Lordstown Motors cuts production forecast for its electric pickup – TechCrunch
Rich in cash from Lordstown Motors PSPC’s dreams turned out to be nothing more than wishes. The automaker on Monday reported disappointing first quarter earnings which was a buildup of red ink stained negativity.
Weak spots include higher than expected planned spending, a need to raise more capital, and lower than expected production of its Endurance vehicle this year – from around 2,200 vehicles to just 1,000. In short, the company is expected to consume more. money than expected and is further from the mass production of its first vehicle than promised.
The value of the company, which went public through a SPAC last year, has fallen sharply from its post-combination highs. Today, its shares are down a further 7% after the market closes, thanks to its Q1 2021 report.
Investors were not thrilled with the company that presented a prototype of Endurance 11 months ago, the all-electric pickup truck it has bet its future on.
Lordstown Motors is an offshoot of CEO Steve Burns’ other company, Workhorse Group, a battery and electric transportation technology company that is also a publicly traded company. Workhorse is a small company founded in 1998 that has experienced financial difficulties at various times. Its subsidiary, Lordstown Motors, has previously announced that it is planning 20,000 electric trucks per year, starting in the second half of 2021, at GM’s former assembly plant in Lordstown, Ohio. Lordstown Motors acquired the 6.2 million square foot plant from GM in November.
Production woes, capital worries
Lordstown reported a net loss of $ 125 million on zero income, as well as capital expenditures of $ 53 million in the first quarter. And yet Lordstown had little to show for its outsized spending.
The company said in a statement that it would still start production of its Endurance electric pickup this year, but that its production “will be at best 50% of our previous expectations.” This fact, in addition to its huge cash withdrawal, was hardly catnip for investors.
“Our research indicates very robust demand for our vehicles,” Burns told investors on a call Monday. “However, capital can limit our ability to manufacture as many vehicles as we want, and as such, we are constantly assessing our capital needs and the different types of capital we have, including strategic capital.”
The EV company plans to end 2021 with just $ 50-75 million in cash, despite its recent PSPC merger which has helped capitalize its operations. Lordstown ended 2020 with $ 630 million in cash; it ended the first quarter of 2021 with $ 587 million. The company expects “capital expenditures of between $ 250 [million] and $ 275 million ”, in addition to its regular consumption of cash from operating expenses.
Burns said the company is in talks with an anonymous financial entity for asset-backed financing.
“We have no debt and we have a lot of assets, and we buy a lot of coins. So there are people who want to finance this, ”he said. Lordstown is also still seeking a loan for the manufacture of advanced technology vehicles from the US Department of Energy. Executives said the DOE carried out multiple due diligence rounds but declined to comment on the timeline, although Burns has repeatedly stated that Tesla would not exist if he had not secured an ATVM loan in January 2010. .
For post-merger PSPC companies, Lordstown’s poor results and bearish trading further indicate that the boom in the use of blank check agreements to bring EV and other auto-focused companies to the stock exchange was maybe premature.
Lordstown announced its PSPC merger in September 2020 with a market value of $ 1.6 billion. Its shares climbed to $ 31.80 each at their 52-week highs. Today, they’re worth $ 8.77.
Burns praised the company’s purported competitive advantages, including its hub motor architecture and physical simplicity, which he said would result in a lower cost of ownership. But the company has fierce competition from new electric vehicle entrants Rivian and Tesla (should the Cybertruck ever reach production) and mainstream automakers like Ford, which has released the electric model of its F-150 model truck. earlier this month with a price below $ 40,000.
But Burns reiterated her feeling the company was on par with its competition and wanted to be “ready to jump” in response to demand for vehicles. The CEO also said he’s confident the truck will hit the 250-mile target range, although that’s less than the Rivian R1T and Ford F-150 Lightning.
Lordstown also gave a brief update on pre-orders after announcing in January that it was hitting the 100,000 pre-orders milestone. Burns said about 30,000 of them had been converted to what he calls “vehicle purchase agreements,” but he disputed the exact number of those customers who paid anything, saying only that “a lot of these” deals included some sort of down payment.
The company has also started work on its second vehicle, an electric van, with a prototype slated for later this summer.
When it comes to Lordstown’s performance in the first quarter, we see a pre-revenue company in the throes of testing and scaling production for an incredibly complex product. Which is a costly undertaking.
Here is the graph:
The company’s selling and administrative costs are higher than before, compared to its booming research and development expenses. For investors holding Lordstown shares in the hope that its early construction will lead to mass production that is now more advanced into the future, it’s a hard-to-digest income statement.
In the first quarter of 2021, the company spent approximately $ 91,000 on research and development costs. “The higher than expected R&D spending is largely due to the higher parts costs of a constrained supply chain, collocations and which impacted our beta costs, shipping costs. higher included expedited shipping and greater use of temporary external engineering, ”Lordstown CFO said Julio Rodriguez.
Company executives also briefly addressed accusations by short seller Hindenburg Research, which claimed the automaker was faking pre-orders of its vehicles. Hindenburg said that “extensive research reveals that the company’s orders appear largely fictitious and used as an accessory to raise capital and confer legitimacy.”
Burns told investors the company has set up a special independent committee to investigate the report’s allegations. This is in addition to a separate investigation by the US Securities and Exchange Commission, which the company is cooperating with, he said.
Following Lordstown’s results, however, Tesla and Nikola’s shares were largely flat.