Lion Electric’s US$500-million merger with investment SPAC Northern Genesis provides the capital to build two factories and opens the door to major growth for the company
In the race to fleet electrification, Lion Electric Co. has pulled a power move on the competition with the announcement Monday that it will become a publicly traded entity on the New York Stock Exchange after signing a US$500-million merger with special purpose acquisition company (SPAC) Northern Genesis.
Lion Electric, a made-in-Canada success story, is one of the country’s leading electric OEMs for medium and heavy-duty urban vehicles. With a half billion dollars set to be invested in the company’s ambitious expansion plans — in both Canada and the United States — the expectations of Quebec’s flagship electric vehicle OEM are mounting.
“It means a lot. It means having the capital to achieve what we want to do within the next few years,” says Lion Electric CEO Marc Bédard, in an interview with Electric Autonomy Canada. “We have several options, but US$300 million dollars is going into two major growth initiatives: one of them is the U.S. factory that we will be opening within the next two years and simultaneously we will be opening the battery factory. The total cost of that is US$170 million and there is US$45 million dollars for the R&D just to finalize what we are doing with our battery manufacturing.”
Battery factory in Quebec?
In good news for Canada’s transportation electrification sector, Bédard confirms that not all of the manufacturing will be happening south of the border. Lion’s battery factory — the location of which has been a hot-button topic for Lion’s Canadian fanbase — may, thanks to the SPAC funding, get to stay close to home for the OEM.
“I am very optimistic that [the battery factory] will be in Canada,” says Bédard. “We are still working on the details right now, but I am very optimistic.”
Northern Genesis is a climate solutions infrastructure SPAC, based in Kansas City. SPACs, which have been all the rage, are publicly listed entities that pool capital with the sole purpose of acquiring an active operating company and taking it public. Northern Genesis approached Lion Electric in mid-2020 with US$320 million investment capital. In addition to those funds, the deal includes a US$200 private placement in common shares. Lion Electric, which is now valued at US$1.9 billion, will keep its name under the terms of the deal.
Growth prospects and a winning culture
“In forming Northern Genesis, we were focused on engaging with a business whose value proposition is proven by current customers, whose tangible growth prospects will be energized by exposure to the public markets and whose experienced management team fosters a winning culture,” said Ian Robertson, co-founder of Northern Genesis, in a press release about the merger. “Lion surpasses our expectations on all these dimensions and we are confident that it has potential to be a great public company in the emerging decarbonized economy.”
For Lion, the feeling of admiration for the Northern Genesis management team was mutual.
“When they reached out to us it made a huge difference because I thought, dealing with entrepreneurs that were able to take a company public and also ramping that business into a $12-billion dollar market company is something very unusual, it’s great. That’s exactly what we are looking at doing,” says Bédard. “For me it was more than just getting the right capital. It was getting the right people behind that capital.”
An eye to the future
Lion’s projections for EV adoption and growth and the market share it will be able to capture are positive, to say the least. Currently, it has over 300 vehicles on the road and over six million miles driven. The company has 650 bus and truck deliveries on the books for 2021 and in the next four years has identified 6,000 potential vehicle sales, with two-thirds of those being trucks. Lion’s current production capacity is 2,500 vehicles annually.
Lion estimates its total available market (combined truck and bus in the U.S. and Canada) is $110 billion annually. By 2024, it estimates it will have over 20,000 in annual vehicle sales netting $3.5 billion in annual revenue. It is also aiming to halve the cost of its vehicles. The company is pointing to further good news for a “booming” bus market coming from south of the border with the incoming Biden administration pledging to replace 500,000 combustion engine school buses with electric within five years.
The types of vehicles Lion will be offering in its fleet is expanding too. The OEM is already manufacturing seven different types of purpose-built electric school buses and electric trucks and will be expanding into utility trucks, refuse trucks and emergency service vehicles — including an ambulance that’s already in development and, potentially, Canada’s first electric firetruck.
The possibilities don’t end with fleet vehicles; they’re just the jumping off point to a more speculative, but potentially more transformative market: vehicle-to-grid (V2G) technology. Two weeks ago, for example, Lion announced a partnership with Nuvve Corp., of San Diego (itself a recent SPAC acquisition), to make vehicle-to-grid (V2G) technology a standard feature in all of its zero-emission school buses. Since 2018, Lion and Nuvve have been running a a V2G pilot in White Plains, N.Y., public school district with Lion C-type electric school buses. Lion now says all future vehicles will be equipped with V2G charging capabilities.
Lion expects to be trading on the NYSE by the middle to end of the first quarter in 2021.