79 replies
4d2h
If the reimbursements were solely for corporate travel, it might not be a concern.
The CEO here sold his previous company for $6.5 billion [1], so he already owned the jet before starting Canoo. The company reimburses him for corporate travel on it.
What's concerning is that Canoo is stacking big losses and living on the edge...it seems like excessive spending for a company that hasn't even made a dime of profit.
But hold on, this same CEO has spent over $230 million(!) buying Canoo stock from his personal funds [2], so he is significantly in the red no matter how much he gets reimbursed for air travel.
Always dig into the details and avoid getting suckered by clickbait...
You need at least 400 Million to enter the car manufacturer market.
The investment does sound absolutely reasonable at this point.
Can someone explain why people try to make new cars from the ground up, rather than "fork" a base platform from GM/Toyota/KIA/whoever with a different design and little features?
This happens in literally every other market and industry. hell, just look at PCs and laptops.
Like why can't a Canoo or Rivian license a base EV platform and come up with their own chassis design, infotainment system, and other little things to differentiate themselves?
why does it HAVE to be all or nothing?
I suspect, starting from the ground up is part of why people are so interested in these companies.
The ICE car market is a massive market, which taking a part of required massive long term investment, and would result in you being relegated to just some minor side note.
Even Toyota one of the longest biggest players is still seen as kinda "new" compared to BMW and VW, let alone hyundai which is basically a massive state backed effort.
Now consider, all of that 100+ year history becoming completely irrelevant. An opportunity to time travel back 100 years and try to become the BMW of the future. I think this is what is exciting people.
when is the last time an entrenched trillion dollar industry with hardly any shakeups in decades suddenly had the ability for anyone to enter and say their biggest advantage is that they are new?
I am not saying I agree with it, I think knowing how to make a luxury car is a skill... But I don't think the goal of these CEOs and investors is to make a good car. Their goal is to make a 100+ year global legacy like BMW. If they could do that without making the car I am sure they would.
Why would anyone think that the current ICE manufacturers will just sit idly by and not get out EV designs at some point? Either on their own, or in collaboration with other legacy manufacturers? They have existing brand loyalty, existing relationships, supply chains, dealership networks etc. etc. that they can make use of even if their designs aren't as good as brand new entrants (and that's assuming brand new entrants can actually scale up quality manufacturing, which so far they haven't been able to).
Because for a long time the ICE manufacturers were making half-hearted play attempts at EVs, and Tesla came in and made real EVs and had a huge stock play related to that.
So now the ICEs are scrambling to catch up, and are doing so, but lots of money is flowing around hoping to be the next Tesla.
And their sales were still dwarfed by legacy manufacturers, who then started paying attention and practically all of them have at least one EV model out there, often with new platforms/models being in the works.
I suspect most of these EV startups are trying for that TSLA bump, and don't really care much that TSLA is almost inevitably doomed to stagnant stock returns for decades now.
Meanwhile the legacy companies will keep moving slowly along and produce vehicles. Some will die, some will merge, some will have wild successes.
But it's much different than Google et al because cars actually cost about as much to make and sell as they do to buy.
ICE is scrambling because ICE has 10 years left of new car sales in California (so the US basically) and Canada before laws prevent them from selling ICE. They aren't chasing Tesla, they're trying to prepare for the outlawing of their 100 year old products.
I'm not even sure an EV car is the answer for "Green". I remember a Joe Rogan ep where he and his guest talk about the giant holes and bad mining condition in Africa because of the current EV rash to get materials for car battery.
EV cars seem to be the go-between for ICE and the real answer for Green.
You need to separate the concept of EVs from the current state of battery technology. EVs are almost certainly the future, and as our battery and charging technology keeps improving the whole package will become greener and greener.
Using an ICE base platform for EVs doesn't make sense, and there is no EV base platform for sale/license. Companies building the EVs are holding their cards tightly to their chests for competitive advantage.
Kind of. Renault's small sized EVs share parts of the platform as some ICE models (e.g. Clio/Renault 5 E-Tech) which allows them to reduce costs of the EV model. Considering their target audience and market segment (small city-focused EV with city-scale range) the tradeoff is perfectly acceptable.
How do you know this? Renault for instance are in a pretty specific spot, market wise, and they were trying to merge with Fiat-Chrysler before the latter ended up with PSA (Peugeot, Citroen, Opel) in Stellantis. They have some EV tech, especially on the cheap city-focused side (Dacia Spring, Renault Zoe, Renault 5 E-tech), and would probably be open to collaborating / sharing risks. This is purely conjecture of course.
Also, Subaru managed to license Toyota's EV tech.
There are EV base platforms for sale and license. For example Nio licensees it's platform. 60% of EVs are made/sold in China so that's where you should look for a platform.
Isn't the Subaru Solterra based on the same platform as the Toyota bz4x?
People do fork.
Tesla's original was a fork of a Lotus. They got the whole chassis/etc from Lotus, dropped in their own drive train and other stuff. Other reply mentioned paccar.
Idk why it doesn't happen more often. I suspect most manufacturers aren't willing to license like that.
That wasn't really a fork, they didn't copy the design, they actually bought the chassis from lotus. It's not really that different from a manufacturer buying brakes or wheels from another supplier.
That wasn't a fork and Elon has stated it was a horrible idea that didn't work.
But then they ended up using so little of the original Lotus that Elon said they should have started with a blank canvas
How enthusiastic do you think those companies would be if someone came to them wanting to license their design perpetually and use it to compete with them? And even if that is something they're willing to do (which they might be), the terms would then make it difficult to ever do something that isn't based on that platform, since the manufacturer whose design is licensed would likely object that the new design was still based in some way on the old one.
The analogy in the PC world would not be "license a design from an ODM like Compal or Quanta", it'd be "license a design from Dell or Lenovo".
That in itself suggests a potential market: perhaps there's room for an ODM in the automotive space?
there isn't a single electric vehicle on the market that looks anything like the international scout, FJ40, or any classic rugged vehicle. Look at how much icon4x4 restorations go for. There are wealthy people out there with great taste, but no big auto manufacturer seems to want to produce a chassis with this aesthetic.
So why wouldn't Ford or GM be cool with letting a smaller label do this and testing the market?
It's a niche market. I love Icon's stuff but they sell very low numbers of vehicles. I would love to have an ev FJ40 or Scout, but I'm skeptical the general populace wants these as much as enthusiasts think they do.
I find this take to be so outrageously wrong. Do you think the public "wants" the new hummer? Do you think they want any of the garrish looking cars that are literally all over the roads? People will literally buy anything and everything that's put out there as the numbers have proven time and time again. This is what brands and marketing does. It shapes public opinion and public perception. There are countless generic, soulless, lifeless car bodies being sold every day. and icon can't put out big numbers because there's numericallyonly so many of those vintage cars left to restore, and they are a small operation.
VW does this internally. They own the VW, Seat and Skoda brand. The up!, Skoda City Go and Seat Mii are virtually identical.
They share tech between a TON of brands and models. https://en.m.wikipedia.org/wiki/Volkswagen_Group_MQB_platfor...
It does happen, for example Paccar is a truck designer and sells licenses (apparently they also manufacture trucks but I think they used to only design them, although I'm not sure). I think some european makers do that as well and I would be surprised if Ford or GM doesn't. At least GM planned to buy (not sell) designs to Nikola if they ever managed to finish one (which I think they didn't in time for the deal to go through).
Paccar builds and sells trucks, not a license to build them. Other companies buy those add their own equipment (cranes, concrete mixers, etc) and resell them.
Light duty truck and van builders e.g. Ford and GM do the same thing but mostly for companies building RVs rather than commercial equipment.
I'm not aware of any pure platform available off the shelf, though I imagine a big enough checkbook and a conversation with Magna might get you pretty far, but you can buy from Ford the Mustang Mach-E motor https://performanceparts.ford.com/part/M-9000-MACHE
There are lots, but most are not road legal. All privateer racers in many race series use cars that are manufactured by established companies, then heavily modify them.
Alpine makes forks of BMWs.
Braubas makes forks of Mercedes.
RUF makes forks of Porsche.
The other example is when 2+ large manufacturers work together to cost share a platform.
Examples:
Several Aston Martin coupes were built on Jaguar platforms.The NUMMI car factory in Fremont, CA was jointly owned by GM and Toyota before Tesla bought it. For a while, it made the Toyota Voltz / Pontiac Vibe.
I think people get the impression from the wording that the “platform available off the shelf” means the consuming manufacturer can just grab some units and modify them, but in practice, there is a massive contractual negotiation. And since car manufacturers are heavily regulated, it makes sense to cost share both the manufacturing and the standards / crash testing.
Some companies will use a contract manufacturer to produce their cars for them. For example Fisker (about bankrupt) used Magna Stehr in austria to produce their EVs.
When you talk about a base platform I assume you are meaning an entire drive train? Most pieces of a car are going to be produced elsewhere and then assembled. Canoo isn’t making their own batteries or motors. Those come from battery and motor manufacturers. Canoo or a similar company might even buy structural battery pack built to spec by CATL.
Do any of the car manufactorers want to sell you their base model? Even if they did, how would Ford dealers feel about Ford selling rivian the rights to make better Ford cars?
“Body-in-white” is a relevant search term if you would like to learn a little bit about the options in this area.
Even doing that is going to run you at least $100 million and you still have many of the risks associated with developing your own platform without anywhere near the number of escape hatches due to significant lock in.
This has recently happened to a well known EV company relying on just the electrical platform from a well known and highly respected auto maker that they have a good relationship with. It means they’ve had to go looking at other platforms (again, just the electrical platform) and has put the whole company at risk.
profit margins is my guess. They are low at the cheap end, and licensing will take a big hit off that.
You gain margin by controlling the supply line. Otherwise you should just be a subsidiary of one the big ones you mentioned.
That's sort of what Tesla did with the Roadster. It was a Lotus that they put an electric motor into.
It’s a classic make vs buy decision. What base platform is offered by GM/Toyota/Kia/etc?
There are some examples where car makers (both EV and ICE) will sell components to competitors but in general this is pretty rare. Most companies want to control key aspects of their supply chain.
Rivian did use motors from Bosch but is now in the process of using their own internally designed motors. This allows them to build exactly what they need and avoid relying on Bosch for a key component of their vehicles.
I imagine anyone willing to license one at the moment only has a crappy one to sell you or it is some Chinese EV, which creates political problems.
The Rivian S-1 document filed with the SEC said that Ford built all the non-electronic stuff for them until they could do it themselves.
I think the real issue here is that a CEO who nobody has heard of and is doing a bad job running the company claims that he needs to fly private as a business expense.
It's one think for Zuck or Tim Cook to claim that flying commercial would be dangerous and a waste of time, but the way that attitude has filtered down to very small companies is astounding (especially given the outsized negative impact private jet travel has on the rest of us).
Any reasonable board for a public company that size and a CEO that unrecognizable should at most reimburse first class fare and if the CEO wants to fly private, the delta can come from personal funds.
I agree. It's one thing for the CEO of a large, profitable company to be flying private, but for a small, loss-making company, it feels off.
The guy is already ultra-rich...he might as well pay for those flights himself to show solidarity with shareholders. But it's up to Canoo shareholders to decide that, not me.
He is effectively paying for these flights by buying Canoo stock. This whole structure is set up to allow him to maximize the tax efficiency of his compensation. The jet travel is realized as a business expense and offsets future potential profits at the company, he also avoids paying the ~60% (federal and state income tax, as well as payroll tax paid by employer) tax that you incur paying high wage w2 employees.
Exactly. Strangely this is actually tax efficient for both parties.
Not a good thing.
Says the temporarily embarrassed millionaire
This slogan is boring.
The politicians play us with "eat the rich" and "fair share". Meanwhile they increase taxes on 400k in HCOL areas making it painful to succeed.
Why isn't the slogan "stop the loopholes" (The one in this thread)? Because politicians play us against each other instead of fixing laws they benefit from.
Permanently embarrassed if we're being realistic.
My friend, that is not how public companies work.
Every common shareholder is an equal, you don't get to launder jet travel the way he's doing - that's securities fraud.
It’s actually not fraud because it’s happening in the open with board approval. And, no not every share holder is an equal. A share holders relevance is proportional to their voting power. While you can’t outright fleece a shareholder, it’s not the case that a single share held is worth the same as is given the same rights as someone holding 51% of all shares. At that point they effectively own the company. The company still has residual responsibility by law and regulation to all shareholders but it not nearly as broad as you seem to paint. This structure described is absolutely ok. Further the fact it’s publicly disclosed almost entirely insulates them - if you don’t like it, vote your shares or sell it on the public market.
If a CEO is intentionally creating a situation to make a company unprofitable and paying it back by buying shares, that is 100% securities fraud and I'm stunned anyone disagreed with that assertion.
Yes but that’s actually not what’s happening, so seems a bit of a non sequitur.
Yes. I agree. That was the point I was making.
I'm not saying the company is committing securities fraud, I am saying that if the company created a scheme as described by the commentor I was replying to, then that would be securities fraud.
Interestingly, he also had a lawsuit at his prior company for excessive use of private jet use on personal travel:
https://www.repairerdrivennews.com/wp-content/uploads/2019/0...
The board chooses the CEO and his salary; if the board wants to give some of the salary in the form of jet reimbursements it's not really any concern beyond them and the shareholders.
It is a concern for the tax payers if company is paying it as expense and deducting it from taxes instead of paying it as (taxed) salary and him doing what he wants with his money. Don't you have rules what can be expensed in the US?
Certainly there are rules. I would speculate that deducting a private jet flight used for business probably doesn't run afoul of those rules however.
My recollection (I’m not checking) is that congress passed a law restricting the deductibility of private air flights, but that there’s widespread fraud in the form of “security consultants” advising boards that such flights are necessary for security purposes and so they are deducted anyway.
It’s pretty unreal when you think about it that our culture has not small cadres of credentialed, professional liars for hire. Not just for CEOs either, think about the fake service pets for another example.
Is this what the kids call late stage capitalism?
And personal use is accounted for (if paid by the company) and remanded as salary/perks.
I even got affected by that at a restaurant I worked at; they fed us and we got a small "virtual" payment that would show up on our taxes for that meal.
Yes, and corporate travel can be expensed.
Also agreed. If shareholders don't want that, they're free to vote him out, or keep him if they're okay with the private flights.
There's quite an interesting youtube interview / chat with him out recently
'Canoo Tony Aquila Fireside' Chat https://youtu.be/AlTG8S0F_fo
It sounds like he's actually doing quite a good job as CEO. The vid from minute 3 to 7 gives much of his strategy and how he got into it.
He was a billionaire investor with a background in car parts and servicing that looked at 12 or so EV companies to invest in and figured Canoo was the one and then the board asked him to be CEO.
I guess if you are a struggling EV company looking for some billionaire to save you you may have to put up with him using a jet.
Just FYI, the stock is down 99% since he joined as CEO in March 2021.
Some of that is market, but TSLA is -15% since then.
it's also sucky because we're in a rightfully very negative EV environment. Fisker Ocean sucks, Cybertruck is good? but rusting?, nobody buys the Lucid, Rivians are great but lose ~80k USD per unit for Rivian, BYD and Evergrande EV cars are filling up junkyards in china...
Canoo is one of a few EV companies that on paper should make it. They have an order book that takes them to profitability. They have alpha vehicles that work (aka the product is not science fiction). Since they're selling these primarily as fleet vehicles, it's pretty valid to believe that the typical consumer EV concerns (range anxiety, nonfunctional/overbooked chargers, I live in an apartment, etc) should apply, their customers have the capital to spend, and can even easily calculate depreciation and expected benefit over existing fleet inventory.
100% of the risk in the company is manufacturing risk + not fucking up the finances e.g. by going too far into debt where the product payout doesn't make sense. That's a pretty nice place to be for being an EV company in the market now.
I actually took a punt on them this week (280 shares), mostly because they're selling something so different from the rest of the market.
It seems like the mainstream American EV manufacturers are very blinkered-- bigger, heavier, longer range, more luxury. Those products might appeal to buyers in the US, Canada, maybe Australia, but for the rest of the world, you're going to have to compete with manufacturers like BYD.
I could see the Canoo product selling in a lot of markets that you'd never sell a Lucid Air or Rivian R1T in. Once they've got a stable base on fleet orders, I could see them acquiring a quirky street cred among consumers-- sort of like Volkswagens of the '60s and '70s.
Maybe he's anticipating making a quick getaway?
Let's dispense with the fiction that there is some "need" or "business reasons" for 99% of CEOs except a very small number of examples like you mentioned to fly private. They do it simply because they can. Private jets are probably the last frontier of conspicuous consumption, and small time CEOs flying private lets them feel big and important.
There is a lot of overhead to commercial air travel, even when it's first/business.
You're probably right that it's more reasonable for flying overseas. But for local travel, limitations on timing, connections, and airports served turn into a big waste of time. It's an analysis that has to be made about the value of the CEO or whoever's time, but it's not black and white, and a couple million bucks vs a few 100k for way better scheduling could easily be worth it.
Its concerning the conflict of interest, it can be crystal clear as going to make public pay for playing at your own golf court, but to be is baffling just how public populace is constantly scrutinised for ethics but seem that the rich can crap all over the world and no one cares
Problem is that a large part of the population is practically worshipping people who are / seem rich. Every questionable thing they do is explained away.
"It's just smart business!"
"People are jealous because they didn't think of this!"
"They're only coming after him because he's rich!"
"You would do this too if you were him!"
All such people hope that one day they can finish climbing the same ladder, and only after that, get to kick it out from underneath them. Crabs.
Isn't this thread of 100's of comments public scrutiny? And this is just one article.
Not defending this guy but I'd say the opposite happens. When you are rich/famous you are looked at with a magnifying glass. Nothing illegal is happening here, but it doesn't "look good".
It’s because we live in an uninterrupted feudal society that goes back millenia with only minor cosmetic changes to the system of governance in reaction to the periodic threat of revolution
I am sure these companies are a massive money laundering operation. What does Solera even do or ever did? Prior to the acquisitions?
Solera sold risk management and asset protection software. A company with $1bn+ in annual sales [1] is a money-laundering operation?
Hint - Most ultra-rich people make their money in boring industries you wouldn't even know about.
1- https://www.macrotrends.net/stocks/delisted/SLH/solera-holdi...
Most of these businesses are actually fronts. They siphon money from Africa and other third world countries with poor laws and wash it with money from private equity firms.
With all due respect, this is rubbish. Private equity LPs are overwhelmingly local pension funds, institutional investors, and high net worth individuals.
Nobody informed is claiming that it's illegal. Even if it's not financially the worst thing, it's a bad look. The CEO's image is important. Already the stock price has tanked likely in part from these revelations.
Obviously, too late for canoo, but if you're running a startup you can learn from his mistakes.
Honestly at this point the reputational damage is enough, that the CEO should probably resign, if for no other reason to boost market confidence in the company and raise the value of his own shares.
I guess the CEO could agree to suspend the contract with his other company until canoo is profitable, and offer to return the 3.4 million, that would be a very nice voluntary move to restore faith in his leadership.
How he set it up some he's leasing the jet from his own private family trust LLC fund sounds so sketchy, it reminds me of the WeWork self-dealing by Adam Neumann.
sound familiar?
When you own a company, the question is always how to get money out. Renting out personal things to the company is one way of doing that.
If you are the sole owner, that's all fine.
If there are co-owners, that shouldn't be done unless everyone gets some benefits.
I once worked for a company that went bust. It wasn't able to pay its suppliers anymore, but alway paid rent on time. Guess who owned the building.
So especially when your company is doing bad, any money you get out is money they cannot take away.
He's not the only shareholder. I am not sure the others appreciate paying for the CEO's lavish lifestyle when his company is on the brink of failure, even though the CEO is also in the red. And as you say, if he really wants to travel private, he can always use his own plane and not charge anything for it. The other shareholders are basically bankrolling his plane.