Canada’s electric vehicle battery supply chain is in good hands with Lion Electric. Located in Saint-Jérôme, Quebec, Lion Electric is getting significant help from the Provincial and Federal Governments for investing in EV tech for Canada’s role in the great pivot. The pivot of vehicles to electric and autonomous technology is a major milestone for the 21st century and is what we refer to as the ‘great pivot’.
Lion Electric ticker: $NGA is basically set for success with a significant pipeline of orders. Amazon plans to procure up to 2,500 all-electric Lion 6 and Lion 8 trucks from Canadian manufacturer Lion Electric by 2025.
Quebec and Ottawa will each provide $50 million, while Lion Electric will invest $85 million of its own in the project for a battery-pack assembly plant in Saint-Jérôme, north of Montreal.
When we are talking EV School buses for North America, Lion could become one of the leaders.
Like we saw with Lightspeed in retail POS technology, government handouts in the socialist province of Quebec can disrupt industries. It amounts to an unfair business advantage when you get that kind of favoritism, but that’s how things roll in the great white north sometimes (think Bombardier, Air Canada, etc…).
Lion Electric will also attract talent with this kind of a foundation. The company creates, designs and manufactures all-electric class 5 to class 8 commercial urban trucks and all-electric buses and minibuses for the school, paratransit and mass transit segments. Lion is a North American leader in electric transportation and designs, builds and assembles all its vehicles’ components, including chassis, battery packs, truck cabins and bus bodies. So the TAM here is quite large really.
The $NGA stock is currently $16.90 and would be a buy under about $12.
It’s estimated 135 jobs will be permanently created once the plant is completed in 2023. Lion Electric says the new facility will allow it to control the costs associated with battery production and have more control over the design of the batteries it uses in its electric school buses and trucks. So this is a promising startup getting a boost from local government at a time when the ‘great pivot’ has become a speculative investment in an EV bubble.
Of course Lion believes that transitioning to all-electric vehicles will lead to major improvements in our society, environment and overall quality of life. That’s nice. The company maintains vertical integration by manufacturing the chassis, truck cabin, bus body, battery packs, powertrain and the controlling software in-house. Readers should note that the production of battery packs will commence toward the end of 2022.
So the true potential of this company only really aligns around 2024. Lion Electric is already producing EVs at its facility near Montreal, Quebec. This facility has a production capacity of 2,500 vehicles per year. Once the US facility comes online, Lion Electric hopes to boost its production capacity to 20,000 units per year. It could realistically become quite profitable one day. Still its timeline to increase production by x8 seems ambitions.
In 2021 and 2022, the company plans to introduce new products, including the Lion8 Tractor, Lion6 Utility, LionD, Lion5, Lion7, Lion8, etc. Moreover, Lion plans to begin producing in the US from 2023 onwards. The Canadian ambitions in the EV market are pretty meek, so it’s nice to see a local company improving its prospects. Realistically this is an Amazon acquisition target, likely before 2025.
Lion Electric is hardly even a startup. It’s been doing this for over a decade. The company has big name partnerships and government subsidies. Having such a variety of trucks and busses, it can be a niche EV player with less competition.
Among the throngs of EV SPACs gone wrong, this is actually more of a value play relative to the unrealistic targets and projections of the newer EV startups. Lion positions itself as a leading OEM in transportation electrification in North America. The crazy part is it could actually come true by 2030.
Speaking of lofty projections and unrealistic targets, Lion Electric also has created its own hype in the SPAC era. The company expects to earn a revenue of $204 million and an EBITDA of $29 million in 2021. By 2024, the company would be earning over $3.6 billion in revenue and over $700 million in EBITDA.
For a company with a market cap of just 600 million, this is actually one of the more promising EV stocks. They have an actual product with real world demand. In the ‘great pivot’ Lion Electric is a dark horse that I rate highly for potential.
It reached a price of $33.48 in February 2021. Its true value is likely around $9. It still has a ways to go to correct in its mean reversion. However there are few EV school bus stocks like this outside of China. Hilariously, even Reddit speculators seem timid about Lion’s prospects. Lion Electric really is a bit under the radar due to its location in Quebec, Canada.
However it’s really not rocket theory, in the ‘great pivot’ demand will be considerable. With its new facility Lion Electric could achieve scale as a niche winner with almost perfect timing, backed by the Quebec Government. If that’s not a moat I’m not sure what is. Quebec has a very downtrodden corporate ecosystem. It needs to have some local winners.
In late March we learned that Lion Electric received a purchase order from Pride Group Enterprises (Pride) for the acquisition of 100 battery-electric trucks (Lion6 and Lion8 models), which is the largest single order up to date. Deliveries from Ikea, no problem. Attempts to improve C-suite, check. Lion Electric is doing all that you might expect for them to have a valid path to success.
They have orders from the Canadian National Railway and significant local demand for EV school busses. While companies like Rivian will get the lion’s share of hype, it’s actually companies like Lion Electric that will have more municipal impact on the future of EVs. It’s at that urban level where higher margins and huge orders can take place. Amazon has the rights to buy 15.8% of the company. Make no mistake, Amazon will target an acquisition here.
Quebec is the underdog province of Canada, and Lion Electric might be Canada’s official underdog sponsor of the great pivot. To date, Lion Electric has delivered more than 300 electric heavy-duty vehicles in North America and its manufacturing facility in Canada has a capacity to produce approximately 2,500 electric trucks per year. That’s not a stock that’s worth more than $10 to an savvy investor. However, neither is this a gambler’s stock.
Lion Electric is for the most part pretty self sufficient. Ikea is buying 15 Lion6 heavy-duty zero-emission trucks. I think you have some idea then the many paths this company has to scale. IKEA and Second Closet co-branded five tonne EV trucks that will service last mile deliveries for IKEA locations in Boucherville, QC, Etobicoke, ON and Richmond, BC. They are scheduled to hit the streets in the fall of 2021. Last mile delivery sounds a lot like what Amazon will be after.
IKEA Canada has been named amongst Canada’s greenest employers for more than a decade and remains committed to its leadership in sustainability. If that pilot goes well you can imagine the future demand for these EV vehicles. Also In the long term, Autobus Groupe Séguin would like to electrify its entire fleet of 310 vehicles by 2030.
That means its other 260 vehicles as well (after an initial contract with Lion for 60). So the orders will keep coming for Lion Electric and with Government funding it essentially becomes too big to fail just as Lightspeed did who eventually bought out all of their major companies in the retail POS space.
The Last Futurist predicts Amazon will acquire Lion Electric in 2024.