Foxconn is tightening their grip on Lordstown Motors as the company will invest up to $170 (£147 / €169) million into the automaker in exchange for common and preferred stock.
Upon completion of the transaction, Foxconn is expected to hold all of Lordstown’s outstanding preferred stock as well as 18.3% of its common stock on a pro-forma basis. This will give the company sizable influence and that’s reflected by Foxconn’s right to appoint two members to Lordstown’s Board of Directors.
The funds will be used for “general corporate purposes” as well as paying for the design and development of a new electric vehicle program in collaboration with Foxconn. The latter was apparently mentioned in Lordstown’s third quarter earnings release, which stated “pre-development work on next vehicle has begun by LMC, in collaboration with Foxconn EV ecosystem, including [Mobility-in-Harmony] MIH consortium.”
Also: Lordstown Begins Production Of The Endurance, Hopes To Deliver 50 Units In 2022
Furthermore, Lordstown and Foxconn have agreed to terminate the existing joint venture arrangement between them. As Lordstown explained, it’s effectively being replaced by the preferred stock investment.
In a statement, Lordstown CEO Edward Hightower said “Over the last year, the LMC and Foxconn teams have worked collaboratively to bring the Endurance into commercial production, despite numerous external challenges. We acknowledge and appreciate the confidence in our team that is shown by this investment.” He added, “The combination of LMC’s experienced vehicle development team, Foxconn’s growing EV ecosystem, the MIH platform, and our asset-light business model will allow us to bring great EVs to market faster and more efficiently.”
That being said, the company’s third quarter earnings release painted a bleak picture. While the Endurance is now in production, they’re being built at a “very slow rate” and only 12 trucks have been made so far.
While production is slated to ramp up later this month, the truck is still undergoing testing and awaiting approval from the Environmental Protection Agency as well as the California Air Resources Board. This is preventing deliveries, but the company noted final approvals are expected to come later this year.
That’s a bit of good news, but the “first production batch of Endurances will be limited to up to 500 vehicles, because the bill of materials cost is materially higher than our anticipated selling price.” That’s not good and Lordstown noted “investments in hard tooling, building scale with production suppliers, and VA/VE initiatives would bring this cost down, but have been deferred to manage the balance sheet and limit the amount of new capital needed to achieve initial production targets.”
Given this problem, Lordstown is seeking one or two OEM partners to help scale production of the Endurance. It remains unclear if any companies are interested, but Lordstown said the Endurance offers OEMs the opportunity to enter the full-size electric truck market quickly and at a relatively low cost.
