The London-based startup says it can build electric trucks and buses at lower cost owing to relatively inexpensive "microfactories" and lightweight composites it's developed.
ArrivalArrival, a U.K.-based startup preparing to sell electric trucks and buses that cost about the same as conventional carbon-powered models, ran into wild market volatility as trading of the company’s shares began on Nasdaq, swinging from a double-digit percentage plunge at the start of the day to end up about 4%.
Backed by Hyundai Motor and BlackRock and with vehicle orders from UPS, London-based Arrival intends to scale up production beginning late this year low-cost “microfactories” in the U.S. and U.K. Arrival said its first three such facilities, each costing less than $50 million to set up, will be in England, South Carolina and North Carolina, with more on the way. In the near-term, vehicles will be shipped to customers for final evaluation, President Avinash Rugoobur tells Forbes.
“We hit production of the bus at the end of this year. The first 12 months it’s all about getting more test vehicles out to customers initially, then starting production runs at the end of this year and into the middle of next year,” he says. Assuming all goes according to plan, “the volumes next year are about 10,000 vans in total and 1,000 buses.”
Amid a wave of EV startups announcing big plans for the U.S. market, what sets Arrival apart is its intention to sell battery-powered models at prices equivalent to diesel- and gasoline-powered vehicles. The company says it can do that because its vehicles are much lighter due to aggressive weight-saving from an aluminum chassis and body panels made of proprietary composites. That allows them to have smaller, cheaper battery packs–the biggest expense for EVs. Battery vehicles also offer lower fuel and maintenance costs so a manufacturer that can sell them at price parity to carbon-fueled trucks could see substantial demand from cost-conscious fleet operators. U.S. policy changes coming from the Biden Administration, which is prioritizing electric vehicles and transit to curb carbon emissions, may also prove helpful for Arrival.
The shares rose 3.6% to $22.80 at the close on Thursday, recovering from an earlier plunge to as low as $18.10. Trading kicked off on Nasdaq following the completion of Arrival’s SPAC combination with CIIG Merger Corp. on March 24.
The company announced plans to merge with CIIG in November 2020. Arrival expects to begin generating revenue this year and be cash flow positive in 2023.
Arrival President Avinash Rugoobur, left, and founder and CEO Denis Sverdlov.
Arrival“Arrival is one of the first major VC-backed companies based in the U.K. to conduct a high-profile IPO via a US-based SPAC,” said Nalin Patel, EMEA private capital analyst for PitchBook. “SPAC activity exploded in the U.S. in 2020 and we expect exits via this strategy to spread quickly across Europe in 2021.”
Unlike Elon Musk’s Tesla, which sees massive Gigafactories as key to holding down production costs, Arrival intends to operate a distributed production network, with small, low-cost Microfactories scaled to supply either 1,000 buses or 10,000 delivery vans annually to customers located relatively nearby. Unlike traditional auto-assembly plants costing more than $1 billion to build and about two years to complete, Arrival says its Microfactories cost $50 million or less and can be ready to start production in months.
The company came out of semi-stealth with a bang in early 2020 when Hyundai and Kia bought a 100 million euro ($110 million) stake. Soon after UPS, which is also an investor, said it would buy up to 10,000 Arrival electric delivery vans for its fleet in a deal that ultimately could be worth nearly $500 million.
Founded in London in 2015 by entrepreneur Denis Sverdlov, who made an undisclosed fortune from his sale of Russian cellular company Yota in 2012. When Arrival started, “we expected there would be many companies in this category, so that’s why we put ourselves in the position of doing things differently, thinking ‘what can we do to have a competitive advantage,’” Sverdlov says. “It’s not enough just to make electric vehicles anymore. If you use traditional methods–traditional parts, metal stamping–electric vehicles are expensive. To address this opportunity we had to reinvent the vehicle itself and the process of making it.”
Despite the company’s volatile first day of trading, Sverdlov’s majority ownership stake has dramatically boosted his wealth. Forbes estimates his net worth stands at $10.6 billion as of March 25.
Arrival thinks it can hold down the cost of its high-tech vehicles by using lighter-weight materials, including aluminum instead of steel for the frame, and body panels made of proprietary composite materials developed in-house. The company’s microfactory concept is also intended to make the manufacturing process as inexpensive as possible. Rather than requiring hundreds of acres of land and a purpose-built structure, the company says it can set up and equip a microfactory in a conventional warehouse space in about six months.
Microfactories don’t use costly metal stamping presses, welding or paint shops and don’t use fixed assembly lines. Instead, its flat, skateboard chassis is put together from extruded aluminum components, body panels are joined with aerospace-style adhesives and coloring is done by dying the composite material or wrapping a vehicle. Automated guide vehicles carry sections of the body to assembly cells throughout the factory. The company’s first microfactory is in Bicester, England, where it’s fine-tuning the assembly process, near an R&D facility in Banbury.
With reporting assistance from Jennifer Wang and David Dawkins.
