Weeks before Rivian’s blockbuster initial public offering late last year, Amazon founder Jeff Bezos managed to both commend and cajole the electric-vehicle upstart’s chief executive in under 180 characters.
Bezos called Rivian founder RJ Scaringe “one of the greatest entrepreneurs I’ve ever met,” then quipped: “Now, RJ, where are our vans?!”
Nine months later, Amazon and retailing rivals like Walmart are still hard-pressed to get their hands on enough electric delivery vehicles. For all the progress manufacturers have made getting more plug-in passenger cars into the garages of consumers, there are only a handful of battery-powered vans on the market to transport goods to doorsteps.
All this helps explain why Walmart did a deal this week with Canoo, a company just two months removed from issuing a going-concern warning. Canoo announced its Bentonville, Arkansas-based neighbor had ordered 4,500 of its still-in-development vans, and will have the option to purchase as many as 10,000.
Founded in late 2017 by a set of executives who broke away from another troubled EV startup, Faraday Future, Canoo spent its first few years toiling away on a bubbly looking electric van it planned to sell through a subscription service. It also planned to provide contract-engineering services to other carmakers and technology companies to tide itself over until it began manufacturing its own vehicles.
Soon after it went public via a merger with a special purpose acquisition company, Canoo pulled a 180, de-emphasizing both those business lines to focus on selling to commercial fleets. Canoo’s CEO, CFO, head of corporate strategy and its top lawyer left in short order. The Securities and Exchange Commission opened an investigation. Even after the surge in its stock price this week, Canoo has squandered almost three quarters of the market value it debuted with in December 2020.
All this drama wasn’t enough to deter Walmart, although the retail giant has secured extremely very attractive terms.
Walmart can cancel the agreement without giving a reason with just 30 days notice. It’s immediately vested almost 15.3 million Canoo shares as part of a warrant agreement. The rest of the 61.2 million shares allotted at a $2.15-a-share strike price vest quarterly in proportion to any payments Walmart makes to Canoo for up to $300 million worth of vehicles. Walmart will own more than 20% of Canoo if that revenue threshold is reached.
In other words, if Canoo succeeds, Walmart stands to gain not only by adding thousands of EVs to its delivery fleet, but by ending up with a significant stake in a then-successful startup.
Of course, Canoo will have to get its vans into production first. Just last week, a trailer at the company’s office in Torrance, California, burned after lithium-ion cells caught fire during testing, the second battery fire at the site since August. The company nevertheless plans to send some pre-production vehicles to Walmart in the coming weeks, and the vans are expected to be ready for roads sometime next year.
If this plan doesn’t pan out, Walmart has some back-up options. It already has orders in with General Motors’s BrightDrop and has 1,100 E-Transits comingfrom Ford.
If Canoo does come through, Walmart will have the vans all to itself. Just as Bezos secured exclusive access to Rivian’s delivery vehicle, Walmart’s deal with Canoo prevents the company from selling any to Amazon.
