(Bloomberg) — There was so much going for Arrival Ltd. when Denis Sverdlov was preparing to take the maker of electric vans and buses public a year ago.
The Russian founder and chief executive officer of the mostly U.K.-based manufacturer had brokered a partnership to jointly develop vehicles with Hyundai Motor Co. and Kia Corp., and lined up a major order from United Parcel Service Inc. All three invested before BlackRock Inc. put in more money. Then a special purpose acquisition company came calling.
“It’s an opportunity, but it’s also a huge responsibility,” Sverdlov said of Arrival’s listing on the Nasdaq during a March 2021 virtual opening-bell ceremony. “I know we’re ready for it.”
But the more than $13 billion market capitalization Arrival debuted with was its high-water mark. The company’s valuation plunged to just below $2 billion by late January, after it pushed back production plans and told investors to no longer rely on the forecasts it made during the SPAC merger. Sverdlov, 43, took time out of an earnings call this week to, in his words, “address any concerns related to my nationality.”
The former Russian deputy minister for communications and mass media said he no longer has any form of connection with the government. He left the country in 2013 and two years later moved his family two London, where he founded Arrival. The company doesn’t source any parts from Russia and doesn’t expect the war in Ukraine to materially affect its business.
Rewriting Rulebook
Arrival’s slick-looking prototypes, built-in-house autonomous robots and radical approach to manufacturing made for one of the more promising pitches during the SPAC boom of the last several years. Now that many of the companies that went public via reverse mergers — including several EV producers — are struggling to live up to bold projections, having backlogs of non-binding orders is no longer enough. Vehicles need to start rolling off assembly lines.
“What we’re doing is extremely challenging,” Arrival President Avinash Rugoobur said in an interview. “We are changing the rulebook of the industry. We’re talking about small, agile production facilities that are low capex, that are building clean vehicles. You could not get more opposite from where the industry is.”
Whereas other post-SPAC-merger EV companies including Nikola Corp., Lordstown Motors Corp. and Canoo Inc. lost founders soon after their listings, Sverdlov is staying put. He built his initial fortune in Russia’s broadband industry and co-founded Yota Devices, the maker of a dual-screen smartphone.
High-Profile Hires
Sverdlov has assembled a star-studded team at Arrival. Rugoobur, 40, was head of strategy and mergers and acquisitions at General Motors Co.-backed self-driving company Cruise. Michael Ableson, CEO of Arrival’s automotive operations, was vice president of global strategy and oversaw EV charging and infrastructure for GM.
Ableson provided a tour of Arrival’s first factory in Bicester, England, a couple hours’ drive northwest of London, in early February. Rather than run conveyor belt assembly lines, the company breaks up manufacturing processes into what it refers to as tech cells. Its proprietary square-shaped industrial autonomous robots, which can each move as much as 2 metric tons, transport vehicle structures from cell to cell.
“We have confidence in the processes, we’ve done a lot of simulation, and you can see, the hardware is going in place now,” Ableson said. “It won’t be long and they’ll all be in motion.”
Bus Setback
Arrival’s progress since that tour has been mixed.
On the one hand, the company began assembling the skateboard-like architectures that will underpin the vans it builds in Bicester. But it’s no longer planning to make buses at another factory in Rock Hill, South Carolina, in the second quarter, which was the plan as of late last year. The facility will instead start up at an unspecified later date.
The first buses will go into production in the U.K. during the second half of this year. FirstGroup Plc, the country’s second-largest regional bus operator, is expecting to start public road trials with Arrival buses before the end of the month and has sought government funding to add almost 200 of the vehicles to its fleet.
The slip in Arrival’s production schedule announced is less drastic than what it disclosed in November.
In addition to scrapping long-term forecasts, Sverdlov cautioned that the size of the business would be defined by the number of low-cost, highly automated microfactories the company deploys, and the amount of capital it has access to. He dialed back the initial amount of production planned for Arrival’s first three plants, delayed a fourth by a year due to cash constraints, and raised $648 million through a share offering and convertible green bond issue.
Modules and Materials
Arrival’s big bet is on being able to make its $905 million cash balance go a long way. It’s using the same battery modules, screens and other common components across its vans, buses and a car purpose-built for ride-hailing it’s developing with Uber Technologies Inc.
The company’s products will also share a unique approach to materials.
Building steel and aluminum-bodied vehicles requires putting in presses and making massive investments in tooling and paint shops. Arrival is working with thermoplastics and composites that don’t corrode, are recyclable and mimic the stiffness and strength of metals. Rather than relaying on heavy presses and steel dies for stamping, the company uses vacuums and heat to mold lighter and cheaper panels.
Execution Time
Arrival believes the innovations it’s pioneering will enable the company to construct microfactories in six months or less, much faster than the years-long process it can take to get a traditional auto plant up and running. Executives also think they can can spool up new sites at a fraction of the cost.
The company hasn’t lost faith in its approach, though it’s starting up cautiously. Each of Arrival’s microfactories will initially operate on one shift and won’t reach full capacity until early next year. The company expects to deliver 400 to 600 vans to customers by year-end.
Those plans depend on Arrival successfully certifying its vehicles for road use. The company expects to sew up this process with its bus in the coming weeks and with its van in the second quarter.
“This turning point — from research and development, to production, to entering into service — is crucial,” said Franck Dessenis, vice president of Arrival’s bus program. “You move from ‘let’s find the next big idea,’ to ‘let’s execute.’”
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