The push for electric vehicles in the US is intensifying. Especially in California as the state just banned gas-burning cars by 2035. Tony Aquila, the CEO of Canoo, a public electric vehicle company, is confident it can compete with brands like Tesla. But there’s a catch – Canoo hasn’t generated any revenue yet.
Walmart signed a deal with Canoo in July to buy 4,500 all-electric delivery vehicles, starting with the Lifestyle Delivery Vehicle, with an option to buy up to 10,000 units. But the company is “hanging by a thread,” writes my colleague Jessica Matthews.
“In the chaos at Canoo, the cash-strapped electric vehicle company that just signed a major deal with Walmart,” is Mathews’ new report that gives the scoop on the inner workings of the Bentonville, Arkansas-based startup .
Canoo said in its Q2 2022 earnings report that the company has “over $1 billion” in sales. However, it reported a net loss of $164.4 million, down from $112.6 million in the second quarter last year.
On the Aug. 8 earnings call, Ramesh Murthy, interim CFO and chief accounting officer, talked about the “road to profitability.” Murthy said: “It’s becoming clearer to everyone that our philosophy on cash and access to capital is in line with what a technology-driven company would do. We’re landmark and focused on how we access capital in our path to profitability. By focusing on milestones and key events, we can deliver sustainable value to the company and all our stakeholders.”
Mathews interviewed Aquila in June and drove around in one of Canoo’s futuristic electric campers.
“Canoo’s vehicles were still going through testing programs and were not yet on the market,” he writes. “Production would not begin until at least late 2022 and the company had not started construction at its own production facilities. the van we were in was a prototype.)”
He continues, “Canoo had just recently signed an agreement with hedge fund Yorkville Advisors to sell up to $250 million worth of shares at a discount to their already depressed purchase price. The Securities and Exchange Commission was investigating the company over its SPAC merger in 2020, and the company was embroiled in three lawsuits, including two class-action lawsuits by retail investors in its stock. Indeed, right there in an SEC filing from March 31, Canoo itself had said it might not make it for another year.”
“Yet Aquila—the tattooed, 57-year-old private equity executive who had begun to take control of the company in 2020—looked me in the eye when I asked if Canoo had the funding it needed for the next year. . “I’m a capital time guy,” he assured me. Mathews also discovered that Walmart’s purchase of yet-to-be-produced electric vehicles isn’t the first financial boost Aquila has received from the Walmart family in his career.
Automakers are now being asked to steadily increase sales of zero-emission cars in California, the nation’s largest auto market. And because 17 other states routinely follow California’s auto emissions standards, last week’s vote by the California Air Resources Board could reach far beyond the state, requiring the auto industry to accelerate its transition to electric cars . Luck mentionted.
As the electric vehicle market continues to evolve, “Canoo is hardly the only EV startup that has taken investors and employees on a wild ride over the past two years,” Mathews writes. “Concern about climate change has attracted an unprecedented amount of investment capital to the space, but the logistical challenges of launching an automotive industry from scratch have not become any less daunting.”
But, “Bend the hood even an inch, though, and it’s clear that, even with the Walmart deal, the Canoo is faltering in the extreme,” Mathews writes. (You can read the entire article here.)
See you tomorrow.
This story was originally featured on Fortune.com