U.K.-based Arrival is the latest electric vehicle maker to reorganize its business, slashing production targets and delaying deliveries of vehicles in the process.
The company released second-quarter earnings on Thursday, posting a $90 million loss and saying it expects to deliver just 20 vehicles this year, down from an anticipated 400-600 units. Last week, the company said it would be reorganizing amid a challenging economic environment.
“Arrival has proposed plans that include a realignment of the organization that would enable it to deliver business priorities until late 2023 primarily utilizing the $500M cash on hand. Arrival’s proposal includes a targeted 30% reduction in spend across the organization and anticipates that it could potentially impact up to 30% of employees globally,” the company said in a statement.
At the time, it said it would push back plans to build electric vans in Charlotte, North Carolina, until 2023. On the Thursday conference call with investors, CEO Denis Sverdlov said the company would “start the van deliveries in Q4 to UPS.”
Arrival, founded in 2015, is taking a unique microfactory approach to scaling production. Each factory would be capable of producing 10,000 units a year. The company announced in 2021 its second microfactory would be built in Charlotte, joining one in Bicester, U.K. The Charlotte facility will build vans to help fulfill a 10,000-unit order from United Parcel Service (NYSE: UPS). Many of the vehicles produced at the Charlotte microfactory are expected to enter UPS’ North American and European fleets.
In May 2021, Arrival (NASDAQ: ARVL) and Uber (NYSE: UBER) announced an agreement that would see Arrival design and build electric cars specifically for ride-sharing applications.
Sverdlov said van production in Europe is on track to begin in Q3, but that is a delay from what the company had said in the Q1 earnings call. The company is also going with just one microfactory in Bicester, U.K., at the moment and one product line, the van. Arrival was also planning to build buses. It is unclear where the long-term status of those vehicles stands.
“We have also seen in the past quarter the world continued to face a challenging economic environment with both new players and traditional OEMs facing supply chain issues and ongoing pandemic, geopolitical tensions and rising costs,” Sverdlov said. “We must address these challenges now as we approach start of production and have made the strategic decision to focus on creating the business in a downscaled manner through at least 2023.”
Avinash Rugoobur, president of Arrival, told analysts there is an Arrival bus operating on public roads in Europe, and the company expects to have a van start trials in London shortly. First deliveries for UPS will take place before the end of the year.
“Moving start of production in Charlotte not only reduces our near-term cash spend, it also allows us to take better advantage of the lessons learned at Bicester to further reduce both capital and operational spending in the Charlotte microfactory, where we expect to produce both our L and XL platforms,” Rugoobur said. “We see strong demand for both platforms in the North American market.”
Rugoobur said Arrival has nonbinding orders for 149,000 units, worth $6 billion.
Sverdlov said the downgrade in the production output comes as a result of the need to “preserve cash” and supply chain issues that make it more difficult to receive parts. He added that “materially as a company, there is no big difference between, I would say, like 400 vehicles or like 20 because the number is small anyway.”
Last month, EV startup Rivian (NASDAQ: RIVN) laid off 6% of its workforce. Canoo (NASDAQ: GOEV) also cut 6% of its workforce in July as EV makers struggle to ramp up production amid rising costs and an uncertain economic environment.
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