EV startup Canoo released its Q2 financial results earlier this week and delivered rather surprising news on the conference call.
Canoo CEO Tony Aquila told analysts during the call that it will not build the first batch of electric vans for customer and shareholder Walmart itself. Instead, the company will use an unspecified contractor for the initial output of its debut EV by the end of the year.
Canoo previously said it would assemble its own vehicles at a small facility in Bentonville, Arkansas, where Walmart is headquartered, while it works on building a dedicated factory in Pryor, Oklahoma. The announcement likely hints at production issues for Canoo, which received an unexpected lifeline from Walmart last month in the form of an order for at least 4,500 electric vans, with the option to purchase up to 10,000.
It's worth noting that Canoo had a contract manufacturing deal with Dutch company VDL Nedcar but backed out of the deal in late 2021 as it believed it could start production of its Lifestyle Vehicle earlier if it made it in the United States.
Despite the change of plans regarding production, Aquila said deliveries to Walmart are on track to begin in the first quarter of 2023. In an SEC filing on August 8 picked up by Bloomberg, Canoo noted that the success of its agreement with Walmart is paramount for its survival.
"We have entered into an agreement with Walmart Inc. for the purchase of electric vehicles and expect that, at least initially, Walmart Inc. will be our largest customer. If we are unable to maintain this relationship, or if Walmart purchases significantly fewer vehicles than we currently anticipate or none at all, our business, prospects, financial condition, results of operations, and cash flows could be materially and adversely affected."
The company's financial results for the second quarter further emphasize that, as Canoo is burning through cash rapidly. The EV maker posted a net loss of $164.4 million in the second quarter and $289.8 million in the first half of the year, compared to $112.6 million and $127.8 million in the same periods last year, respectively.
However, while last quarter Canoo was warning it might not have enough cash to stay in business, three months later, the startup says it has access to enough capital to navigate the rest of the year. Canoo claims it has ended the quarter with more than $1 billion in its sales pipeline, largely attributable to the Walmart deal. Mind you, only 17 percent of the 32,500 reservations are committed sales under contract, the rest being non-binding and refundable.
The startup closed out the quarter with cash and cash equivalents of $33.8 million, which is very low for an EV company. Still, Canoo claims it has about $220 million of unused capacity on its Standby Equity Purchase Agreement (SEPA) facility filed with the SEC in May.
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Source: Canoo via Bloomberg