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Canoo, Panasonic and State Incentives.

Updated: Oct 14, 2023

In June of 2021, Canoo announced it was

setting up a "Mega Microfactory" in Pryor, Oklahoma to be its main manufacturing plant with a yearly capacity of 150k units. At the same time, a partnership with VDL Nedcar, based in the Netherlands, was announced as the contract manufacturer to be a stop gap until the Pryor Factory was online, at which point VDL would be a means for a European expansion. Canoo was going to provide 2000+ jobs and Oklahoma was going to give Canoo $300+ million in tax breaks.

Fast forward a couple months to November and Canoo's Go To Market strategy had changed quite significantly while also inflating the amount of non-dilutive financing via tax incentives. They made a bunch of annoucements with (3) different press releases but the only items concerning this post are the incentives. So, the skinny of it: VDL was out, Bentonville was in, Pryor annual capacity went from 150k to 300k and the incentives went from $300M to $400M.

According to the press release, "in addition" to the $400M is an extra $50M from each state in vehicle orders. As reported by Frontier, Oklahoma has already signed it's PO with Canoo, even waiving a competitive bidding process that would normally be standard. That article implies that Oklahoma will be paying Canoo between $35M and $50M, simply because that is the listed variable in MSRP * 1000 vehicles. I think it's safer to assume that the entire package of vehicles will land on or near that $50M mark. This isn't to imply that Canoo will be over charging the state - I'm just assuming the vehicles will come with valuable fleet management software, and unique upfitting that will probably bring the average price per unit to $50k each and end up in line with Canoo's projected earnings.

Out of the promised $400M promised so far, only $15M is actually officially signed and slated for Canoo, via Gov. Stitt's "Quick Action Closing Fund" . There is $100M worth of land and site developments from MAIP being offered to Canoo, but the company hasn't finished negotiations with MAIP and signed a definitive agreement. This was originally supposed to have been done and signed by late 2021, then in the middle March of 2022, it was supposed to be just 30-60 days away form being finalized. (I'll update this later with links to back up those statements)

Originally I was confused as to what was taking so long for MAIP and Canoo to sign the agreement, but this was before I was fully clued into the full scope of what was happening. We can now look to Panasonic's "Project Ocean" to find out why it keeps getting delayed


PanaCanoo Gigafactory 1

First off, I would like to qualify that although I've been using the term Panacanoo Gigafactory 1 for the past 9 months, I don't have anything concrete to prove there is a relationship between Canoo & Panasonic beyond Panasonic supplying batteries. So for the record, it's all rather speculative. I've suspected Panasonic and Canoo had something else cooking since late 2021, but I was

off base a little on where Panasonic would end up - even tho it should have been obvious, I thought they would build in Arkansas.

Once it was leaked that "Project Ocean" was in fact Panasonic and they were looking at MAIP(Mid-America Industrial Park) as a location, I started calling it PanaCanoo Gigafactory 1. Not to suggest that they would have a the same arrangement as Panasonic does with Tesla in Nevada, but to signify that they would be more than just neighbors with a commerce agreement.

MAIP wanted to create a TIF inside Mayes County as part of negotiations with Panasonic - at the very outset, this TIF district was to include 2000 acres and the Canoo plant. Eventually this was pared down into smaller and smaller packages as County commissioners and MAIP worked on what they felt best suited the residents of Mayes County.

From here it's a bit of a convoluted mess so I'll try to sum it up - the commissioners ended up passing a $300M TIF district including only 588 acres. Of that $300M, only $100M would actually end up going back to Panasonic. A group of Facebook Karens didn't like the proposed economic benefits to the area, suggesting the TIF was corporate welfare, and challenged the process. They ended up getting enough signatures and forcing the TIF to a public vote this November.

While this TIF business was happening, Panasonic was also using as Oklahoma as leverage against Kansas to beat them up for a better incentives package. It seemed pretty obvious to me that no matter what, Panasonic is coming to MAIP due to their relationship with Canoo. So to sum up the question as to why MAIP and Canoo keep delaying the DA with each other: because Panasonic is a critical third party to the Plans. Until they stop playing games and publicly commit to Oklahoma, the full details on Canoo's incentive package won't come to light.

Thankfully, it seems Panasonic is gearing up to make that commitment. However, they might wait until after the November election for the TIF vote. They originally said they wouldn't come without the TIF - so if they committed to coming before then, Mayes County residents would have less incentive to vote for it. I will say that $100M isn't that big of a slice to scuttle a $4B project over, so anything is possible.

One other clue to Panacanoo Gigafactory 1 being real can be found diving into HB4455, which is the incentive package Oklahoma agreed to give Panasonic if they come to town. The bill included two different project scales, a larger "Company A" and a smaller "company B" - I got into that in more detail in this tweet thread from late April. I encourage you to read that and watch the video clips of the Oklahoma legislatures discussing it. To sum up what HB4455 does for Panasonic and Canoo - I'm going to quote this great article from the Tahlequah Daily Press.

It pays $613 million to a “mega project” and allocates $85 million to another project related to the same industry. It provides a 3.4% rebate of the investment over five years up to the balance of the fund once capital expenditures and jobs are created...Citing nondisclosure agreements, top lawmakers continue to refuse to name the company targeted by the legislation. However, other lawmakers confirmed to CNHI Oklahoma that the two companies are Panasonic and Canoo.

This $85M is, in my opinion, what Tony was referring to earlier this month during the Q&A portion of the ER when asked if there were any additional monies coming their way from government incentives.

To continue on the topic of Panacanoo Gigafactory 1 just a little further, I also think there is room for Panasonic and Canoo to have a joint venture together in developing battery technologies, possibly in conjunction with University of Arkansas at the Fayetteville R&D facility. But that is just speculation wrapped within a layer of more speculation.

So to recap the $500M promised between incentives & purchase orders:

  • $15M from Gov. Stitt QAF (signed DA)

  • $50M from OK State PO(signed DA)

  • $100M from MAIP (no signed contract)

  • $50M from AR state PO(no signed contract)

  • $85M from HB4455 (signed into law, but Panasonic must commit to building it's factory in Pryor)

This leaves a total of $200M in mystery incentives and doesn't even touch on the $1 Billion Opportunity Zone Fund...but that is a topic for another day.

Authors disclosures: I am long Canoo - I own common shares, warrants and call options.

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Aug 31, 2022

Canoo's current market cap is around $1B - funny they have half of that lined up just in between OK & AR. If a DOE loan comes in, not only will it secure that amount of $$ for the company as a loan to get building - but it also pretty much guarantees that Canoo can meet the requirements to access this $500M

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