DETROIT — See if this sounds familiar: A start-up EV company is basically gifted a modern plant chock-full of world-class production equipment. To reduce product-development costs and time, its first vehicle uses thousands of proven off-the-shelf parts from major suppliers and established automakers.

Lordstown Motors is closely following Tesla’s early playbook as it gears up to launch late next year the battery-powered Endurance, a full-size pickup with four electric motors, a 250-mile range and a starting price of about $52,000, before a federal tax credit of up to $7,500.

Flush with $675 million in cash from a reverse merger with a special-purpose acquisition company, Lordstown’s path will veer in a different direction than Tesla’s did once the Endurance starts rolling down the production line.

CEO Steve Burns told Automotive News during a brief test drive of the company’s lone operational prototype in suburban Detroit that Lordstown will not sell to individual consumers — at least initially — and will target only fleet customers.

With just 50 engineers on staff, one drivable truck in existence, 40,000 preorders and deliveries scheduled to start in about a year, Lordstown will not only need every single thing to go perfectly, it might also need some luck. There’s no telling, for instance, how the COVID-19 pandemic could affect product development.

Burns’ plan to ramp up production quickly with a vehicle that targets the Ford F-150 in safety, handling and quality revolves around making the Endurance extremely simple. Engineers did that by reducing the number of moving parts in the drivetrain and by buying proven components already used in other vehicles.

“There are only four moving parts on the entire vehicle,” Burns said of the four-wheel-drive Endurance’s powertrain. He’s referring to the electric motors installed in each wheel. They eliminate the traditional transmission, transfer case, axles, U-joints, driveshaft and other driveline parts in today’s 4wd trucks.

The motors were designed by Elaphe Propulsion Technologies, a Slovenian company. Elaphe has been working to improve the performance of wheel hub motors and to reduce their weight. The motors are mounted behind each wheel on the Endurance.

Burns said Lordstown licensed Elaphe’s technology and will build the wheel hub motors at its plant in Ohio, which until 2019 assembled the Chevrolet Cruze compact sedan. General Motors lent Lordstown Motors $40 million, some of which was used to buy the plant.

GM parts are all over the Endurance. “We’ve worked a deal with GM, and they are selling us the little things that trip up everybody,” said Burns, while sitting in the Endurance test truck. “These seats we are sitting in are from the Silverado. So are the door mechanisms, seats, and airbags — all Silverado,” he said.

Simplicity isn’t the only reason the Endurance is made of parts bin components. Cost was also a driving factor, Burns said.

“Every EV company comes out at a luxury price point and then says with volume we’ll move down to the mainstream.

“A fleet [operator] won’t pay a luxury price. We had to figure out a way to come to market at the same price as a Ford F-150 right out of the gate,” he said.

The Endurance will use lithium ion batteries from two Korean suppliers. Burns said Samsung is one of the suppliers, but he would not name the other.
The company’s proprietary technology is in the software that controls the four wheel hub motors, about 1.5 million lines of code, says Chief Engineer Darren Post, a GM veteran who was the vehicle line executive for a number of vehicles, including the Chevrolet Impala, Saturn Sky, Pontiac Solstice and Opel Zafira. Post, who was in charge of manufacturing for Hummer, also worked at Karma Automotive after he left GM.

Post said Lordstown Motors’ path to production looks like this: Three more trucks, which he called “alpha builds,” are in the process of being assembled and should be operational by the end of the year. But 2021 leaves little room for error and disruption. Plans call for 40 “beta builds” hitting the road next year for durability and safety testing. The goal, Post said, is to have at least 500,000 test miles before production of salable vehicles begins about a year from now.

There is no time frame for the consumer version of the Endurance. But Burns signaled that it won’t be anytime soon.

“There will be a consumer version, but first we want make sure we have a national footprint of service. We don’t need a sales network because we will distribute direct to fleets, but we want to have service network. We really want to get a few billion miles before we roll these out to consumers,” he said.

Lordstown officials would not discuss specific production schedules, nor would they say how long it will take to fill outstanding orders.
Asked why a fleet operator would take a chance on a new-from-the-wheels-up vehicle that uses a drivetrain that has never been mass-produced in automobiles before, Burns gives a one-word answer: Money. With no gasoline or diesel fuel to buy and the only scheduled maintenance items for the first five years being windshield wipers and tires, fleet operators can — in theory — reduce costs by using electric trucks instead of gasoline- or diesel-powered pickups.

“Fleet [managers] buy on total cost of ownership. That’s the main thing. We will save them $20,000 over five years over the cost of running a Ford F-150. We start out at the same price, but you start saving money on day one,” he said. “So far everyone has come out with expensive trucks, Rivian and Hummer. No one is in this lane of coming out of the gate with a fleet truck.”

The latest online used-vehicle company preparing to go public has spotted the same trends its predecessors have: a highly fragmented market, relatively low e-commerce penetration and a consumer appetite for online shopping.

But CarLotz Inc., a consignment platform that expects to go public via a reverse merger this quarter, raising $321 million in cash, should be seen less as a merchant that buys low and sells high and more as a service that streamlines the used-vehicle selling process, its CEO told Automotive News. “We are consolidating all the middlemen into one middleman,” said Michael Bor, who co-founded the company.

While competitors deal with auctions, wholesalers, buyers and other parties, “We’re just collapsing all that” as a unified platform, he said.

Initially, CarLotz was meant to be an online platform that would help consumers sell their cars and trucks in a hassle-free way.

Bor, a former investment banker, got the idea for the company when he was driving in his native Virginia down a busy road lined with private parties’ vehicles bearing “for sale” signs.

CarLotz still sells vehicles for consumers, but now the bulk of its business — and the fastest-growing part — is sales it brokers on behalf of corporate partners such as fleet management companies, leasing companies, banks, credit unions, dealers, automakers and others.

“Anybody who otherwise would sell a car in an auction is either a client of ours or a prospective client,” Bor said.

About 60 percent of CarLotz’s inventory comes from corporate partners, some 15 percent from consumer sellers and another 15 percent are vehicles the company acquires “noncompetitively,” Bor said. Less than 10 percent of the company’s vehicles are sourced from auctions.

That said, CarLotz does not have a frosty relationship with auction giants Manheim and ADESA, according to Bor. In fact, ADESA parent KAR Global is listed as a shareholder in documents filed with the U.S. Securities and Exchange Commission, although the size of its stake so far has not been disclosed. Bor said he did not know KAR’s share offhand.

A KAR spokesman confirmed that the company is a minority shareholder but declined to give an investment amount.

At any rate, CarLotz is still a relatively small player in what it sees as an $841 billion used-vehicle market. It has eight hubs in Virginia — its home base — North Carolina, Florida, Illinois and Texas. After going public, the company plans to expand with three or four additional hubs per quarter.

CarLotz has decided to go public via a reverse merger with Acamar Partners Acquisition Corp., a special-purpose acquisition company, or SPAC. It’s the same method Shift Technologies used to go public on Oct. 15.

Bor said that even a few months ago, he was not necessarily familiar with SPACs. After speaking with some banks, he decided to go forward with the process, calling it efficient and transparent. It also allows the company to raise more capital than a traditional initial public offering would, he said.

Like most auto retailers, CarLotz saw solid performance in January and February and was gearing up for what was going to be its best quarter in company history. Then the coronavirus pandemic hit in March and created two separate situations for the company — one for sales and another for sourcing.

On the sales side, there was a dramatic drop in March and April, followed by a swift rise in May and throughout the summer. On the sourcing side, it was a longer-term disruption, Bor said. With assembly plants shut down and moratoriums on vehicle repossessions, “it muddled the supply chain quite a bit.”

Many of CarLotz’s clients weren’t getting new inventory to swap out with the old, and the company’s inventory dropped more than 40 percent from March until September. All the while, there was a backlog of inventory forming that needed to get sold, Bor said. In September, CarLotz was expecting to get some of that built-up inventory, but not as much as it did. It now has a record 2,000 vehicles to sell vs. pre-pandemic levels of about 1,300.

In investor documents, CarLotz put the e-commerce penetration in auto retail at just 1 percent, compared with 9 percent for groceries, 27 percent for appliances and 32 percent for apparel. And with used vehicles, Bor sees a long runway. Even in difficult economic times, people still need cars, Bor reasons, noting that in hard-hit years such as 2001 and 2008 sales stayed well above 30 million vehicles.

“So as long as the volume is there, we’re good,” he said. “And the volume seems to always be there in this market.”