Q3 2021 Lightning eMotors Inc Earnings Call
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'twenty One earnings conference call today's call's being recorded and we've allocated one hour for prepared remarks and Q&A at this time I'd like to turn the conference over to Nick <unk> director of marketing and sales operations for Lightning. He motors. Thank you. Thank you you may begin.
Thank you operator, and thank you everyone for joining us hosting the call today are lightnings seat or co founder and CEO, Tim <unk>, Chief revenue officer, cash Stuffy and CFO Teresa Covington.
This call Lightening issued its third quarter 2021 earnings press release and presentation, which we will reference today. These can be found on the Investor Relations section of our website at Lightning E Motors dotcom.
On this call management will be making statements based on current expectations and assumptions, which are subject to risks and uncertainties actual results could differ materially from our forward looking statements. If any of our key assumptions are incorrect because of factors discussed in today's earnings news release. During this conference call or in our latest reports and filings with the securities and exchange.
Inge Commission. These documents can be found on our website at Lightning E Motors Dot com, we do not take any responsibility or duty to update any forward looking statements. Today's presentation. Also includes references to non-GAAP financial measures you should refer to the information contained in the company's third quarter 2021 earnings press release for definitions.
Information and reconciliations of historical non-GAAP measures to the comparable financial statements with that let me turn it over to Tim.
Thank you, Nick and thanks to everyone for joining us today.
For today's presentation, we will be referring to the slides that were posted to the Investor Relations section of our website earlier this afternoon.
I'll start off on slide five with today's agenda I'll begin with an overview of lightning and our recent product releases discuss the impact of the new infrastructure Bill signed today into law by President Biden and provide a supply chain update and discuss our manufacturing progress cash will then provide an update on our order backlog and sales pipeline.
And Teresa will wrap it up with a financial overview.
Moving to slide seven we founded lightning to create purpose built hybrid electric specialty commercial vehicles for urban medium duty fleets to reduce carbon emissions.
Today Lightning motors as the only full range manufacturer of class three through seven battery electric and fuel cell electric vehicles in the market, including ambulances shuttle buses utility trucks school buses and motor coaches and.
In addition to full vehicles, we sell powertrain systems to vocational and commercial vehicle Oems as well as the partners like ABC companies, who install the powertrain systems and re power applications.
Moving to slide eight we have built a modular software and hardware architecture that allows us to serve a highly segmented and customized market with a cost effective and scalable solution. Our high level of software and hardware customization is something that legacy Oems have not historically performed and if not.
Well suited for companies like Ford and GM are building trucks and high volumes and do not have a business model that supports manufacturing for the medium duty segment.
Moving to slide nine our team again this quarter leveraged our modularity and customization Toolboxes and released two new exciting products are zero emission type a school bus and our zero emission class a double decker motor coach one of the largest zero emission vehicles in the world today with over 200 miles of range.
I continue to be impressed with the speed at which our team has been able to deliver new compelling products that are seeing immediate customer uptake as you can see in slide nine.
Moving to slide 10, we are pleased with the passing of the U S infrastructure Bill and the signing of it today in the law by President Biden.
We believe we are well positioned to immediately benefit from four of the initiative initiatives funded by this legislation.
The legislation provides $39 billion for public transit, including more than 4 billion of funding that's dedicated to zero emission transit buses over five years, something we expect to create more demand for our forest River shuttle buses.
It also funds $5 billion for school buses expected to create more demand for our new school bus partnership offerings with Collins as well as lightning as Repower products.
It funds seven $5 billion for charging infrastructure, something we expect to accelerate our lightning energy growth and provide support for our fleets, who use public charging to augment their depot charging requirements.
And it provides $8 billion for new hydrogen hub construction expected to provide funding for many of our customers and our hydrogen fuel cell partner plug power, who demand the longer range and higher payload capacity of lightnings hydrogen fuel cell powered powertrains.
We expect this federal investment to encourage additional purchasing an investment by state and local governments as well as corporations in each of these areas further accelerating the electrification of fleets.
Moving to slide 11, let's discuss the supply chain landscape, we are experiencing strong and growing product demand. However supply chain disruptions continue to serve as obstacles for our business.
Major Oems like Ford and GM have publicly spoken to their limited chassis availability, which is expected to continue for the next few quarters.
Limited chassis availability has been impacting both traditional ice vehicles as well as electric vehicles exasperated by a lack of transparency from the legacy Oems on wind chassis will ship.
Our manufacturing and supply chain teams have been taking measures to adapt to the circumstances. Additionally, as previously announced we are working on a path for addressing the industry chassis shortage, where their own lightning branded strip chassis and cab chassis products.
We'll be providing further details on our <unk> chassis in the coming months.
Regarding the battery shortage, we've been working for the last several months to remedy supply chain disruptions through the technical and commercial validation of additional suppliers. We are pleased with the work we've done to strengthen our positioning recently signing a four year supply arrangement with pro Tara securing long term supply of quality and road tested by America compliant battery packs.
Several of our key platforms.
In fact, we expect to deliver vehicles powered by pro Tara in the fourth quarter.
We continue to work to validate new supplier and new battery suppliers and secure long term battery contracts for all of our platforms.
And believe that the progress we've made with our battery suppliers will help mitigate our battery supply constraints in 2022 and beyond.
Although our Q3 revenue was constrained by chassis availability battery and accessory component deliveries, we were able to help mitigate several other supply chain constrictions in sell 43 complete zero emission vehicles.
It is important to note that we have not lost any sales due to the supply chain delays, rather revenue is being pushed to future quarters.
Moving to slide 12, let me now provide an update on our manufacturing capacity expansion plans recall, we signed a lease amendment in November 2020, and November 2020 for an additional 107000 square feet at our Loveland, Colorado campus.
This additional space will be used to expand our manufacturing square footage and provide additional space for our growing team.
In October of this year, we completed the first phase of that facility expansion that increased our manufacturing space to over 100000 square feet.
The next phase of the expansion will deliver another 40000 square feet of manufacturing space in the first half of 2022.
We've been working in parallel on capital investments and other factory improvements to reduce the labor cost per unit and improve efficiency and reliability as we drive towards an expected factory capacity of up to 3000 vehicles and powertrain systems.
We were able to expand this quickly with a light capex investment as we don't build vehicle bodies or interiors, which eliminates many of the higher cost and long lead item capital spending items.
Notably, we believe we can readily expand and add the additional square footage needed on our 1 million square foot campus and with our OEM customers installation capacities that will allow us to support capacity for up to 20000 powertrain systems in complete vehicles per year.
We believe we are one of the very few companies in the U S zero emission vehicle commercial vehicle market with a fully operational factory.
Our three years of experience building vehicles and powertrains in this factory.
And now our experience scaling it up has provided us with unique insights on manufacturing quality controlling cost and we believe we are now well positioned to reduce costs increase Ottomans automate increase automation and digitization and scale further.
And now I'll turn it to cash to provide an overview of the order backlog sales pipeline and key partnerships.
Yeah.
Thanks, Tim I will begin on slide 14 to discuss our order backlog and sales pipeline.
As of September 30th 2021, Lightnings order backlog included all electric commercial vehicles, all of that to powertrain systems and charging systems for a total of 1617 units up 72% from the prior year period and up 500% since the first quarter.
Of 2020 the quanta.
Quantify that in dollars that is $171 4 million worth of 100 to $124 9 million in the prior year period and up from $28 million in the first quarter of 2020.
The increase in backlog reflects robust demand for our all electric trucks and buses powertrain systems charging infrastructure products and services telematics analytics and other related accessories.
Our sales pipeline at the end of the third quarter was one tweet to $1 billion, which.
More than 74% growth versus the prior year period and up 800% does the first quarter of 2020.
Our pipeline is diversified with more than 238 deals in the works across several market segments.
We expect the momentum to continue due to successful pilot deployments validating our technology in the field and expanding sales team now engaging with a wider audience.
New vehicle partnerships that unlock new market verticals for us in the commercial vehicle space and favorable news at the state and federal level. That's the just broad support for commercial fleet electrification.
As Tim mentioned, we see significant upside potential and the wide variety of funding programs, including new programs funded by the bided infrastructure Bill the strengthening American leadership in clean cars and trucks by an executive order and the build back better build currently before Congress.
Given our reach into multiple market verticals within the commercial vehicle space and our proven record of deploying zero emission vehicles, instead of only making long term product planning.
All of the leading companies.
We believe we are uniquely positioned to capitalize on these programs, which will increase our order backlog and sales pipeline.
Now I would like to turn to slide 14 to provide an update on some of our strategic partnerships.
Starting off with Florida Sugar, we're pleased to announce that we are making steady progress on this partnership and agreement we have already delivered the first batch of vehicles support of sugar and expect to deliver additional zero emission shuttle buses and bands by the end of the year.
As a reminder, Horus Novartis bus Division is north America's largest shuttle bus manufacturer and an agreement with them has the potential value of up to $850 million or up to 7500 fully electric powertrains as well as charging products and services over the next four and a half year.
For silver showcase their first likely E motors powered vehicles.
Public Transportation Association Expo in Orlando last week.
A testament to Forest River commitment towards this partnership.
During the third quarter, we also announced a strategic partnership agreement with Collins bus a Rev group subsidiary and a leading U S based manufacturer of type a school buses.
This agreement includes an initial firm order commitment worst around $11 million to deploy over 100, all electric type of school buses across the U S and Canada, who the end of 2023.
We're pleased to report that the first nine electrified school bus chassis have already been delivered to Collins.
On slide six of the presentation you can see some of these chassis when they were going down a production line.
Given the recent momentum funding from the infrastructure plan and focus on school bus electrification, we believe the potential here much must we believe the potential here may be much larger.
<unk> minimum order commitments.
We look forward to working with colleagues to meet the school bus industry into a zero emissions future.
Next we continue to be excited about our partnership with ABC companies as corporate campuses are expected to resume operations in the coming months. We believe we will see a strong demand for our motor coach Repower and passenger van offerings to ABC.
And with that I'll turn it over to Teresa to provide an update on <unk> financial results and outlook.
Thank you Kash I will now provide some commentary on our third quarter results, followed by our fourth quarter outlook.
Beginning on slide 17 for the third quarter, we generated revenue of $6 $3 million, which increased 65% from the year ago period, driven by a 43% increase in vehicle sales.
During the third quarter Lightning sold a record 43 vehicles compared to 30 vehicles in the prior year period.
Cost of goods sold in the third quarter was $7 million compared to $3 $9 million during the prior year period, primarily due to an increase in revenues.
As we ramp production in our revenues grout grows we expect to generate operating leverage as we benefit from higher volumes fixed cost leverage on labor and overhead improved battery supply terms and operational efficiency.
The gross margin percentage was minus 12, 6% in the third quarter compared to minus three 6% during the prior year period, primarily due to higher factory overhead and warranty expenses in the current period.
SG&A in the third quarter with $9 $3 million compared to $2 $8 million in the prior year period, primarily due to higher administrative expenses related to being a public company.
Research and development expense in the third quarter, it was $823000 compared to $287000 in the prior year period, primarily due to higher engineering head count to advance the development and design of new vehicle platforms, refine and improve our production processes.
For farm product testing and enhance our in house engineering capabilities.
Operating expenses in the third quarter were $10 $1 million compared to $3 million in the prior year period.
The operating loss for the third quarter was $10 $9 million compared to $3 $2 million in the prior year period.
The net loss during the third quarter was $49 $5 million compared to a net loss of $18 $7 million during the prior year period the.
The change in net loss was primarily due to a $31 8 million dollar noncash change in the fair value of the earn out liability and a $5 million noncash change in the fair value of a derivative liability as well as higher operating expenses and interest expense, partially offset by a gain.
On extinguishment of debt.
The adjusted EBITDA loss for the third quarter was $9 $3 million compared to $2.8 million in the prior year period. The change is primarily related to higher operating expenses in the current period.
A reconciliation of net loss to the adjusted EBITDA can be found on slide 19.
Turning to our balance sheet Lightning ended the third quarter with $187 $2 million in cash and cash equivalents.
Please turn to slide 18 moving.
Moving to our outlook for the fourth quarter as Tim noted earlier, we are pleased with the work we have done to strengthen our position on battery supply and during the fourth quarter, we are transitioning to a new battery supplier on some of our products.
Deliveries from the new supply agreement and our other efforts should help to mitigate the battery supply challenge in 2022 and beyond.
Due to chassis due to supply chain disruptions with our chassis and other components suppliers.
Over the course of the last 45 days, we have pushed out over 60 expected vehicle sales from the fourth quarter into 2022.
We continue to experience supply chain challenges as we are reliant on a number of different suppliers for our components.
Associated with any of these components may impact the timing of revenue.
We have not experienced any order cancellations related to the push out of this 60 expected vehicle sales.
Based on current business conditions, we expect for the quarter ending December 31 2021.
Vehicle and powertrain system sales to be in the range of 40 to 60 units.
<unk> to be in the range of $4 million to $6 million.
<unk> EBITDA loss to be in the range of $13 million to $15 million.
As Tim mentioned earlier, we have a capital light model for our manufacturing facility. We are continuing to focus most of our capital investments in three areas, one manufacturing facility build out and equipment to increase capacity and drive cost reductions and factory efficiency.
Two added additional sales demonstration vehicles to deploy at pit potential customers across the country to drive an increase in sales backlog and pipeline.
And three engineering, and R&D equipment to support our existing and new products and services.
Our full year 2021 capital spending is expected to be in the range of $7 million $8 million.
Now I turn it back over to Tim for closing remarks.
Thank you Teresa and closing while in the near term Lightning is experiencing the same supply chain headwinds as other companies in our space, we feel confident in our longer term outlook as evidenced by the continued growth in our product portfolio order backlog and sales pipeline.
Over the course of 2021, we have continued to invest in our organization to position ourselves to capitalize on the market opportunity and our leading market position.
The closing of our business combination enabled us to make these investments and has increased our credibility in the market space. It has given us the necessary capital to invest in our people products and processes. We've made significant improvements in our internal production controls increased our production capacity and enhanced our testing and product quality procedures.
We have doubled the number of our suppliers to reduce reliance on any single vendor for key components.
Through these investments we've continued to improve the quality of our products, while also significantly reducing costs.
We believe that lightning stands out to our customers because of our ability to produce and deliver reliable products, which is a significant differentiator in our end markets. Further we believe the opportunity for lightning and the EV industry remains robust with less than 1% of the U S. Commercial vehicle population electrified today.
We look forward to many years of strong growth ahead.
I would like to finish by thanking all of our customers for their commitment to lightning our partners for their contributions to our company's success and our shareholders for their continuous support.
Also want to give a special thank you to our employees, who are working incredibly hard to navigate the current supply chain environment.
And with that thank you everyone and I. Appreciate your time today I would like to ask the operator to open the line for questions.
Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press star two if he'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one one moment please poll for questions.
First question today is coming from Colin Rusch from Oppenheimer. Your line is now live.
Thanks, so much guys.
Can you talk or just give us an update on how many channels do you guys have on hand, and how you're allocating build slots just love to understand that process.
Certainly Collin and great to hear from you again always a pleasure to hear from you. Thank you for participating.
We placed an order about a year ago for a.
A large number of chassis and those have begun much later than expected to begin to trickle in.
Don't know exactly how many we have on site today.
But then we allocate those based on two things both based on how quickly a customer wants them and then also whether we have the additional <unk>.
Components required for that particular platform as you can imagine a class III platform has different components that may be or may be more or less constrained from a class four.
And so based on what else is available and what we can ship.
The team looks at all of that and then decides what the ship and where to ship. It to so it is a complex internal algorithm with a lot of people actively looking at it.
We will continue to be for the foreseeable future given all the complexities.
That's super helpful. And then it's good to see the pipeline continuing to grow.
But we've seen you know the backlog continued to be flat here for several quarters, and I guess I'd love to understand the dynamic around the conversion of pipeline into backlog and what you guys are looking for.
Yeah, moving that process, along obviously theres a lot of uncertainty out there.
Some of those conversions might take a little bit of time, but just love to understand what the sticking points. If then and what folks are looking for to actually.
Actually place those orders central payoffs.
Cash can you respond to Collyns question.
Yeah, absolutely so Collins.
There are several factors.
Behind that.
Generally speaking, we're seeing a lot of demand for our product market engagements high number of leads coming in number of new opportunities between I think it's very robust.
A lot of the new agreements, we announced recently, especially the four distributor agreement, which has the potential of up to $850 million.
All of that has not trickled into our backlog yet.
We've signed those foundational agreements, we are working with customers like those to identify exactly what products they need and when so theres a bit of a lag between assigning these foundational agreement.
With those customers their dealer networks and end customers airports transit agencies property with parties to identify the exact specification and quantities and then having those become force firm purchase orders. So over the next quarters, you will see that activity happen.
Also.
Oh go ahead go ahead.
Well I think that covered it and I was just going to add that generally speaking, we it's not linear and on the commercial vehicle market, especially because we are in so many different market verticals each market vertical has its own nuances of how soon customers move from one stage to another so it's not quite linear we're making a lot of progress and you'll see the impact.
The next few quarters, but broadly speaking our backlog is very very healthy today.
Perfect that's exactly what I needed. Thanks, so much.
Thank you. Our next question today is coming from my Suski from D. A Davidson your line is now live.
Hey, guys good afternoon.
So your outlook for Q4 has let's say call it a million or so a million change lower on revenues, but about 5 million lower on the adjusted EBITDA line compared to the third quarter.
He was a little of color on some of the puts and takes there as to how that.
Those those numbers ended up being your forecast is in SG&A or some other costs that we're not thinking about here.
I think and I'll, let Teresa augment my answer here on this as well but.
Q4, as you can imagine when when you have this much movement on an almost hourly basis on to Collyns question, which chassis are you prioritizing and what do you have components for and do you have all the components in it.
As we've heard several other of our peers say, even if all you're missing is is a one one little battery connector you still aren't shipping of vehicles, so and the challenge with that is it makes it difficult to predict mix and so as you can imagine some of our.
Products that are on generation, three or generation, four where theyre more mature our mix is better than and we generally will make better margin on those then we will certain other of our products. So part of it is a changing mix and that will level out over time as each of the products get to maturity.
And then part of it is also how much we ship as you can imagine.
As factory overhead absorption or lower if you don't hit them.
Yes.
<unk> at all or use at all youre going to have a lower EBITDA for that quarter than was predicted Theresa did I catch that accurately.
Yes, yes, Tim.
Mike The other thing is the primary driver on the higher adjusted EBITDA loss is an expectation of higher operating expenses in the fourth quarter.
Both on the R&D side as well as SG&A.
Okay.
I think you can look forward to 2022, just briefly here if you would.
You've got quite a bit of growth in your projections out there.
From the past and how things might turn out in 2022.
It sounds like the first of January all the supply chain issues, you know kind of went away it probably won't but if that were the case do you have the backlog do you have the agreements with forest River and the appropriate quantities from the.
Crossover and Collins and so forth is there enough units that you think you could sell in 2022, if you just handle the chassis that you needed at this point.
So you can orient to yeah, it's a very into your forecast.
And you and I that I like the fact that we've been carrying on this dialogue for a while so I like the the question of where the where the dialogue goes and.
And I always as an optimist I'm always excited to look out at what could the best possible outcome B and so it's always interesting to look out and say hey, if we didn't have all these constraints do we have I think your question is how much back do we have enough backlog that and enough orders and demand to fill in the answers yes.
But I will say.
Sadly I don't think the especially the supply the chassis supply chain, we've been told from Ford and GM and others that it is going to continue to be constrained well into 2022. So consequently, that's not what we're forecasting but in terms of demand and backlog, we definitely have the demand and backlog to keep us very.
Busy in 2022.
Okay, I'm not big on these <unk>, but I had to throw it out there.
I want to ask one more if I could.
Your first your first lightning each asset you're looking to ship in 2022.
Is that going to be a revenue producing had been it was just a test a test vehicle.
Thank you.
Could you just give us some kind of a feel for the types of customers that are currently interested in that particular product.
Yes, certainly Mike.
The lightning chassis is will be a N is intended to be a a essential cab chassis and so it will serve a cab chassis need so people like Forest River and Collins, both today by cab chassis from Ford and GM.
And then it will also provide us a product for the step van environments. So two different product places.
You've got folks like Freightliner and four provide step van chassis. So it will be a competitor to both of those products.
Part of it is because we make this chassis without a.
Transmission, where many of the transmission chip constraints exists today, we won't be constrained in the same way that the legacy Oems are constrained shipping chassis. So we do expect to have a chassis to be able to ship right now our plan is still in 2022 to both.
The first.
What I'll call demonstration so.
Anytime's demonstration could be revenue, but revenue and non revenue, but early production chassis out as well as later in the year full production chassis that are revenue products. So we are moving quickly. It is a product that isn't doesn't have a lot of of a technology hurdle. So that's why we can move at the pace we can move.
And it also is not supply chain constraint on the traditional things that have everyone else supply chain constraint today. So we're optimistic about it but there is still ongoing development work here.
Okay. Thank you I'll leave it there I appreciate it.
Thank you Mike Thank.
Thank you as a reminder, that star one to be placed in the question queue.
Next question is coming from Steven Fox from Fox Advisors. Your line is now live.
Hi, Good afternoon, a couple of questions from me if I could first of all is within the sales pipeline you mentioned 238 deals in Newark, which sounds like a massive number for a company your size.
And you just had a couple of foundational wins in the last 90 days. So can you maybe give us a little bit of color on how you're managing expectations around those given supply chain and maybe what kind of deals you're working on that we wouldn't have thought of or how it sort of fills out across the breadth of the niches that you're serving and then I had a follow up.
Thank you, Steve and great to hear from you as always so I'll, let as cash if he will give you his insights.
Yeah, absolutely so.
Our sales team is small, but it's growing very quickly today.
We get a lot of inbound requests.
No. We don't quite have to go door to go to create those opportunities theres enough interest in the marketplace and thanks to some of our market leading partners. They have a lot of brand reputation and dealer networks that bring deals to us. So we haven't had to do a lot of hard work to create these 238 deals.
Some of these deals off were five to 10 vehicles. Some of them are for 50 to 200 vehicles. So it's a very wide variety of deals mixed in there.
It's easy to manage so far in terms of engaging with the customers most of our customers want to actually try of a vehicle.
As many easy companies out there with fancy web sites and brochures, but not a lot of real product. We have a lot of real product. So we take every opportunity to put our customers behind the steering wheel and getting them to experience. The technology. So that's an important part of the sales process. We are doing the heavy lifting there.
In terms of managing lead times.
Our customers get it on the ice on the commercial vehicles as well would be times have gone out to six eight and 12 months. So we're planning with our customers when do they need the vehicles. So when they need them in three months and over the last few months, we have delivered vehicles from Peel to delivery within a matter of two to three months some customers have a 10 to 12.
Months planning cycle, so when they will like the vehicles as soon as possible, but the charging infrastructure is not going to be ready at the depot, that's where our lightning energy division steps and it helps playing on that so we have a T. Besides the sales team we have a team of technical account managers with work with our customers to design their project put again, Chuck together and make.
So the vehicles and charges arrive at the same time.
There's a couple of situations, where we're actually able to offer a quicker lead time than what they would get from Ford or GM with some of the legacy traditional Oems. So so far it has not been hard for us to manage and I expect that number of deals to grow in the coming quarters as our sales team goes in house and all of our partners and their dealer net.
Books activate around the country.
Great. That's really helpful color I appreciate that and then as a follow up just back to the supply chain a little bit. So I mean, basically youre talking about pushing out.
[laughter] vehicle demand that's equal to the amount you think you could ship in this quarter.
And I know, it's hard to predict but can you give us a sense for qualitatively a recovery you just mentioned the chassis could take a while to.
To come back, but you're also gaining purchasing power I imagine with Forest River. So like how do we think about just you know, it's obviously not going to be a straight line, but give us a sense for what you think about the recovery now 90 days since you last reported on in terms of supply chain recovery.
Yeah. So one of the things that I appreciate it very much Stephen that as accurate as we are working as we say here to control the controllable and there are some things we can control. So we're adding significant team members to our global supply chain group.
To be able to work on more supply chain agreements, we're adding a lot of engineers in R&D, which is part of what that team does is validate new components and new products to give us more optionality. So that if one product isn't available we have another product that we can fold right in and that takes work because you have to design, new new brackets and.
New wire harnesses and new software to support each different components. So we.
We have our successfully I think adding the people to control the controllable. The other part we're adding is the systems to control the controllable so.
Both on ERP and Mes systems are really enhancing what we're doing on that front. So that we have more front end forward knowledge of what isn't coming or what hasn't common what is coming.
And that can populate throughout the environment and throughout the company. So that we can more quickly mitigate or resolve those issues as they come up.
And then thirdly as you alluded to as we go out and move from buying in very small quantities, sometimes just kind of on the shelf. So to speak now today, where we are as we've announced some with battery manufacturers like pro Terra we're putting in place long term supply agreements and we're putting in place.
Larger volume supply agreements and the combination of those two gives us a lot more leverage and a lot more priority.
A lot more visibility with some of the supply chain. So we do expect all of those things to improve our position, but it wont totally mitigate the macro economy that if if some of these folks just don't have anything to ship no matter how high up on the priority. We are we still aren't going to get a chassis or or or whatever it needs to come so.
The other challenge of course is you really to ship a vehicle you have to have all of it so even as we walk through and mitigate.
Really work on these long term agreements with the top 20 or 30 suppliers.
Until you get to the bottom 20, or 30 suppliers, you still don't guarantee that you're going to be shipping vehicles on a more regular and predictable basis. So in from my perspective, we expect kind of the main one that's difficult which is chassis to continue to be constrained and what we're hearing from the legacy OEM player.
There's like Ford and GM, and Hino and Isuzu is that they expect to remain constrained not zero, but constrained through the first half of this year and then to begin to see improvement in the second half of this year I heard one of the Oems tell one of our customers. The other day, they're expecting 2021.
2022 to look similar but a symmetric and reverse symmetric in terms of first half and second half of the year.
So we are making improvements in what we control, but still being a.
Very careful about expectations and planning around the things we can't control.
Great I appreciate all that color. Thank you.
Thank you I'm not showing another question in the queue. This will conclude the question and answer session for today you may now disconnect. Your lines. Thank you and have a great rest of your day.
Yeah.