On January 31, 2013 we published a research piece outlining our skepticism toward Echo Automotive (OTC BB:ECAU), a company that claims to possess a technology that converts gasoline powered vehicles into plug-in electric/hybrids. ECAU now trades at around $1.10 after reaching a high of $3.61 on January 29, 2013. We believe the stock will soon break $1.00 to the downside.

As we have mentioned time and time again in past Pump and Dump (P&D) articles, a successful pump is often tied to associations with “trustworthy people relationships” in order to help build an illusion of credibility. It appears as though ECAU is no exception.

In the days after we published our report, ECAU shares received a boost from the continued email campaign from the likes of Five Star Equities and The Bedford Report. The new talking point of the ECAU story, which attempts to convince investors into accepting their claims, centered on a test drive of one of ECAU’s alleged converted vans by the Mayor of Indianapolis, Greg Ballard. It seems that ECAU has jumped all over this PR opportunity. Watch the Mayor of Indianapolis test-drive EchoDriveâ„¢.

A sensational quote from a Five Star email letter reads:

“Watch the Mayor of Indianapolis Test EchoDriveâ„¢ to Rave Reviews”

Well, we’ve watched the Mayor’s test-drive and he did seem to be entertained by his minute and a half trip. But we think most investors will agree that his commentary was not a “rave review” of Echo’s technology, nor does it infer that the city of Indianapolis is about to sign up for Echo’s platform.

As we will discuss, the promotional email conveniently failed to mention that the Mayor is already in discussion with partners and major automakers. Furthermore, ECUA’s “business plan” appears to be geared towards converting existing vehicles whereas it seems that the Mayor would like to purchase some of its new vehicles from established automakers. Finally, it seems that if the city of Indianapolis does choose to convert vehicles it will convert a good deal of its fleet vehicles to natural gas.

It is no secret that Mayor Ballard is championing the plight to reduce U.S. dependency on oil. On December 21, 2012 Mayor Greg Ballard signed Executive Order #6,

“requiring the city to replace its nearly 500 non-police sedans with electric or plug-in hybrid vehicles. New vehicles would be purchased as older ones are retired, and the city hopes to completely swap out its current 3100-vehicle fleet by 2025.”

Here is some specific verbiage from the Mayor’s December 21, 2012 press conference about the new bill. Around the 6:12 mark, he clearly states that:

“…our team is currently working with multiple automakers to have IMPD (Indianapolis Metropolitan Police Department), and the city of Indianapolis  serve as technical advisors, test drivers, and eventually the proud users of the first plug-in hybrid police vehicle.”

An article at Indystar.com does a good job outlining Mayor Ballard’s proposals:

  • Requires the purchasing of electric or plug-in hybrid vehicles for non-police fleet use. The city fleet of approximately 500 non-police fleet cars will be replaced, as needed, saving taxpayers approximately $12,000 per vehicle over the ten-year life cycle of each car.
  • The city is currently working with partner organizations including Energy Systems Network and finance experts to convert the city’s heavy fleet, including snow plows, trash trucks and fire apparatus to compressed natural gas (“CNG”).
  • Finally, the city is seeking to partner with one or more automakers to develop a plug-in hybrid police vehicle that meets the safety, power, electronic and range needs of a modern urban police force. If a plug-in hybrid electric car could achieve just 40 MPG and meet the needs of police officers, city taxpayers would save up to $10 million per year. The city’s current police vehicles average 10 MPG.

Considering the facts, we conclude that the odds that ECAU will play a meaningful part in the city’s transformation process seem to be grossly over-exaggerated.

So here we go again. In our opinion ECAU is nothing but a pipe dream and will endure the same fate as all of the other P&Ds we have tracked, in a flop. Ultimately, we believe that it is likely that ECAU will follow the route of several of its president’s past business ventures as detailed in the Seeking Alpha report published on February 7, 2013: Echo Automotive: The $155 Million Company Driven By Promotional Steam. Mayor Ballard may or may not be aware that his name and reputation are being used in what we believe to be a pump and dump game, but we assume that he will not be particularly ecstatic when he finds out.

Disclosure: Short ECAU

Disclaimer:

You agree that you shall not republish or redistribute in any medium any information on the GeoInvesting website without our express written authorization. You acknowledge that GeoInvesting is not registered as an exchange, broker-dealer or investment advisor under any federal or state securities laws, and that GeoInvesting has not provided you with any individualized investment advice or information. Nothing in the website should be construed to be an offer or sale of any security. You should consult your financial advisor before making any investment decision or engaging in any securities transaction as investing in any securities mentioned in the website may or may not be suitable to you or for your particular circumstances. GeoInvesting, its affiliates, and the third party information providers providing content to the website may hold short positions, long positions or options in securities mentioned in the website and related documents and otherwise may effect purchase or sale transactions in such securities.

GeoInvesting, its affiliates, and the information providers make no warranties, express or implied, as to the accuracy, adequacy or completeness of any of the information contained in the website. All such materials are provided to you on an ‘as is’ basis, without any warranties as to merchantability or fitness neither for a particular purpose or use nor with respect to the results which may be obtained from tte use of such materials. GeoInvesting, its affiliates, and the information providers shall have no responsibility or liability for any errors or omissions nor shall they be liable for any damages, whether direct or indirect, special or consequential even if they have been advised of the possibility of such damages. In no event shall the liability of GeoInvesting, any of its affiliates, or the information providers pursuant to any cause of action, whether in contract, tort, or otherwise exceed the fee paid by you for access to such materials in the month in which such cause of action is alleged to have arisen. Furthermore, GeoInvesting shall have no responsibility or liability for delays or failures due to circumstances beyond its control.