Ree Automotive: Business life during wartime

Startup Ree Automotive builds its drive-by-wire electric powertrains in the United Kingdom. Its future customer base is mostly in the U.S. But its headquarters is in Tel Aviv, where the Hamas-Israel war takes an emotional toll on employees and their families called to fight.

Israel-based businesses count on some portion of their workforces serving in defense of the country surrounded by enemies sworn to destroy it.

When war comes calling, as it did during the Oct. 7 surprise bombing of Israel by Hamas, that number rises dramatically.

“We don’t give out numbers because it might serve our enemies,” Ree Automotive CEO and co-founder Daniel Barel told me. “But I can say that there are quite a few out there. All of them are accounted for and safe for now. Some of our employees have been called, some of their  spouses or somebody in the family has been called. So, there is a larger circle that is affected.”

The outpouring of support and messages of concern touches Barel.

“I think we’ve received hundreds, if not thousands, of messages of support and queries from everybody, from customers, suppliers, partners and even people we’ve never worked with,” he said. “It’s been overwhelming to be honest.”

A wartime stock price hit?

At the same time, there’s a hard-to-prove correlation between the outbreak of the war and the prices of Israel-based stocks. In the days after the fighting started and Israel began a bombing campaign of Gaza, Ree’s price plummeted, trading as low as $2.40 a share on Oct. 25. It has recovered most of the losses, closing Wednesday at $4.47 following a 1:30 reverse stock split on Oct. 18.

“It might be a coincidence, but if you put the two together, you see some correlation,” Barel said.

Or the stock split — to stave off delisting from the Nasdaq — may have been a bigger factor.

Ree went public via a special purpose acquisition company merger with 10X Capital Venture Acquisition Corp. in July 2021 at a $3.1 billion valuation. Like many SPAC-born public companies, its price plummeted. The stock split inflated its share price. But it had no effect on the company’s underlying $38 million enterprise value.

Preparing for production

The wartime hit is less impactful to the business because Ree concentrates employment in the United Kingdom, where the Ree Corner electric powertrain is assembled. Contract assembly of Class 3-5 work trucks containing the drive-by-wire system comes to the U.S. in late 2024.

Ree continues on the path to commercialization of its integrated electric braking, steering and motors that sit at the four corners of a chassis. By packing electronically driven motors, braking and steering into a single module controlled by a central computing system, the Ree system could make mechanical components obsolete.

Its order book stands at $40 million. Real orders, Barel said, not letters of intent and other squishy terms that would let customers walk away.

“I’m not passing judgment on anybody else’s business,” Barel said. “It’s just that we decided we’re not playing that game. When this game started at the beginning of the SPAC attack,  everybody started throwing [around] ridiculous numbers. That for me didn’t make sense. Nobody orders 1,000, 10,000 or 50,000 trucks without trying them first.”

Even if the numbers were real, there was no charging infrastructure to service them.

Caught inflating orders

Electric truck startups like Lordstown Motors, XL Fleet and hydrogen fuel cell maker Hyzon Motors drew Securities and Exchange Commission scrutiny and eventually faced fines related to inflating order numbers.

“We decided we’re only going to take binding orders,” Barel said. “We’ve doubled the order book in just a few months. Those orders are not cancelable. They’re not subject to anything other than us delivering a product.”

Incentives welcome but cannot save a business

The amount of incentive money available for Class 3-5 work trucks is welcome, but spiffs cannot sustain Ree’s business any more than they could keep Proterra’s transit bus business from selling for just $10 million during a recent bankruptcy auction.

“The business plan cannot rely on incentives. It simply cannot,” Barel said “Now, if there are incentives, by all means, we’re qualifying. But it’s not contingent on that at all.

Ree’s asset-light approach to work trucks involves a scant staff in Austin, Texas, where modules will be imported for incorporation by a yet-to-be-named body builder. Major fleets will receive a very small number of trucks for testing late this quarter. A year from now, Ree expects to begin production in the low hundreds of trucks.

Holding off on a contract manufacturer and building its first trucks internally allows Ree to pin down its material cost. The test trucks will lose money, but Barel foresees being break-even on materials when regular production begins. Positive earnings before interest, taxes, depreciation and amortization should follow a year later.

“We’ve designed our technology, the by-wire technology and our integration center to work on low capacity,” Barel said. “We don’t need to ramp up in order to get to economics of scale.”

A new chairman

Ree in September named longtime UPS executive Carlton Rose as chairman. He evaluated practically every electrification technology offered to fleets during a long career at UPS, where he last served as the president of global fleet maintenance and engineering.

“I have been around trucks my entire life, and I have a good understanding of what good looks like. Ree’s technology is a game changer in the industry,” Rose said. “I have been following Ree closely for the past four years and as I have always said, ‘better is before us,’ and Ree will be an essential part of achieving better.”

Briefly noted …

Mack Trucks has added charging infrastructure developers InCharge Energy and Blink Charging to its Turnkey Solutions program for electric vehicles.

Crowley’s land transportation group will work together in a pilot project for the Terraline EV500 test truck.

Schneider National has crossed the 1 million-mile mark in battery-electric-driven freight with its fleet of nearly 100 Freightliner eCascadias.

Truck Tech Episode 42: A future fuel cell scenario

That’s it for this week. Thanks for reading (and watching).  Click here to get Truck Tech via email on Fridays. And catch the latest in major events and hear from the top players on Truck Tech at 3 p.m. Wednesdays on the FreightWaves YouTube channel.

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Editor: Alan Adler