Q2 2021 Arcimoto Inc Earnings Call

<unk> investor updates at that link.

Before we begin I want to call your attention to our safe Harbor disclaimer regarding forward looking statements. This note identifies risk factors that may cause our actual results to differ materially from the content of our forward looking statements for the reasons that we cite in our Form 10-Q and other SEC filings.

Let's dive in.

At arc and Laura we built light electric ultra efficient rides that are outrageously fun to drive for a reason our vision with Citi that doesn't suck anymore. Today's city is dominated by the car we pave over nearly half our urban land for these giant multi ton extractive machines that we mostly drive.

Alone or with just one other person and we've parked rusting for 95% of their life.

We believe that by right sizing electrifying and better utilizing our ride we can reclaim our space clean our air and make our cities much more livable for everyone. We built a new human scale vehicle platform and our family of products style for a wide range of everyday trips the fun utility vehicle.

For daily driving rentals, and rideshare, the deliberate or for last mile delivery of essential food and goods. The rapid responder for emergency services and security the flatbed for general fleet utility and the roadster a fund machine that drives like nothing else on the road every Arca Moto is pure electric range for every.

Driving have Rockstar parking as a standard feature and accelerate from zero to fund instantly our experienced model as rental first with operations open and multiple destination markets and more on the way to give potential adopters of patients the right I've been driving it everywhere.

Like a 16 year old I don't even care, where I go or why I go there I go out and get in and I just drive around.

Awesome Awesome machine Wrybill acquired Scott plenty of power all the power you need.

This call everybody wants that went into it and it hasn't been driven.

The reality is when you get to here and there.

Then you just get the feeling quite a solid that I'd also like to give a big shout out to the Arca Moto G E.

Workmanship and design.

On the full future Arca mono vision as driverless technology to make shared rides much more convenient imagine a city, where your personal transportation is available at the touch of a button on your phone.

Uh huh.

Enjoy the experience of driving depth and when you reach your destination.

You just pop out in New York and Moto was available for its next driver.

We are in production now every orca Moto is built here in the App, where we transform raw material through cutting forming welding machining and final assembly all under one roof.

To take the venture to scale, we've purchased a new much larger facility and team who is sandy Munro and associates with the goal of kicking off mass production late next year.

We acquired totally motor horse developers in the trio accessories that can turn two wheeled motorcycles into amazing tilting three wheelers together, we're building a new ultra light micro mobility solutions for the rapidly growing global electric bike and scooter marketplace with our overarching focus on scale this year or we plan to do.

Demonstrates the full breadth of Oracle mobile solutions for sustainable mobility, and expand our market presence as we prepare for the next decade of debentures growth.

Arc <unk> is a public company, we've been power and since our inception by a community of stakeholders with whom we share our mission to catalyze sustainable transportation.

Hope you join us.

[music].

Okay.

To set the frame.

The IPCC just issued a code red for humanity.

And we're in the middle of a global pandemic more infectious and harmful variance of COVID-19 are circling the globe.

Every organization, we interact with all the people are under significant stress is the fragility of the global supply chain has been laid bare and as our patterns of behavior are showing an ever more clear perilous toll on our home.

At the end of the day sustainability as a social networking exercise the right sizing of our relationship with our planet is going to take all of us working together to accomplish.

We're heartened that leaders around the globe are advancing targets for carbon reduction, including the Biden administration, our Oregon congressional delegation and state and local leaders around the country.

More specifically much of what I'm going to talk about today in the context of archon mode is rapidly accelerating pace of innovation towards its mission is reflective of a shared commitment to maintain a livable planet.

But first the numbers the SEC.

Second quarter wasn't all roses as Ive cautioned in several prior updates and as anyone who is following the automotive industry already knows we're subject to a topsy turvy supply chain in an emerging field.

Two prominent examples during Q2, one of our critical supply components had both production and transportation setbacks that would've resulted in an extended production shut down starting mid August on our earlier plan passed in another key components update exhibited a software error that prompted a delivery pause where several.

<unk> is a multi organization tiger team dissected root cause and solutions. Consequently, we adjusted our build rates and have revised our planned mainline target a production output to 425 F&B platform vehicles in 2021.

Next at our planned marketing efforts I will discuss shortly this will impact total planned customer deliveries in 2021 as well.

That said by the financial metrics that we see is most important to the achievement of Arca modest mission Q2 was far and away the Companys best quarter to date, our balance sheet is the strongest in the Companys 14 year history, we continue to maintain a disciplined approach to resource expenditure.

And we've made substantial forward progress on critical fronts for the company's growth in.

In Q2, we submitted a first draft ups and are presently we're planning our application to the department of energy or alone to fund the substantial portion of our planned expenditures for next stage production.

And further the ATM facility, we put in place this year in partnership with Canaccord Genuity allows us to continue to fortify our position at current market prices and times. We believe are in the best interest of our stakeholders.

Contemporaneously as our balance sheet has strengthened we have noticed a meaningful rise in the number of market. That's against the company you can refer back to our last two webinars. If you want more color on some of the knock on ecosystem effects of such activities.

But to provide some perspective on relative size at the time of the last NASDAQ reporting shorts holders of our stock collectively had short positions that totaled almost double the amount of funding. The company is presently contemplating requesting in its next ATM loan application revision.

We go on.

We have three broad top level goals for 2021.

First we laid out one year ago. During 2000, Twenty's Q2 report to get to mass production in a new facility starting by the end of next year with a targeted targeted capacity once at full output of 50000 vehicles per year that provides further a pattern for yet higher scale replication SEC.

<unk> continue to build the market for <unk> products to support that level of production and ultimately way beyond and finally showcase the full presently contemplated range of automotive solutions for sustainable mobility.

Go into the progress to date on all three fronts.

The push to volume production is our most important overarching objective Barr Nunn, we believe achieving scale will allow us to reduce vehicle costs to the point, where the <unk> is affordable to almost everyone, while providing the positive cash flows necessary to sustain the business long term.

And I am pleased to report that in the second quarter through presence, we've made significant headway towards this primary goal.

On the purchase of a new facility more than 200000 square feet under roof on 10 acres of land, we landed our new plastics thermal forming sell in new facility and are aiming to have it operational before the end of this year.

We've completed the first phase of construction planning and that building will commence when the prior owner completes move out targeted at the end of this month.

With our partners at Munro and associates, we've completed architectural down selection of all major vehicle subsystems, essentially the materials and manufacturing method choice for the parts of the vehicle for volume and Engineering and Assembly planning are now moving ahead full steam.

And as I mentioned earlier in Q2, we submitted our first draft U S Department of energy for a vehicle manufacturing loan and are now in regular conversation with their team expecting to submit a refined drafts imminently that takes into account their feedback and requirements as well as our ongoing engineering refinement efforts in summary on <unk> significant progress.

Yes, the mountain of work ahead.

On the marketing front, one thing is clear the more people get a chance to drive in our kimono vehicle and experienced they're one of a kind electric performance the more our market growth.

In addition to test drive and media events across the West Coast. We've also held large scale test drive large scale test drive event at the Portland International Raceway in July and continue to receive positive product reviews from top tier <unk>, including a review on Forbes Dot Com last week, which stated the <unk> made more people smile than any other via.

Nicole I've ever reviewed.

We've also grown our rental operations in key markets opening our first two company owned stores and Eugene in San Diego, We will also be delivering additional rental vehicles to go car tours in both San Francisco and San Diego.

We continue customer deliveries in Oregon, Washington, Florida in our home state of Oregon, and are preparing to open sales and rental in Hawaii, Arizona, and Nevada, where we expect to begin taking reservations from our preorder customers in the coming months.

We've recently relaunched <unk> configured or tool on our website in order to further streamline the ordering process. The first of several major planned upgrades to the initial user experience for prospective customers.

We are actively working with both city and state officials with the goal to electrified government fleets the city of Encinitas and California is testing arc model vehicles for use by Anthony This lifeguards and infrastructure and sustainability departments, continuing continuing mayor Catherine Blake Spears efforts to reduce carbon pollution and advance sustainable transportation.

In Encinitas. This week, we will begin our statewide pilot program in the state of Tennessee, introducing <unk> in Memphis, Knoxville, Chattanooga in Nashville, with test drive events. This month.

In addition to retail sales and rentals, we believe a key path for our kimono vehicles is and shared mobility and are engaged with multiple potential partners to begin rolling out vehicles share programs as the population in cities continues to grow and as vehicle ownership in urban areas to clients the need for right sized.

<unk> sustainable fleets becomes ever greater and our vehicles offer clear environmental efficiency and economic advantages over current karcher options.

We continue to work with state governments across the country to improve access to Arca motor vehicles. Most recently successfully advocating the removal of special motorcycle endorsement requirements in Florida, Hawaii in Louisiana, So that customers. There can operate on Arca modal with standard driver's license, thereby modernizing legacy.

Three wheel legislation with a common sense solutions and.

As we look globally, we've begun developing a measured strategy to enter the world market, starting with countries that fully accept the United States Federal vehicle Motor vehicle safety standards and summary on gold two significant progress and a mountain of work ahead.

Finally, <unk> has continued to rapidly accelerate its pace of innovation in order to demonstrate the full range of our solutions for sustainable mobility.

At our summer event, just a few weeks ago, we launched our first production roadster showed the long awaited half door accessories and showcased with partners some of the truly exciting technologies now in development.

Torque vectoring to dramatically improve low speeds during as well as vehicle handling.

Driverless capability.

Heated storage deliberate for meals and finally battery recycling in line with our longstanding goal to create true cradle to cradle products.

By the way, it's not lost on us that the top three best selling cars in the U S last year, we'll pick up trucks.

I would explain all the excitement around cyber truck Libyan ports Lightning F 150, and others well know Arca Moto has a pickup truck. We showed the first prototypes of the arc of modal flatbed and it's awesome.

<unk> based scalable Arkham auto platform incredible configure ability and volumetric carrying capacity in a small footprint, we aimed to begin piloting the flatbed later this year.

I want to emphasize again, the importance of partnerships and collaborations.

Munro and associates Stoffel systems sure Tech Redivivus Bib technologies, and so many others have pitched in their brilliant minds and hard work towards our shared purpose.

On that note of partnership just shy of a year ago I reached out to Bob mile founder of tilting motor books about an idea for a new micro mobility product line that would leverage their expertise in tilting trikes with archon motives electric vehicle capabilities I am incredibly excited to report that the first prototype from that collaboration is now.

On the road.

We're not ready to show the product yet, but I will tell you I got to write it for the first time on Thursday and on that first right.

Leaned it way farther than ive ever leaned bicycle.

Easy smooth and stable.

Wait to show it to you in product form.

This mean lean machine is chock full of new electric vehicle technology.

We are actually reinventing the wheel this time and is targeted squarely at the rapidly growing E bikes and E. Scooter marketplace. We believe it will perfectly complement our go to market strategy of rentals, and rideshare and will set a new bar for efficiency utility and affordability for a wide range of transportation tasks.

We acquired tilting motor works at the beginning of this year to accelerate development of that program, but I want to take a moment to talk about what else we got in the deal and.

An existing product line from motorcycle riders, who don't want to fall over anymore.

Our trio accessory transforms our motorcycles into an amazing three wheeled tilting machine and we see giant market potential for this product in the U S alone there are more than 12 million motorcycles in use and the trio is already adapted to the leading big bikes Harleys of which 180000 were sold last year worldwide.

Indians Gold wings, and most recently the lightning electrics, Superbikes, which we intend to get with which we intend to compete for land speed tilting three wheeled record at Bonneville next year.

In summary, <unk> is shipping and continuing to further develop kickass ultra efficient three wheelers alongside a world class team with whom we share our mission to rightsize mobility as we grow our market presence in preparation for volume production.

We must continue to improve the experience for the organized our early customers and writers the vehicles. The first time user experience and sales service and communication processes. This means listening closely to feedback we received from customers and pilot partners to improve our offerings for scale.

We must continue to cultivate our leadership skills as our team in demands expand our kimono has more than 200 people right now about double where we were one year ago and this means continued emphasis on process culture, and our core values of continuous improvement environmental efficiency and fund we must maintain our focus.

On the health and safety of our team during an ongoing pandemic encouraging good life choices and bolstering our resilience to the road ahead.

<unk> is not waiting around the Ipcc's code Red is our call to action, we must continue to step up our production pace amidst the churn in order to make the contribution for which we recall.

And with that let's bring on the rest of the team, except Terry who is on its way back to Eugene and dive into Q&A.

Alright.

You guys need to turn Europe.

Mike's and cameras on.

I can't turn Mcglamery Mark Mike.

Sure Ron.

You may need to enable a camera option for panelists.

Okay.

Well.

And if not you can just listen to our disembodied voices perfect perfect, let's start there.

Okay.

I just want to give a little bit of back background here.

We are this is our quarterly stakeholder webinar, we do quarterly webinars in tandem with our filings with.

With the SEC.

And this is sort of the modern day replacement for the conference call.

While in an operator and stuff like that.

We're aiming to modernize that approach in order to give our stakeholders a clearer picture of the company.

So.

We're still continuing to experiment with the format.

And of course its stake.

Stakeholders and analysts have any feedback on the format feel free to send it into the company and we will adjust accordingly.

And with that let's.

Let's take our first question from say.

Alright.

In regards to the ATV and loan what timeframe does <unk> believes they might get access to funding.

So what percent of the argument of projected you believe will be covered by the ATM, though so.

No.

Very good question.

Anticipating submitting our next draft revision of that application.

With an imminently within the next week or two.

And we anticipate that it would likely be some.

Somewhere in the vicinity of.

<unk> a.

Forward, a 10 month process from there should the department decided that Arca modal is worthy of that loan.

In terms of what percentage of the projects.

Would cover as I mentioned earlier, we are in the best balance sheet position we've ever been in.

Have.

Plenty of cash on hand to move forward ultimately.

I think we will end up asking for the AGM to cover something like <unk>.

80% or a little bit less of the overall total project cost for scaled production, which is what we're now calling one point X.

Great.

Once our kimono a second facility goes into production with the current AMT facility be converted into a production line for platform two vehicles.

We know on our current plan we have.

Our current facility will still be doing production targeted at platform one so.

It is we're going to be playing a little bit of musical chairs as we move forward over the next 18 months.

So I think it's less than that next.

Well, yes.

Year and change.

Is that we're going to be.

Moving certain components that are presently in the amp into the ramp and that will make space for some new development programs that are going to come online to support.

The scaled production version in the App.

We've not yet selected a facility.

For the manufacturer of our platform to product.

Windows aren't going to believe it will be able to implement factions remote control systems and to a type of shared vehicle network.

And related question from chat from it hurt Lee.

Curious if.

That's <unk>.

Technology will be available as an upgrade for existing vehicles.

To allow existing owners to use the rideshare service or will it be limited to company owned vehicles.

So.

And is that.

Is the question really around Wil.

So around shared use something we've talked about for a long time is the potential for our kimono customers to share out of their vehicles to others basically.

Set rental rates and let their neighbors.

Groceries with their archon motives.

That is still in its certainly in the long term plan.

And in terms of.

Really more the driverless component technology that faction demonstrated using Europe motor platform in terms of when that is going to be meaningfully deployed.

And even in even in sort of like on road pilot form.

That has yet to be.

Determined and certainly yet to be announced so stay tuned on that front, we are very heartened.

Fashion was able to take.

And our kimono provisioned with our intermediary torque vectoring and driverless layer and get those vehicles up and running inside of about four weeks.

So those guys were.

Moving fast and certainly very motivated as we are.

Two to get rideshare working.

In an actual useful way out in the world that Leverages that tech and what that really does that we think it will make it more convenient for vehicle sharing customers to get vehicles, having a vehicle sort of delivered to you.

Without paying for somebody to actually drive view once you're in it.

And we think that that is.

A very compelling future model for vehicle sharing that we are pursuing aggressively.

C. A follow up question from Ed regarding the.

Phone app and when we can expect to see that come online.

It is in development, we have mapped out.

The sort of initial stages of.

The phase one requirements.

In development now and it will be ready when we release. It. So we don't have a fixed timeline that we have announced yet.

But it is it's a critical piece of the puzzle.

Something that is we are definitely pushing on.

When will the SUV get over the air updates and how much do you anticipate this will end up saving <unk> and service costs.

It will save us.

Not run the numbers on what it's going to save us, but it's just such an obvious win in.

In terms of when that's going to happen, we're balancing that with a number of different priorities.

So again, we don't we have not announced the timeline on that for US one of our top level goals, but it is something we're pushing forward on.

When will owners get a personalized arent in letter of portal account to track service and referrals and will it show data like battery helps and mileage my goal is that the.

So we've talked about this a little bit in terms of the <unk> dot life portal.

It's both an.

Owner portal for getting more details on vehicles tracking service updates.

It's one of the critical pieces of customer communication that we want to bring online.

My goal is to have the first incarnation of that.

Online this fall at some point and this would be it is going to be a pretty rudimentary first step into both.

The sort of owner portal as well as some of the.

I would call it.

Virality pieces of the puzzle. So is any owner of an SUV knows you are constantly bombarded with questions about the vehicle whenever you park in.

It just drives a ton of attention and a ton of questions and what we really want to enable on that side is to have our owners as ambassadors be able to point someone to two.

Yes.

QR code on the side of the vehicle that sort of tracks amount of high scoreboard.

Let's let's us all participate.

In the sharing of the arc of mono product family idea.

How is your partnership with Munro and associates had an effect on the SUV product and your ability to quickly scale mass production.

It's been a substantial impact having the munro team.

Really jump in with both feet to help push VR kimono to scale has been a huge shot in the arm for our kimono.

They bring a whole different lens of expertise focused on mass production.

Large automobiles and the technologies and materials and capacities for pulling that off.

Expedited reason manner.

So we are working with them hand in hand.

And week out to push this project forward, we're still targeting having the ramp open and shipping vehicles at the end of next year it will be obviously <unk>.

Continued ramp up in terms of vehicle output at that point to achieve maximum capacity, we're planning multiple systems that will come online in.

And programs that will come online over the next years in order to continue to drive down costs.

And ultimately provide a foundation for true global scale.

Yes, they've been pivotal help to the company.

What is the status on the doors and their effect on the ATV and loan application and approval process.

So some astute folks out there have noticed that the AGM requires what they call a fully enclosed fully enclosed carrier fully closed compartment vehicle.

So the the vehicle that we are applying for funding in the factory that we are applying for funding for us to deliver squarely on that requirement.

In terms of the half doors that we demonstrated the production version of just a few weeks ago and plan to ship the first customers this quarter.

That is.

It's a piece of the puzzle in terms of understanding closures, but.

<unk>.

The full scale version will this is a product that we haven't actually shown yet.

If you recall from our last earnings call, we sort of ballpark about 75% completion.

In terms of showcasing new products on the Arco model platform family.

One of them. There is another one that we also have not yet shown.

And we are aiming to at least display where we're going by the end of this year.

Does <unk> have plans to export or build a plant in Europe that would seem like an excellent market and then kind of.

Perpendicularly related from Jeffrey Campbell with Chad can you point out of the country or two that would meet the requirement to be receptive to U S standards sure thing and actually we've got Dilip syndrome on the line are Chief International Business Officer, and Doug would you like to give a little bit of color on to that question, yes, absolutely.

Thanks Mark.

So yes. Thank you for the question as mentioned earlier Mark had mentioned earlier, we are developing a very cogent and a comprehensive strategy to global markets first.

<unk> first priority of course will be to focus on countries that fully except the U S.

Federal mogul motivate go safety standards and.

To answer the second part of the question is basically it as countries like Mexico believes Barbados, Bahamas, Honduras, Guatemala, and there's a host of others now.

This F&B assess market itself represents a huge market now this will be followed with the homologation of our products to meet new standards and that will make it possible either to export which is definitely.

Again.

Europe is a large market, so which would be more.

Quite likely explore.

Otherwise it is quite likely also that we might find a partner to manufacture in Europe.

And to add a little bit on that we also see.

Europe and actually the entire global market as being.

Very ripe for our platform to efforts so.

Again platform two is aiming at something yet again in order of magnitude more efficient and less expensive than the platform one product family and so we see a true global applicability for that product as well.

Tesla is opening up the supercharger network to other evs, how and when will the <unk> be able to take advantage of this what are you doing right now to make the platform long trip capable.

Great questions.

We have not talked in specific detail about product features of whats.

What's coming off of the one point X development effort.

What I would like what I would really like to see is just that customers get the choice of what charge for it they want.

And can have options for things like higher capacity charging I mean, thats sort of a no brainer.

And it is it is certainly on our roadmap, but to me. It would just make we've got a bunch of customers who are also Tesla drivers and so having the same charge port the same.

<unk> to US just makes a lot of sense Tesla has done an absolutely fantastic job building out.

Global charging network for electric vehicles, and we're Super thrilled that they are now looking to open that network to make her makers of other vehicles.

Have there been any discussions with large food retail chain operators about the deliberate and possibility of a fleet acquisition.

We have discussion, yes is the short answer to that question.

But.

No details that I'm willing to talk about now other than we did have a pilot.

At a at a franchise here in Eugene.

And just got.

Phenomenal feedback from that operation for the deliberate or as.

As a food delivery vehicles, and if you look at what what bid technologies has done with the platform they have taken.

What we're calling project hotbox they have built a deliberate or that is a.

As a.

Serves a piping hot food. So it's we are definitely looking in this sort of in the early pilot phase at getting as much feedback from prospective customers to really fine tune that.

Offerings for.

For the mass production versions of the vehicle platforms.

Okay.

Production is slow can we focus on production and getting vehicles in customer's driveway when will we see at least 100, a week being produced and delivered.

And then there is a there is several.

Kind of related questions and chat just.

Related to the earnings results, maybe you can provide a little color on <unk>.

Revenue projections versus actual I know you mentioned some of the struggles in the presentation.

But perhaps a little bit more on.

Plans for deliver.

Revenue projections and.

The amount of inventory on our balance sheet.

Sure so.

As we again I did touch on this at some length at the beginning of the presentation.

We are definitely still within the COVID-19 pandemic that is still having substantial effects on our supply chain.

And that does impact production, we think we have got clarity for the end of this year in terms of our planned production output of 425 vehicles.

A portion of those will go to customers, where we see it particularly in the in the stage that we're at right now.

We think it is very important to get as many sort of demonstration and rental vehicles into the market as well we have had.

In Eugene here, just at our local rental shop of our commodities, we've had fully subscribed vehicles on many days.

A quarter of the days that we've had the Eugene rental sharper than we've had all of our rental vehicles.

We subscribed and utilized and Thats.

What we're really going to end up having to balance is delivery to early customers versus building seeding the marketplace for scale using rideshare pilots and rentals.

I am expecting a substantial increase in output in 2022 beyond what we are building in 2021.

And we are still fine tuning those numbers. So I would expect that on our next quarterly stake.

Stakeholder update that we'll have more guidance about what 2022 looks like.

But this is still again and this is in advance of our push to mass production.

Which is where we would start to see numbers like 100 vehicles a day.

What are some of the current biggest risks that would delay started production of the new facility and How's Europe low teen taking steps to ensure the schedule stays on track.

So the biggest risks that IC are unnecessarily unnecessary couplings between vehicle systems and cost reduction efforts.

And so we've taken.

Great pains over the last couple of months to really identify and this is.

The one point X program is all about is identifying.

What the long lag items are and making sure that we decoupled those from the scale improvement and cost reduction programs that we can execute sooner.

And.

There are any number of potential risks, whether youre talking about construction slowdowns.

Two two compliance testing.

That can always take take.

Take longer than you think now I think the <unk>.

Vantage that <unk> has is that we have already gone through that with our with our first platform vehicle, we're very familiar with that terrain.

And so I think that is a risk reducer for us.

But as of now we are still targeting.

End of next year for first vehicles emerging from the ramp.

Okay.

We've talked about <unk> earlier, but I'm not sure. If this question was addressed what exact stage.

The loan.

So we are we are in the.

Pushing towards the substantially complete application sales. So that's what we're aiming. This next this next piece to accomplish and then there are of course multiple gates beyond that in terms of <unk>.

Conditional commitments and then ultimately funding envelope.

A delivery vehicle needs to operate in all weather conditions are there plans to fully enclosed to deliver it and make it viable for four season use.

And a related question and chat.

I.

I'm wondering about the.

Full sized full doors and what the timeline might be on that totally the.

The assumption that.

I guess a question on the basic assumptions since there are plenty of deliveries being done on bicycles and motorcycles and so on.

But to the point for for a full all world all season vehicle, Yes, you need you need full enclosure and so same thing with the sort of the answer a little bit back on the ATM loan regarding close compartment.

Part of that program in those doors that will apply to.

The fund utility vehicle will also work on the deliberate or we've designed them to work for us.

Ken production and profit increased by eliminating the options for the customer when ordering and build the same design over and over.

Hi.

In theory that there are multiple ways that profit could be increased but actually options are where we see a real opportunity for higher profit margins.

And ultimately we see the fun utility vehicle is having that Optionality is a big part of the selling features of it particularly when we actually have our full etc family launched so.

As we've looked out at other vehicles I mean, I think we have it's hard to find.

Except perhaps like the model T.

A product family that has optionality was.

Issued and not a part of the profit story.

I think I do think that one of the things that we are really focused on streamlining that process of option selection just to make it easier to get through that.

That whole piece of the puzzle.

What opportunities do you see in last mile transportation, specifically with E scooters and E bikes that <unk> platform to will be uniquely enabled to address.

<unk>.

We'll talk more about it when we actually show the product.

Alright is there anything specific that you hope to learn in the upcoming Tennessee pilots that might be different than pilots in Florida in California or are you looking for patterns of repetition and all three efforts.

<unk>.

I think probably a little bit of both.

We expect that that.

Largely.

People, who get in the F&B and arc motor platform vehicles, there's a lot of the same feedback, particularly regarding the enjoyment of the ride.

And the sort of that.

<unk> unique SUV experience.

But every pilot that we've done has provided specific.

Option specific enhancement requests related to how they used vehicles and I would expect that.

Find folks that we talk to in Tennessee will have lots of good ideas about how we can make arca motives better for them.

Our cafe credits being used in future cost calculations as a credit when estimating reduction of retail price is this a large portion of the tactic to reduce consumer prices no.

In terms of like Carb credits, there is now discussion about bringing motorcycles into that regime.

That's going to take some time and we have not modeled it as part of our.

As part of our sort of profitability story, we do see.

Near term opportunity in terms of end user tax credits at the federal level, we think that.

The substantial pronouncements that the Biden administration has made as well as congressional leaders supports.

A much higher tax credit for our kimono type vehicles, we think theres, a very strong argument that affordable.

Vehicles that are super Super efficient and don't take up a lot of space. It.

Should benefit from.

The same tax credits that much larger much more expensive full sized cars get so that's.

It's an area of advocacy that we are continuing to push on with partners and with others in the field.

And if you think about it I mean that could.

And truly dramatic impact.

Particularly in the near term on the affordability of arc most products for for.

The wide market.

Any plans to change battery chemistry or format since a lot has changed since the first SUV introduction.

Or would you rank your battery priorities reduce weight reduce cost or increase range.

Well.

Okay.

I should say that we have we have some very interesting.

Battery developments in the works.

We will be talking about on future earnings calls.

And stakeholder webinars.

But.

Versus.

Priority for me at this point would be reduction of costs and improvement range.

The batteries actually in a really good spot in the vehicle.

We and we will likely see as energy density continues to incrementally improve.

We will see the batteries that are essentially the same ways that go farther have higher.

Volumetric energy density.

And we're also seeing.

<unk>.

<unk> down the cost curve of battery cells.

<unk>.

We've got a lot of a lot of good stuff coming on that front I would say from a from the customer perspective.

Really about just incremental changes over time for the foreseeable future.

<unk> been testing with any other companies software for autonomous vehicle arrival.

None that we've talked about publicly yet.

Yeah.

Alright.

Doing shifting over to Chad.

Kind of touched on this already can you comment on why retail sales were only 30 units last quarter. The number of consumer events plenty of people drove our covenants this quarter, whether it's perfect as springtime when as you sell more.

But it's again we are now.

Mission, where we are constrained on the production of our kimono vehicles and as we looked at our at our options and what we need to do to execute the growth of our market plan.

Allocated a significant number of our vehicles to things like our opened opened rental stores in Eugene and San Diego I also mentioned that there was a delivery.

Pause for several weeks due to a software glitch.

That did impact those sales numbers as well because we actually count the sale when we deliver the vehicle.

And again I think what we're going to see in terms of end user sales is that <unk> has to balance.

The growth of our market growth plan with the sales to existing preorder customers and new customers, who want our vehicles.

As a stakeholder is critical to understanding greater details issues related to the supply chain can we hear how precisely our plans to jump production in Q3 from 75 units to 150 units.

So well.

Well, we it is looking like we are in good shape today at four.

For quarter, three and quarter four in terms of hitting that target of 425 vehicles produced this year.

There are some challenges that <unk> has that are unavoidable in the supply chain at our scale. We have parts that are single supplier source.

We are producing at a low enough volume that in and a lot of cases, we have only a single supplier who supplies a particular component for the vehicle as we look to higher scale. Obviously those are elements that we're going to address and make much more robust but.

And again this is a caution that I put out.

I believe over at least the last couple of quarterly stakeholder Webinars is that we expect a relatively flat.

Growth curve quarter over quarter with the potential for lots of Choppiness due to the supply chain.

I mean, just as one example.

We had.

What was.

Not quite a port shutdown.

One of our suppliers uses like an eight week delay we've had multi week delays at the.

At the Port down in Los Angeles, and then.

Suppliers as well as us face always the questions around the movement of the pandemic and now more and more.

Related to.

Extreme weather events and things like.

Things you wouldn't even normally expect like the Texas.

Texas freeze that shutdown petrochemical plants in Texas actually had an impact on our gearbox and the seals that we use so it's.

We are going to continue to use absolutely best efforts to make sure that interruptions are as.

As lease problematic as possible, while executing our market growth plan continuing to deliver vehicles to customers opening up rental locations, but.

It is we are still amidst choppy seas and a global pandemic.

When my way, Hawaii, one more thing actually for us on that.

Yes.

So a way.

To look at this particularly given that our kimono is we are one of <unk>.

A dozen nascent EV companies here in the U S that are targeting.

Bringing clean transportation solutions to the world one of the real advantages that <unk> has in building towards that mission is that we are already in market.

We are in market today, we have vehicles out for demonstration the constraints that we have on production at very low volume certainly have an effect on.

Near term measures of the company's progress.

But our our really next stage goals are to step up to much higher production volume and to do so in a time window. When we've got a lot more clarity on things like the global chip shortage.

Battery supply chain constraints and all the rest I think that really positions <unk>, well certainly versus others, who are attempting to launch scale production of vehicle programs.

Towards the end of this year. So we've already got vehicles on the road.

We are definitely doing our absolute best to deal with the supply challenges in the near term.

But our again, our overarching focus right now is the push to scale the planning for scale building resilient supplier relationships for the scale production version of the product family.

And so everything that we are doing in the near term really needs to be balanced through that lens.

When will Hawaii get a rental facility and with island in Hawaii.

Which island singular I think there are multiple islands in Hawaii.

Certainly that our commodity team members had volunteered to go spearhead.

In terms of timing, we are waiting on the acceptance of our.

Vehicle manufacturing license or license that <unk> can be easily registered on the road there.

But we see we see tourist season and sort of the winter tourist season as being a good time to get first rentals going in Hawaii and so we're that's.

We I am not I don't have a fixed timeline for you today, but we're pushing hard I would like to have.

At least one of those facilities opened up right around the end of the year at the beginning of next.

And in terms of what islands, we see opportunity.

On on.

In Honolulu on Maui.

Really I think the automotive platform vehicles are just.

Going to be phenomenal vehicles for that marketplace, both for people, who live there and for people who are listening.

Our kimono expressed support for black lives matter last year, what has been done to increase African American equivalent of the company. The National average is approximately 15%.

So what we've done put in place at the board level is a real push for forgetting it.

Diversity programs in place.

I would like to report that we've made.

More progress on this front than we have.

But it is still certainly.

Key.

Piece in terms of our kimono at its root is all about transportation.

Clean transportation, and ultimately transportation equity and.

And so making sure that we as an organization take that seriously in terms of.

In terms of our own composition is really important.

Can you comment on the status of customer preorders is the backlog growing holding or declining.

We actually saw a meaningful rise in terms of indications of interest in quarter, two and I'd refer you back to our 10-Q, if you want to look at that exact breakdown of numbers.

Doug do you have that right in front of you.

It was approximately 700 vehicles or 700 preorder increase.

Yes, and again just a note about preorders, we look at preorders as strong indications of interest in the products. They are either refundable nominal deposits or they are.

Things like letters of intent from commercial customers and so on but we definitely do see them as a meaningful indicator of future market traction for our products, So seeing a big guy.

Substantial step up is not about that.

And then what looks to be easy last question of chat here.

Any opportunity for alternate controls of the vehicle.

Okay.

Well.

Is there any indication there about what what there seems to be some trepidation towards the handlebar controls, specifically, but but but I would I would say that there has been several questions about ultra able folks.

And other opportunities for.

And alternate control system.

One of the things we've heard from ultra able folks is actually that the handlebars.

Our real advantage there and it will.

For folks who have limited lower body mobility that would remind it would require a certain special hardware to be added for for example for the hydraulic brakes be able to move them to the handlebars.

I was the one thing that was really cool that we saw at the summer showcase was the work that stoffel systems has been doing on torque vectoring.

And what that.

The implication of that for four.

For the <unk> is just a much smoother experience on the handlebars.

Particularly at low speed, but for anyone who's trepidation about driving the Ark model I mean really it.

It takes a very short time to get the get the hang of it if you've ever written a bicycle.

It's a peace cake and what you end up ultimately feeling is like the sort of like the vehicle becomes an extension of your will to move.

We're going to continue to refine that user experience, particularly through.

The software controls work that we're doing with stifle.

But we have no present plans to change to something like a steering wheel in fact, it was the switch from a steering wheel.

That really unlocks the true.

The true win of the Orca modal platform in terms of.

Being able to carry an awful lot on our small footprint vehicle.

And the move to handle bars was actually a big piece of that.

Alright couple more rolled and how are we doing on time.

I think we got time for one more and then I'll.

I'll wrap it up.

Have you considered making an electric all terrain vehicles similar to the Tesla cyber quad.

How about that one.

Hi.

Short answer on that one is yes, we have considered making a number of different types of vehicles.

For the moment, we are very focused on bringing our current product offerings to scale and focusing heavily on the daily driving problem as well as vehicles that sort of fit in that same go to market approach. So.

One of the things I really like about platform to again is that it.

We think those vehicles are going to do very well in our rental shops, we think theyre going to do very well.

In terms of the rideshare conversations that we're having.

And so where you get that overlap of business model.

It becomes easier to move multiple products through it.

When I look at off road I think the platform has real opportunity there, particularly at least constituent elements of that platform.

But it has a whole different go to market approach.

And a lot of additional engineering work.

To make it happen so.

We want to keep Arca motto as focused as possible, particularly right now in getting our existing product lines refined getting our new factory up and running and really pushing to scale to deliver on our mission.

Alright, one more since we've got a.

Question Couch and a complement arc, Nevada is the second largest pure EV maker production use decide behind Tesla with extremely low cash burn compared to other EV makers can you explain how you manage the success.

Wow that is.

Thank you for the question.

I do think that one of the things we pride ourselves on is.

Hi.

Focus on.

A meaningful solution that is that as simple lightweight ultra ultra efficient and we just have more waste.

And I think that has kept us we <unk>.

For our first seven years.

I was I missed the first fund or I would put in the first couple of million dollars and sort of treated every additional investor dollars going in as though where my own in terms of really trying to get the most bang for the Buck I mean that meant that we basically got into production with I think a total spend.

Over our first 12 years of about $42 million. So zero napkin sketch to first production vehicle on $42 million for our next generation EV company is fairly unprecedented so.

I also.

We have an Oregon ethos.

Building startup companies into into more mature companies.

And that has also been.

The Oregon has a it's very.

<unk>, but also you use it used to be.

Very capital efficient.

So.

And just one example, I mean do you think about.

Building out marketing and sales, we really focus, particularly in the early years and up to production launch on the vehicle on getting the product really dialed on getting something that we think is going to sell itself. Once we can really get it to scale into the right price.

And so that is.

That's another element of it I think is just focus.

Shall we shall we wrap it up.

We're a little bit over time.

Good morning, Thank you guys all for attending.

<unk>.

This officially concludes our <unk>.

2021 quarter, two our kimono stakeholder webinar.

I would add that.

Got a little something special for you.

If you all could have been there at our summer showcase.

We're seeing some truly impressive things tilting joy.

Towards vector driverless vehicles tilting.

Tilting Joy rides and a community appears rowing together towards a brighter future.

You also might have caught uncle John in the from here band Serenading the crowd with another fine too.

Now John Couldnt make it back down for the call today, but an honor him Sandy and all the fine companions, who joined US on our quest Emily Jensen founder of <unk>, and CEO of thinking tree yours truly and rich lamas. The best stand in standup Guy I only just met played again the San <unk>.

<unk> for the showcase.

Of course for any one of the opinion that good fun tunes have no place in our stakeholder webinar now is your Q to hit the log out but.

Okay.

[music] warm summer showcase in a little town called Portland.

And then some techniques to build the world of Orion.

Across the parking lot a song.

As a veteran who saw walk drawn up and asked and Sandy can you give me some advice.

Yes.

You said sooner made my life.

At a turn down the big companies.

One where the flaws were among the way they joined their parts. So if you don't mind, my saying I think.

We can really help you.

Non modal.

Get you guys to scale you got to know when a home.

No.

Sure.

No into two markets.

No into pharma.

Yes.

These when your key.

Key mode there'll be time enough.

When the factory is done.

Now if rebuilder knows that the secret to design it is.

Just keeping all things simple great suppliers by your side because every fasteners can be in trouble.

In Europe for Bobs assembling shorter shadow design cost and we will build the best right you got a no win all of them.

No.

No and to walk to work.

<unk>.

All of our talent.

<unk> is when you're <unk>.

<unk>.

For accounting.

When the factory is done.

And when he finished talking to you.

It turned back towards a lobbying.

When those heavy chicks and got into his plan.

Somewhere in the darkness, we see that big ramp comment.

And then this awesome team we've got the pieces that we need you got a no win.

No.

Good luck.

When two afterwards.

Two follow ups.

Accounts.

It is when you're sitting now.

The board now.

<unk>.

When the factories.

No.

Hmm.

No.

Awesome.

No.

Two for me.

Yes.

It is.

The keyboard there'll be time enough for account.

When the factories.

[music].