Canoo Shifts European EV Manufacturing: Ends VDL Nedcar Deal, Partners with VDL Groep

Canoo Shifts Manufacturing Strategy, Ends VDL Nedcar Deal

Electric vehicle innovator Canoo has terminated its contract manufacturing agreement with VDL Nedcar, a Dutch automotive company, as detailed in a recent Securities and Exchange Commission filing. Simultaneously, the company is exploring a new collaboration with VDL Groep, also based in the Netherlands, for vehicle production within the United States.

Focus on Domestic Production

According to Tony Aquila, Canoo’s CEO, the decision to manufacture in America aligns more closely with the company’s core objectives. This includes investing in communities and states that are actively supporting advanced technology manufacturing.

Aquila stated, “The backing from Oklahoma and Arkansas will enable us to reach Start of Production (SOP) sooner and with reduced risk across multiple areas.”

Financial Implications of the Shift

As part of the agreement’s dissolution, VDL Nedcar will return a prepayment of $30.4 million to Canoo. Conversely, VDL Groep will acquire $8.4 million worth of Canoo stock as part of the new partnership.

Headquarters Move and Production Targets

This announcement follows Canoo’s recent decision to relocate its headquarters and establish an advanced manufacturing facility in Bentonville, Arkansas, the same location as Walmart’s headquarters.

Previously, Aquila had projected VDL Nedcar to manufacture up to 25,000 units of Canoo’s lifestyle vehicle in 2023. These vehicles will now be produced in Arkansas.

Mega Microfactory and State Incentives

Canoo is also developing a “mega microfactory” in Oklahoma, anticipated to be operational by late 2023. This facility will focus on producing Canoo pickup trucks and multipurpose delivery vehicles.

Oklahoma has committed $300 million in non-dilutive financial incentives to support Canoo’s operations and the next phase of its manufacturing process. While details regarding similar incentives from Arkansas haven’t been disclosed, their existence is probable.

The SEC filing indicates that Canoo can now more effectively leverage the incentives offered by both Oklahoma and Arkansas. This shift also allows the company to potentially deliver vehicles ahead of the fourth quarter, avoiding a 25% tariff that would have applied had production remained in Europe.

Buy American Act and Government Contracts

With the enactment of the $1 trillion infrastructure bill, including the Buy American Act, Canoo may actively pursue federal government contracts and related incentives.

This legislation prioritizes domestically manufactured products for federal projects and restricts the use of non-domestic supplies.

Strengthening Domestic Supply Chain

Aquila emphasized, “We will be 100% built in the heartland of America, and we have proudly achieved another major milestone of having sourced 96% of our parts from U.S. and Allied Nations.”

Benefits of the New Strategy

By selecting a different manufacturing partner, Canoo aims to mitigate supply chain vulnerabilities, accelerate time to market, and enhance control over innovation and intellectual property.

The company also anticipates an increase in advanced manufacturing jobs within local communities and significant cost savings – estimated at thousands of dollars per unit – by eliminating warranty risks, tariffs, and overseas shipping expenses.

Revised Production Roadmap

Canoo has also released updated guidance regarding its manufacturing strategy and production roadmap for the period spanning 2022 to 2025.

• 2022: Production target increased to 3,000 to 6,000 units, up from the previous estimate of 500 to 1,000 units.
• 2023: Projected production of 14,000 to 17,000 units, an increase from the earlier forecast of 15,000 units.
• 2024: Target production of 40,000 to 50,000 units.
• 2025: Anticipated production of 70,000 to 80,000 units.