Q2 2023 Fisker Inc Earnings Conference Call
Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily.
Please stay on the line. Thank you.
[music].
Good morning, and welcome to <unk>, Inc. Second quarter, 2023 earnings call.
All participants are in a listen only mode.
The speaker's presentation, we will conduct a question and answer session I'd like to ask a question on the star.
Star followed by the number one on your telephone keypad.
This conference call is being recorded.
I would now like to turn the call over to Frank bark VP of Investor Relations. Thank you. Please go ahead Sir.
Thank you operator, Hello, everyone and welcome to <unk> earnings call as the operator mentioned my name is Frank <unk> VP of Investor Relations and Treasury here at Fisker. Joining me on today's call are Henry <unk>, Chief Executive Officer, Dr. Mccarthy, <unk>, Chief Technology Officer and Dr.
Pittsburgh, Chief Financial Officer, and Chief Operating Officer. Please note that today's discussion includes forward looking statements about our expectations actual results for future periods are subject to risks and uncertainties that could cause our results to differ materially from those projected. These risks include those set forth in the press release, we issued earlier today as well as those more fully disk.
Bribed and our filings with the Securities and Exchange Commission todays discussion also includes certain non-GAAP measures, including non-GAAP operating expenses quantitative reconciliations of our non-GAAP financial information to the most directly comparable GAAP financial information appears in today's earnings release with that I'm happy to turn the call over to Eric.
Thank you Frank Good morning, everyone. Thank you for joining us today for our second quarter 2023 earnings call first I would like to thank all of our stakeholders teams and partners for all the hard work and the continuous progress we have made in 2023.
The past few months, we have achieved several significant milestones our first product <unk> achieved best in class range, providing access to large addressable markets commenced production ramp up and began global deliveries.
We also had a large scale media test event, completing an important financing and unveiled our future product lineup yesterday.
Believe all of these achievements position us well for long term sustainable and profitable growth and talking about profitability.
I don't know of any EV startup that ever made a double digit profit margin on the very first cars that we have delivered and I think that really sets the stage for where we're going in the future and of course. It is interesting to see that nobody's really mentioning that anywhere in the news. So I think it's very very important to mention it here and I know our CFO Scott <unk>.
About this as well because it really highlights our excellent engineering teams, how they executed the ocean the build of materials of that vehicle and what the possibilities are in the future.
This vehicle and for our future vehicles quite frankly.
It's Ben.
Exciting to get the ocean in the hands of our customers over the past few months and we look forward to quickly expanding deliveries across our launch markets. The physical team and all of our partners are working around the clock to bring the best in class oceans to our customers as fast as we can.
Our direct to consumer sales and service network supports exceptional customer experience, our north American flagship location at the Grove in Los Angeles has completed all construction. We are awaiting final inspection next Monday and as soon as that is completed we expect to open the location.
Im really excited to open this store as a truly demonstrate the experience we want our customers to have in addition to the comprehensive 24 seven digital storefront, we are establishing a growing physical retail footprint to complement the virtual experience. We currently have customer locations opened in Austria.
Mark, Germany, Norway, Sweden, and the UK and we expect to quickly expand our physical presence to more cities in North America and Europe throughout 2023 additional upcoming locations include France, Alright, Zona, Maryland, New York, and Tennessee, which will bring current locations of <unk>.
<unk>. In addition, we have a few dozen other properties negotiation in North America and in Europe , and they will also come online this year.
We have also expanded our internal service, Kevin capabilities and physical technicians in the field and station of a stage that our physical locations.
We complement our third party service to complement our third party service providers that offer broad geographic coverage in each of our markets and you can actually see how fast we are able to respond to customers and.
I think this is really has shown that our broad service network is working really really well we have started our test drives events as well and will extend these two hour ocean one customers, who have not received the vehicles, yet and of course, the deposit holders and new customers in North America, and Europe going forward. We now have the vehicles we need to.
During these test rides, we have teams ready and in the last few days, we exited <unk> done quite a lot of test drives.
Let's do a little bit of detail Ocean update here, our number one priority is launching and ramping our high quality <unk> with class leading features and range. We're excited to have begun initial deliveries in Europe , and U S, which will be followed by a fast ramp.
In Q2, the Ocean extreme completed U S obligation achieved the EPA range of 360 miles, which is the longest range of any electric SUV and our class and of course in Europe is actually the longest range of any electric SUV unsafe.
I had the pleasure of being on hand for initial customer deliveries, both in Europe , and Germany, and Denmark last quarter, and we have now delivered fiscal ocean to customers across four countries on five U S states and a rapidly expanding to be in all of our nine launch countries and of course, many more states in the U S.
We are prioritizing deliveries of the ocean <unk> and extreme trends throughout most of 2023. We are currently working through the obligation process for ultra and sport trends, we anticipate customers deliveries of those terms will begin in the fall and Luka will also touch upon that a little later.
I'm pretty excited actually that both our ultra and the sport also will.
I anticipate they will actually also overachieve.
The specifications like range when we get the final certification. So again I think both of these vehicles will be best in class and offer more range than any of our competitors. So this will obviously broadened the entire customer.
All the customers that we have available in this segment.
The Ocean is a large total addressable market in both Europe , and North America, which is where our nine initial launch countries, but we also have plans to expand into other regions as well for example, we announced a limited edition delivers into India, which will commence in Q4 of this year 2023.
And we actually see India as a key market for our vehicles, especially the lower priced pair that we showed yesterday and.
Now of course, India now is one of the largest car market in the world and we expect from 2026, India actually will start accelerating in electrification as well and of course, we have announced that we will open a delivery center later this year in China, and we will start deliveries in Q2 next year in China.
Yeah.
Alright on the per.
Per this program design and engineering continues to progress well.
For those who had a chance to maybe see the real vehicle yesterday, you can see we pretty much finalized the design of this vehicle is frozen.
<unk> concept is frozen.
We have made some amazing steps towards creating what I think is going to be the most exciting vehicle of the century.
$30 parts, count, which has actually reduced by 35% is amazing and I want to congratulate our innovative engineering team to come up with a completely new body structure for this vehicle.
Super excited about that and that's really one of the reasons. We can self fund the 30000, and we will still make money on it and it is scheduled to go.
These are available for sale in mid 2025.
And of course, we continue to work was focused on finalizing plans for an innovative manufacturing setup that will require that we will require for this uniquely engineered tier.
And of course yesterday, we held our product vision day in California, and it was quite exciting to show all these vehicles I believe that fundamentally in the automotive industry. It's all about product is not just about any sort of car and just making a another electric car. We have seen in the past that some electric cars came up but they werent really.
Selling I think we have a fantastic phenomenal product lineup and I think the ability to go into some market segments, where there is absolutely no competition, it's going to give us really the potential to catch up to graph a giant part of that market I mean, if I look at it they're really.
Isn't any.
Electric vehicle under $30000 today, and let alone in a cool electric vehicle and I think we showed yesterday, how cool the Paris and of course looking at our pickup truck the Alaska that vehicle.
Which will incentives.
It's $37900 there is no electric pickup truck in that segment and I don't believe Theres any electric pickup truck as cool as sporty as the Alaska is in with our versatility. We showed in that vehicle with a bed going from four 5% to seven five feet.
<unk> is just amazing we already got a ton of response on this positive response for that vehicle I think we already got a thousand orders overnight and I hope, we're going to keep expanding the reservations when we get the word out about this truck in the future.
See huge potential there and the good news is that that vehicle has a lot of ocean carryover parts. So we should be able to get that very fast into production and I believe youre going to have very high profit margin. So that vehicle as well and then of course, we also showed in.
An expansion on the Ocean was a force E package, which I think is just going to broaden even more the ocean market going into the more hardcore hardcore off road market, which I think is really unique as well because there really isn't any off road EV in our market segment.
It is available for people, who want to enjoy off roading. So I'm very excited that we are going to offer that package already in Q1 next year and then of course finally.
<unk>.
It's going to be a low volume car I think is really about exploring new technologies.
In the end of the day and of course is going to build the brand, which I think is important as well is not going to be too big an investment is going to be low volume handmade vehicle, probably under a thousand units, but it's a super exciting vehicles will be going to showcase our engineering capabilities and creating a vehicle with the world's longest range 600 <unk>.
So I'm really excited about that as well.
Finally.
Let's talk about sustainability because it is one of our most important brand pillars, if not the most important so the hard work and ESG continues we recently published our lifecycle assessment.
For the fiscal Ocean, which is a cradle to grave.
Angela licenses that details the carbon footprint of the ocean.
The findings were that the physicals and has the lowest published carbon footprint of any electric SUV. The lowest so we didn't really keep to our promise of making the ocean. The world's most sustainable vehicle and it really highlights the unprecedented sustainability through five phases of the vehicles life from raw.
Reals to the vehicles and have US we are very pleased with the results and believe it shows how sustainability is woven into every aspect of our business and is core to what we stand for fiscal <unk>. We are progressing on the companys targets aligned with the United Nations sustainable development goals that are materially relevant to our company.
So I think overall, it's just absolutely been a fantastic week for us showing all of these products showing for the first time I think any company on the car sold at double digit margin I think it's huge.
Our.
Really expanding and ramping up our deliveries, yes, we started a bit slow.
I think what's really important here is that we can very fast get to our 300 of cars 300 cost production at date, and we will achieve that with the next couple of months. So we are on target for that which ultimately when we get to 300 cars. A day is 6000 cars a month and that is over achieving on a yearly.
Production of 50000 was for our original goal, but we will over achieve on the monthly target already this year.
So I am very excited about the future and I would like to now hand, it over to book Hart, Our Chief Technology Officer.
Thank you Henrik.
During second quarter, we completed dual continent obligation, both Europe and the U S for the fiscal Ocean extreme.
And achieved the lowest range in this segment as Henry pointed out highlighting all of the hard work from our engineering teams and our partners.
Currently working on Canadian and India obligation for the extreme which we expect to receive later this quarter. We are also focused on homeowner gating, our ultra and spa trim levels Dierdra follows relatively streamlined process given the similarities to the extreme versus display.
<unk>, which is a different powertrain and other characteristics, we expect to receive approval to sell these trims in the next months or two and then initial deliveries should start in the fall.
As we have discussed before a vehicle software and will continually be tolerated.
The initial oceans with essential features which will be enhanced over the coming months and will be complemented by more advanced capabilities.
We are currently working to finalize the integration of new features and packages such as integrated driver assist and outdoor <unk>.
Which we can push out over the year release since all vehicles are fully connected.
We are incorporating early customer feedback to improve the product our teams are working around the clock to make refinements.
We then slash updates to the fleet of vehicles.
We are very proud of.
The quality of the ocean and seeing positive external feedback from those who participated in the media drives in Europe . The past few weeks, yes, but we know there's always room for improvement and doesn't engined vehicles will continually updated.
But we are pleased with the excellent product to bring to the market.
They are ready to launch our OTA updates and we expect to deliver the first over the air update to our customers that will support and hanes connectivity et cetera.
Now, let me provide an update on payer.
Leveraging our experience from the Ocean program and the rapidly expanding in house technical capabilities to create a truly revolutionary next generation of mobility.
As I emphasized yesterday at the product creation day, the pair really exemplifies what it means to be a data centric vehicles.
Our team has developed a very fast high performance centralized computing platform because fiscal plate.
It supports modular upgradable single box compute.
And communications within the vehicle.
It's an all in U E architecture designed on a blank sheet to reduce complexity with distributed zonal architecture.
The past highly connected vehicle with cloud analytics.
Allows us to continually monitor and improve the vehicles via rapid over the software updates that makes the vehicle smarter safer and perform better over its lifetime.
Please go bleed. This is scalable reusable and flexible platform that can be used for the various evs in physical product lineup. It's truly a win win for fiscal <unk> and our customers. It leads to lower cost and less software development for fiscal resulting in more sustainable and affordable vehicles.
By giving customers more flexibly vehicles that are constantly refreshed and improved <unk>.
Resulting in increased vehicle long liquidity.
In addition, we are introducing significant innovations in how hardware and software developed.
Integrated and tested much earlier in the vehicle development cycle three called shift left.
<unk> left transformed institutionally sequential automotive development poses into apparel.
It enables designers to find mistakes earlier in the design process.
They are not only easier and cheaper to fix but also been Oems can have visibility into the earliest parts of the design through virtual models.
But the shift left strategy design teams can integrate functional safety and reliability into the PCB designed from the start.
Begin software development and identify problems up to 18 months earlier before opera is available.
And incorporated security and quality into the software during development and testing and across the supply chain.
We are implementing the tools and processes to achieve this full payout enrollment and any future <unk> programs.
We have built an amazing team in house and have some world class partners.
The physical Ocean is an exceptional class leading Vega.
I'm excited for the years of work, we've put into the program to be experienced by more and more customers in the coming months.
We are well positioned to support ocean maturity and upcoming vehicle platforms.
That forms we shared yesterday. Thank you I will now turn the call over to Dita.
Thank you Brad I wanted to begin by thanking the entire Cisco team, our suppliers partners customers and investors a lot of hard work and focus has gone into building a globally. The brand and it is extremely exciting to see the fruits of our labor, but more and more ocean getting in the hands of our customers are super excited.
Excited and had chills and I saw a great product lineup that the team has put together and I hope excited our customers future customers.
This amazing product lineup in the first half of the year, we received approval to sell the ocean in Europe , and U S and commence deliveries in both regions.
Unprecedented and never been done before to actually receive homologation and deliver product in multiple countries at the same time and as a startup.
The focus for the company for the second half is now expanding into additional geographies and ramping production and delivery volumes I will give a little bit more detail later on now.
Now, let me provide an update on our manufacturing and supply chain status.
We made really good progress ramping up our manufacturing capabilities, ensuring that vehicles coming off the line are of the highest quality. Our main focus has been on supply chain maturity and making sure suppliers.
Ramping and Theyre delivering just in time the volumes that we require to meet our targets while as a whole we've seen some supply chain disruptions easing, we have certain suppliers and sub suppliers, who request a bit more time to ramp and meet any.
Annual high volume targets. These are not unusual during launch and ramp up phases, but these don't relate to any supply chain issues, we expect to see over a long duration of time, while as a whole.
Our supply chain task forces will directly with our suppliers to identify and breakthrough any volume bottlenecks, we need 100% of our suppliers to increase capacity to align with adjusted volume forecast again. This is not as capacity issue, which is harder to solve these constraints just require a little bit.
More time and increased collaboration and we expect all of our supplier partners to be able to eventually achieve our capacity requirements and as Henrik mentioned will exceed our monthly targets and we expect to increase capacity next year. These challenges are common for new high volume platform launches and we are confident that we.
And our partners can solve them.
Now, let's go to numbers, we produce 1022 vehicles and entire Q2, but the majority of the production in late May and June our first partial quarter of production and exceeded our targeted 70 rate of 80 units per day at the end of June .
In the month of July which was a partial month 1009 units were produced up from 741 units in June and peak Daily Assembly rate hit 140 units in July again, a 75% improvement from June peak daily rate.
That's unprecedented.
Precedented first startup.
July production was impacted by reduced shifts and fewer working days due to the regular summer shutdown at Magnus Shire, which continues through August 15th.
Now this is a standard practice for second OEM manufacturing sites, specifically in Europe , which consist of preventive maintenance and upgrades for the assembly facility shutdowns will take place in the summer currently and at year end. We are also using this summer shutdown to help some of our suppliers bank parts to <unk>.
Our volume ramp coming out of summer shutdown, we will be able to immediately resume manufacturing at the rate we looked at due to the highly automated nature of advanced manufacturing today.
Since our U S approvals happened late in the second quarter.
We have begun a standard ocean vessel transport to multiple ports in the United States and in Europe .
And in certain countries in Europe , we are tracking.
This will enable us to expand both U S delivery volumes and geographic distribution in short order.
To give you a sense of the near term upcoming ramp monitor key commodities is batteries, we already have over 8000 batteries in transit to Europe already received.
With a total of 2031 vehicles produced between Q2 and during the partial month of July Magna's tire handed over just under 60 vehicles in June and the rest of the vehicles in July that is around 876 customer vehicles.
And the majority of these occurred as Ive said in late June and July which are making their way to logistics to their respective countries and customers. These include USA, Austria, Germany, Denmark, Sweden, and Norway now, let me talk a little bit about deliveries, yes, we reported we delivered 11.
Vehicles in June added the under 60 vehicles Magna delivered to US in June However, till date, we have delivered over 120 vehicles to customers and as each day goes by we increase our deliveries to tens of hundreds of vehicles every day, because we are delivering.
<unk> countries every single day, so the numbers will only go up every single day.
Looking ahead as we announced.
Our investing in additional battery capacity.
To support higher volumes than originally anticipated next year. This enables us to expand beyond the initial five gigawatt hour annual capacity, we announced in late 2021. This decision demonstrates our confidence in the growth potential of our business fueled by the impressive demand for our class leading fifth corrosion that.
Magnus Shire without having to invest additional capex. We can go to 70000 volume per year beyond that we would have to invest in minor capex. The critical point is to make sure all our suppliers, especially long lead parts get ramped up simultaneously we are.
Already paying attention to growing customer demand globally, and we are going to address increasing capacity with our suppliers already this year.
Our digital first direct to consumer business model went live last quarter with.
With the full digital purchase journey, including financing and insurance offerings, providing a convenient one stop solution. Our approval rates are unprecedented we are very proud to be partners. The case in Santander, providing great rates and solutions to our customers. We continue to enhance the fiscal web and app platforms to allow our customer.
But to seamlessly purchase their vehicles and we plan to introduce new functionality over the coming months. We have introduced we are introducing <unk> insurance and many other exciting products that provide a complete ownership experience now turning to our Q2 balance sheet and 2023 outlook second quarter.
It was our first momentous first quarter with revenue derived from vehicle sales.
Very exciting milestone for our company that brings the company from the Powerpoint from potential automotive company to a REIT.
Well automotive company in two.
Two continents in Europe and in the U S second quarter revenue totaled 825000, driven primarily by initial ocean vehicle sales during the quarter as I mentioned earlier, we delivered 11 vehicles of the 60 vehicles handed by Magna to us, but we had a unique situation during this period.
As three of those vehicles were sold to some early stage investors, who had provided fiscal with capital very early on at lower interest rates and return for the free base vehicle and repeat the difference between the base and Ocean one price and this was not Henrik and myself.
This population represents up to 30 potential vehicles.
Second quarter cost of goods sold totaled 763000, reflecting some costs associated with initial production ramp.
<unk> with what we have guided before.
We saw a positive gross margin for the quarter of 62000 or seven 5%. Despite the discounted early stage investor vehicles, and early operational costs that negatively impacted our margins in the quarter.
Excluding these early stage investor vehicles, our gross margin was an unprecedented never done before by any other startup on the first initial vehicles and 18, 5% and <unk> 18, 5%.
Our Q2 operating expenses totaled $88 million, which was flat year over year.
A 28% decline quarter over quarter that shows an unprecedented discipline on cash management expense management loss from operations was $87 9 million also approximately unchanged from last year net.
Net loss totaled $85 5 million or 25 cents loss per share compared to 36 cents loss per share last year capital expenditures came in at $91 3 million for the quarter, which were driven by primarily supplier milestone payments packaging and facility investments.
With respect to manufacturing.
We continue to prudently access to capital markets to support our business plan during the quarter, we raised approximately $88 million from our aftermarket equity program and subsequently canceled the remaining balance.
Similar to two years ago, when we issued the industry's first or the green convertible. We recently executed an innovative financing structure, which bolstered the balance sheet with a 340 million aggregate principle zero percent coupon senior unsecured convertible notes offering.
Due in 2025, which has the potential to double to $680 million in principal balance after 12 months.
This transaction was conducted with an investor which has deep pockets with over $20 billion AUM, who wishes not to be named the zero coupon transaction resulted in gross proceeds of $300 million of ESCO.
We finished Q2 with 500.
$522 million in cash and restricted cash, which would have been $822 million pro forma for the convert issuance on a gross basis.
Hello to a year ago levels. This cash balance excludes approximately $33 million in VIP receivables, which we expect to receive as refunds or monetize against upcoming sales taxes due to the original issue discount from the zero coupon bond instead of actual cash interest expense.
We will accrete the noncash discount on the P&L as interest expenses.
<unk> 5 million each quarter.
Now turning to the outlook as noted in today's press release, we are updating our production guidance for 2023 to a range of 20000 to 23000 units as our compressed timeline of producing these units in half of the year are challenged by only one supplier.
<unk> near term ramp capability due to limited hours in a day for day labor to ramp that product.
We do not expect this to impact any of our future Years' production capacity in fact, we expect our supplier to ramp further up.
Still anticipate gross margins for the full year 2023 in the 8% to 12% range despite exceeding targets in Q2.
Provided input costs do not change dramatically our overall non-GAAP SG&A R&D plus capex guidance for 2023 is now 565 to 640 million the increase from last year quarter was driven by under absorbed cost prior to production.
Secondly, this guidance balances the asset light model disciplined cost management and prudent investment plans. The fifth <unk> team is now represented in 12 countries and growing and our reach is growing as we continue with the rollout of the ocean one to all our launch markets and prepare for the next wave of countries, we will enter I'd liked.
To thank the entire hardworking fiscal team for all their hard work unwavering focus on launching an amazing vehicle and customer service that we are now providing we continue to show agility resilience and adjust whenever needed to stay on track. We are now happy to take your questions.
Please go to our first question.
Thank you as a reminder to ask a question. Please press star followed by the number one on your telephone keypad.
In the interest of time, we ask that you. Please limit yourself to one question and one follow up thank you.
Our first question will come from Chris <unk> from Needham. Please go ahead. Your line is open.
Oh, Hey, good morning, I just wanted to see if you could help with the timeline on production to delivery as you kind of went into detail on magna's shutdowns. This summer and production numbers for July so I'm thinking that production is going to be very backend weighted to the fourth quarter and does that mean deliveries are going to be kind of deliveries of new vehicles.
In the first quarter of 2024.
To get a sense if I have that timeline right then I have a separate question as well.
Yes, I think.
As we mature our production and we translate what is handed over from Magna to us we optimize countries, where we can.
Managed to deliver earlier earlier in the quarter or countries, where it was.
We have NATO countries.
Countries, which have longer logistics get delivered earlier countries, which have postal logistics get delivered later for example, Austria can pretty much be delivered within 48 hours as soon as magna hands over the vehicles to us just to put things in perspective, when magna hands over vehicles to us they have to be trucked to a train line, which.
As eight kilometers away once they get trucks to this train line they have to be loaded onto the train line. They then make them or if they are tough to Germany or Austria. They have to go on a truck.
Put about six vehicles on a truck once they get to a port in <unk> they have to be loaded onto a vessel just Scandinavian countries into North America East Coast is about 10 days to 14 days West coast is a bit longer. So obviously these logistics to a certain extent govern how we manage.
Veeco movements from Magna to our prospective customers once the vehicles arrive in locate and physical locations destinations certain countries require a limited.
Period of time, when you can convert customers of their financing of course of their cash customers less restrictive, but if they are going through a change so santander financing and registration is required certain period of time, so I'm going to give about a week or so to allow for financing.
Getting all the registration documents as well, but I expect that the inefficiency will convert into more efficiencies and reduce timeframes as we moved further so production and conversion will get only better with time.
Okay. Okay. Thank you for all that detail and then just lastly on the gross margin.
Other competitors or other startup EV Oems have talked about unfavorable pricing that they're receiving from suppliers given their small supply runs.
Her initial production so I'm, just curious how youre able to kind of achieve these gross margins with the magna relationship, helping you guys with your suppliers achieve better cost per unit when you make the vehicle or.
I guess the broader question is as you increase production should gross margins go higher from here or are you seeing the benefits we have already seen that the cost per part benefits because of the magna relationship and that's how you were able to achieve those growth targets now it's kind of hard to get the question.
Magna as a contract manufacturer for us magnetism by parts for US, we manage supply chain relationships directly ourselves, but to answer your question on gross margins.
The first critical topic is to design and engineer a vehicle.
You have talked about gross margins you have thought about material input you have talked about the number of parts. So we from the get go created an organization that part about selling a 37 $5000 car another $100000 car. So the entire organization thinks about fewer parts.
The entire organization thinks about DST and stamp body, how can we engineer the car for more efficiencies. So that's the first topic. The second topic is that we have seen battery costs go down so the input costs on batteries went down from Q1 from Q2 to Q3, so I expect those trends to.
Continuing to further go down and I think number three what's really critical is to look at volumes in terms of the program lifestyle. So from a program lifetime, we have a 50000 annual volume and those volumes are fairly straightforward. We also by the way don't amortize our investments.
I can comment on what other startups do but legacy Oems do amortize the investments. They also amortize their <unk> that they in how spend which we don't amortize because we actually spend the money with our suppliers. So again from our perspective, we have an asset light strategy Veda.
<unk> business model to other.
Startups of legacy Oems.
Okay. Thank you appreciate it.
Yeah.
Our next question comes from Jeffrey Osborne from Cowen. Please go ahead. Your line is open.
Good morning, congratulations on the strong margin side. Thanks for the details so far on the call.
I was hoping to flush out the nature of the supplier constraint you mentioned labor.
It was the second.
Or.
And question always Infinity labor intensive or is this an Israel tooling.
Working we're having to do.
Listen I'll detail.
Are you going to resolve the problem.
Jeff It's on a simple case of how many units can you crank out a day as simple as that.
Unlike electronics, where you can just sort of print.
<unk>.
There are certain components and automotive which are more <unk>.
You also have to make which require more time and it's a cost of water line can produce what is the capacity of our line. What is the what is aligned tooled up to produce. So this particular line is tuned up to produce 50000 units a year and.
They simply can crank it out in six months.
And so just.
Independent of that that'll be resolved by Q1.
One at that run rate that you talked about.
Yes.
6000, a month.
Yes, you exit the year at that and we feel comfortable that that suppliers may be investments to resolve that in terms of hiring.
Sorry, Jeff could you repeat sorry would you repeat the last point of view.
The supplier has made the effort to.
We go through the hiring exercise to run at six months by January or December .
That run rate by the end of the year. So I just want to make sure.
One of the gating factors to get there.
Yes, I think it is.
It's a two shift operation. So we are already running a two shift operation.
<unk> run three shifts the regulatory shift, but I think that.
In our full year two shift operation is good enough to get us the volume that we need.
Got it and then just a quick one on that there are no atrophy, great to see last night in L. A.
What is the commonality of the two platforms and with regard to the Alaska and certainly you saw that was helpful. On the wire leveraging Barcelona, three I would imagine you'd be able to do the same and that's going to be margin accretive but is there any way to dimension what the commonality is from those two platforms.
For the Ocean.
Yes, it's very high.
And I would say.
Probably ever in the region.
I mean, if you exclude the body panels.
Probably in the region of about 85% to 90%. So I would say is extremely high commonality.
Just an extended.
Ocean platform, where we have added our wheel base towards the rear.
We are even using the same battery size, which allows us to have this houdini Trump was actually.
<unk> write down behind a battery, which would not be possible in any of the pickup software to battery goes all the way to the rear axles on hours or doesn't it also gives really good weight distribution on you can put a lot of load in the back because you don't have the battery run it all the way to the back so it's like I said, it's very high.
Analogy and.
That's also one of the reasons, we should be able to get a very fast to market.
I appreciate it thanks centers.
Our next question comes from Pavel <unk> from Raymond James. Please go ahead. Your line is open.
Thanks for taking the question.
It seems like battery prices have really.
Ed in the past.
100 days kind of four or five months perhaps.
Is that consistent with your expectations or is there, perhaps some room to achieve cost savings compared to the initial assumptions.
Battery prices actually quite transparent you can see.
Yes.
Let me in the Shanghai metal exchange, so since it's not a secret that we buy batteries from CTO Shanghai metal exchanges, obviously, the obvious exchange for us to look at raw materials, and you're absolutely right raw materials have gone down and I think everybody has benefited from it and we have.
Two different Chemistries as you know in our car NMC and LSP.
And the mechanical components, we have a good edge on because we of course.
For killing them in China with CTO.
So I expect that trend continues.
This way and it stabilizes the market because frankly in my opinion, our customers need to be able to afford electric vehicles batteries are.
Significant part of the Bom and for us to make affordable Evs and for prices to stabilize battery costs have to go down there is no other way.
Okay, Let me follow up on the new models that you guys unveil yesterday or.
Or everything except of course, the ocean in Australia.
The new models be produced in the United States in House.
So.
Obviously, the pickup truck the Alaska has to be produced here in the U S. Because that's where the main marketers.
We are also eventually planning to bring ocean over here to the U S and build it here as well for the U S market, we see the uptake in Europe , and just a general outlook in Europe to be extremely promising and I think Matt.
Magna Europe can probably serve Europe already from next year.
Their capacity, so we need extra capacity probably by in the next year or beginning of 2025 here in the U S. P.
Pair as we already announced we will also be built here in the U S.
We are still in final talks with Fox economy. When you deal with the contract manufacturing is a little different because you have to go through all the details of each vehicles, who understand the exact cost of assembly now the vehicles. We showed yesterday all of them. It's not just a show car that we showed those are.
Exited vehicles have been in development for quite a long time I mean, the pair we start development in 'twenty one.
The rollout will start in 'twenty, two and the same with the Alaska, We started last year.
So all of these vehicles are actually pretty far in their development time. So now it's just a matter of US later this year deciding on the exact manufacturing location or potential manufacturing partners.
Yeah.
Got it thanks very much.
Yeah.
Operator, now we will take some of the.
Retail investor questions.
First one it's been mentioned that the <unk> team is in talks with other partners to expand production can you expand on this and update us on these partnerships will they be for the ocean only or for all fiscal Evs.
And then any update on production start dates for some for the other vehicle programs.
Well I mean, obviously when you're a confidential chalks theres a reason why they are confidential we can.
Generally like elaborate on those but I would say on that on a on a high level note.
What we are interesting and strategic partnerships that spans over all of our product lines.
And our large strategic partnerships. So we're not really looking at just taking one vehicle out and doing a partnership on that.
I think that's the important thing here.
I do think that.
Amazing product line, we showed yesterday.
Which is all vehicles that can go to market within the next two years.
Is something unique there is no other there's no other company. There is no other car company on the planet I don't care, if the traditional OEM, our startup that have kind of product line that we just showed yesterday and the reason we can bring them faster market is because they are already very far into the engineering process.
So obviously, having a strategic partner with me and we might even be able to bring them faster to market and higher volume. So that's something we're looking at it's not something that we as a must but I think we are always open to discussions and we continue to having interesting discussions.
With different.
Potential partners, but I can't really elaborate more on that right now.
Thank you.
Other question some of the early customer feedback is that the ocean software is slow or a little lagging.
What steps are being taken to improve this cannot.
Cannot be addressed with OTA updates actually that's really interesting one I've read a number of comments and in fact, yes.
Yesterday, I had a chance to talk to Sean Callahan, eight cases, karate and as Sean Sean I've read a bunch of comments online with says the UI UX and software is very Laggy and I said, you know I have a feeling there was a faint Bloomberg article that tried to tell people that there was an issue with software and software.
Lagging and very few people want to define that so Sean tell me what do you mean by software is lagging. So two things first of all I ask Sean to run on their view on his forum, where he should ask people.
Especially the 120 owners who received their cars, let's go from Pap to tap to tab and let's see how long it takes to go from top to adapt to that.
And then let's do a comparative vehicle and Sean said well you know people are comparing this to the iPhone, if I'd like to be compared to the iPhone. That's a completely different metrics. So that's the first thing. The second thing is that I think that we have to put into perspective, what we can say.
Uh huh.
As the vehicle and the connected vehicle and what do we expect of the vehicles I'd like to pass it onto book hard now to talk about what is the <unk> software and what can we do to make the experience like Apple.
Yeah. Thanks, Peter So as we are.
Mentioned, the software will be continually iterate it so with the crypt.
Ocean some of them with essential features and this will be enhanced over the coming months and will be complemented by a more advanced capabilities.
We are currently working to finalize the integration of new features and packages and we pushed that.
Yes.
Over the.
Pipeline and released it since.
Since our vehicles are fully connected and that is.
Smartphone experience Gigawatts, just referring to or you get constantly update and that makes it so interesting and attractive to keep the call fresh and updated.
We have incorporated already early customer feedback so even incorporating into these updates.
Customer feedback who can do that our teams are working around the clock to make refinements.
Sweden flushed into the fleet of vehicles. So we're ready to launch of OTA updates and we expect to deliver the first OTA to our customers that will support enhanced connectivity et cetera.
Thank you.
I will go back to the analyst SKU operator.
Thank you. Our next question comes from Adam Jonas from Morgan Stanley . Please go ahead. Your line is open.
Hi can you hear me.
Yes, okay.
Okay, great. Thanks, I wanted to see some color or guidance on second half working capital.
Thank you for the detail on the Opex and Capex, but.
Given the working capital usage this quarter and maybe some of the ranges of gaps between production and deliveries you have I don't know if you could give us any sense.
For that and I apologize. If this question was already asked I had.
Had some audio difficulties thanks Henrik.
Adam except for adding $30 million in SGA, which may require for customer deliveries and.
Certain other.
Expansion there is no change to our guidance, we have the capital required for our.
Second half.
Okay. Thanks very much.
Okay.
<unk> from Evercore ISI. Please go ahead your line is open.
Thanks, so much team.
You don't want to keep focusing on that production ramp that you talked about specifically.
If you would it seems like from the implied guidance you hit that 300 per day rates or 6000 per month sometime either October or November .
Just looking at the cadence of what you described for Q3 and Q4 could you just maybe clarify the.
The parts issue with the sub supplier.
Our PUC will they be ramped by.
Q4 or is that a process that will take longer from Q4 into IND.
Q1.
As I mentioned, the banking parts into summer shutdown right now and they are going to have to shift and if needed they'll go to a three shift operation to provide us the parts we need.
Okay. So it basically feeds.
Some time in Q4, you actually hit that that that rate.
And then that whatever that five to 6000 per month will extend into them into 'twenty. Four is that the right way to think about it. So the way to think about it is that when we can make 300 cars a day.
We need the relevant parts to arrive at Magna Shire, the bigger parts need to arrive the same week the smaller parts can be stored so that's the way to think so what what matters is when we assemble cars, we have the parts ready.
That's what you have to time it doesn't matter if a supplier can ramp in December 2nd half last two weeks. It doesn't help us what matters is the parks are bank ready and waiting if they don't have the ability to ramp at the time and that's what we're working on right now.
All of the suppliers that have ramp issues are taking this to a three week period, the backpack and we're doing this right now.
Okay.
Typically the second part of the question Henrik If you show the product displayed.
Yesterday, I think some of the questions that people ask then is.
With some of the timing like Alaska talking about.
Again around that that turn of the year of 2025, when we have the the sort of the know how of the agreements with.
With Fox Con because basically these vehicles are going to be built in North America to get the.
The IAA credit.
And im.
I'm conscious that we may not always get the full <unk>.
<unk> of that agreement, but when will there be something thats enough that you can kind of disclose where the vehicle is going to be built in and just kind of talk about it.
On district together.
Yes, I expect.
We will have balanced manufacturing of these vehicles.
Within the next three months.
Perfect Okay.
Thanks, so much guys.
Thank you.
I think we have time for one more question.
Our final question will come from James Picariello from BNP Paribas. Please go ahead. Your line is open.
Hi, everyone.
Just in the spirit of the prepared remarks on this I mean.
Unprecedented ambition with respect to a.
Simultaneous multi continent.
Litigation and delivery logistics effort.
On top of all the real time servicing demands that will need to be met once these oceans get out in the wild.
It does seem to be a strategy that might have no equal, especially for startup. So what gives the company the confidence to go after this launch in such a global fashion.
Right out of the gate.
Would it be more manageable and cost efficient to just focus on one region or are not necessarily okay. Thanks.
No I think so yeah, let me let me take some of that question at least.
<unk> set up quite an amazing organization in Europe already.
Half the people in all the launch countries already we have service partners assigned and all the launch countries we have.
As I mentioned.
Available in all of these countries and I think we've already seen with our vehicles electric vehicles do not need the type of service of the gas gasoline vehicle need.
Mobile technicians, we have been able to reach out to anybody who need of something extremely quickly. So I think it's really a benefit for us.
Not really see that as a.
Hindrance or a negative or something there holds us back on the contrary I think it's great to be able to have customers in all of these locations immediately I think the U S. We are concentrating in fewer states right. Now I think we are in about five states delivering vehicles.
So in the U S. We actually are concentrating on.
Five of the main states, where we have most of the customers.
Because it is a little easier here, but Europe all the launch countries. They are pretty much laid out and I think it also means that we can accelerate extremely fast because we have such a huge customer base that are ready to take delivery of the vehicles.
Okay.
Got it and just like that's that's that's very helpful. And then just on the on the 'twenty to 'twenty 3000 production range. I know there are a lot of factors on the delivery side, but is there a just a range off of this production target.
To think about deliveries.
I think if I can just take the first of all.
Speaking of our yearly target.
We really only are talking about a half a year production is probably a little misguided quite frankly, I think we need to talk about the daily volume that we want to have that I'll talk about how many cars can we deliver out let's say we do.
20000 vehicles, how many of those can be deliver like Guida mentioned the strategy. We have is probably in November or is the last shipment that goes out to the U S. So we can still deliver all these vehicles in late December and then all the vehicles that are produced.
In December are going to be delivered in Europe , and the very last vehicles, probably made just before Christmas are going to be delivered in Austria, and Germany. Because you are talking about like you said a couple of days to deliver those cars. So I would say our target it would be to <unk>.
Get up to about 95% delivery rate of our volume.
Thank you.
Yes.
We have time for one more question from the retail platform.
There's been a lot of discussion.
News from other automotive brands about charging networks.
Can you update us on <unk> charging network relationships and any plans for expansion.
Yes, So we've announced a public charging partnerships charge point in North America, and depth power and illegal in Europe to provide our customers with broad coverage and it's really encouraging to hear the various announcements about expanding fast charging network across North America. They are very open to discussing charging with all potential partners. We believe the marker.
The better for the customer and for expanding EV adoption in general it's.
It's important for our customers to have access to charge both of their homes and undergo Europe has a common standard but U S is competing standards, we believe competition advances innovation and it helps improve the customer experience I understand there's a lot of anxiety if they have any discussions with Tesla do use the supercharger network.
We absolutely will do whatever is the right thing for our customers whatever supports our customers from our standpoint, we have a fully drawn up agreement Cisco.
Has signed the next agreement, we just waiting for a signature from Tesla.
Okay.
Great. Thank you.
That concludes today's Q&A operator.
Okay.
I would now like to turn the call back over to Henrik Fisker for any closing remarks.
Okay.
Well, thank you very much.
I, just I kind of want to come a little bit back to two points one the.
The products that we showed yesterday I want to emphasize that these are all <unk>.
<unk> that have been in development for quite a long time, we have an amazing team of Fisker.
They work extremely hard we have some really good suppliers, we are working with as well on these vehicles all of these vehicles.
We're going to be able to put all these vehicles into production within the next two years, which I think is super exciting and it really will allow us to grab a huge.
Market.
In whatever market, we go into a huge part of that market because we don't see a lot of competitors for any of these vehicles quite frankly.
When you look at even what other car companies have announced so that's something that I'm Super excited about I'm also really excited about positive gross margins quite frankly, because normally in an EV startup.
You are running RBC companies running two or three years with massive losses, which obviously means you need to raise a lot of money just to cover those losses. So.
We are not in a position where kind of half an hour program, the ocean, which to start paying some of the bills and Thats just amazing.
And I think.
I want to really give kudos to our engineering team.
Our finance team for having achieved this this is just outstanding.
Actually even overachieve, we actually have higher gross margins that we had anticipated again because of how we have structured this program and how our vehicles engineer then there is just amazing.
Here in the end it will also like to thank our reservation holders I know is really tough to wait for this ocean you read about it it's got amazing reviews.
And I know, it's tough to weight and we all here actually are really annoyed as well that we can bring these vehicles quicker out to you.
But we are scaling up we actually are hiring a lot more people.
Our boat does tick like either set 10 to 14 days to get into Baltimore. So we can't really change that but we are already shipping more vehicles on the boat several hundred vehicles are getting on boats.
We're getting more trucks going so I think youre going to see a huge acceleration in deliveries already here in August and really scaling up so I'm very excited about that and of course also I want to thank all of our partners everyone and all our investors for also dialing into this call. Thank you very much everyone.
Thank you.
This concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
Yeah.
Okay.