Why is ev star Lion electric struggling to access funding?
You’d be forgiven if you haven’t heard of the Lion6. unlike many other electric vehicles, which tend toward slick lines and outsized price tags, the Lion6 looks like an updated version of what you might find in a u-haul lot, minus the noise and emissions. This “all-electric urban truck” tops out at 105 kilometres an hour. There is no Ludicrous Mode.
The Lion6 and its manufacturer, Lion electric, are nevertheless one of the sleeper hits of these Covid-addled times. In documents filed with the u.s. Securities and exchange Commision in the dying hours of 2020, the company revealed it had entered into an agreement with Amazon to deliver up to 2,500 trucks to the company by 2030. Translation: along with its beefier cousin Lion8, the Lion6 will be a significant cog in Jeff Bezos’s outfit’s drive to net-zero carbon by 2040. In fact, Bezos et al. are apparently so enamoured with Lion electric’s wares that Amazon has taken the option to buy up to 20 per cent of the company.
The best part of this story? The Lion6 and the Lion8, along with the company’s line of electric buses, are manufactured in Saintjérôme, Que., about a 45-minute truck ride from Montreal. Founded in 2008, Lion electric was birthed by CEO Marc Bédard and nurtured along by at-home investors like Power Corporation and XPND Capital. The company is set to go public following an anticipated merger in March with Nyse-listed SPAC Northern Genesis Acquisition.
In short, Lion electric is an electric-powered antidote to a prevalent cynical belief that the development and manufacturing of electric vehicles is the domain of nations other than Canada.
It was strange, then, that Bédard has said Lion electric’s plans to build a $180-million battery manufacturing plant in its backyard were in doubt. “Our objective is to have this factory in Quebec, but we have a lot of pressure to build in the u.s. because we’ve made a lot of sales there,” Bédard told La Presse last November, about six weeks after the company announced an initial 10-truck deal with Amazon. “We want to do it in Quebec, but it takes money to do that. It depends where the money will come from.”
I called up Lion electric VP Patrick Gervais last week to ask the obvious question: why on earth would a proudly, almost stubbornly madein-quebec company look Stateside to expand? Gervais told me his boss was simply outlining the cold, hard math: the u.s. was offering up land and treasure to lure the company south. The Liberal government in Ottawa, meanwhile, wasn’t quite as forthcoming. “The hold-up has been federal,” Gervais told me, point blank. “It’s a bigger organization, and I think it’s a different way of doing things.”
Lion electric hoped to receive a third of the budget to build its battery plant from Innovation, Science and economic development Canada (Ised). As the ministry charged with pulling Canada out of the economic doldrums, Ised oversees a $3.14-billion arsenal to be used in the country’s fight for a cleaner, greener recovery to pre-covid prosperity.
And yet, Ised has a near-chronic inability to get this clean, green money out the door. As my colleague Murad Hemmadi reported in december, a quarter of Ised’s $3.14 billion went unspent in the 2019–2020 fiscal year. Though the ministry said the money would be carried over, it remains that it has left between 20 and 30 per cent of its budget on the table since 2015. Last year, the largest tranche of Ised’s unspent money sat in the coffers of the ministry’s Strategic Innovation Fund — the very fund that Lion electric wanted to tap, Gervais told me. The situation at Ised is akin to the country’s vaccination struggle, in that the federal government’s problem isn’t the country’s anticipated vaccine supply, but actually getting those vaccinations into the arms of Canadians.
The money lag is particularly galling in the case of Lion electric, if only because the company is in the Venn diagram sweet spot where technology, economy and environment meet. Operating one electric truck prevents up to 100 tons of greenhouse gases — the equivalent to 20 cars — from entering the atmosphere every year. Lion electric has already secured a 450,000-square-foot plot of land in Saint-jérôme on which to park the battery plant, which would employ 135.
And then there’s this: Lion electric also makes school buses, more than 300 of which are currently in service in North America. Along with the Amazon deal, this on-theground precedent has turned American eyeballs the company’s way at a particularly fruitful time. A task force of the incoming Biden administration has recommended replacing the country’s entire fleet of 500,000 school buses with “American-made, zero-emission alternatives within five years.” Bédard went on CNBC’S Mad Money last week to convince a typically excitable Jim Cramer that Lion electric could service this demand.
Citing commercial confidentiality, Ised wouldn’t comment on Lion electric’s funding. “As Canadians expect, there is important due diligence undertaken before an agreement is reached,” spokesperson John Power told me via email. “We continue actively working with industry to determine opportunities for investment to create well-paying jobs for Canadians and to establish our goal of an all-canadian electric vehicle supply chain from mining to battery manufacturing.”
There may yet be a happy ending to this story. A few weeks after Bédard mused about déménaging to the u.s, the company received a letter from Ised expressing its desire to participate in the Lion electric project. “Suddenly things are moving faster than we thought,” Gervais told me.
To be sure, the company still plans on building a manufacturing plant in the u.s., if only to meet anticipated demand and satisfy the terms of Biden’s madein-america nationalist bent. However, the cog now properly greased, Gervais said the company is set to announce its new battery-production plant as soon as the end of the month. Mostly automated, it will include an r&d centre and a test track. And it will be about a 45-minute truck ride from Montreal.