The tale of Electric Last Mile Systems (ELMS) brims with irony.
The startup’s Class 1 battery-powered delivery vans will be assembled in the plant where the hulking Hummer H2 SUV came off the line from 2003 to 2009.
Jim Taylor, the same executive who ran Hummer at General Motors (NYSE: GM), led talks to sell the brand to Sichuan Tengzhong Heavy Industrial Machinery as GM teetered on the edge of an eventual bankruptcy reorganization in 2009. The deal fell apart in February 2010 and GM mothballed the brand.
Now, GM is resurrecting Hummer as a high-end battery-powered SUV under the GMC truck brand. Taylor is importing tiny painted van bodies from China to electrify and finish in the former Hummer plant for ELMS.
More than 20 years ago, Taylor led purchasing for construction of the Hummer plant in Mishawaka, Indiana, located off the Interstate 80/90 toll road about 5 miles from South Bend.
He later was promoted to president of Cadillac before becoming Hummer CEO. When GM thought it had sold Hummer in June 2009, Taylor was ticketed to go with it. When the sale fell through, Hummer employees scrambled to find other jobs in the depths of the Great Recession.
Moving on
After leaving GM, Taylor joined Workhorse Group (NASDAQ: WKHS) predecessor AMP Electric Vehicles as CEO. He stayed for five years. Then he joined Chinese-owned electric luxury carmaker Karma Automotive as chief sales and marketing officer. Taylor moved to SERES Automotive, another Chinese-backed startup, as CEO in 2019.
He quickly saw that launching a Henrik Fisker-penned luxury electric SUV would cost far more than his new employer thought. SERES had purchased the Hummer plant in 2017 for $150 million and planned to build the SF model there. It also had recently built a new plant in China. Ownership agreed with Taylor’s suggestion to launch the SUV in China only.
“It’s suicide to think about launching simultaneously in two countries,” Taylor said in an interview with FreightWaves. “I gave them examples of GM trying to do the exact same vehicle in two continents at once. Even with all their resources, it’s very, very difficult.”
Pivot to trucks
Taylor then suggested pivoting to making a small battery-powered delivery van SERES was already selling in China for the U.S. equivalent of $15,000. They weigh less than 6,000 pounds and offer 170 cubic feet of cargo space.
Taylor didn’t want to import the entire van to the U.S. because of the optics.
So, ELMS is importing the painted bodies, accounting for about 50% of the bill of material. The term for ELMS’ approach is CKD, or completely knocked down. Historically, CKD operations target less-developed countries where advanced assembly plants are scarce.
ELMS gets its 42-kilowatt hour batteries from Chinese supplier CATL. But the inverter and the chassis skateboard design for the batteries will be sourced in the U.S.
“Hey, made in America. Made in Mishawaka. Half of it’s American,” he said. “Our engineers are here. The software guys. The homologation is all based in Auburn Hills [Michigan].
“You’ll be going into the FedExes, Walmarts, all these guys. I’d say there’s a low chance to sell them a Chinese truck,” Taylor said. “But after we’re finished, it should be looked at as just a few parts from China.”
Nikola Corp. (NASDAQ: NKLA) is importing kits of parts from Germany to assemble heavy-duty battery electric trucks in Arizona. Eventually, Nikola will produce the trucks in the U.S.
Don’t look for ELMS to do that.
“If we move all the way into vertical integration, we’re like everybody else,” Taylor said. “I’m not sure we can hang onto that price point.”
Eliminating range anxiety
As a purpose-built last-mile van, range anxiety — being stranded by a dead battery — should not be an issue. The vans are expected to travel 30 to 50 miles a day based on monitoring data.
“You can’t have range anxiety in a fleet knowing exactly how far they’re going every morning when they leave,” Taylor said. “Just by definition [Class 1 vehicles] don’t go very far.”
Like most commercial EVs, they can be recharged overnight when electricity is usually cheaper. ELMS is leaving the charging infrastructure for customers to figure out.
Making the business case
ELMS is spending comparatively little to launch its van compared to competitors in the Class 2 and Class 3 delivery space.
“Rivian’s becoming the poster child, smoking through $2 billion, $3 billion,” Taylor said. “If you think $200 million to $300 million for product engineering, ours is $80 million, That’s really just airbags, seat belts and adapting to [U.S. safety requirements].”
Tooling is already in place because SERES spent $20 million for the canceled SUV plans. Earlier post-Hummer occupants also left some usable equipment behind. “Coming off the existing platform is worth hundreds of millions,” Taylor said. “Supplier tooling alone would normally be a couple hundred million.”
All in, Taylor thinks ELMS can build two years’ worth of delivery vehicles for about $160 million. Its target is a 5% share of the delivery vehicle segment, which totals 500,000 a year.
ELMS has sold 30,000 of the Urban Delivery vans in China. It has 30,000 reservations in the U.S. with plans to produce 4,000 beginning in the third quarter. Startup Canoo projects it could build a Class 1 truck in 2023. United Kingdom startup Arrival is building microplants that also could make Class 1 vans.
“At this point, we know we have at least a year and a half where we have first mover advantage,” Taylor said.
Getting SPAC sponsorship
ELMS looked into several funding sources including private equity before agreeing to be sponsored by Forum Merger III Corp. (NASDAQ: FIII) in a reverse merger. Forum III is a blank check company created specifically to merge with a startup or other private company seeking to go public.
“We talked to the normal suspects,” Taylor said. “This SPAC thing is tough because it’s taking an IPO that might take two years and jamming it into three or four months.”
The trade-off of quickly getting money to scale the business — $379 million in the case of Forum III — versus waiting out a traditional IPO is worth it, he said. ELMS doesn’t need all the money for its business plan. It might partner or buy bodybuilding companies that could co-locate in the Mishawaka plant.
“That’s a pretty wide space of hundreds and hundreds of those guys,” Taylor said. “Most of that capital will be used for that because we start generating cash at a pretty high rate once we go over 50,000 trucks.”
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