(Montreal) Lion Electric is hopeful that the US$5 billion pledged by the Biden government to fund the electrification of school buses will bring in new customers, while analysts say growth in the order book is disappointing.
Posted yesterday at 1:19 p.m.
The Saint-Jérôme company’s order book, worth 600 million, reached 2,422 electric vehicles, as of May 3, 2022, or 286 trucks and 2,136 buses.
This figure contrasts with the production potential of 22,000 vehicles that the manufacturer wishes to reach in 2023, notes Nauman Satti, of Laurentian Bank Securities. The company still expects to begin vehicle production at its new US plant in Joliet, Illinois by the second half of the year. “The low order threshold casts doubt on the investment thesis,” comments the financial analyst. Execution risk continues to increase over time. »
Lion’s president and CEO, Marc Bédard, wanted to be reassuring during a call with financial analysts on Wednesday. In the United States, the Biden administration confirmed last February that it would pay states nearly US$5 billion over five years to support the purchase of electric school buses. “It was difficult to get orders in the last year in the United States, because everyone was waiting for the program,” he explains. I believe we will see orders from US carriers increase in the future. »
The order book in the electric truck segment also showed signs of weakness. There are 14 fewer trucks there than three months ago. Factoring in deliveries, Satti believes that means the company only received two truck orders in the quarter.
Trucking companies had their hands full over the past year, Mr. Bédard pointed out. “Their attention was elsewhere [que l’électrification de leur flotte] with the pandemic and supply chain disruptions. We have good indications that this market is coming back. »
The electric bus occupies a larger share of the company’s activities, but the potential market for the electric truck is much larger, underlined Mr. Bédard. “Keep in mind that the truck market is ten times larger than the school bus market and that the American market is ten times larger than the Canadian market. »
The lack of vigor in the electric truck market could be explained by the fact that it is less subsidized than that of the school bus, advances Rupert Merer, of the Financière Banque Nationale. “Demand could grow faster in markets like California, which has introduced incentives to encourage the adoption of electric trucks. We think Lion could have success in this market with the start of production at its plant in Illinois while it could take advantage of the vehicles being manufactured in the United States. »
Battery reserves
Mr. Bédard also indicated that his difficulties related to the supply chain continued to lessen. The company’s strategy for several months has been to keep larger reserves of parts and components in order to avoid production delays.
The price inflation of electric battery components does not seem to worry management for the moment. Chief Financial Officer Nicolas Brunet said the company has nearly 3,000 batteries in stock with “large” orders to come. The company has also entered into long-term contracts with these suppliers, which provides it with some protection against price increases.
He recalled that the company wanted to “eventually” produce its own battery. “Even if the price of materials increases, the advantage of doing it yourself, without having to pay a supplier’s profit, will allow us to have a significant reduction in the cost of our batteries. »
Revenues quadrupled
Lion Electric revealed the day before that its sales had almost quadrupled compared to last year to 22.6 million thanks to an increase in the number of vehicles delivered.
The manufacturer of all-electric trucks and buses notably announced that it delivered 84 vehicles during the first three months of the year, an increase of 60 vehicles compared to the 24 delivered during the same period last year.
The company posted a net profit of 2.1 million, compared to a net loss of 16.1 million for the first quarter of 2021. This profit, however, takes into account a gain of 21.5 million related to an accounting item and a lower charge than last year related to a stock-based compensation program. The diluted adjusted loss per share, for its part, is 6 cents.
Prior to the earnings release, analysts had expected a loss of 1 cent and revenue of 23.04 million, according to Refinitiv.
Lion’s stock fell 3 cents, or 0.38%, to $7.85 on the Toronto Stock Exchange around noon.
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