Continue to burn money and lose money

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Editor's note: This article is from the WeChat official account SuperEV Lab (ID: SuperEV Lab), written by Cao Tingting, and edited by Chuangye Bang in China.

The lifesaving money that is coming is gone.

Arrival, a new car manufacturer, has just announced that it has terminated its plan to merge with a blank check company (SPAC).

Three months ago, Arrival announced that it had signed a merger agreement with Kensington Capital Acquisition Corp V. After the merger, Arrival would receive $283 million in trust cash to supplement the rapidly depleting cash flow.

Now the money is in vain. Now Arrival is looking for other ways to raise funds.

However, from the perspective of business conditions, this newly built enterprise is really worried.

Since its establishment eight years ago, Arrival has been burning money and losing money. It lost 588 million dollars in one quarter, up to 1 billion dollars (equivalent to about 7.2 billion yuan) in the whole year of last year, and 1.304 billion dollars (equivalent to 9.4 billion yuan) in 2021. In this way, if it can't find a fund owner, it may be in danger.

Arrival is a British newly built car company. With the concept of "skateboard chassis" and "micro factory", it was once one of the largest technology companies in Britain. At the beginning of listing, it was valued at $15 billion, and now its total market value is only $42.28 million.

On July 3, Arrival issued an announcement announcing the termination of the merger plan with a SPAC company.

The merger with SPAC to obtain financing was originally a key step for Arrival to overcome the difficulties. It planned to obtain $283 million in cash for the construction of its factory in Charlotte, North Carolina, and the development of XL van.

Source: Arrival

Arrival's share price fell by more than 2% in after hours trading when the merger was terminated.

As early as April this year, Bloomberg reported that Arival was facing bankruptcy risk, so it would consider merging with SPAC again. SPAC was written as Special Purpose Acquisition Company, which translates as a special purpose acquisition company.

SPAC companies are usually led by private equity funds or tycoons and can be listed on the New York Stock Market after their establishment. This kind of company has no main business and is also called "blank check company". The only role is to be acquired by a growth enterprise after listing, thus filling the "empty shell".

For some companies eager to go public and in trouble, it is a good choice to use SPAC's backdoor listing.

As early as March 2021, Arrival has merged with the SPAC company CIIG Merger Corp (CIIC. US) and successfully listed on NASDAQ.

So this cooperation with SPAC is the second merger of Arrival in three years, but this time, unlike in the past, Arrival has been in a serious state of overspending.

According to Arrival's financial report for the first quarter of 2023, the company's balance of cash and cash equivalents was only $130 million, down nearly 37% from the end of December last year.

Arrival did not disclose other details of its first quarter results in the financial report, but said that its factory in Bicester has produced three van cars and another five are in production.

Source: Arrival

Earlier, Arrival released the fourth quarter financial report of 2022, and the company said that the loss further increased to 588-597 million. You should know that in the same period of 2021, the loss data was still 67 million dollars.

As for the reason for the loss, Arrival said that the "non cash impairment expenditure and debt cancellation" was $406 million. Even if this figure was deducted, it would not change the fact that Arrival's quarterly loss was between $182-191 million.

While the loss data increased, the administrative expenditure and R&D expenditure also increased, reaching US $133 million and US $31 million respectively, up 209% and 107% year on year.

When the fourth quarter financial report was released last year, Arrival announced that it had just completed a round of equity financing of $300 million, which is expected to support the company to reach the end of 2023, and then hopes to raise another $500 million. However, as we look into the second half of 2023, Arrival still has no progress in financing.

One fact is that Arrival's revenue is still zero, and it is difficult for Arrival to continue to maintain.

Arrival was founded in 2015 by Denis Sverdlov, former Deputy Minister of Communications and Mass Media of Russia, in the UK.

Source: Twitter

It is positioned as an electric truck company. Initially, it planned to develop electric trucks and buses. So far, it has launched an electric bus and an electric truck.

Different from Tesla's concept of "mass production", under the leadership of its founder Sverdlov, Arrival took a customized production route of "micro factory".

This kind of micro factory is asset light, similar to some brand chain stores. It produces wherever there is demand. This is also a feature of micro factories. The most obvious features are small floor area, low operating costs and rapid expansion.

In addition, in order to accomplish the mission of "using a more efficient new method to design, produce, sell and serve the best electric vehicle ever", Arrival also adopted the way of "skateboard chassis" to build cars.

The sliding plate chassis has two advantages. One is the non load bearing body structure, which can cancel the mechanical connection to ensure the space of the car compartment; The other is that the same chassis can adapt to different vehicle types.

The new model makes Arrival a leader in start-ups. During 2020-2021, Arrival will develop rapidly and get 100 million euros of investment from Hyundai and Kia, which is also the investment, making Arrival's valuation reach 3 billion euros and becoming one of the most valuable start-ups in the UK.

Source: Arrival

At the same time, it also completed an order for 10000 electric express trucks with USP Express (United Parcel Service), which is expected to be put into production in 2022. Uber (American Travel Company), LG Energy and other giants have established cooperation relations.

At the peak of Arrivals, in March 2021, it was listed through merger with CIIG Merger, a special purpose acquisition company (SPAC), with a market value of more than $15 billion, making it the largest technology IPO in the UK at that time.

The founder Sverdlov, who holds 75% of the shares, rose sharply and became one of the world's top millionaires.

But I'm afraid only the financial report can tell us the pain of the car building. Arrival's net loss in 2018 was 30.19 million euros, and its net loss in 2019 reached 48.1 million euros. In the face of increasing losses, Arrival said that losses are normal before mass production, and it is expected that losses will increase further in the future.

Sure enough, Arrival's loss reached 95 million dollars in 2020, and this number will grow to 1.304 billion dollars in 2021.

In order to stabilize the partners, Arrival said that in 2022, it would produce 400-600 electric trucks and some buses in the second half of the year. Now it seems that all these words have come to nothing.

In November 2022, Arrival received a delisting warning from NASDAQ because its share price was below the minimum requirement of $1 per share for 30 consecutive trading days.

In order to survive, Arrival decided to start from the top leadership and carry out a round of great changes. The founder Sverdlov was forced to step down, and Peter Cuneo was appointed as the interim CEO, who once served as the CEO of Marvel Entertainment.

Source: Twitter

On January 30, 2023, Arrival appointed Igor Torgov, the digital executive vice president, as CEO. The first thing after taking office was to cut costs. At the end of 2023, there was a wave of layoffs.

The focus of business has also shifted from the UK to the US. Arrival focuses on developing XL delivery vehicles for the US market and is expected to start production in Charlotte, North Carolina by 2024.

For new business in the United States, Arrival also rent out several office locations and streamlined its global offices. But it is hard to say what specific effect this series of operations will have.

When electric vehicles become the air outlets, the start-ups have mushroomed into the soil, but after time of polishing, there is not much left.

Arrival is not the only new car manufacturing company facing bankruptcy crisis.

Two years after its listing on NASDAQ, Lordstown, a new American car maker, was overwhelmed by heavy losses and applied for bankruptcy protection in Delaware at the end of last month.

Source: Lordstown

Lordstown is an American electric pickup truck manufacturer founded in 2018. At present, it has only one electric pickup truck model Endurance. Like Arrival, Lordstown will be listed on NASDAQ through SPAC in 2020, and its initial market value will reach 1.6 billion dollars.

However, half a year later, Hindenburg Research, a short selling agency, targeted Lordstown. The short selling report said that Lordstown used false orders to raise funds for its first electric pickup, and the delivery time of the electric pickup was also false. This report directly led to the investigation of Lordstown by the US SEC.

In order to raise funds, Lordstown sold the factory to Foxconn at a price of 230 million dollars, and then the agreement broke down, causing disputes between the two sides. So far, there is no clear result in this war of words.

When applying for bankruptcy protection in June, Lordstown still insisted on taking an appeal against Foxconn, accusing Foxconn of fraud and failing to comply with the agreement to invest $170 million in it.

Nikola, the first electric vehicle manufacturer listed through SPAC, also received a delisting warning letter at the beginning of June this year.

Source: Nikola

Since April 12 of this year, Nikola's share price has fallen below the bottom line of $1. In contrast to this figure, when Nikola was backdoor listed, its market value once exceeded $30 billion, even surpassing GM and Ford.

In the latest financial report, Nikola's total revenue was $11.12 million, its net loss expanded to $170 million, and its cash consumption increased from $200 million to $240 million.

Facing the chicken feathers of Lordstown and Nikola, Fisker, Faraday Future and other start-ups are also worried about money.

The story of newly built cars is not over yet, but inevitably, some enterprises are hard to come to the end.