Vicinity Motor Corp. (VMC.V) (“VMC”) is a leading supplier of electric, CNG, gas, and clean-diesel buses for both public and commercial enterprise use in the United States (US) and Canada. The Company is recognized for its flagship line of Vicinity™ buses, which maintain a dominant market share in Canada. These buses are produced by Vicinity’s world-class manufacturing partners or at the Company’s Buy America Act compliant assembly facility in Washington state.
For context, CNG gas refers to Compressed Natural Gas, a fuel gas made of petrol that is mainly composed of methane. Compressed to less than 1% of the volume it occupies at standard atmospheric pressure, CNG gas is stored and distributed for use in traditional Internal Combustion Engine (ICE) vehicles that have been modified, or in vehicles specifically manufactured for CNG use. That being said, you won’t catch me driving around with CNG gas in my 2015 Toyota Corolla.
Currently, there are three types of Natural Gas Vehicles (NGVs):
- Dedicated: vehicles designed to run only on natural gas
- Bi-fuel: vehicles that have two separate fueling systems that run on either natural gas or gasoline
- Dual-fuel: these vehicles have fuel systems that run on natural gas but use diesel fuel for ignition assistance. This configuration is traditionally limited to heavy-duty vehicles
According to the U.S. Department of Energy, natural gas powers more than 175,000 vehicles in the US and roughly 23 million vehicles worldwide. Some benefits associated with natural gas as a transportation fuel include its domestic availability, widespread distribution infrastructure, and reduced greenhouse gas emissions compared to conventional gasoline and diesel fuels.
With this in mind, VMC offers a wide range of electric, clean diesel, and CNG gas vehicles, including the Company’s flagship Vicinity™ bus. The Vicinity™ offers 33% fuel savings compared to competitors, lower upfront cost, and lower operating costs, to name just a few advantages. Did I mention it looks cool too?
Furthermore, Vicinity™ is a market leader in the Canadian Mid-Sized Heavy Segment with 90% market penetration. Additionally, there are more than 600 Vicinity™ vehicles in operation today, with over 50 million in service miles. Aside from busses, VMC offers medium-duty electric vehicles (EVs) and electric low-floor shuttle busses. In fact, the Company is the exclusive North American distributor for Optimal-EV E1 and S1LF low-floor shuttle busses.
VMC entered into a licensing and marketing agreement to license and sell the Optimal S1 and E1 product lines for a period of ten years in exchange for an investment of USD$20 million. As a result, VMC now has a foot in the Medium & Light Duty sector, with access to market segments such as school buses, commercial trucks, ambulances, recreations vehicles, and fleet trucks.
Is there really a market for EV buses? According to Report Linker, the North American Electric Bus Market is anticipated to register at a compound annual growth rate (CAGR) of 26.76% between 2020 and 2025. Keep in mind, almost every state in the US has a transit agency that currently owns or is planning to own new electric buses. Furthermore, federal grants are making it easier for transit operators to acquire new units. Overall, electric bus sales are expected to reach 25,000 in 2030, and 75,000 by 2040.
Growth in the EV market is associated with multiple factors, however, government support for zero-emission transit is expected to drive this market significantly. In fact, Canada’s Minister of Environment and Climate Change formally submitted Canada’s enhanced Nationally Determined Contribution (NDC) to the United Nations, committing Canada to cut its greenhouse gas emissions (GHG) by 40-45% below 2005 levels by 2030. That being said, Canada has already invested $14.9 billion into a transit funding program, with $2.8 billion dedicated to zero-emission transit in 2021-2026.
Latest News + Financial Results
Most recently, on November 12, 2021, VMC announced its Q3 2021 Financial Results. According to VMC’s results, the Company had cash and cash equivalents of CAD$4.9 million on September 30, 2021, compared to CAD$1.2 million on December 31, 2021. In the same period, the Company had total assets and total liabilities of CAD$38,812 thousand and CAD$8,610 thousand, respectively.
In total, VMC’s revenue decreased 67% to $2.9 million for the three months ended September 30, 2021, compared to $8.9 million for the three months ended September 30, 2020. The Company attributes this decrease to the delivery of 6 busses in the quarter, compared to 20 busses in the third quarter of 2020.
More specifically, this decrease was caused by low order intake during the first nine months of the pandemic. Additionally, VMC experienced delivery delays related to shoppings delays and global supply chain challenges for certain parts. However, VMC’s revenue grew 128% to $49.3 million for the nine months ended September 30, 2021, compared to $21.6 million for the nine months ended September 30, 2020. In total, the Company delivered 119 buses for the nine months ended September 30, 2021, an increase from 49 buses year-over-year (YOY).
“We made significant moves towards fortifying our balance sheet in recent months as well to support some of these exciting new growth initiatives, supplementing our $20 million line of credit with a $10.3 million debt financing and the proceeds from a US$17 million underwritten public offering,” commented William Trainer, Founder and Chief Executive Officer of Vicinity Motor Corp.
Overall, VMC reported a gross loss of $700,000, or 24.9% of revenue in Q3 2021, compared to a gross profit of $600,000, 0r 6.3% YOY. Margins for Q3 2021 were negatively impacted by sales of higher than average cost buses in inventory and the sales of fewer buses compared to the prior year-end period. For the nine months ended September 30, 2021, the Company’s gross profit increased to $5.7 million, or 11.6% of revenue in Q3 2021, up from $1.2 million on September 30, 2020.
“Our near-term sales momentum is beginning to accelerate and given the inherent delay between a customer placing a purchase order today and the revenue realized from vehicle deliveries months later, I firmly believe that we are lining ourselves up for a strong 2022. This creates the potential to notably exceed our financial guidance – helping to generate sustainable, long-term value for our shareholders,” continued Trainer.
Looking forward, VMC is cooperating with EAVX to develop next-generation delivery and municipal vehicles. EAVX is the newest business unit in the JB Poindexter enterprise, which provides best-in-class commercial automotive and manufacturing goods & services. The EAVX unit was designed to integrate JB Poindexter’s five industry-leading brands, responsible for 95% of its USD$2 billion revenues, with technology partners like VMC.
VMC entered into a strategic collaboration agreement with EAVX on October 4, 2021, whereby EAVX will integrate its bodies with the existing Vicinity™ bus and truck motor chassis. In particular, this agreement will focus on two primary objectives, including the development of a next-generation Class 3 EV truck and the development of a next-generation Class 5/6 truck. Additionally, the Company received an LOI for 100 VMC 1200 EV trucks from Pioneer Auto Group, a leading retail automotive dealer in British Columbia, representing $14.0 million in anticipated revenue.
In total, VMC expects to achieve CAD$140 million in revenue and an adjusted EBITDA of at least CAD$10 million through significant potential upside driven by the sale and delivery of:
- 95 Vicinity™ Classic busses
- 75 Vicinity Lightning™ EV busses and chassis
- 200 VMC 1200 EV trucks
- 300 Vicinity Optimal EVs
VMC’s share price opened at $4.78, up from a previous close of $4.74. The Company’s shares are down -4.22% and were trading at $4.54 as of 12:20 PM ET.
