The deal between Canoo and Hyundai to build electric vehicles appears to be dead, as the California EV startup is moving away from trying to sell its electric vehicle technology to other automakers.
Canoo chairman Tony Aquila shared the news Monday during an icy investor call — Canoo’s first as a publicly-traded company. Canoo’s CEO was also absent from the call, and the company announced earlier in the day that its CFO had resigned to take another job — the second major departure in recent weeks following Canoo losing its head of corporate strategy.
“These are significant surprises on the call today, and that’s not ideal,” Roth Capital analyst Craig Irwin said at one point on the call.
The deal with Hyundai was announced in February 2020, and it was supposed to result in both the Hyundai and Kia brands building vehicles on Canoo’s electric vehicle platform. It was seen as a major vote of confidence in the startup, which was just two years old at the time, as well as its tech. Canoo called it a “key partnership.” Hyundai did not immediately respond to a request for comment. Canoo did not respond beyond Aquila’s statements.
Aquila took over Canoo as part of the startup’s merger with a special purpose acquisition company (SPAC) in 2020, which netted it around $600 million. Speaking obliquely at first, he said Monday that the startup’s board of directors decided to “de-emphasize” its “engineering services” line. This was the planned part of Canoo’s business that was supposed to see the startup provide technology to bigger companies that wanted to enter the electric vehicle space. Canoo’s desire to sell its technology at one point even drew the interest of Apple.
In documents filed with the Securities and Exchange Commission, both before and after the merger, Canoo had said its planned engineering services business presented “a significant market for contract engineering services among legacy OEMs who lack the expertise to develop an electric powertrain at the pace needed to capitalize on the rising regulatory requirements and global demand for EVs.”
The startup also said these types of partnerships would serve as “concrete points of external validation for our technology and the talent of our team, as well as provide additional sources of revenue and long-term commercial opportunities.” Canoo said it was “in discussions with a number of other partners and expects to be in a position to announce many more partnerships in due course.”
But on Monday, Aquila said Canoo will now focus more on making and selling its own vehicles to commercial operators. The company has so far announced a delivery vehicle, a pickup truck, and a van, all of which are built on the same underlying technological platform. Canoo will focus even less on the idea of selling its electric van to consumers through a subscription model — the original pitch when the startup broke cover in 2018.
Aquila has previously spoken about focusing more on selling to fleet operators and small businesses as opposed to customers, though it wasn’t until Monday that he explained just how far he is willing to take that strategy shift. To wit, Canoo quietly uploaded a new investor presentation to its investor relations website on Monday that no longer mentions Hyundai.
“We have so much demand for our three [vehicles], let’s get all that work done, and then let’s, you know, look at if there [are] partnerships,” he said. Aquila explained he believes that this will make for a more sound business with less risk.
When pressed on the startup’s previous claims about this part of its business, Aquila — who invested $35 million into Canoo before the SPAC merger — pointed to its prior leadership. Aquila said they were “a little more aggressive” than he would’ve been with some of their public statements, and that talk of potential partnerships was “presumptuous.”
“You’ve got to be careful with statements you make. So, you know, again, I think it was a little premature,” he said.
While some of those executives are indeed now gone, like cofounder and former CEO Stefan Krause, others remain — though they weren’t on Monday’s call. At one point Aquila was asked directly if Krause’s replacement, Canoo cofounder Ulrich Kranz, was still CEO. Aquila confirmed he is, Kranz’s contract was recently renegotiated and he was removed from the board of directors.
Aquila said he believes the refocused business will help “protect” the intellectual property Canoo has developed, and that the original deal with Hyundai didn’t factor in the value of that IP. When one analyst asked if Aquila thinks Hyundai misappropriated any of Canoo’s IP, Aquila said “well I’ll leave it to you to make that decision.”