Updated: Oct 11, 2022
We first broke the news about Zeeba's potential deal with Canoo back in late august, in fact, it was the first Canooers first article! Now that the two companies have publicly shared some of the terms with us, it's time to revisit.
Zeeba describes themselves as a national fleet leasing provider. Their services allow customers to "more effectively and efficiently conduct business operations" by renting their vehicles and fleet management tools from Zeeba. In addition to rentals, they also have a fleet acquisitions arm where they will buy and sell used fleet vehicles.
What we know:
Zeeba has signed an agreement to purchase 5,450 electric vehicles from Canoo. The first 3000 units of this order is actually a binding commitment for delivery through 2024. Zeeba will take delivery of both the passenger Lifestyle Van(LV) and the Cargo/Utility model Lifestyle Delivery Van(LDV).
Zeeba says they're going to be using the Canoo EVs to target clients for last mile delivery, ride hailing, delivery of food and other goods and services.
What we don't know:
The press release wasn't very heavy on the details, but honestly that seems par for the course for public companies announcing purchase orders that won't take place immediately.
While it's not surprising for Canoo to be tight lipped with finer details, it would have been nice to know how much the contract is to be valued at or how the vehicles will be split up between LV and LDV trim levels. It's doubtful they would be able to secure pricing as good as Walmart, so it's probably safe to say the 3000 units are probably no cheaper than $35k and represent $105M in revenue for Canoo through the end of 2024. Considering it's current market cap is roughly $400M, an order representing 25% of that seems significant. However, the number one question on everyone's mind right now is just how will Canoo actually produce and fulfill this order? As of yet, there hasn't been any light shed about the current roadmap Canoo intends to follow through on delivering to Walmart let alone any additional orders. Thankfully Canoo isn't ignorant of that fact and indicated they're going to update the public on the manufacturing roadmap.
"We have a large committed, growing order book, are finalizing our multi-year allocations for 2023 customer deliveries and will share our manufacturing plan with the broader market shortly" - Tony Aquila
Binding agreements such as this one will make Canoos manufacturing plan more impactful. We covered Canoo's pivoting GTM strategy before, but the main intended take away from that is it doesn't really matter WHO the new contract manufacturer is, what matters is that it happens at all. Canoo has enough demand for years worth of production capacity, but none of that matters without a feasible means of production, so we greatly look forward to Canoo sharing additional details and restoring retail investor confidence.
A new market for initial roll out:
Unless Canoo plans to limit Zeeba, whose main presence is in California, on who or where they can lease vehicles, it seems that California will be added to the list of roll out states for Canoos GTM strategy. Despite Canoo's current HQ being there, California hasn't been included as an area of service for the initial roll out. Prior to this only five states were on the list: TX, OK, AR, MO, KS with TN being added on later.
Even this late in the game as SOP approaches, we think it makes a lot of sense to include California. As mentioned above, Canoo already has a presence there - to help with service & maintenance issues. Also as you are probably aware of, the state is leading the push in the the electrification of mobility. The California Air Resources Board (CARB) recently approved the "Advanced Clean Cars II" rule that mandates by 2035 100% of new cars and light trucks sold in California will be zero-emission vehicles.
Zeebas intention of offering Canoo LVs to ride share contractors reminded us that back in May of 2021, CARB also adopted a regulation that required rideshare companies, such as Uber or Lyft, begin gearing up to electrify their California fleets starting in 2023. They will join other corporate fleets in needing to meet annual GHG and electrification targets. By 2030, 90% of their vehicle miles must be fully electric. Coincidentally or not, Uber and Lyft already have commitments that align with the same 2030 target.
The Lifestyle van is perfect for ridesharing, so much so that Canoo made reference to those targets in a past 10-k filing and expounded the benefits that the Lifestyle Van could bring ride sharing companies.
"With Uber and Lyft recently announcing their intention to have all vehicles offered through their platforms be electric by 2030, the need for EVs suited to ride-sharing applications is clear. An EV that can offer maximum space on a small footprint is well suited to meet the demand for more passenger space in combination with maneuverability in urban driving.
We expect that we will be very well positioned to take advantage of these additional B2B opportunities as well as others as they arise because our core platform provides unique flexibility as well as opportunity for customization for specific use cases faster and at lower cost. In addition, importantly, the vehicles required for many of these applications, particularly in ride-sharing, will benefit from the attributes already engineered into our Lifestyle Vehicle, because it:
is purpose-built for urban driving;
maximizes interior space to accommodate larger groups or cargo;
affords easy in/easy out access;
can be customized through the use of “wraps,” pegboard accessories and other features;
may facilitate flexible lease or subscription options, which includes ease of refurbishment and cleaning;
incorporates timeless design and a consistent “newness” factor;
is built to reduce ongoing repair and maintenance costs; and
provides enhanced vehicle durability and longevity."
EV-only ride share start ups Earth Rides and eCarra have also both expressed a strong desire to add Canoo to their fleets. As they both serve markets in Texas, we wouldn't be surprised to see them take delivery on some LVs in late 2023 or 2024.
Although funding is a concern and a low share price puts that funding into question, we believe Canoo will triumph over its current struggles and bridge the gap to production. Thanks to the IRA passing, billions of dollars are already being channeled back into American Manufacturing so we don't doubt that enough will find its way to Canoo.
The California market is massive and we're excited to see what other early partnerships transpire from its addition of being an early focus. But as we've said before, demand isn't an issue, the challenges ahead lie instead with ramping production without sacrificing quality.
Authors disclosures: I am long Canoo - I own common shares, warrants and call options.