St. Jerome, Quebec’s Lion Electric will produce a giant order for Amazon for up to 2,500 all-electric Lion 6 and Lion 8 trucks by 2025. Moreover, Lion Electric will go public by merging with SPAC Northern Genesis Acquisition Corp, led by the same founders of Algonquin Power.
Because Lion Electric will go public, Amazon has the option to purchase upwards of 19.98 percent of the company through shares and warrants, if they purchase $1.1 billion worth of products.
“It’s been a good week for us,” Lion Electric’s Patrick Gervais told MTLinTECH. “It’s been quite busy and one good news after another. Things are moving forward really rapidly and we’re very excited about what’s happening.”
Lion Electric will also provide maintenance and training for Amazon.
Lion Electric is required to reserve a portion of its manufacturing capacity for up to 500 trucks per year from 2021 to 2025. The deal calls for Lion Electric to provide the greater of 500 trucks per year of 10 percent of manufacturing capacity from 2026 to 2030, notes Yahoo! Finance.
The framework agreement with Amazon wrapped up in July 2020, but was hidden in a long stock exchange notice. Amazon Logistics is listed as the specified customer in the SEC filing issued last week.
In the filing, the company revealed that it had 300 purchase orders for up to 6,000 vehicles at the time of its SPAC merger announcement. The company predicts 2021 revenue hitting $204 million from 650 units sold. In 2023, revenue is expected to jump to $1.67 billion from 7,580 units sold.
Electric vehicles are extremely hot right now in North America, particularly after Joe Biden’s Clean Energy Plan calls for 500,000 clean energy school buses by 2030. The agenda will continue to generate interest from both school districts and investors for the next several years.
This bodes especially well for the province of Quebec, which is emerging as a modest hotbed for electric vehicle innovation, as we’ve previously noted.
As for Lion Electric, the company’s timing has proven impeccable.
“We’ve been around the last five years. It was tough but we believed electrification was the way of the future of transportation, and it’s happening right now,” said Gervais.
“(CEO) Marc Bedard decided to go all electric in 2011 and he had the vision thinking that electric would be the best powertrain instead of any other alternative. He had that vision. You don’t build electric vehicles in one day. There’s a lot of research and development that goes into it, a lot of time and our timing has been perfect,” added Gervais.
Big plans for Lion Electric
Gervais told us that the company will soon build out its own battery assembly line manufacturing plant, with a targeted groundbreaking date of March, 2021. They already have the mining capacity and now the company needs a cell manufacturer.
“Everything’s going to be here. It will create a lot of savings on GHG emissions and that will help us reduce our price per vehicle by 50 percent over the next four years,” said Gervais.
After that, Lion Electric will build a vehicle manufacturing plant in the United States with the capacity to produce 20,000 vehicles.
“We are the number one in school bus electrification. We hope to be one of the leaders in heavy duty electric trucks,” he said.
How did Lion Electric meet Amazon?
Gervias said that Bedard, the company’s CEO, was a guest speaker at an event in the trucking industry. There he met the folks at Amazon, which started a relationship that lead us to today. After the event, Bedard invited Amazon to come to Quebec to see Lion’s trucks.
“They tested and audited the truck, I imagine they liked it, they made a master agreement with us and we’re all really excited about this,” said Gervais.
This explains a lot of things
Electrive cleverly noted that today’s news explains quite a few recent happenings involving Lion Electric.
First, Amazon’s big order should explain the confidence with which the company is pursuing its IPO. Second, the company placed a large order with Romeo Power in November 2020, worth $234 million. They ordered battery modules and packs for Class 6 to 8 vehicles for a five-year period starting this year.
Lion Electric had previously signed a deal with Amazon for 10 Lion 6 trucks and has delivered two.
Finally, Lion also delivered 10 Lion Class C buses to Twin Rivers School District in California, adding to its fleet of over 40 EV buses, the largest in North America.
Let’s talk EV investing
Investment expert George Fisher noted in his column that the electric vehicle industry can be divided into several segments. These include the retail automobile and truck market, the long-haul heavy truck market, the local box van delivery market, and the EV charger market, to name a few.
Quebec-based companies are currently providing products and services in nearly all of the above market segments.
Focusing exclusively on the school bus market, Fisher notes something especially interesting.
While trucks and vehicles make up a competitive market, in the school bus market there exists just a few competitors, including Lion Electric. The others are Blue Bird, IC Bus, a division of Navistar, and Thomas Built, a division of Daimler Trucks/Freightliner and part of Daimler AG.
According to Lion’s Electric investor presentation in November 2020, the new school bus market is estimated to be 45,000 units a year valued at around $10 billion. This is a bit shy of the medium and urban truck market of 335,000 new units a year, valued at over $110 billion, noted Fisher.
In addition to school buses, Lion Electric makes medium box and urban trucks, and specialty trucks such as garbage haulers. The usage profile for these trucks usually involves lower mileage per day and periods of overnight storage, which translates well for electrification.
Talk about opportuntity for Lion Electric. And with the Amazon news, it appears their fortunes are only becoming sweeter.
A strong investor base
Canadian financial mammoth Power Corp is an investor in Lion Electric. Power Corp is controlled by the powerful Desmarais family, which owns several Canadian life insurance companies and wealth management/retirement platforms in Canada, Europe, and the US. Its portfolio companies include Wealthsimple.
Interestingly, Fisher notes that the Desmarais family has a long history in transit bus operations and founded the Sudbury Bus Lines in 1912.
Power Corp representatives will be on Lion Electric board of directors. SPAC founder Ian Robertson and Chris Jarratt, also the cofounders of Algonquin Power, will also be on the board. This a very strong board with significant street cred.