 90+% of their respective market cap, and shares in mobility tech companies have been hit particularly hard. As a result, financing our Sion program through equity has become increasingly challenging and dilutive.
Raising money takes much longer than expected, since we failed to explain to investors why the Sion has the potential to become the world's first affordable solar-electric vehicle and that there is a huge demand for it.”
Sono Motors began 50 days of crowdfunding in December. According to Christians, the company has raised about half its ambitious funding target and extended the campaign to the end of February.
People can buy a car outright, or put down any amount from €500 to the full price of a Sion, which is currently set at an incredibly affordable €29,900.
You only pay if the campaign succeeds, and all reservations receive a discount of up to €2,100.
But crowdfunding also has a bigger goal of keeping the company in the spotlight of existing and potential institutional investors.
Sono as a solar company
According to Hahn, the solar bus kit shows the commercial validity of solar-powered vehicles:
"Our technology is unique, and it's proprietary. We have over 50 patents filed and granted. Over 23 customers are already announced, with many more in the pipeline, as big corporations begin integrating solar capabilities into their first products. And we are at the forefront of that trend.”
So the evidence is clear that even if the Sion doesn't roll out anytime soon, there's a clear, compelling commercial case for B2B product offerings.
In January, the company secured €1.46 million in funding from the European Climate, Infrastructure and Environment Executive Agency ("CINEA") to advance the development of the company's proprietary solar technology.
The company also told me a big carmaker (that they were unable to name) is interested in incorporating Sono Motors solar panels into their own vehicle.
What are the learnings from the current financial challenges?
I asked Christians what some learnings that might help other startups currently in similar positions were:
- Focus: Focus your goals from milestone to milestone on one model instead of trying to design, test and market multiple vehicles simultaneously.
- Asset lightness. "Up until we bring the final vehicle into production, we have spent close to €500 million on the whole vehicle. Other automakers can spend a billion, if not more, on their car projects." One of the ways the company saves money is by outsourcing manufacturing to Valmet Automotive.
- Transparency. Weekly all-hands meetings provide the "time to talk about every and not beat around the bush. So everyone knows where we are financially and with our fundraising."
- Look beyond Europe for your future customers. According to Christians, "As a German company, we had a good start here. But at one point, you have to address the US market. The European market is simply not big enough or open enough for startups or scaleups like us."
Of course, Sono Motors' top priority for the near future is its European roll out – "after launching in Europe, the US could potentially be the next market."
The company did a road show in the US last autumn. What's more, the current US Inflation Reduction Act incentivises the purchase of electric vehicles through tax credits.
However, there is a requirement that "a vehicle's final assembly take place in North America." So this would require additional infrastructure on the ground in the US.
Will the Sono Motors community be enough?
The company has always been good at community building. In 2017, Sono offered public test rides for its first prototype, which few companies would ever do. Christians recalls:
"We were the first. This was crazy. But people loved it. They felt like they could participate in bringing the idea of a solar vehicle to reality."
Can the company save Sion and get the vehicle into manufacturing? I'm not entirely confident, but I admire its grit.
If successful, Europeans could see the world's first commercial solar vehicles on the roads by 2024.
It is easy to write an article focused on scepticism. But let's not forget that, at the very least, Sono Motors forever advances the R&D of solar energy in mobility with the potential to change the industry if not now but in the future to come.
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