For those that are uninitiated to the young thundercats chasing Tesla for electric vehicle supremacy, Canoo Inc. initially caught my attention way back in prehistoric times (2019) with the announcement of their opaquely-named “Lifestyle Vehicle.” The car, or van, or whatever it is, is polarizing enough to catch headlines; I say it resembles a stretch-limo version of a VW Bug but what caught my attention was the consumption model, which is a pure-subscription play. Sadly for shareholders, Canoo is grabbing headlines for another reason- their stock price.
A subscription model for cars is not a totally novel concept. Leases have been around forever, but they don’t typically include the care & feeding a vehicle requires. The experience isn’t drastically different from owning a vehicle. Renting has been around forever too but that becomes expensive the longer you rent that vehicle. Ride-sharing services like Uber and Lyft are practical for limited use but not a good solution for road trips. The Canoo subscription is supposed to be an all-inclusive model that allows users to sign up for a month-to-month service to drive a Canoo vehicle, and includes all the accoutrements like insurance and registration.
Styling aside, the Lifestyle Vehicle is unashamedly aimed at millennials in urban environments who do not want to fuss with all the pleasantries that comes with car ownership. This includes insurance, registration/taxes, fuel (or charging in this case), maintenance, and of course- eventually reselling or trading it even-steven for a small movie theater popcorn. The 250mi approximate range might actually be targeted at my demographic though. Sorry in-laws, we can’t visit this weekend. My Canoo just doesn’t have range to get there and back.
Being set in my ways, I always owned my cars. My formula was to buy a slightly used vehicle so as to not eat the massive depreciation of a new car, then drive it until I inherited enough money from dead relatives to purchase an upgrade. But I have to admit, the idea of driving a new(ish) car without eating depreciation or paying for new tires sounds pretty good, even if I don’t fit the targeted demographic. Ok, I’ll miss the fresh aroma of dad jokes I collect at the service station every time I go offroading through Nashville potholes and pop a tire, but sacrifices must be made to make room for progress. Heck, I might even let a valet park it. Also, when I’m tired of it (or a pandemic requires me to drive approximately as much as a brick wall does), I can throw the keys back at Canoo like I’m in a breakup song video. “Hey Canoo, to the left, to the left.”♫
Canoo seems to have serious engineering chops too. Canoo’s vehicles can be thought of as two separate, yet equally important parts (dant dant)– the first is the “skateboard,” which consists of the mechanical guts including the motor, battery, steering/braking systems and a frame that are common to all Canoo’s vehicles. Underneath the West World taxi-looking Lifestyle vehicle sits this in-house-designed skateboard packed with homegrown goodies that allows for multiple “top hats” that sit atop the skateboard.
The second part of the vehicle is this aforementioned aptly-named top hat. This top hat is the cabin portion that can be configured into any number of designs, such as a sedan, pickup truck or even a delivery van. Along with a custom-built motor and battery pack, Canoo introduced what they claim to be an industry-first true drive-by-wire system, which allows for top hat configurations that are infinitely flexible. As a result, the driver position can be placed anywhere in the top hat design without restrictions typically found in a traditional steering column setup. I’m still hopeful for a mad-max-inspired, high-mounted center driver position, with armor & spiked panel options of course.
This flexibility allowed for Canoo to announce the Multi-Purpose Delivery Vehicle, or MPDV back in December 2020. This “last-mile” delivery vehicle is interesting and marks a shift to focus on commercial fleet use cases, competing in this lucrative market with Lordstown Motors, Arrival and Workhorse to name a few.
While this new MPDV still utilizes the proprietary skateboard design, it also marked a head-fake back to traditional purchasing options versus the subscription model. The MPDV was also presented as a traditional purchase with a stated starting price of “about $33,000” according to Tony.
Now the third top hat design was launched earlier this month. This new pickup truck, which keeps strong design cues from the original Lifestyle Vehicle, is apparently also going to be for sale rather than the subscription model.
Why the change? Listening to Canoo’s first ever earnings call, executive chairman Tony Aquila clearly repositioned the company’s trajectory towards commercial fleets and professional workforces. Apparently the numbers work better that way. Please excuse the technical financial jargon. My personal feelings are that the subscription approach is really innovative and I wish there were more options like this.
Wall Street might agree with me too. The morning after the first earnings call in which Tony seemed set on this new model, their stock dropped an eye-watering 25% to $8.52/share at one point from an already deflated level, and even further away from their highs, briefly peaking over $24/share shortly after their merger with Hennessy Capital Acquisition Corp. via a reverse “SPAC” merger back in January, marking their entry into the public market.
Personally I’m cheering for Canoo. I like their vehicles, but I really want to see something unique from the consumption and procurement side of the operation like the subscription promised. The way people buy or perhaps “consume” vehicles is bound to change. Heck, Elon will even sell you a Tesla using Bitcoin [Maybe not—Ed.]. My guess is that all the recent innovations to the traditional dealership model is a strong indicator that customers are demanding a better way to buy, or maybe even subscribe to their next ride.
The stock might have dropped for any number of reasons and not necessarily the abandonment of Netflixing your whip. Nevertheless, the new executive team seems very intent on a traditional procurement model going forward. Let’s hope they decide to at least keep subscription offerings on the Lifestyle Vehicle. I bet subscriptions could turn out to be the real winner.
