BENTONVILLE, Ark. (KNWA/KFTA) — The electric vehicle maker promising to bring more than 500 jobs to Northwest Arkansas might not have enough cash to last another year.
Six months ago, Canoo announced plans to move its headquarters to Bentonville and create a research and development center in Fayetteville. Since then, the start-up has hit a number of bumps in the road. In December, three top executives left the company. Then, came its first-quarter earnings report. Canoo reported a net loss of $125 million and was forced to issue a warning that there is substantial doubt it can meet its financial obligations 12 months from now.
It has not been all bad news. Canoo has thousands of pre-orders and plans to start production by the end of the year. Even NASA has taken notice, selecting Canoo to provide transportation for astronauts to the launchpad for an upcoming mission to the moon. KNWA’s Chad Mira took a test drive with the CEO to learn more about the vehicle and its pathway to production.
The product is unlike anything currently on the road, from its steer-by-wire technology to the spacious feel and even the AC.
“You noticed when you got into the vehicle, you couldn’t feel the air because it’s like convection flow versus the vent blowing air on you. So the design is just completely different. The field of view you had, the energy it gave you,” CEO Tony Aquila explained from Canoo’s new facility in Bentonville.
Right now, Canoo is working on a lifestyle vehicle, a delivery model and a pickup truck. They are all highly customizable. In fact, the entire tophat of the vehicle can be changed out. So instead of buying a whole new car, a person can have their lifestyle model turned into a pickup truck in just a matter of hours.
But, there’s new doubt this vehicle will ever make it to market. During Canoo’s earnings report last month, it told investors that it might not be able to survive another year. It is called a Going Concern warning. The warning reads, “Our management has performed an analysis of our ability to continue as a going concern and has identified substantial doubt about our ability to continue as a going concern.”
On paper, it does not sound good. In person, Aquila was much more positive.
“Tech companies do not keep cash based on 12 months and one day. They’re milestone-driven. They hit milestones. They raise capital,” he said.
Canoo did outline plans to raise more capital. But again, in that earnings report, it “cannot conclude as of the date of this filing that its plans are probable of being successfully implemented.”
“In 2018, Tesla declared a Going Concern. It’s an accounting thing. It’s the right thing to do. We wanted to do the right thing and that’s what it is,” Aquila said.
“Tesla, was also at a different part in the production phase,” KNWA’s Chad Mira responded.
“It’s based on 12 months and one day. It’s the same test. It’s just a test. Carnaval Cruise did it not too long ago,” Aquila said.
“So you personally don’t feel worried that 12 months from now you guys won’t be rocking and rolling still?” Mira asked.
“Well look, we live in uncertain times,” Aquila said.
The State of Arkansas is banking on Canoo’s success. It offered Canoo millions of dollars to move its headquarters to Bentonville and build a couple of new facilities in Northwest Arkansas. It was announced last year that the two had struck a deal. Some construction has already started in Bentonville. But, given the new Going Concern warning, KNWA wanted to know if Arkansas’ investment is protected. So KNWA asked the state for a copy of the agreement. The Arkansas Economic Development Commission says the deal still has not been finalized so the contract could not be released, publicly. The state agency says it has provided no funds to Canoo and will not do so unless the incentives are earned.
“You want to work through all the details of the agreement with the state. It takes sometimes a couple years if you go look at Tesla’s deals,” Aquila said.
It’s the same concept used in Oklahoma, where Canoo also signed an incentive agreement. KNWA does have a copy of that contract. Oklahoma will give Canoo $10 million to build a $450 million facility, but that will not be paid out all at once. When the first phase is finished, Canoo will get $3 million. After the next phase, the state will give the company another $2 million and so on. Only after Canoo completes the $450 million facility will the State of Oklahoma give the company the full $10 million promised. If plans fall through, Canoo has to pay back any money it has received.
There are similar incentives for the number of jobs created and how much they pay. When 25 people are hired with an average salary of at least $85,000, Oklahoma will give Canoo $1 million. If the company employs 25 people at its Tech Hub with an average salary of $125,000, the state will pay $2 million.
The most lucrative incentive is the sale of vehicles. Oklahoma agreed to buy 1,000 vehicles from the company for anywhere from $35-$50 million.
Canoo told its shareholders it also has an agreement to sell Arkansas 1,000 vehicles. These would go to state agencies and universities, meaning Arkansans will not just be making the cars but driving growth in the EV market.
“I really believe that the heartland has a chance to take advanced, clean mobility and really be at the center of all of that,” Aquila said.
If Canoo can keep the power on.