May 13, 2022
  • May 13, 2022

REE automotive stock: a modular electric vehicle platform

By on December 5, 2021 0

Readers have directed us to the assessment of the massive traffic jam of eelectric vvehicle (VE) listed companies, mainly through mergers with sspecial pgoal thatordered vscompanies (After-sales services). Last year, we issued a warning about the wisdom of investing in electric vehicles, as well as the peculiar dangers inherent in after-sales service that are becoming increasingly evident as many of these companies fall one by one. It certainly didn’t take long for an Israeli EV tech company called REE Automotive to give up. Let’s see if the REE Automotive stock is a buy at any price.

About REE Automotive Stock

Founded ten years ago, REE Automotive (REE) had raised $ 57 million in the disclosed funding, according to Startup Nation Central, the Israeli equivalent of Crunchbase. The company is developing a modular EV platform that basically consists of the chassis and wheels (more on the technology below). The initial market emphasizes urban mobility, so consider last mile delivery vehicles. In July, REE completed a reverse merger with a SPAC named 10X Capital Venture Acquisition Corp, a name you can now quickly forget because it is no longer relevant to the conversation.

Some relevant elements:

REE Automotive only pulled out $ 288 million from the deal, far less than the $ 500 million originally planned from PSPC and additional external investment through so-called priver Iinvestment in ppublic eequity (PIPE). It’s not entirely clear what happened except that some shareholders have decided that a safer bet might be for Tom Brady to win an eighth Super Bowl.

REE is a developing stage business which means zero revenue and no specific timeline when the business expects to start making money.

Its recent third quarter results were most notable for posting a net loss of nearly $ 415 million, up from $ 18.8 million last year. Wow. REE must have built a factory or something, right? In fact, the change was “primarily related to a higher non-cash stock compensation expense of $ 409.8 million… which was granted to the founders prior to the merger with 10X Capital and was acquired upon closing.” .

REE claims to have around $ 294.5 million in cash, which should be enough to take the business to market. Well, the current wording is ‘execute your business plan’, so let’s make no assumptions and take a closer look at REE Automotive’s inventory.

Technology

At first glance, it looks like REE has developed a fairly large electric skateboard:

REE Automotive modular platform
The largest electric skateboard in the world. Credit: REE Automobile

The design consists of two technologies. The main innovation is called REEcorner (you can tell its a big deal because the company dropped it off), which bundles all the components that make it vroom into a single compact module between the chassis and the wheel – including steering, braking, suspension, powertrain and control. This means that there are no mechanical links between the four individual corner modules, so the company’s X-by-Wire control technology controls all of these functions. The flat EV chassis, the REEboard, houses the control system, thermal management system, power converter and power module.

REE technology platform.
Credit: REE Automobile

The company claims that its EV skateboard design has a lower center of gravity than those with the motor located between the wheels. This allows it to carry more passengers, cargo and batteries, as well as support higher cabins and lower step height for greater overall volume. Its customers, who would likely be mostly OEMs, can customize the design. For example, customers can order front-wheel drive electric shuttles with maximum payload capacity and minimum kWh consumption. Conversely, logistics companies can choose low-speed, all-wheel-drive and all-wheel-steering configurations for last mile delivery, with low step height and minimum turning radius for easy maneuverability on the streets. crowded urban areas.

The main claim is that the design will also reduce the total cost of ownership by up to 59% for cars still with combustion engines and up to 19% for comparable electric vehicles. Cost savings are calculated based on the purchase price, cost of energy, cost of charging infrastructure, and cost of maintaining a vehicle with a range of 225,000 miles.

Cost comparison of REE Automotive electric vehicles versus other electric vehicles and diesel vehicles.
Credit: REE Automobile

Of course, much of this is still very theoretical, as REE Automotive has yet to put most of this technology into practice.

The business plan

In fact, based on all of the press releases from the past year, it looks like the company is still figuring out how it all plays out. For example, last month REE announced that American Axle & Manufacturing (AXL), an automotive supplier, will provide the 3-in-1 electric transmission technology that houses the electric motor, gearbox and inverter in one package. Another company called Brembo was contracted to develop and supply the brake system.

This outsourced approach to manufacturing, REE argues, will help keep large capital expenditures low. The company plans to assemble the various components in future integration centers which are expected to be able to produce 600,000 EV platforms by 2026. Each installation will cost $ 15 million to build. The first US-based integration center is slated to open in Austin, Texas by next year, with an assembly capacity of 40,000 EV platforms.

Total addressable market of the future EV.
One EV platform for every vehicle in the $ 700 billion EV market.

Meanwhile, REE is also signing memoranda of understanding and agreements left and right to partner with companies to develop commercial electric vehicles based on its platform. Hino Motors, the heavy-duty arm of Toyota, is arguably the most prestigious name in the long list of alliances on offer. There are also companies like JB Poindexter, which manufactures utility truck bodies, and NAVYA, which develops autonomous buses and other autonomous technologies for commercial vehicles. Additionally, REE has just released the Leopard, a last mile autonomous concept vehicle.

The Leopard, who doesn't look like a real leopard.  Credit: REE Automobile
The Leopard, who doesn’t look like a real leopard. Credit: REE Automobile

Most of these sourcing and manufacturing deals are about as onerous as your buddy saying he’ll meet you at the bar for a drink and then decide to get messed up at home, leaving you dry. Everyone’s favorite electric vehicle company, Rivian (RIVN), was supposed to do great things with Ford (F) but this collaboration ended last month. Unsurprisingly, Rivian stock fell from its ridiculous highs after its IPO in November.

Should You Buy REE Automotive Stock?

If you got to this section, it probably means you jumped ahead and missed the fact that REE Automotive is not just pre-income but hasn’t even completed commercial product development. final. Institutional investors bailed out even before the PSPC deal was done. The founders got their big paychecks, but every retail investor who hopped on REE Automotive stock in July lost -60% already their investment. The company’s market capitalization has grown from $ 3.1 billion to around $ 1.25 billion.

REE car stock
REE Automotive stock wasted no time before collapsing after its IPO in July. Its best days were back in February, when the PSPC merger was first announced. Credit: Yahoo! Finance

At this point, we really can’t imagine a price that would make REE stock an attractive buy. Retail investors like us cannot afford to let a company’s R&D float, especially in the highly competitive and well-funded electric vehicle market. Amazon and Walmart, in particular, are investing heavily in autonomous and electric fleets for last mile delivery services that are primarily developed by third-party technology companies.

We are also wary of the company’s ability to implement this horizontal business strategy which sources all of its major components from third-party manufacturers. Most deals are little more than handshakes these days, and supply chains these days are not overly reliable.

Conclusion

The day might come when we will feel secure investing in a stock of electric vehicles, but it is not that day. REE Automotive offers an interesting but unproven model for the emerging electric vehicle market. This might actually turn out to be a viable model if the economy really works as the company predicts, but we are still years away from verifying what is only a guess at this point, and we don’t. let’s not invest in theories.

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