Electric vehicle startups finding much support with SPACs the preferred model

Another sign that Covid-19 has taken a turn — at least on the economic level — is that electric vehicle startups are gaining traction again. Companies that have been flying under the radar for long periods have suddenly found generous deals from investors.

The Lucid Air all-electric sedan had been getting most of the attention for this startup.

But not all the news is good, and we won’t see any of these new EVs come to market this year. Here are a few interesting developments………

It’s all about SPACs
Special purpose acquisition companies (SPACs) have been growing at an unprecedented pace this year, with investors and private company owners seeing the business model as a win-win. EV startups are among a growing number of automotive sectors gaining SPAC backers.

Crunchbase News, which tracks Silicon Valley and tech startups, just documented these 2021 deals and found that big-name investment and venture capital firms have gotten into it this year for the first time. SPAC may not get as much respect as initial public offerings, but it has gained quite a bit of credibility and support. The publication’s list includes electric busmaker Proterra; charger netwtwork EVGo; fuel-cell powered commercial truck maker Hyzon Motors; EV startup Lucid Motors; online used car marketplace Cazoo; electric scooter maker Bird; and DC faster charger company Tritium.

Autonomous vehicle companies and automotive suppliers are also reaping the rewards of going public by merging with SPACs, which are publicly listed investment companies. The latest one was Lucid Group, the company formed after Lucid Motors’ merger with Churchill Capital Corp IV (CCIV) and which is now a publicly listed company. Lucid has been best known for its all-electric Air sedan.

Lucid Group launched on Nasdaq on July 26, which the company said brought in $4.5 billion in capital. Class A common stock and public warrants are now listed under the new ticker symbols “LCID” and “LCIDW.” The capital will allow it to add 2.7 million square feet of additional space at the company’s greenfield factory in Arizona; some of that will go to adding a separate line for the Project Gravity electric SUV. Shares of Lucid Group climbed nearly 10 percent in their first day of trading on Monday, hovering around $26.50, while ending the week at $24.25.

The SPAC deal had been announced in February as the fog started lifting from the pandemic. Investors have been enthusiastic about these types of deals, allowing businesses to go through public combinations with shell companies and avoid traditional IPOs. Lucid had already invested $700 million in the greenfield plant, and had looked forward to bringing in more outside investments funds. In 2019, the California startup gave up majority ownership to Saudi Arabia’s sovereign wealth fund in exchange for a $1.3 billion investment.

Canoo, a startup with a plan to roll out an electric minivan in 2022, went public last December through a reverse merger with an SPAC. In June the company said it planned to build an assembly plant in Oklahoma that would open in 2023. Canoo is known for its “skateboard”, or a low-rise platform that bundles batteries and electric motors with chassis components such as as steering, brakes and wheels, on which a variety of vehicle body types can be built.

Last October, Fisker went public in an SPAC reverse merger with Spartan Energy Acquisition to net the company more than $1 billion. Outsourcing to other companies like Magna and Foxconn to do the engineering, and being less invested in assets, could help the company reach growth and profits. The Fisker Ocean electric SUV will start rolling off the assembly line at Magna’s Graz facility in Austria in November of next year.

Faraday Future had a revival from what looked like a near-death experience not that long ago. That was thanks to a SPAC deal with Property Solutions Acquisition Corp. that is providing the automaker with $1 billion. The company had gone through upheaval — abandoning a plan for a $1 billion factory in Nevada; but it has yet to build its first vehicle. Another difficulty: Its founder and CEO, Chinese billionaire Jia Yueting, filed for bankruptcy in 2019.

The company received much attention for showing off its alluring electric car, the FF91, with voluminous interior room, gigantic display screens and Tesla-competitive acceleration. But the audience will be very limited once the vehicle roll out, with pricing going from $120,000 to $200,000.

UK-based Arrival makes electric buses and vans using micro-manufacturing – an asset-light strategy. It recently went public via a SPAC merger, and partnerships have helped the startup move forward, Last year, it made an agreement with UPS to roll out an initial order of 10,000 electric delivery vehicles through 2024. This year, Arrival partnered with Uber to create a purpose-built EV for ridesharing, and more recently took an order of 3,000 EVs from LeasePlan, a major fleet management company.

It didn’t go well for Nikola
Nikola Corp. has tried out SPACs as an alternative method to finding the backing that it needed, but that took an ugly turn for the worst. Its former chief was indicted last week on three counts of criminal fraud over false claims he made about the company.

Nikola was able build support and interest by rolling out a number of zero-emission fuel cell electric concept trucks from 2016 to 2020. Trevor Milton, the founder and former CEO of Nikola, had been an articulate champion of the product. Milton had also become a billionaire after taking the vehicle maker public through an SPAC deal. The stock price had skyrocketed as the CEO made several claims about the company’s progress toward bringing its electric and fuel cell trucks to market.

Trouble began brewing last year when a report from Hindenburg Research made several allegations exposing deception by Nikola and Milton. The report had included several claims corroborated in previous reports from Electrek and Bloomberg. The company did respond to those claims, but its response failed to address and rebut these allegations.

The U.S. Attorney’s Office in Manhattan charged him on July 29 with two counts of securities fraud and one count of wire fraud. The former CEO pled not guilty to the charges later that day and was freed on $100 million bail. The US Securities and Exchange Commission also filed a civil suit against him for securities fraud.

In a statement, Nikola said that the indictment was against Milton and not the fuel cell electric truck manufacturing company. The company also noted that he had not been involved in the business since last year. The company had hoped to restore confidence and enthusiasm in its business model well beyond Milton, living up to its ambitious claims. One of those had been its goal to build 700 hydrogen fueling stations across North America by 2028. The hydrogen would be produced on site at each location. But now the very existence and future of Nikola Motors is in question.

What does chip shortage mean for electric vehicles?
The global auto industry has been particularly vulnerable to a shortage in chips, or semiconductor devices, that are behind the increasingly complex electrical and digital devices used in new vehicles. That comes primarily from entertainment systems, navigation systems, and sensors.

The pandemic increased demand for personal electronics, especially cell phones and laptops, that also require chips — throwing off the supply chain where production couldn’t keep pace with demand. Experts say that the chip shortage will greatly affect EV production, which puts startups in another sensitive situation.

This issue came up during Tesla’s second quarter earnings call. CEO Elon Musk said that the company has been able to switch to types of chips that are readily available, but that the chip shortage was limiting the company’s output.

Market analysts expect that the chip shortage will begin to ease in the third or fourth quarter of this year. However, it could take much of next year for these new chips to make their way through the supply chains to new vehicles being produced.

Three other EV startups to watch
Rivian: The electric truck maker startup has been been doing very in finding financial backers and corporate contracts, with Amazon being the most noticed. Ford’s support has been helping, too. There may be some type of IPO coming up soon. Rivian has been in talks with government officials about building a factory in the UK, near Bristol. That may involve a large state-support package. A delivery van version of its R1T electric truck has been delayed from June to the second half of this year to arrive with customers.
Lordstown Motors: This Ohio-based startup has been capturing interest in its Endurance L-1500 with in-wheel motors that can delver 250 miles of range and 600 horsepower. That interest is more tied to commercial customers than consumers. It will have a starting price of $52,500. Production is expected to start in September for initially reach 1,000 units. The company launched its own SPAC in October 2020 on Nasdaq under the ticker symbol RIDE. The company has been hurt by negative reports, and by conerns that having bought General Motor’s former massive (6 million square foot) Lordstown, Ohio, assembly plant was not a good idea.
Workhorse, as reported here recently, has been spending a lot of time in the delivery drone business. Its electric truck story fell out of grace recently by losing the U.S. Postal Service deal on the agency acquiring its battery electric vehicle delivery trucks. That’s meant a 70 percent drop in share prices from its all-time highs. Its product is still an unknown risk — electric trucks designed with hub motors, which offers potential benefits to fleets but has gone largely unproven so far.

And in other news…………..

Speaking of SPACs, they’re not always going to succeed: “Investors are perceiving EV charging businesses as highly promising investment_targets based on their long-term revenue projections, however the relevance of strategic investments in this area cannot be underestimated as has been displayed by the performance of recent SPACs.”

That comes from Charles River Associates new report, Investment in EV Charging Business. Eager buyers coming into the charging and e-mobility are making it tougher for startups and established suppliers to stay focused on the tasks at hand in the competitive landscape. But the opportunities are there.

Lyft’s role in autonomous vehicles: This Automotive News podcast features Jody Kelman, head of Lyft’s autonomous ride division, explores the suprisiding moves made by the ride-sharing giant that looked like it would be completely stepping out of the autonomous shared ride business. As podcast interviews tend to go, it offers a more interesting and personalized look at the issues. Kelman talks about the company’s new deal with Ford and Argo AI, offers insights gathered from driving data, and tells the story of her first ride in an autonomous vehicle.

Hydrogen coming to India? The use of hydrogen power for vehicle transport is an “interesting alternative” for India, especially as it would reduce dependence on lithium imports, the chairman of India’s top-selling automaker Maruti Suzuki said on Monday. R.C. Bhargava discussed the challenges with shareholders in the company’s annual report meeting as the company looks to meet stringent emissions targets; and as demand for lithium used in batteries soars worldwide. India would be following behind three other neighbors in the Asia Pacific region — Japan, South Korea, and China — which for years have been committed to bringing in more fuel cell vehicles and charging stations.

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