ZAPZ had another miserable day today compliments of the Smart Division of Mercedes Benz. In an article published by Reuter’s, the CEO of the Smart Division of MB was quoted as saying “We do not want to and will not have business ties to ZAP in any way.” Click Here to read the entire press release.
ZAP’s strategy of publicly announcing the $1 billion purchase order with Smart has officially backfired in the worst possible way. 20/20 hindsight is perfect vision, but it is clear ZAP should have subtlely pursued a relationship while implementing its original strategy.
The company should have simply purchased a few thousand cars through distributors, got them into the public’s hands, and then pursued a potential relationship once they didn’t really need it.
ZAP’s credibility is damaged severely at this point. The market responded by knocking another 37.5% off the value of the stock on huge volume.
At this point, ZAP should move forward with one of the other strategies Steve Schneider laid out in the interview. They should acknowledge they probably won’t be doing any business with MB, place an order with a distributor that can deliver cars, get the cars, and get them converted and sold. They should prove they can deliver before embarking on any more media battles.
As you can see from the chart, ZAP has taken a severe drubbing since announcing its billion dollar order with MB. So, where to from here? That depends on you. Here are my thoughts:
1. If you have given up on this company, and are stuck in the stock, don’t sell. The company will no doubt have some response and the stock will probably rebound. That would be the time to sell. My guess is the stock will probably bounce to around $1.40 in the next few days.
2. If you are a long term investor and believe they will get cars, sell them, and the other portions of their business could thrive as well, don’t worry about this too much. Nothing has really changed since last week with one exception. It appears they won’t be buying cars directly from MB.
3. If you don’t own it and are looking for a quick trade, the stock might be a buy. The market has probably overeacted to the news, and could bounce easily.
I still believe the company has a reasonable chance of selling a fairly large number of Smart Cars, which means the stock has upside potential. High risk capital only- this company has to prove itself at this point.
If Mr. Schneider were to ask me what to do, I would tell him to go get a couple thousand cars, get them converted, and get them sold ASAP. This is the best way to restore the company’s credibility.
Sometimes the most money is made by those with the courage to buy at the point of maximum pessimism. We’ll see what happens here.
Daimler-Chrysler screws up on their Smart strategy and meanwhile for 2 years the greatest nation on earth can’t get want I can walk down the street in Toronto and buy. In 2007 the bloom will be over and dead. I will never buy or rent another Daimler-Chrysler vehicle so long as I live, and will short their stock until they are dead dead dead like all the US auto manufacturers. I have an entire lifetime to seek revenge for this kind of arrogance and stupidity. Every day I see all the SUV’s and Hummer’s lined up on the parking lots they call highways spewing smog and supplying Osama’s buddies with bombs I just want to puke. I agree, my advice…get as many damn cars as you can and convert them to delievery FAST. Start ramping the price up if you have to to get the job done, JUST TAP AND KILL THIS GOLDEN EGG FOR GOOD BEFORE THOSE BASTARDS SCREW IT UP MORE THAN THEY ALREADY HAVE. America will pay for what it wants, especially when it know that it wants it NOW!!
Editor: ZAP’s strategy of announcing the order to MB backfired badly. Now, the only thing they can do to re establish credibility is sell cars in my view. The window of opportunity will close on this one before too long. They need to jump now. A word of advice- turn in your hotmail address for a Yahoo address.
Greetings from Canada, Appears as if they brought this on themselves. Unfortunately, sometimes early Corporate missteps become Public Perception which in turn creates an Investor Headache. This one may have Excedrin written all over it. Still appreciate the product theory. Guess we’ll know the final verdict soon enough. Appreciate your well rounded observations. Warmest Regards, Darren Investments@866GetHost.com
Editor: Thanks for your comments Darren. They need to get the sales rolling to make up for this blunder.
Well, I knew there was a risk here, but I didn’t expect that the Management would have been foolish enough to make such a huge PR blunder. I’m holding on for now, but MB might re-consider the American market in time to create some competition for ZAP. Oops. Schneider & Co have a lot of work to do.
Editor: To paraphrase Al Davis: “Just sell cars baby”.
It is unfortunate that Benz is taking such a position and that Zap has spent many $$ getting required government approval. This may be great for Benz (paves the way for them to sell here) and it could be great for Zap. The June 6, 2005 issue of Barron’s “Chinese Auto Makers Great Leap Forward” discusses the extra capacity available from chinese auto makers and their desire to enter other markets. Perhaps Zap could set up an alliance with one of them. The Jin Bei line of vehicles is superior in quality, costs less, has better handling, braking, dependability, fuel mileage than Toyota vehicles. And they have a vehicle smaller than the Smart Car which can be seen in great numbers on the streets of Beijing and Shanghai.
Editor: I know they are working on an alliance of this nature. Nevertheless, the quicker they get out and sell cars the better in my view.
I assume that the CEO will resign today…
Editor: Don’t think so, but what do I know on this one.
ZAPZ looks like a good buying oportunity now. ZAP can sell thousands of Smarts for the next few years, and that will push their earnings millions into the black. They company should make a press release soon to announce purchase orders with their new distributors and Smart sales projections for 2005 and 2006.
Editor: I bought 20,000 at $.95 for my own account yesterday for a trade. We’ll see what happens. My stop loss is $.75- my target is $1.30 to $1.40.
I owned a smart car when I was assigned overseas. The car gets 50 plus MPG, fact! This is a quote from an article, a few months back, in Business Day “You have to ask if it’s actually possible to make Smart profitable,” said Michael Schneider, a fund manager at Frankfurt-based Deka Investment, which has $144 billion under management and owns DaimlerChrysler shares. “I have my doubts.” Could this assertion contributed to Mr. Walker’s very libel and defaming comments regarding Zap? The last 2 sentences of his so-called press release sound like “hell hath no fury like a scoundrel scorned.” A simple business like response would have been sufficient. Below is a copy of an article from a smart car forum. I believe this to be optimistic news for all concerned. STATUS OF PENDING VEHICLE IMPORT ELIGIBILITY PETITIONS 2005 SMART CAR COUPE AND CABRIOLET ELIGIBILITY APPROVAL [ May 31, 2005 Vehicles Smart Car, make and model Coupe and Cabriolet, year 2005 and type passenger car Registered Imported Name and number… G&K Automotive Conversion, Inc. 90-007 Complete petition received date 5/17/2005 NHTSA Docket number… 21334 Status number 7 denotes…Currently being processed For G&K Automotive Conversion/Zap to get 2006 approval will be a matter of paper shuffling.
Editor: Nice to have some feedback from someone that actually owned the car.
Looks like they’re beginning to roll em out now. Hope it ‘s fast and continues for a while.
Editor: Unless they announce a deal to get thousands of cars, I believe the stock is likely to take a little breather at this point.
I AM A SMALL INVESTOR. JUST A FEW THOUSAND AT THE BEST OF TIMES. IS THIS A STOCK WORTH BUYING NOW AND HOLDING FOR A FEW YEARS LOOKING FOR GOOD GAINS. OR JUST TO MUCH RISK FOR THE LITTLE GUY.
Editor: As I have said, I believe it is a good speculation. If you are going to buy it and hold it for a couple of years, it really doesn’t matter if you pay $.95 or $1.60 or $2. It’s either going to work or it isn’t. The demand seems to be there. If they can handle the supply issue, they have a window in time to really make some hay. Don’t invest more than you can afford to lose at least half of, or 100% to be on the safe side. If they had significant sales and were profitable, it would be different.
What wrong with FMLY? they shooting alot Stock going no where, but down> Jed
Editor: I recently wrote an edition devoted to that very issue. Here’s a link:
http://www.otcjournal.com/archive/listserv/20050528-1.html
That edition summarizes my views.
I met the original founders of ZAP here in Seattle a little over 10 years ago. Since then, I’ve been riding one of their electric bicycles, and I invested in their company because I believe in what they have been trying to do. I made friends with some of their people, visited their plant in Sebastopol (Santa Rosa) and set an example for biking in my community (I’m 75, and recently recovered from open heart surgery). I feel that ZAP’s progress since 1995 has been admirable, despite the bitter and unwarranted setbacks they have received and the hostile, competitive marketing that characterizes human behavior these days. Frankly, as a very-low income person (I play piano for local nursing homes and retirement centers, and a coffeeshop) I could certainly use something with 4 wheels to replace the aging electric bicycle, so I can get around town to my gigs. I hold 1900 shares of ZAP and trust that one day I can buy a little electric car with it. Any takers? — – Jerry Diamond
Editor: Admirable Jerry. While I share your admiration of what they are trying to do, the whole Smart Car fiasco in retrospect to me looks like a big promotional stunt to get participation in their stock. I wish I had never heard of the company. They should have had some inkling they would never be able to get cars, and as such I now feel their whole focus in that arena was misleading at best. I’ll bet if you check the insider trading, there was plenty of it when the stock ran up. There is something wrong with announcing you have over $1 billion in sales orders and being able to fill very little of it.