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Panasonic TIF ballot bombs...What's Next?

Updated: Oct 14, 2023



TIF Tuesday was terrible for TIF fans. The voters of Mayes County returned a very resounding NO with 64% torpedoing PROP 2 and dashing the hope for those in favor economic expansion and bringing home the biggest commercial deal Oklahoma has ever seen. This isn't the end of Canooers coverage on MAIP and Mayes County - but it does appear to be the end of direct involvement with Panasonic and them.


So what happens now, is Panacanoo dead? In our opinion, no!


Despite a name to the contrary - "Panacanoo Gigafactory 1" wasn't about a physical joined space - it just represents the partnership between the two companies and possible joint ventures into developing future technology together in a similar fashion as Panasonic had with Tesla at the Nevada Gigafactory they co-habited.


Here's why we think Panasonic will still come to Oklahoma. They spent a lot of time looking across the nation already for where they wanted to land and they want Oklahoma but the initial narrative spun was they couldn't decide between Oklahoma and Kansas and first one to bring the money might win it. Perhaps this was just the politians who were doing the spinning in order to get their legislatures whipped into a frenzy to pass the funding ASAP. We know Panasonic had wanted to build out both locations, as to why it has to remain a big secret even after it's all public knowledge, that remains a head scratcher. Perhaps the TIF would have passed had they allowed MAIP to publicly state they still intended to show up.


With the LEAD Act (HB4455) already passed, they have somewhere around $615M already approved in state incentives - it takes a lot time and effort to make that happen, especially in an election year with accusations of reckless spending against the governor lining up. MAIP was perhaps the best site within Oklahoma, but it wasn't the only one.


A few months ago we covered a special meeting MAIP held at the Tulsa Regional Chamber Offices. In that article, we suggested it was either about making a Plan B for Panasonic, or about moving up Canoo's Manufacturing Plan for Oklahoma - In all likelihood it was about both. Where could they end up? Well in the area there is Inola Port and Fair Oaks Ranch while Port of Catoosa is also notably on Cherokee land. Our current best guess on "plan b" is Fair Oaks Ranch, who we noted in the other article just had $50M in ARPA funds approved for a wastewater infrastructure and is also looking to establish a joint development agreement with the City of Tulsa and pair it with a TIF of their own. If this is where Panasonic is headed, we hope they can avoid the TIF drama this time.


One more hint at Panasonic still coming to Oklahoma is from Canoo themselves. For some context, when we reviewed the OK state incentives and first mentioned Panacanoo, we had assumed the $85M in rebates that would be paid to Canoo via HB 4455 was included in the $400M lump sum for government incentives mentioned before. It turns out this is NOT the case! Take note of these two quotes taken from the Aug 8th, Q2 FY22 ER.

  1. Tony iterates the $400M in state incentives. "As we mentioned in previous calls, we have also secured more than $400 million in non-dilutive incentives from the States of Oklahoma and Arkansas."

  2. Tony mentions $85M specifically being in question "there is the opportunity for us to receive an additional, I think, it’s up to $85 million, but we are not prepared to speak to that at this time"

As we already said, we wrongly assumed the $85M was contained within the $400M since we have never gotten full details on how that $400M comes together. Now as it turns out - the lump sum is up to $485M per Tony's remarks from this past ER: "the significant economic impact they can bring over many years, Oklahoma, Arkansas, and local partners have offered us now rising to $485 million in total incentives."


It IS possible we're wrong and the $85M lining up with HB 4455 funding is merely a coincidence. Maybe the OKC plant or Battery Module manufacturing facilities opened up further incentives that happen to end up being worth the same amount. For now, we're going with the assumption that Panasonic is coming still to Oklahoma and its opened up that $85M for Canoo.


 


Lets look at some things Canoo has said about their relationship with Panasonic:


  • We designed our battery systems to account for future advancements in cell technology and today we are excited to announce the selection of Panasonic, a global technology company and a leader in the cylindrical lithium-ion battery industry, as our partner." - Tony Aquila, Canoo CEO 10/21

  • "I would like to personally thank Allan Swan, the President of PENA, for his leadership and the entire Panasonic team for their support." - Tony Aquila, Canoo CEO 11/2021

  • "195 Watt hrs per kg is specific energy, also known as gravimetric energy density. This is “all-in” at pack level, including pdu and mechanical structure. This is a production design. We are building gamma level properties now, for production in late 2022. That’s why Panasonic selected us." - Peter Savagian, Canoo CTO(at the time) 11/2021

  • "As you know, we also selected a proven battery partner in Panasonic and are honored to be selected as their second partner in North America besides Tesla. " - Tony Aquila, Canoo CEO, 11/22


It's pretty clear from those comments that Canoo considers Panasonic partners, not just in terms of a vendor/buyer relationship but something deeper, in our opinion. Tony's comments quoted there from earlier this week also signifies he think Panasonic views Canoo as a partner as well.


Slide from Panasonic IR day 2022

Panasonic stated this past summer at the IR day presentation that they intend to increase production capacity in NA to meet the robust demand. The more US based factories the merrier, especially in light of the IRA passing.

Canoo Battery Module being constructed

Panasonic has said the Kansas factory they're building is focusing on 2170 cells. Given their 2-prong strategy of ramping production of 2170 cells while also getting 4680 cells to strategic partners, it seems safe to assume the focus of the Oklahoma plant will be for the production of 4680 battery cells, mainly for Tesla of course, but also possibly for Canoo! Tony said their battery systems account for advances in cell technology and Peter Savagian, CTO for Canoo at the time, was quoted as saying "We start with 2170s. However, the structural battery module concept works with 4680s when we are ready to change."

Panasonic is a big deal, they have sold over ten billion cells of cylindrical batteries equivalent to over 1.7 million EVs and are No. 1 in market share for North America. No critical problems. Zero recalls. The fact that they would align with Canoo, an unproven startup, speaks volumes to the skill, design, and technology that Canoo must be bringing to the table.





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



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