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Canoo gets lifeline from Walmart in electric delivery van deal

Purchase agreement from Arkansas neighbor could help startup electric vehicle maker survive

Walmart will purchase 4,500 Canoo electric vehicles for use in its last-mile delivery fleet. (Photo: Canoo)

Startup electric vehicle maker Canoo Inc., which said as recently as May there was “substantial doubt” about its survival, appears safe for the moment thanks to Walmart’s purchase of 4,500 of its lifestyle delivery vehicles.

The announcement Tuesday morning before the opening bell on the Nasdaq sent Canoo (NASDAQ: GOEV) shares soaring. It more than doubled in price before falling back to a 53%, gain, closing at $3.63 Tuesday.

Walmart signed a definitive agreement with Canoo for its LDV with an option to purchase up to 10,000 units. Canoo built several dozen LDV prototypes. Canoo and Walmart plan to start  advanced deliveries to refine and finalize vehicle configuration in the Dallas-Fort Worth metroplex in the coming weeks. Production is expected to begin in Pryor, Oklahoma, in 2023.

Walmart will deliver online orders, including groceries and general merchandise. It may use the LDVs for Walmart GoLocal, the retailer’s delivery-as-a-service business.

Canoo a troubled startup

Founded in 2017, Canoo has been beset by troubles since choosing to go public via special purpose acquisition company with Hennessy Capital Acquisition Corp. Hennessy is a a four-time creator of blank check shell companies. They are created to merge with startup companies and bring them public.

Blue Bird Corp., a maker of school buses, and Daseke Inc., which operates multiple flatbed trucking companies, went public under Hennessy’s aegis. Hennessy bailed on a fifth SPAC with autonomous trucking software developer Plus in September.


Hennessy’s sponsorship of Canoo brought almost immediate scrutiny by the Securities and Exchange Commission. The SEC continues to investigate a range of issues at Canoo. In its first-quarter earnings report, Canoo said, “there is substantial doubt about the company’s ability to continue as a going concern.”

Canoo received about $625 million in SPAC proceeds before expenses in December 2020.

Lifeline from a neighbor

That warning remains in effect. But the opportunity to provide vehicles for Walmart, its Bentonville, Arkansas, neighbor, brightens the immediate future.

“My guess is they gave Walmart a really bangin’ deal on some minivans,” Sam Abuelsamid, principal analyst at Guidehouse Insights, told FreightWaves. “Nobody else seems to want to buy them.”

It is unclear how much Walmart is paying Canoo for the LDVs. They are designed for small package delivery with a modular design and 120 cubic feet of cargo volume. Canoo’s website lists the starting price for the battery-electric LDV at $34,750.

Canoo is using steer-by-wire technology, reducing moving parts and cabin intrusion. That results in more usable interior space and better driver ergonomics. A panoramic window improves road visibility.

“Our LDV has the turning radius of a small passenger vehicle on a parking friendly, compact footprint, yet the payload and cargo space of a commercial delivery vehicle,” Tony Aquila, Canoo CEO, said in a press release.

In a blog post in June, Fernando Cortes, Walmart’s senior vice president of transportation, laid out the company’s plans to eliminate mobile emissions across its global operations by 2040. The post did not mention Canoo. 

Walmart already partners with Cruise Automation to pilot its autonomous small crossovers; with Gatik on Class 6 autonomous trucks; and with General Motors subsidiary BrightDrop for electric delivery vans.

Canoo in tough financial shape

Canoo reported a tenuous cash position in Q1 earnings. It burned through $120.3 million in the three months ending March 31. That left it with just $104.9 million and anticipated second-quarter spending of $85 million to $105 million.

The company has $600 million it can tap through a shelf registration of company stock and $300 million from a private investment in public equity from an existing shareholder and an equity purchase agreement with Yorkville Advisors.

“Assuming they have enough cash upfront to pay for parts and turn the lights on in the factory and start turning out some vehicles and getting some revenue when they actually deliver, it could keep them going for a little while,” Abuelsamid said.

Ramping up production is expensive. He pointed to startup electric pickup and delivery van maker Rivian, which Bloomberg reported Monday is considering laying off 5%,of its workforce, or 700 employees. The news service cited people familiar with the matter.

“Once Rivian started production, their losses just went through the roof because they had to start paying for parts,” Abuelsamid said. “Depending on how much revenue [Canoo is] going to get from Walmart, it’s not at all clear that this will be enough to keep them going.”

Canoo could gain credibility and customers

On the other hand, if Canoo can deliver reliable vehicles on time to Walmart, it could benefit longer term.

“These kinds of commitments can result in legitimate resuscitation and revival for a company,” Mike Ramsey, a Gartner Inc. vice president who follows digital transformation, told FreightWaves. “For Walmart, it’s kind of a low-risk thing. 

“It could be very good for [Canoo]. They have to actually produce and deliver the vehicles. And if they can’t do that, then Walmart’s not really out very much in real terms. If they do get them, they get the potential for some pretty cool proofs of concept for their digital transformation efforts.”

Ramsey said the Walmart deal reminds him of when Daimler and Toyota invested early in struggling electric car maker Tesla in the 2000s.

“They didn’t have a lot of credibility and they didn’t have a lot of capital,” he said. “That [investment] was instrumental in helping Tesla survive and also apply for Department of Energy loans. It gave them credibility effectively.”

Canoo has lots of competitors and more on the way from legacy automakers in the Class 1 delivery space.

“I wouldn’t be surprised if in the next 18 to 24 months we see an electric version of the Transit Connect from Ford, an electric version of the Promaster City from Stellantis and also something smaller from BrightDrop,” Abuelsamid said. “It’s a start. It may not be sustainable.”

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Click for more FreightWaves articles by Alan Adler.

Alan Adler

Alan Adler is an award-winning journalist who worked for The Associated Press and the Detroit Free Press. He also spent two decades in domestic and international media relations and executive communications with General Motors.
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