18 Jul Canoo Inc: In the Driver’s Seat Once Again?
Canoo Inc. (NASDAQ: GOEV), an EV start-up that aspires to be a high-tech advanced mobility company, announced the signing of a definitive agreement with Walmart (NYSE: WMT) for 4,500 all-electric delivery vehicles beginning with the lifestyle delivery vehicle (LDV). The contract also has an option to purchase up to 10,000 units.
The Company expects to begin delivering the LDVs in 2023. However, the companies are working on advanced deliveries to refine the vehicle configurations in the Dallas Fort Worth metroplex in the coming weeks.
The LDV is optimized for sustainable last mile delivery and is built using the Company’s proprietary multi-purpose platform (MPP) architecture. The vehicles have cutting-edge features such as optimized cabin, customized cargo space, true steer by wire technology, fewer moving parts, and cabin intrusion that deliver more interior space, improved driver ergonomics, and road visibility.
Tony Aquila, Investor, Chairman, and CEO of Canoo, commented,
“We are proud to have been selected by Walmart, one of the most sophisticated buyers in the world, to provide our high-tech, all-electric, American made Lifestyle Delivery Vehicle to add to their impressive logistics capabilities. Our LDV has the turning radius of a small passenger vehicle on a parking friendly, compact footprint, yet the payload and cargo space of a commercial delivery vehicle. This is the winning algorithm to seriously compete in the last mile delivery race, globally. Walmart’s massive store footprint provides a strategic advantage in today’s growing ‘Need it now’ mindset and an unmatched opportunity for growing EV demand, especially at today’s gas prices.”
Walmart currently fulfills its online orders through a dedicated fulfillment center, besides using a combination of company associates, independent contractors, third-party delivery service providers, autonomous vehicles, and drones.
Canoo plans to initiate the production of the Lifestyle Delivery Vehicles in the fourth quarter of 2022.
Canoo Inc. (NASDAQ: GOEV)
Market Cap: $1.15B; Current Share Price: $4.28
Data by YCharts
Strength
Canoo manufactures Lifestyle and Multi-purpose delivery vehicles that incorporate cutting-edge safety features and user connectivity. The Company’s MPDV line is designed to offer greater productivity, efficiency, cargo volume, and cost savings compared to other EV’s in the market. Furthermore, Canoo has built an inimitable independently drivable modular platform that leverages its proprietary “skateboard” technology to offer features such as the first true steer-by-wire platform, an in-house ECU and battery management system, and a composite leaf-spring suspension, among others, for individuals and businesses. The technology enables cost-efficiency in vehicle development and is designed to completely rethink EV architecture while addressing the need for space and value.
Image Source: Company
The Company aims to redefine the EV architecture with novel designs. It intends to launch its first consumer model in 2022, followed by an MPDV and a sports vehicle built on its proprietary platform.
In March 2021, the Company debuted a fully-electric pickup truck, which will be open for pre-orders in Q2,2021 and will be available for delivery from 2023. The pick-up truck incorporates unique features such as pull-out bed extension, options for cargo storage, flip-down side tables, side step + storage, modular bed with space dividers, and a multi-accessory charge point, to name a few.
Tony Aquila, Executive Chairman, Canoo, commented, “Our pickup truck is as strong as the toughest trucks out there and is designed to be exponentially more productive. This truck works for you. We made accessories for people who use trucks – on the job, weekends, adventure.”
In April 2022, the Company was selected by NASA to provide crew vehicles (CTVs) for the Artemis Lunar Exploration launches. The Company will deliver customized all-electric lifestyle vehicle models by June 2023.
Most recently, in July 2022, Canoo’s electric vehicle was elected by the U.S Army for analysis and demonstration.
In January 2021, the Company closed a merger with Hennessy Capital Acquisition Capital IV to become public and raised $607 million in equity capital to fund its EVs. Canoo is planning a subscription model that does not involve conventional lease agreements, down payments or payment of maintenance and registration costs. The owners can lease the EVs for a minimum period of one month, drastically reducing the barriers to entry and pushing more people to join the EV bandwagon.
Canoo is projecting a revenue of $1.43 billion in 2024, $2.341 billion in revenue in 2025, and a profit of $188 million through building 10,000 vehicles in 2022, 60,000 in 2024, and 95,000 in 2025.
Weakness
The purchase agreement includes a Warrant issue agreement, allowing Walmart to purchase 61,160,011 shares of Canoos common stock priced at $2.15 per share. The SEC filing shows that if Walmart exercises its warrants, then it can receive nearly 20% of the Company’s stock.
The agreement also states that Canoo cannot enter into any agreement involving the design, manufacture, consult, advice, lease, or sale of EVs or issue any equity, equity-linked, or debt securities of any type, or enter into any agreement for the purpose of transferring control of the Company to, Amazon.com, Inc. (NASDAQ: AMZN), its subsidiaries, or affiliates. While the condition is understandable, it restricts the market opportunity for the Company.
In May 2022, the Company filed a lawsuit against DD Global Holdings and lead beneficiary Pak Tam Li, to reclaim profits made by selling its shares in March, while doing an equity swap for the same number of shares with an undisclosed buyer. The Company is seeking over $61 million for the “short swing” profits made by DD Global Holdings. Park Li was one of the original investors in Evelozcity, which later became Canoo.
In 2020, before Canoo’s SPAC merger, Park Li owned 26% of the company’s shares through DD Holdings and other affiliated businesses. However, at the time of the merger, they entered into a national security agreement with the US Committee on Foreign Investment, which resulted in both parties agreeing that DD global would own 10% or less of Canoo by Feb. 28, 2022. The lawsuit alleges that DD global held more than 10% of the company’s shares after the sale of 35.3 million shares to Aquila’s LLC in March 2022. Canoo is now trying to uncover the identity of the unknown buyer of the shares in March and any other unreported transactions.
The Company had substantial doubt about its ability to continue as a going concern as per its Q1,2022 financial results, but the deal with Walmart may have given it a new lease of life.
Opportunity
The International Energy Agency predicts that Electric Vehicles, which stand at 3 million today, will grow to 125 million by 2030. The Global Electric Vehicle market is all set to compete with the internal combustion engine (ICE) vehicles in the next five-year, accounting for one out of every five cars sold by 2030, according to Seth Goldstein, an analyst and chair of Morningstar’s electric vehicle committee. The growth of this industry is a result of the initiatives by governments around the world in the form of tax rebates, grants, and subsidies for the adoption of renewable and more environment-friendly options for transportation. Unlike conventional vehicles, which can only replenish their fuel at specific public locations, Electric cars can be charged at home or commercial charging stations.
However, the limitation of sufficient charging capacity to cover long distances discourages using these vehicles. There is an increased focus on research and development activities, especially in the passenger car sector, to improve infrastructure and supply equipment, establish EV chargers at easily accessible public places, and allow long-distance travel. Range anxiety, which acts as the most significant impediment to the market, will soon be a thing of the past, with Companies racing to develop connectivity modules.
The demand for electric vehicles will also bolster the demand for ancillary industries such as engine components, electronics for propulsion systems, battery optimization, and torque transfer devices. According to Seth Goldstein, the demand for lithium, a crucial element of energy storage in transportation batteries, is likely to quadruple over the next decade.
A report by McKinsey estimates that by 2025, more than 350 EV models will be introduced into the market, with ranges of 200 miles. However, a lack of charging infrastructure could hamper the growth in the market. The report also highlights that besides price and driving range, lack of access to charging stations is the third most serious barrier to EVs. However, there has been a gradual decline in prices and improvement in driving range, and companies are making a concerted effort to provide the requisite charging infrastructure. Furthermore, the total energy demand for electric vehicles in China, the United States, and the European Union alone will reach 280 billion kilowatt-hours by 2030.
Image Source: Mckinsey
There has been an increasing interest in EVs owing to environmental concerns, which has prompted leading automobile makers such as BMW, Daimler, Ford, and Volkswagen to announce an investment plan for the deployment of 400 charging sites across Europe, in addition to investing in approximately $90 billion in electric vehicles, according to a report by Reuters.
According to the U.S Energy Information Administration, in 2019, renewable energy provided 11.5 quadrillion British thermal units (Btu) or 11.4% of total U.S. energy consumption, out of which the electric power sector contributed 56%, and 17 percent was from renewable energy sources.
The most significant advantage of renewable energy is its ability to reduce greenhouse gas emissions by lowering fossil fuel consumption, the most crucial cause of carbon dioxide emissions. The renewable energy sector has now come under a sharp focus owing to Joe Biden’s administration’s plan to fight climate change with greater emphasis on clean energy and a mission to reach net-zero emissions by 2050.
The government’s position on clean energy was made clear by its recommitting to the Paris Climate accord and its call for moving to clean energy by 2035. The new administration will invest close to $1.7 trillion over the next ten years to bid for a “Clean Energy revolution” to establish the US as the clean energy superpower and transform the energy sector by providing the economic impetus.
Threat
The Company will likely face increased competition with more companies jumping onto the electric vehicles bandwagon. The Electric Vehicles industry has seen an influx of players, from conventional internal-combustion-engine vehicles (ICEVs) vehicle manufacturers changing with the time and making a switch to Companies like Tesla that are revolutionizing the space with their forward-thinking and innovation. U.K based Arrival, Rivian, and Ford are some of its competitors eyeing the same niche market as Workhorse.
Key Takeaways
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Click here to please visit our detailed disclosure
References
https://www.press.canoo.com/press-release/walmart-purchases-canoo-electric-delivery-vehicles
https://www.canoo.com/nasa/nasa-selects-canoo-electric-vehicles-for-artemis
No Comments