# British EV maker Arrival seeks second chance with US EV tax credits
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-05-25
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: British EV Maker Arrival Seeks Second Chance with US EV Tax
Meta Description: British electric van startup Arrival, aiming for a fresh start in the US with huge subsidies from the Inflation Reduction Act, looks to rebound after struggling
URL: https://financedigest.com/british-ev-maker-arrival-seeks-second-chance-with-us-ev-tax-creditshtml

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# British EV maker Arrival seeks second chance with US EV tax credits

By Paul Lienert and Nick Carey

DETROIT/BICESTER, England (Reuters) – British electric van startup Arrival, which has hit many road bumps in its quest to become the next Tesla Inc, now hopes huge subsidies from the U.S. [Inflation Reduction Act](https://www.financedigest.com/factbox-governments-act-to-ease-inflation-pain.html "Factbox-Governments act to ease inflation pain") and a second reverse merger will give it a fresh shot at survival.

Since it was founded in 2015, Arrival has developed vehicles for high-profile customers like United Parcel Service Inc and Uber Technologies Inc, but has burned through piles of cash without ever hitting mass production and is winding down its UK [operations in favor of refocusing on the United States](https://www.financedigest.com/uk-brings-train-operator-transpennine-under-temporary-state-control.html "UK brings train operator TransPennine under temporary state control").

With the $283 million it should receive from a [merger with special-purpose acquisition](https://www.financedigest.com/its-what-you-know-the-role-of-data-in-mergers-and-acquisitions.html "It’s what you know: the role of data in mergers and acquisitions") company (SPAC) Kensington Capital Acquisition Corp V, announced in April, executives at Arrival said they will focus on just one U.S.-produced vehicle for now. That vehicle is a larger Class 4, or medium-duty, delivery van that will bring customers a $40,000 IRA subsidy, far above the $7,500 for smaller electric vans.

Arrival’s new investors are “very excited about our U.S. product and the U.S. [market,” Chief Financial](https://www.financedigest.com/how-predictive-marketing-analytics-empowers-financial-leadership.html "How Predictive Marketing Analytics Empowers Financial Leadership") Officer John Wozniak said. There are a lot of tail [winds there,” including a recent California mandate requiring commercial fleets to transition to electric over the next 10 years](https://www.financedigest.com/enel-suspends-colombia-wind-farm-construction-after-years-of-protests.html "Enel suspends Colombia wind farm construction after years of protests").

Crucially, Arrival says early [investor UPS is still an anchor customer – it has ordered up to 10,000 vans – though admittedly not a happy one after waiting](https://www.financedigest.com/dollar-edges-lower-as-investors-wait-on-feds-powell.html "Dollar edges lower as investors wait on Fed’s Powell") years for vehicles.

We continue to evaluate Arrival’s [decision to refocus its efforts in production and how this may impact](https://www.financedigest.com/court-fees-and-access-to-justice-the-impact-of-the-supreme-courts-decision-on-lenders.html "Court fees and access to justice:  the impact of the Supreme Court’s decision on lenders") potential, future vehicle deployments,” a UPS spokesperson said.

Other EV startups like Rivian Automotive Inc, Lucid Group Inc, Fisker Inc and Lordstown Motors Corp have [faced similar challenges](https://www.financedigest.com/how-to-overcome-the-challenges-faced-by-women-in-business-3.html "How to Overcome the Challenges Faced by Women in Business"), trying to ramp up production while burning through cash at a time when few investors will give them more.

But the IRA, which took effect last August, has provided enough of a lifeline to Arrival to [attract new investors](https://www.financedigest.com/old-trafford-attracting-not-just-footballers-from-around-the-world-but-also-investors.html "Old Trafford attracting not just footballers from around the world, but also investors"). It includes customer [tax credits](https://www.financedigest.com/automakers-scramble-to-decode-new-u-s-ev-tax-credits.html "Automakers scramble to decode new U.S. EV tax credits") for purchases of certain EVs.

Arrival now aims to begin producing its medium-duty XL Van at a “microfactory” in Charlotte, North Carolina, by late 2024, and Wozniak said he is confident of [hitting that target](https://www.financedigest.com/japans-inflation-stays-above-bojs-target-key-gauge-hits-four-decade-high.html "Japan’s inflation stays above BOJ’s target, key gauge hits four-decade high").

The company has so far made three prototypes of its smaller L Van at its Bicester plant in the United Kingdom, which are being road-tested to aid development of the larger, more expensive model.

Class 4 vans are more appealing than smaller [models “because the prices](https://www.financedigest.com/polypropylene-fibre-market-witness-a-spike-in-growth-pace-recent-improvements-in-pricing-models-fmi.html "Polypropylene Fibre Market Witness a Spike in Growth Pace Recent Improvements in Pricing Models: FMI") and margins are so much higher,” said Michael Abelson, head of Arrival’s North American unit.

“The question is, will they have enough cash to actually get into series production?” said David Bailey, a professor of business economics at the University of Birmingham.

### ‘ABSOLUTE LIFELINE’

At its peak, Arrival was developing two different electric vans and an electric bus. It was also developing a specially designed electric car for [Uber drivers](https://www.financedigest.com/french-uber-drivers-to-earn-more-than-8-per-ride-after-union-deal.html "French Uber drivers to earn more than per ride after union deal").

But like other [electric startups that collectively raised billions](https://www.financedigest.com/china-greenlights-audi-faws-3-3-billion-electric-vehicle-venture.html "China greenlights Audi-FAW’s .3 billion electric vehicle venture") through SPACs, Arrival found that going from concept to mass production is both expensive and immensely difficult.

The company [projected 2024 revenue of $14 billion in its initial SPAC deal’s](https://www.financedigest.com/iraq-and-total-sign-27-billion-energy-projects-deal.html "Iraq and Total sign billion energy projects deal") investor presentation, but Arrival lost a combined $2.3 billion in 2021-2022.

To conserve cash, Arrival has [cut staff](https://www.financedigest.com/qantas-idles-2500-more-staff-as-covid-19-cuts-domestic-flights.html "Qantas idles 2,500 more staff as COVID-19 cuts domestic flights") almost 75% to 750 employees. It had just $130 million in cash at the end of the first [quarter in an industry where launching a single model](https://www.financedigest.com/the-iphone-x-factor-over-a-quarter-of-smartphone-users-plan-to-upgrade-to-a-new-iphone-model.html "The iPhone X Factor: Over a quarter of smartphone users plan to upgrade to a new iPhone model") can easily cost $1 billion.

The startup warned in November it would [run out of cash before the end](https://www.financedigest.com/is-oil-on-the-brink-of-ending-its-three-year-bear-run.html "Is oil on the brink of ending its three-year bear run?") of 2023.

Arrival’s second SPAC is with Kensington, whose earlier [deals brought startups](https://www.financedigest.com/ma-deals-what-tech-startups-need-to-know.html "M&A deals: what tech startups need to know") QuantumScape, Amprius and Wallbox to the market.

The rare double [SPAC is being watched by others in the industry to see](https://www.financedigest.com/could-london-see-a-spac-boom-in-2022.html "Could London see a SPAC boom in 2022?") if it is worth replicating.

An executive with experience running SPACs, who spoke on condition of anonymity, said Kensington’s deal was an “an absolute lifeline” for a startup in Arrival’s situation.

There’s no [way they would find that kind of money](https://www.financedigest.com/five-ways-to-make-money-trading-bitcoin.html "Five Ways to Make Money Trading Bitcoin") anywhere else,” the executive said. “There could be more of this if these guys are able to make it happen.”

Reuters contacted all of Arrival’s current institutional shareholders, but they either did not respond or declined to comment.

### ‘ROOM TO RUN’

The IRA is key to making Arrival’s turnaround work, which the University of Birmingham’s Bailey said was ironic in light of the company’s former [reputation as the “great British](https://www.financedigest.com/british-funds-tell-texas-emission-cut-vows-matter-for-our-reputation.html "British funds tell Texas: emission-cut vows matter for our reputation") hope.

“It was seen as Britain’s Tesla and yet it’s the U.S. government that’s essentially supporting it,” he said.

The U.S. medium-duty Class 4 van segment is relatively small, with annual [sales of 30,000 to 40,000 vehicles](https://www.financedigest.com/sales-of-smart-antenna-to-rise-at-8-5-cagr-through-2031-digital-transformation-of-vehicles-computers-factories-fuels-market-growth-tmr.html "Sales of Smart Antenna to Rise at 8.5% CAGR through 2031, Digital Transformation of Vehicles, Computers, Factories Fuels Market Growth: TMR"). That is too small for most major manufacturers, so it [leaves Arrival with just a few rivals](https://www.financedigest.com/russias-ochakovo-ups-soft-drink-bottling-capacity-as-western-rivals-leave.html "Russia’s Ochakovo ups soft drink bottling capacity as Western rivals leave").

Those competitors include Shyft Inc, a Michigan-based manufacturer of multi-brand specialty commercial [vehicles whose Blue Arc electric vans will go into production](https://www.financedigest.com/spain-to-invest-5-1-billion-in-electric-vehicle-production.html "Spain to invest .1 billion in electric vehicle production") this fall.

Daimler [Trucks’ new Rizon brand will start importing electric vans](https://www.financedigest.com/amazon-com-to-invest-over-1-billion-euros-in-european-electric-van-truck-fleet.html "Amazon.com to invest over 1 billion euros in European electric van, truck fleet") from Japanese affiliate Fuso later this year that qualify for IRA subsidies because of free trade agreements with Japan.

California-based startup Xos Inc, which sold just 31 [vehicles in the first quarter](https://www.financedigest.com/rheinmetall-wins-quarter-billion-euro-order-for-e-vehicle-parts.html "Rheinmetall wins quarter-billion euro order for e-vehicle parts"), is also a competitor.

With price tags for medium-duty electric vans targeted to start from around $175,000, the segment represents a potential [market worth $5 billion](https://www.financedigest.com/new-tricks-needed-to-stop-the-e45-billion-counterfeit-smartphone-market.html "New Tricks Needed to Stop the €45 Billion Counterfeit Smartphone Market") or more.

We think that (Class 4) is a sweet spot where Arrival can make a lot of [money,” CFO](https://www.financedigest.com/the-evolving-role-of-the-cfo-money-isnt-everything.html "The evolving role of the CFO: money isn’t everything") Wozniak said. We looked across the [competitive landscape](https://www.financedigest.com/smart-exoskeleton-market-competitive-landscape-analysis-with-forecast-by-2031.html "Smart Exoskeleton Market Competitive Landscape Analysis With Forecast by 2031"), and from where you sit today, there’s a lot of room to run in that segment.

(Reporting By Paul Lienert in Detroit and Nick Carey in Bicester, England; Editing by Ben Klayman and Matthew Lewis)


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