Lion Electric: Patience in Declining Electric Truck Segment as Company Picks Up Pace in Bus Market

2023-05-09 22:55:56

The Saint-Jérôme company delivered 220 vehicles in the first quarter, slightly more than the 174 deliveries made during the previous three-month period. (Photo: The Canadian Press)

Lion Electric (LEV) is pleading for patience in the declining electric truck segment as the company picks up the pace on the bus side.

There are currently 295 trucks in Lion’s order book, down six from the company’s last update two months ago. Its president and founder, Marc Bédard, admits that the acceleration of the pace is taking longer than anticipated.

However, this offer must be given time to gain traction, he argues. “If you remember our work with school buses, it took five to six years to really take off,” he said in a conference with financial analysts.

He pointed to the recent launch of the Lion5 model, the first with a company-designed battery, and the release of the Lion8 model by the end of the year as encouraging developments. “What we are seeing now is very exciting, judge Mr. Bédard. (…) We feel that the context is finally playing in our favour.”

Analyst Benoit Poirier of Desjardins Capital Markets believes that investors will be more cautious as they await signs confirming the strategy in the electric truck segment. “We are satisfied with the progress of the bus segment with deliveries exceeding expectations. However, as the order book is an important catalyst for the action, we believe that investors will wait for evidence of an increase in truck orders before embarking.

National Bank Financial analyst Rupert Merer finds that the average price of vehicles sold by Lion, at US$248,000, is lower than his forecast of US$310,000. He attributes this discrepancy to the fact that deliveries are more geared towards the bus and the Canadian market than he had anticipated. “The average price should improve with the effect of subsidies in the United States and a better distribution of sales by category.”

Towards profitability

The acceleration of the pace in the electric bus segment, however, enabled Lion to unveil results that exceeded financial analysts’ forecasts. As he did during the inauguration of the Mirabel battery plant in mid-April, Mr. Bédard continued to dangle the prospect of possible profitability, without giving a precise timetable.

“We are paying great attention to our road to profitability. Revenues per unit are healthy and Lion’s model works well at scale. As we produce and sell more vehicles, we are confident Lion will generate attractive profit margins.”

Chief Financial Officer Nicola Brunet reiterated that the company’s intention is to “drastically” reduce capital expenditure in 2024, with the end of planned investments in the school bus factory in Joliet, in Illinois, in the United States, and that of batteries in Mirabel, in the Laurentians region.

While waiting for the company to finance itself from the cash generated by its activities, Mr. Brunet opened the door to finding other sources of financing, without going into details. “We will continue to monitor market conditions, our liquidity, our capital needs and we will evaluate various financing opportunities in the coming months. That being said, I can’t give a specific answer on when or how.”

Results above expectations

For its first quarter, Electric Lion announced a net loss of 15.6 million dollars (M$) US, compared to an exceptional profit of 2.1 M$ US for the same period last year. Net loss per share was 7 cents.

The Saint-Jérôme company delivered 220 vehicles in the first quarter, slightly more than the 174 deliveries made during the previous three-month period.

Revenues were US$54.7 million, more than double the US$22.6 million recorded last year.

Lion Electric’s backlog includes 2,565 vehicles, for a total value of US$625 million, according to the company’s estimates.

Prior to the earnings release, analysts had expected a net loss of 14 cents per share and revenue of $54.9 million, according to financial data firm Refinitiv.

The stock lost 27 cents, or 8.36%, to $2.96 at the close of trading on the Toronto Stock Exchange.

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