Q1 2022 Fisker Inc Earnings Call
With all our suppliers between Mac Memphis gone I think.
Peter will talk a little bit about that later.
So far we have done extremely well.
Working together on that because we're still on target for production startup production.
On 17th of November this year, and we will start deliveries immediately thereafter, so it will be delivers this year as well.
We have a very strong balance sheet, we got over $1 billion in cash.
The business continues to scale, we now well over 450 people that.
That represents about a 40% growth year to date and we continue to grow throughout the rest of the year, we have really.
Hyper growth mode.
And I mentioned earlier, our marketing efforts just.
Just to kind of.
Give an example.
We were in Denmark, where we had a prototype in one luxury mall for I think about 10 days and at this point just in Denmark, we have over 1650 reservations that represents about six 5%.
Of the Danish EV market.
<unk> phenomenal for.
Vehicle, which has only been shown there once.
And while a lot of the reservations were taken before was shown and as it was shown we saw an incredible acceleration.
In the orders so I can really see that once we start getting this vehicle out and people get to see it and then later try it I have no doubt.
But we're going to be able to easily fulfill.
Or really deliver every vehicle we can produce.
Also lately reasonably we had actually it was last Friday, we had a.
<unk> strategy to date.
And.
We actually the leadership leadership leadership team reinforced our clear future products and technologies strategy roadmap.
<unk> talk a little bit about the technology.
But I just want to mention a little bit about our strategy with all four vehicles, because I know once in a while people are saying well why don't you just make one vehicle and then when you're done with that and we produce and start selling. It then you talk about a second vehicle well if that if that will be how we did it we wouldn't have a second vehicle out until.
2026, and obviously, that's not the way we want to go and that's also why we chose our unique strategy and I actually would call. It our hyper product development strategy and what I mean by that is that in.
In any other EV startup.
The two enormous task one is building factory and learn how to manufacturing a car and the others to developing a car in technology in our case, we are only looking at developing car in technology, because we've got amazing amazing manufacturing partner. So we don't have to worry about that we know we're going to get high quality cars from the get go.
So what we have done is we have set up an organization within fisker, which is geared towards making multiple vehicles in tandem developing multiple vehicles and 10 of them and I called out the hybrid product development mode. What we have done is we have set up our UK entity.
Which is already up and running.
By our senior Vice President of engineering over there which is running.
One of our new programs the Rone and then I'll get back to that and then of course, we have our development teams here in Los Angeles, which are running a high volume vehicle programs, which is the ocean on the payer and I was never a believer in giant teams, where 1000 people try to get into developing.
One vehicle from the start in my view small teams agile moving extremely fast moving people around in a unique matrix organization. That's the way we have set it up and <unk> and I have spent a long time discussing how we maximize this.
Effort and this advantage of being agile and we have now I think really shown that our development our unique development process of developing a vehicle in less than two and a half year actually worked and of course, we already started the pls last year. I mean, you started also the rone and laugh.
Year on those two programs, we'll see the benefit from all these lessons learned and we're already seeing these benefits and thats, something which I really think since fiscal apart because I believe before 2025, that's really our chance to take a huge market share and if we can bring for vehicles to market in segments, where there is.
Not a lot of vehicles already and where we have at least four unique features I love you.
You have the longest range in our segment like for example, the Fisker Ocean was 350 mile range of this is the longest of any SUV or a crossover in our price segment or for example to California mode doesn't the ocean. So for features that are unique segment, leading that needs to be part of every vehicle we do.
So let me just finalize here the ocean update.
Have completed.
The prototype the first prototype build phase.
And we have already done a ton of testing we have done when the testing in Sweden.
Which booker personally travel to and we are doing now a whole bunch of different test as well.
Whether it's chassis systems are or the ESC the suspension the brake chewning. All of this has already been done and is now followed by a round of next vehicle dynamic testing in Italy was Bookrunner my silver.
Flyover too as well.
Now, let me talk a little bit about the.
The demand again.
Our original goal was to have 50000.
Orders of reservation by the startup production. So on November 17th we already have 45000, and it's clear that when we get to start with docs and it'll be closer to like I said, 6% to 5% to 75000. So I think it's very important to mention that with the high gas prices and everything we see I believe that.
Demand for an affordable SUV is going to grow tremendously and we don't have a lot of competitors in this segment and specifically as knowledge. We also see Europe is picking up with reservations. We think we're going to have a really strong stance in Europe as well without vehicles over there.
And it brings me a little bit too.
Our marketing.
Like I said, we have done relatively little marketing, we tried now out the pop up shop in Denmark and that was <unk>.
Successful, we are planning now to bring our vehicle to Norway, which is one of the biggest EV markets in Europe , right now and we have already done very well in Norway.
Also plan a few other events through the rest of this year, but we really want to kick off our larger marketing event a little later in the year. Once we have fully finished drivable vehicles coming off the production line.
Sure.
In Austria for Magna, we don't really want to blow everything out right now as we have all these orders already so please be patient with that I don't think it makes sense to spend a ton of marketing money right. Now is we are doing so well.
A little bit to the peer update.
This program is in full speed, we are now increasing the efforts on peer as some of the engineers are starting to gear down and out of the Ocean program or have simply just less to do on the ocean programs. So we cannot divert a lot of these extremely talented people over to the payer program and.
That's again the advances by having these fast developing.
Processes, we can actually use people right when they get off the.
The Ocean program, they don't have to sit and wait to start in a program. We have already started the second and the third program. So we are taking full advantage of our team at <unk>.
Something new about the pair I just want to mention at least some news.
We have decided.
Our strategy six session now to go forth with having three derivatives initially on the payer platform.
It's really a result of that we see as such an efficient platform.
It will be fairly low cost.
Say really low cost to manufacturer we are aimed to take a lot of parts complexity out of the platform concentrate on spending money on high technology.
And really interesting consumer features has never been seen before.
It'll be two other variation of the peer coming out of course after we launched appear in 2024 and they will come later in 2025 and 2026, but ultimately these three derivatives we believe it.
It will enable us to sell a million pairs a year sometime in 2027, so fairly soon and we think this is going to be a really important story the growth story of <unk> in the future globally.
Third vehicle update you might have seen that I announced a project ronen. This morning in this.
This vehicle has a unique.
Space within Fisker in the sense of it's really the technology testing platform and to a certain extent.
And what I mean by that is that as we develop here, we need to be able to develop some extreme technology make decisions, whether it be bring it into pay or not it could either be because it's not radio because it's too expensive, but we already see some interesting.
Synergies between even though pair is very low cost vehicle and the Romans very expensive once it comes to technology is really more about.
The value of that technology enables you to do and if it's ahead of everything else. So for example, we are developing I think a world leading wiring harnesses that are super simple Super light and very low cost, but it's really effective and Bukhara can elaborate on some of these technologies, but the.
The rone and is really there to allow us to explore some of those ideas early it will be a vehicle that is super unique.
It has really never been seen the segment before and I know, we showed a picture and it wasn't really clear to see.
What it actually is and some people said it was just a four door sedan and it's not and maybe that becomes a little clearer in the next couple of days.
I will elaborate a little bit on that what's so unique about it.
Also I've set the engineers are very tough task of reaching 600 miles we already know no now that for sure. We will have over 550 mile range, but the target would be closer to 600 miles and if you can achieve that that would be equivalent in Europe testing driving trial of 1000 kilometers. So the idea of course with this vehicle is that it truly will replace.
<unk>.
The luxury gasoline Grand tours out there and I think ultimately the way we have positioned.
The Ronan it we'll be able to both compete against all the luxury electric sedans, all the luxury gasoline sedans and all the luxury sort of sports coops on all the luxury convertibles in the market segment, but from a $100 and up.
And when you look at that entire segment it could be an interesting segment. If you can take an unnatural large part of it and I think we will be able to do that with a rolling and when we show a little bit more about what it offers.
Again that vehicle is developed or run out of England.
Our magic works. So it really is not about focusing or we don't have the ocean teams have been focused on this vehicle, particularly is done in a different development groups. So of course as matrix into here for electrical architecture, powertrain et cetera, but it really is a product thats run separately.
And let me end by <unk> <unk>.
Talking a little about our advanced sustainability vision, we just published our inaugural environmental policy and also expect to introduce our first ESG impact report in the next few months.
In alignment with our belief in transparency and that is well ahead of startup production. So I think in this regard as we've always said, we aim to be the leader in sustainability create the world's most sustainable vehicles and I think that we have shown that we live up to this commitment. So overall I'm really optimistic about.
<unk> future despite uncertainty that's going on in the World and I think it's really to do with our incredible strong partners Magna.
For our Ocean program and Fox Con for our payer program being.
With such large global companies.
Obviously, something that clearly has helped us weather the storms of supply chain issues chip issues et cetera, and so far I can only relay again, we are on target to start production 17 as of November this year.
And with that I'd like to hand, it over to our CTO.
Luca.
Thank you Henrik <unk>.
Beginning with the fiscal Ocean engineering testing and validation is progressing well and is on schedule to achieve <unk> in November .
Transition from stimulated to physical validation and testing and that has been very encouraging to see the results from our physical test match those accumulated tests.
Prototype testing is accelerating globally.
Testing in Sweden.
Explained was completed March chassis systems, such as electronic stability control suspension and brakes tuning was done well.
Statistically powertrain system extreme cold and low friction environments.
The first round of vehicle dynamic testing with early prototype vehicles was performed in February in Italy, with our partner Bridgestone the chassis brake and right characteristics of the vehicles and tie ins with <unk>.
The team is currently performing another tuning activity to further refine the dynamics and white characteristics of the vehicle using both early and advanced prototype vehicles.
Durability testing and high speed high load conditions after suspension components with prototype vehicles was completed already in April .
So we are continuing to leverage <unk> Magnus collective expertise and reach to ensure critical components sourced delivered assembled and tested unscheduled.
With over 450 strong at fiscal yearend hundreds of Magna engineering resources, we can quickly address challenges and re architect is needed.
Our vantage point semiconductor chip availability is improving.
And we are partnering with our supply chain to protect November 17th production plants.
We are currently building the next phase of prototype vehicles with the production intent design and components.
These vehicles are being used for testing all vehicle attributes such as safety Adas.
N V H, which is noise vibration harshness climate for powertrain system performance chassis electrical integration complete vehicle durability.
Some key testing activities with these prototypes vehicles has already begun for safety durability and vehicles dynamics.
We will continue to ramp up testing activities with the prototype vehicle fleet in the month of May.
Finished the first high speed site Krish.
This site moving to form a barrier.
And obtained a green results as expected by virtual analysis as top safety ratings range.
Henrik mentioned.
Dissipated in the management drive along with Henry can get a couple of weeks ago and cards with a prototype vehicle and got to experience firsthand the fully functional software at high speed.
We are focused on delivering all the attributes for borrowers to save and from driving experience.
Examples include torque vectoring for impressive high speed handling premium braking system, and Chelsea tuning for exceptional performance and fully integrated <unk> plus <unk> package.
We are executing on the IC software stack that can flesh electronics controlled units and are progressing well with our over the air hotelier implementation.
The <unk> pipeline is installed the backend is in place and we're already collecting data from prototypes rolling off the line.
Overall, the goals of our digital strategy is to improve the users' ownership experience and develop unique touch points with.
With each customer to create a very positive feedback loop. In addition, we will leverage this connectivity for future revenue opportunities to continue investing in the customer experience.
Now to briefly touch on Pan specifically Panama.
<unk> engineering is ramping and as <unk> gets closer to S&P will.
We will continue to.
Transition resources from the Ocean program two the Pap program.
Through our strong supply chain partnerships and by leveraging innovative software solutions, we are creating a truly revealed an evolutionary electrical architecture for fiscal <unk>.
With so many skus and traditional vehicle consolidated down to a few central computer units.
Without going too much into detail the payout will have our next generation connectivity.
Adas functionality and OTT platform capabilities.
Continually updated with to use software and technology improvements the call will become smarter and safer OLED lifetime it.
It will change how we think about smart mobility.
In addition to the advancements with payout Henrik mentioned project Rone in a few moments ago, we will use this project.
<unk> exploration platform.
You'll have to wait until next year for more details. Thank you I will now.
I'll turn the call it over two Gita, Thank you Luca and welcome everyone. It's very exciting.
Frank as the Q1 2022 marks our sixth quarter as a public company.
I have a lot to get to so I will speak fast with almost six months to Sop, we remain intensely focused on the supply chain monitoring weekly with suppliers drilling down multiple tiers to mitigate any disruptions address input cost inflation and protect protect logistics resilience to ensure timeliness and quantities to earn.
Jack.
<unk> has a firm the production timing and they are now in full execution mode to deploy all the necessary factory tooling beta clients have started production and subsequent ramp up.
And they have confirmed that beyond the current committed volumes. We can further ramp up production in second half of 'twenty 'twenty four into 2025 provided we can scale up suppliers at the same rate now let me give you some additional ocean program update with <unk>.
Past a functional confirmation gateway on March 16, 2022, the program completed 95% of production releases and suppliers have been kicked off a lonely tooling.
<unk> built piece is underway with critical testing started quite explained design progression and releases the launch are all on track.
To shop tooling installation at Magnus tie and suppliers is on track to support the body in white.
But in my pre birds eye.
Bought in by Big trials at the production facility started integration for pre production build for GTA online.
In addition, we have a number of supply chain.
Sure all key ocean suppliers have been nominated on boarded and embedded into our processes. The bill of materials for all ocean bed in has been cost optimized at a highly competitive bid process and detailed cost benchmarking, we are implementing global supply chain management using consolidate.
<unk> centers in China, and EU for optimized routing and logistics.
We have also nominated our third party logistics providers for incoming parts to Magna style and are now into detailed logistic planning for all incoming parts, especially components like batteries, including planning for 2023 inventory cycle.
A dedicated quality team has been deployed for managing critical suppliers for launch readiness and also to ensure on time production part approval process also newness Pee Pap and capacity confirmation.
We have created an executive task force with Magnus and.
And this task force the system magically conducting reviews with critical suppliers, including in person visits to confirm bumper to bumper readiness, but tooling.
Status capacity and Pee Pap achievement. We are also using this opportunity to share and excite our suppliers with our current reservation numbers, which we announced with over 45000 today and discuss opportunities for subsequent scale up beyond our current book capacity.
Relationship with <unk> remains very strong and in addition to see ATL, we have already commenced discussions with other suppliers, but might be sourcing batteries for the larger program.
Our launch team reviews daily any potential supplier part shortages for pre builds and proactively manages.
Support plants logistics, expedite routing and assist tier one and twos recovery plans and provides them assistance to maintain the fact delivery commitments.
Seb integration from physical to Magna to manage end to end seamless integration of parts and communication with our suppliers is underway. We have planned for highly optimized packaging returnable dunnage systems for power delivery to Graz.
Finally last quarter, we proactively rolled out a chip chip delivery requirements or tier ones and twos one year in advance to provide advanced planning volumes for desk. Subsequent suppliers dedicated team at Fisker manages chips chip supply chain and is responsible for all action plans.
Staying on the supply chain topic material and commodity pricing is a concern for everyone. Coincidently vehicle bodies are primarily made of steel which has not increased significantly as aluminum. In addition to battery chemistry approach.
That we decided two years ago enables us to better align the higher priced NMC battery with a premium trim levels margins are less sensitive Conversely in our base model sport, we will utilize LSP lithium iron phosphate batteries, which do not contain nickel cobalt all of our contracts address commodity prices.
As inflation productivity in Forex and some of these critical pricing elements are calculated on a quarterly or in some cases on an annual basis as we go into ramp up and volume production. As a result, we will have better visibility of the actual impact of these world world events to.
Bob as we ramp up in 2023.
Now I want to address the impact of Forex on our commitments as they are a us dollar based company, but many of our supplier contracts are in euros. At this stage, we have benefited from Forex as U S. Dollar has strengthened against the euro.
Year to date Euro has weakened 8% versus the us dollar compared to the same time last year and what's more relevant is the current spot rate, which is at the lowest level. Since 2017. This FX favorability can potentially mitigate some of the inflationary pressures now let me turn to some operational topics during the first.
Quarter, we enhanced our it infrastructure to streamline processes and advanced real time decision, making we've implemented robust systems to create a seamless IP architecture that can be scaled globally for all vehicle programs and for all customers globally, we enhanced our integration architecture to accommodate multiple customer channels.
Partner ecosystems, and physical enterprise applications to provide for a seamless customer experience. We continue to invest in building out a highly scalable and Geo distributed cloud business service applications seamlessly integrate with this cloud it provide a fresh and engaging experience in the vehicle on the web and on the phone we are heavily.
Investing in a state of art analytics pipeline to enter.
Hence the vehicle ownership and experience and to provide real time business decision support as Luca mentioned, our OTT strategy ensures tamperproof high velocity data delivery for software updates and DP configuration, we are aiming to build best in class fully integrated digital platform with full support by experience handoff as the user moves between mobile desktop.
Vehicle.
In addition to delivering a unique customer experience additional strategy will enable monetization of innovative mobility features and services. We believe the revenue and margin potential of our connected strategy will be first of its kind.
Driving these initiatives is a 450 plus global team, which we expect to surpass 800 as the end to see reproduction. Later this year, we established an India headquarters in Hyderabad to support software and virtual vehicle development supporting a seamless <unk> architecture across vehicle platforms globally.
In March we announced crossing 40000 reservations and elaborated on our ocean pricing strategy at this stage, we do not intend to raise prices for the fiscal ocean before the earlier of calendar 2024, or the sale of the first 40000 Ocean units based on customer feedback, we expect much of 2023 production to be Facebook.
On premium trends, including the fiscal Ocean, one launch edition and the Ocean extreme both of which are slated for 68999 MSRP in the U S.
However, we will take a prudent approach and following material and commodity pricing and benchmarking our peers at the time of ramp up.
As we get closer to startup production, we are intensely focused on delivering an exceptional customer experience both inside and outside the vehicle.
Digital themes of knee deep in configuration development web and mobile development to swap on the physical experience previously announced that our first two experienced centers will be in Los Angeles in Munich at those centers will be ready to welcome customers later this year.
Emulation at the relocation is planned to begin this month. This is an attractive time to be in the market for new retail facilities, and we look forward to announcing additional locations in the coming months.
Our experience centers will complement additional consumer experience.
And enhance the overall customer journey, we just came back from a European tour of exceptional facilities and have several allies in preparation for launch in various European countries. We continue to expand our global footprint with 15 subsidiaries bond or in progress preparing for a seamless customer experience in each region building on our <unk>.
Existing pens in Germany, Austria, and the U K, we have now from subsidiaries in India, China, France, Denmark, and Canada and in recent months with an additional half dozen countries currently underway.
Now I want to turn your attention to pair very excited about this program. We are taking all our learnings and IP from the ocean and focusing on a highly affordable and ultra high volume Super innovative vehicle. The concept phase is complete and we are actively looking to identify content that can be shared between ocean and pet.
Whilst there will be plenty of new innovative content and the pair carryover parts will benefit the bill of materials for both ocean and.
We anticipate the sharing of components and IP will further help us optimize R&D and Capex investments, which would typically be in billions for traditional OEM. We also anticipate volume based reductions for <unk> due to its high volume expectations and especially for parts that can be shared amongst all our vehicles as Luca mentioned pay will have.
The state of the Art E architecture, and we are now actively engaging engaging suppliers on both carryover and also for new long lead tooling.
Tooling items with respect to our manufacturing facility in partner Foxconn received <unk> approval for acquiring lots down last month and whilst they have extended the closing date by a few weeks they have assured us that the deal closure is on track.
Turning now to our first quarter results.
Alan sheet in 2022 outlook, our Q1 operating expenses of $123 5 million or $118 4 million ex stock compensation expense align closely with internal expectations and the guidance. We provided on the Q4 and full year 2021 call.
Capital expenditures of $45 8 million was slightly below Q4 levels due primarily to the timing of capex billing by our suppliers operationally the slight decrease in R&D in Q1 versus Q4 was primarily the result of the completion of many key engineering design and development.
Stones as we are now moving closer to execution increase in SG&A expense in Q1 versus Q4 was the result of significant growth in head count and marketing expenses related to consumer electronic show in Las Vegas, and mobile World Congress in Barcelona European market is very important for fiscal <unk>.
We discussed our partnership with Lego, a leading European public EV charging network with over 13000 locations across 15 European countries. Lego is also in the process of expanding the network of innovative fast charging stations. This collaboration will benefit our customers and create a competitive advantage for <unk>.
We invested $10 million in our legacy pipe and are working to develop seamless integration of our legacy network onto the Fisker App and we will offer 12 months of free charging on the Lego network to ocean customers that registered their vehicles before March 31 2024.
During the first quarter, we recognized a $5 1 million mark to market gain on our languishes in other income. This will of course fluctuate each quarter based on <unk> share price regarding the balance sheet. As you can see from our $1 billion 1 billion cash balance we have stayed disciplined with our spending and have the resources to fully fund the ocean.
Program launch in November this year and to stay on track with our other projects in 2022 looking at the Ocean ramp post November we have developed a robust working capital model and we are in discussion with global banks exploring non dilutive asset based borrowing facilities to fund our working capital to support our growth in 2022 and <unk>.
And we have bolstered the finance team with 10 additions so far this year, including <unk>, our new VP of Treasury and Investor Relations, a seasoned finance and capital markets leader, who will assist me in prudently managing our capital stack and maintaining a sound liquidity profile, we have demonstrated access to capital markets. Most recently with our <unk>.
August 2021 convertible and we maintain an effective equity shelf, which enables us to be nimble and positioned to bolster our balance sheet in support of future growth opportunities. If we see the right time and opportunity in the marketplace turning to our outlook.
As noted in the press release.
Overall, non-GAAP Opex plus Capex guidance for 2022 is $715 million to $790 million, which is consistent with our expectations provided last quarter. This compares to a total of $458 million in 2021. The bulk of the spend is continued execution of ocean through launch plus cost.
Running the business, but their R&D spending ramping up in second half of a deal.
Really to get Capex is exclusively for ocean and for some experience centers as you don't expect any significant capex on pay this year. Finally, as we approach launch I want to reinforce something that is unique to our capitalized strategy all manufacturing planning and launch costs are included in this guidance, including the cost of manufacturing the initial ocean volume.
In 2022, any sharing of launch cost with our partner, including Unabsorbed overhead the manufacturing facility a prenegotiated and included in our guidance, which helps us avoid the uncertainty and cash spending volatility around the launch period that plagues. Many startups, we wanted to make that clear for your modeling purposes.
I am extremely proud of the entire fiscal team for all the accomplishments year to date and the steadfast pursuit of launching a fantastic vehicle on time, we're now happy to take your questions.
Yes.
Thank you operator.
Go ahead.
We will now begin the question and answer session.
To ask a question you May press Star then one on your kind of thank you Pat.
You May you can speak Chinese please pickup your handset before pressing the keys.
If any time your question has been addressed and you would like to withdraw your question. Please press Star then two.
You have the first question is from Adam James.
<unk> of Morgan Stanley . Please go ahead.
Thanks, a question first of all data.
You do sound very.
Comfortable might be the wrong word, but not particularly worried about.
The supply chain and raw material environment now granted you are not in production right.
Right now it won't be in any significant volume this year, but.
If I had to say what area what areas of either.
Raw materials supply chain or specifically battery materials.
<unk> is really on higher alert.
And they're getting more of your attention.
Yes, great.
Great question.
Don't want to give the impression that I'm not worried about supply chain.
It's just I went into a great detail to explain today, because I'm going to give.
Little view oversight of what we're doing on a daily basis, we're seeing the same problems that everybody else is seeing but we just figuring ways on how to solve for the supply chain. So that's the first thing. The second thing is we don't know what we don't know we do have exposure to Europe , clearly because we are manufacturing.
So it's hard to predict if.
Some of the events, let me see in Europe with respect to a recession or with respect to the war could bring.
So far we are.
Checking in with our suppliers on a regular consistent basis, and we are making sure that they are securing parts that they need to for our production and ramp up and areas, where we feel that there might be some risks. We are trying to put containment plans in place, but again I don't want to give the impression we don't have any.
Problems, we do like everyone else, but we are just collectively working with magna to find solutions, whether it's the secure chips to stockpile them, whether it's to get into legal agreements.
One thing for example, I can give you.
We had some issues with semiconductor chips believe it or not on the beautiful 17 launch in screen that we have in the vehicle and I know that we had a detailed discussion with foxconn yesterday, where they had factory closure closures in China, but they have resolved that and they are clearly working with us.
As a partner and we are on our way to deliver screens for a testing phase and find me ramp up to production. So again, we do have problems, but we are just finding better ways to solve them.
<unk> and just one follow up for me is on funding.
I think I think investors on this call.
Expect that youre going to.
<unk> hit your startup production in November and you've mentioned in your in the.
The press release that you have a funding up to startup production.
But you Didnt mentioned ramp and I think thats a reasonable expectation.
You will especially been following your guidance of Opex and Capex that you will.
You'll end up.
I don't know a $400 million range or thereabouts by the end of the year and so I think by most People's definition, you want you want more capital by the end of the year or shortly after startup production. We can debate this year and next so.
Most of our modeling and capital raises in their forecast from what I've seen.
I think this year we've seen.
Making evs in Europe , specifically, probably getting.
Increasingly strategic importance, particularly with governments that see the crisis the energy crisis in Europe , but at the same time the capital markets environments, a lot more difficult. This year than it was last year. So kind of help I know there's not much you can say, but just wanted to kind of try to give you another opportunity to address the funding, which is which some on this call.
You might see it as kind of a binary event like you got a ramp is going to be issues. When you ramp you're going to need capital Howard what areas what else can you say with some details on what youre exploring between brands.
Loans equity that just anything else there were just help a little bit of help help with the discussion, even though youre not going to announce anything today I appreciate that thank you.
Yeah, absolutely. So first of all again, Adam I want to correct that we have funding.
Not just for the launch of the OS shouldn't we do have funding beyond it obviously it doesn't cover the working capital and there is a point next year when we do.
Have a period that we need working capital and as mentioned we are talking to several banks to see what we can do with respect to working capital.
We do have tons with all our suppliers and the range anything from 30 days to 120 days, so all our suppliers supporting our working capital along with us.
In addition to the existing cash balance in addition to working capital and in addition to supplier terms. We are of course talking to multiple groups.
Oems when they want emission credits as I've mentioned before we also have an interest on the ocean platform from another OEM.
We are in deep discussions with those as well and if you recall, Adam we have filed a shelf.
We are ready if the market conditions are right and if we feel we need to bolster the balance sheet, we will take an opportunity whether it's equity or debt.
That's a discussion to be had with the bankers, but again, we will make sure we take every opportunity to consolidate the balance sheet.
Thanks Peter.
Thank you.
We now have a next question from.
John Murphy with Bank of America. Please go ahead, when you're ready John .
Good evening everyone.
So I wanted to start first with project Ronan.
You have to confirm whether that's the second vehicle after the Magnum platform I know there was an intention to launch a packing vehicle off the <unk> platform, but a GP sports car and crossover a fairly different architectures. So are you able to comment on which contract manufacturing partner that vehicles coming from whether it's magnified.
Our partner you have yet to announce.
Okay.
Yes, Hi, this is Henry thanks for the question. So we are planning a second vehicle off the ocean platform, but it's not the rona the Ronan will be.
What I would call a low invest low volume vehicle, but what we're doing is we're incorporating some new technology. For example, we are looking to integrate.
Our battery pack in a new way.
Which will give it enhanced.
Energy density and also lower weight and Thats why we have the aim of 600 mile range, which would be at least as us up to date the longest range for production car, we'll see what else is out at that time, but no. It's not using the ocean platform. However, we are using certain ocean components in the Rona.
Which makes it a much lower in invest vehicle.
And that new platform by the way will probably spin off some other vehicles in the future as well, but it's really a.
Vehicle that will showcase high technology, it's lower volume lower invest but on a different platform.
Okay, Great. That's helpful and then I wanted to follow up on.
Some commentary in the press release that you plan to on a pricing band for vehicles up to that 40000 reservation number at the end of the corner. So has that been more about your commitment to your customers in an effort to establish good well.
Or is it more that you have a handle on the cost side going to Peters comments that you guys are getting creative.
With some of the solutions there.
Recent pricing or the compensation you see us go after the necessity to pass on a customer in the near term.
Yes, I think there is several answers to this question one it's clear that.
That a lot of customers that I think are reserving vehicles particular from startups.
Are looking for.
I think transparency honesty.
We are building a brand I think the number one thing we have to do is take care of our customers. The good news for us is that.
A majority of our customers so far have indicated they want to buy.
One of the two more expensive vehicles and as you know we are launching first the.
A special edition Ocean, one which is about $69000, we are starting to tick.
Firm commitments.
So that vehicle from July one.
And that will be limited to 5000 after that we continue with extreme and because we are use because we are selling these very higher end or the highest end vehicle first we have a much higher profit margin and combined with our data set in terms of managing.
The cost extremely well from our purchasing and engineering and finance side, we have a lot of leeway, where we felt we can we can really make sure that we can commit to a first 40000 customers of not having to change the price now than as we then launch.
Eventually the base model as Peter mentioned, we do have the LSP battery, which is not so affected by price increases, but we have said and we will make some of those as well without a price increase but.
40000 vehicles 40 to 50000 vehicles, what we can make next year. We are trying still to see if we can ramp a little bit in the end of next year. So we might get higher but we have set over 40000 vehicles, there will likely be an increase because that will be about a year later and I think every OEM in the world at least increases the <unk>.
Price once a year in fact, there are some Oems that are increasing their price every week or every months. So I think that for us. It was about staying true to our customers and of course still managing the finances and then we are able to do that because of this high profitable first vehicle, we're sending out.
Okay.
Okay understood and one last one if I may I wanted to follow up on your comment of pushing Magna triple capacity for the Ocean SUV is that something that.
All onboard weapon and currently planning for right now or is there some.
Got caught hesitation are planning from there I can say.
Let's get started production out of the way the vehicle on the road and see the customer traction before we make the decision to install additional capacity I'm just trying to get a sense for how receptive they are to the conversation of capacity expansion prior to startup production.
Well, our Magna is fully on board on it but we don't have to make any investments or decisions at this point.
We just I just got off a call the magna.
Last week and Im sorry.
Monday this week.
And we don't need to make a decision until about 12 months before which is about the same with CA TL. Our battery supplier. We also need to let them know 12 months before so I would say December January is the time when we have to make that commitment I think is prudent to wait.
So if it's through the turns out that we have 70 580000 orders or maybe even more by the end of the year, then we'll pull the trigger and if we see that trend is continuing and do it but there's no point of doing it now if you don't need to so we don't need to make that decision until December or January . So December this year or January of next year. So we got plenty of time.
But it is confirmed that we would be able to do it.
Okay fantastic thanks for taking the questions.
Thank you I'm going to jump in here with a couple of the retail questions. We received over the <unk> platform. The first question is.
Last earnings call.
Mentioned about a potential fleet order or is there any update you can share yes.
Yes, so the last earnings call or before Ukraine Wall War I just mentioned so.
There was obviously a lot of things has changed.
And one of the thing that changed was we saw an incredible.
Increased activity in googling, the Cisco erosion and I think has lot to do with the racing gas.
Gasoline prices we saw in.
The huge increase in our reservations.
No.
<unk>.
We went ahead and cancelled an Mou, we had with a large rental car maker for a potential sale of quite a lot of vehicles.
And I did it because I realize that with this increase in reservations.
We're not interested just to do a sale to a rental car entity because in endo, Dave you can make a lot more money.
Specifically, we are flexible lease even with our normal sales of vehicles. Because we also have a mobility model, where we are selling over there updates. So while we are doing is we are still pursuing talks.
For a potential sale, but it has to include a much more innovative business model, where we can generate revenue during the <unk>.
Active use of these rental.
Vehicles, meaning we need to make sure we can make some revenue on these vehicles why the emphasis of the rental car company and we are willing to share some of that revenue. So to build that business model takes a little longer time, and we wanted a little more freedom to do that we were not in a hurry just to announce any random deal I think historically.
Selling to rental car companies have not been great profitable deals for any carmaker. So if we do it I had a very clear mandate from our CFO . It has to be more profitable than just even if we sell on vehicles. So we need a new business model for this and I think we can see some interest in that because we would also offer some revenue to rental.
Carmakers. So some people will continue to work on.
But not something we'll do for any cost I just wanted to add to that.
What we've seen and I experienced the rental car companies are still in the overhang of previous deals where they are expecting 12 to 24 month deals buybacks.
I think evs require less of is there more sturdy so for some of the rental car companies. They have to come to terms with the fact that evs behave fundamentally differently cars of the future are connected so far.
From our perspective, we still have a limited production at Magna and we would like to clearly do some of the smaller fleet deals that we've already done but a deal that's in.
<unk>.
A big order 30, 40, 50000 would require a very unique business model.
And the next question is from the retail as shareholders. What can you say regarding all the speculation of the Fisker an Apple partnership.
Well I think people are reading too much into this one.
As I mentioned before the inspiration for naming our second vehicle pair was a bit of a joke kind of playing on our partnership with Fox Con.
Call It personal electric automotive revolution, and they kind of fit really well with that name.
But I would say the payer will be such a unique and disruptive vehicle that we believe and I believe it can be the automotive industry. The automotive industry with the Apple iPhone was to the cell phone industry really revolutionary.
And.
No.
I think.
I don't know if you can say you can compare apples to pears, but I definitely think the Paris is going to be such a unique amazing vehicles, but there is absolutely no.
Deal our talks with Apple the company at this point in time.
Thank you operator can you continue with the queue.
Thank you we now have.
<unk> <unk> from BNP Paribas Exane.
Your line is now open James.
Hi, guys. Thanks.
So within the 45000 reservations as of May 2nd the associated potential revenue side to be $2 $5 billion. So obviously, a pause in ASP 56000, but it sounds as though in the prepared remarks right. All of 2023 production could be at that extreme trim price point in the high 60% range. So.
Just wondering if you can your impact is what are the build intentions for next year I believe the number is about 50000.
And what that price point could be.
Well, let me just explain I think that we are using a very conservative.
We are calculating this $2 5 billion potential revenue and Youre right. They are using 56000 and we are using that because we have looked at <unk>.
Certain.
<unk>, we have taken with our reservation holders, but truly we don't know until we do all our final.
Get our final commitments from our.
Our customers, but what we do see is that we probably could make almost all the vehicles extreme but we have committed to deliver a certain amount of base vehicles that will be low there will be a certain lower volume because we first are going to fulfill most of the extreme motors and then some ultra and they will be delivered in the <unk>.
Year. So I think we have given our conservative guidance on it could be very well if we go over that.
Okay got it and then.
Do you have any color on Fox Con Finalization of the Lords, which town planning I mean, there have been some recent announcement to my understanding you might not be your high just yet on that asset transfer. So wondering if you could share anything on that point and then you confirmed the 2500 payer reservations you mentioned the 1 million unit.
<unk> in just five years right 2027.
Can you remind us what the Max capacity potential is at Lordstown, just Fox John have any other Oems there'll be working at that plant to your to your knowledge.
First I cant speak on behalf of.
<unk> they are a public company, but all I can say is there's been no change in our conversations are planning with Fox con on producing the pair in Ohio.
Plant I believe can go up to 400, or maybe even 500000 vehicles a year.
To my knowledge.
I don't know any other than then I think there is a truck that they are thinking to do there, but what I understand is we have a clear priority and we will take definitely vast majority of the volume in that plant.
Obviously, the 1 million vehicles are not all going to be produced in the U S. As I've said earlier we are.
Be contemplating production of the parent China in Europe , and potentially a D contented, even lower cost version in India eventually.
So I think that we have enough time to sort out the volume months of 2027.
Also remember we are not actively promoting the pair and initial perform quite frankly.
We are we simply over the reservation on request of I think some enthusiast I want to make sure. They got first in line and we did also because as I mentioned, we are are talking to a few fleets about purchase.
So.
We are convinced about our sales targets, but.
At this point, yes, there has been no change to the compensation reflects call. Yes, just from a public update I think about five or six days ago, Foxconn had announced that they had received there.
Regulatory clearance on surface, which is sort of the foreign investment in the United States, given it's a factory and I think that obviously the regulatory aspect that they needed to get through which is a big hurdle. So that was publicly announced.
Got it appreciate it.
I think operator, I think we have time for one more question.
Thank you.
Our next question from Jason Scott as RBC capital markets. Please go ahead, when you're ready Jacob.
Thanks, so much for squeezing me in here.
And I just want to go back to.
Dual chemistry strategy.
Especially in a complex and how youre talking about launching vehicles I understand youre going to auctions.
The first edition of <unk>, I mean, you're talking about really.
Very high mix of.
The upper trim levels.
But if you are using LLP for the lower trim levels.
From a from a margin perspective really start to tip. The scales. I mean, we just we just saw Tesla right, 20% operating margins largely on the back of.
Really upping the <unk>. So I'm curious about your thoughts there in terms of I know traditionally you start and high end.
Move down, but given what's going on with the metal prices like why wouldn't we consider or why wouldn't you consider a change in the next launch.
Because when you have one vehicle at 37, 569000, and you clearly have a way way higher margin on the six to 9000 model. So there is a much more headroom and we don't have we're not affected like some full aluminum vehicles like some of those you just mentioned.
They obviously have a big impact right now because of the rising aluminum prices our entire body is out of steel and some composite materials in fact.
Something that I think nobody knows at this point nobody has even noted we have designed the ocean originally to have a very very low insurance cost and what we did was we actually made both the front Fender and very uniquely and may be one of the few cars in the world.
Vehicle that actually have the re offender in plastic bumper material like to have on the front and rear bumper, which means that you can actually bump the reoffend without even having to replace that there is not too high speeds and if you do have to replace it.
Yeah.
Hold it off and put another vendor on whereas normally the entire body side stamping. This part of the reoffend are and it can cost.
Credible amount of money to repair it now that now also comes back to the fact that because its plastic we don't have these issues with extra costs. So.
No I think it is a bring a brilliant tactic because when once we need to go up in volume next year.
<unk> will still be a cheaper battery, whether it be have increasing raw materials cost or not that's why we chose in the first place look I'm going to be honest I didn't forecast.
The Ukraine War back in early 2021, when we chose LSP.
We chose it because its generally cheaper and we also chose it because we think that the ocean in the future could be a second vehicle that you buy and maybe mainly use in in the city and for that you want Super fast charging and LSP actually offers.
Faster charging even though has less range, but offer fast charging that NMC and other other battery technologies. So I think we've got a real jewel here and I think because we.
It looks like at this point, we could be one of the first companies to offer this in the U S and I.
As a real competitive advantage and we can always decide to raise the volumes and that's obviously, what we're doing right now with Magna.
Just one point I wanted to add is that the reason why not just.
The customers want.
Fully.
Optioned out a trend the reason to also start with that is because it has all the features that you want to all the suppliers to scale up with every single tool and you want to make sure that we are able to showcase every single feature in that vehicle to the customers. So for us it is.
Really critical it's all wheel drive is silicon carbide.
NMC long range batteries, but the.
California mode. It has solar roof. It hasnt rotating screen. So you really want to showcase the best attributes against benchmark first.
Okay. So it sounds like maybe you know.
Maybe just by the rough math like the margin gap between the trends has narrowed but it's still makes sense to go to go out.
And then maybe just you made a comment about.
The guidance assumes.
Any sort of I guess.
A lack of absorption in lock volume with your partners can you just expand on that comment I'm not sure I quite followed followed that sorry, yeah sure absolutely absolutely. So there's two things to think about one thing to think about is that when you have a facility, which is 9 million square feet in the case of magna's tire or.
Some of the peers. They have four 5 million square feet, you always have unused capacity. So in our case, we are obviously only paying for the capacity.
Use and the second thing is in every vehicle launch.
As always something called inefficiency, meaning how many hours it takes to assemble a vehicle because youll fundamentally cleaning your workforce to assemble the vehicle an optimal number of hours would you call HBV or hours per vehicle. So an equal electric so in our case, we are not paying.
Magna for any inefficiencies magna in defense above and beyond what we've currently agreed and that's factored into the guidance because magna his responsibility is to get to those optimal hours. However, if you're a start up or if you're a company that's assembling its own vehicles you have to.
Factor in those inefficiencies, which could be as high as 100 hours per vehicle and you can calculate if the.
Manufacturing costs two to $3000.
It takes about 20 hours to assemble a vehicle if youre going to $100, what does that duty of gross margins.
And those inefficiencies.
Okay, great. Thanks, Thanks for that I appreciate it.
Thank you operator, I think that's all the questions. We have time for this afternoon.
Yes. Thank you very much. Thank you everybody for listening in.
We are super excited about our next trip over to Austria in mid May and.
Do another test run in the first corrosion. Thank you very much everyone.
Thank you for joining this does conclude today's call.
You may now disconnect your lines.
Yes.