CANOO – BUYING THE STORY OR THE COMPANY

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As an investor, do you want to own an electric vehicle manufacturer, or one that says they will produce them years down the road?

Because there are a lot of big EV stories hitting the market, and they all sound great.  Big projections of growth for years to come. Many are coming through US SPACs, and receiving big funding, and big publicity.

The problem? They are still years away from production.

Meanwhile I have a nascent EV story in our portfolio that has doubled over the last month. And they will have a vehicle in production, delivered to customers across North America, in months, not years. I expect them to start announcing orders with within weeks.

Add in the fact that Canadian Prime Minister Justin Trudeau has announced a $1.5 billion plan to electrify Canadian transit—that puts a hurricane of tailwind behind this company.

But even without that—after meeting management face-to-face (mask-to-mask), I’m convinced my EV stock has a “pull-product”—where demand is intense and their new EV product (from this trusted supplier with almost a decade of trust built up) doesn’t need a sales cycle—it just needs to be available.

It looks like the time to put up or shut up is here. Through the spring and summer, the market was chasing stories. But over the last few weeks that seems to have flipped.

Consider an EV company formed from a recent special purpose acquisition vehicle (SPAC) acquisition: Canoo. 

Canoo is being acquired by Hennessy Capital Acquisition Corp IV (HCAC – NASDAQ), a SPAC targeting the electric vehicle market.

HCAC and Canoo reached a deal in August. The combined company will have a $2.5 billion capitalization and $600 million of cash.

HCAC stock took two moonshots, one over $12 and one over $13, after announcing the deal. But investors have since cooled, and the stock has come all the way back to $10.

Admittedly, Canoo has some cool ideas.  While the electric-vehicle business is trying to revolutionize how automobiles are propelled, Canoo is taking that a step further – re-imagining the automobile all together.

Canoo’s vision of the future relies on two innovations. 

The first – Canoo is creating a modular car – one chassis fitting many cabins, called the “skateboard”.  

Canoo’s skateboard is a flatbed that includes all the guts. They brag that you could sit on a chair, connect a joystick and ride off on it.

Source: Canoo Investor Presentation

All Canoo’s vehicles use the same skateboard. Sports car, light truck, delivery van and SUV.

Canoo’s second innovation is to sell vehicles by subscription.

Sound crazy? Maybe not as much after you consider that a subscription is not far off a vehicle lease. Take away the down payment and fixed time component – its basically a subscription.

Source: Canoo Investor Presentation

In interviews, Ulrich Kranz, CEO of Canoo, has stressed that the subscription model is geared to millennials. No down payment and rent for the car is month to month. Canoo plans to start with 13 urban centers and go from there.

Canoo could be a big winner in the EV space. It is certainly unique. Its success is going to depend on A. execution and B. whether consumers take to the design and the subscription model.

The catch for investors – the evidence remains two years away – at least.

Canoo Production Starts In 2022

Canoo has three vehicles in its pipeline.  

Source: Canoo Investor Presentation

The first to hit the road will be their “lifestyle” vehicle. It was introduced as a prototype in September 2019. IT is anticipated to be available by mid-2022.

The lifestyle vehicle is geared to mid-market, a reasonably priced automobile but one with some bells and whistles.

The footprint of the lifestyle vehicle is the size of a Toyota Prius. Yet because of the flat-bed design, it seats 6 or 7 passengers.

This car is certainly unique. The rear seats look more like a living room than the back seat of a car.

Source: Clean-Technica

Canoo has allocated space for LiDARs, sensors and cameras, along with the electrical guts to make it work. The vehicles will be autonomous driving-ready.

You can see it in the design. The extra space, the couch-like seats. It feels like a cabin that would have no driver.

Source: Canoo Investor Presentation

Next will come a B2B vehicle, available by 2023. This will be followed by a sports vehicle, in 2025.

It sounds great, but again – years away. I’d rather take on an investment that can show me the product now.

Betting on EV Buses

Now take this for comparison:

The EV company I brought to subscribers is only weeks to months away from selling their new EV product – a midsize transit bus. 

This should be the perfect time to roll out an electric-bus. Cities are struggling with public transit amid the pandemic and looking for smaller footprint vehicles—which is what this company sells.

Buses are a natural fit for EVs. Fixed routes and overnight charging. While bus sales overall have been poor – a direct consequence of the pandemic – EV bus sales have been a bright spot. 

BlueBird announced in their Q2 that their electric powered school-bus sales were up more than 250% year-over-year. They have over 300 electric buses on the road since announcing their first bus delivery 2 years ago.

BlueBird plans to expand their electric bus capacity to 1,000 units.

NFI Group offers the widest choice of non-diesel buses: propulsion, zero-emission battery or fuel cell electric, electric trolley, hybrid electric, natural gas or clean diesel. NFI expects to build 400 all-electric buses next year, 50 of which will be fuel cells.

Justin Trudeau has been clear that the COVID recovery will be a green one. They are already planning rebates on zero-emission buses as well as direct purchases of fleets for municipalities. That’s a $1.5 billion program and a gift to my EV bus company and its shareholders!!

No, my pick is not going to revolutionize what a bus is like Canoo is trying to do, but that is okay too.

Innovation comes with risk. Canoo has a clever design, but it may also have some gotchas.

A conventional chassis has two elements that prevent it from being separated from the body of the car. 

Source: Canoo Investor Presentation

The first is the steering assembly – tying driver steering and the wheel axles. The second are the struts.

Canoo broke both. They have the first ever steer-by-wire platform. And they use a leaf-spring suspension. 

The steer-by-wire platform is untested.  Meanwhile the leaf-spring suspension was used on cars in the 50s and 60s. They were intentionally phased out of passenger vehicles. Their disadvantage was comfort – they didn’t provide as smooth a ride as a modern independent suspension.

Conclusion

Canoo projects some big numbers if you look way out. By 2025 they forecast 75,000 new subscriptions a year and another 20,000 of its last-mile vehicles which will be sold more typically.

But they have yet to produce more than a prototype so far.

My little EV bus manufacturer, on the other hand, has been in the bus business for years. Not only do they have revenue, they have EBITDA!!! This is what they do. They know buses.

Now they are going to sell their new EV bus—to the same customers they have sold buses to in the past. Customers they have a track record with, that trust their product.

Oh, and did I mention they make money? While Canoo burned through $42 million in the first half of the year.

So do you want a story or a real, producing company?

I know which one I want.

To get the name and trading symbol for my #1 EV stock—CLICK HERE