Arcimoto, Inc. (FUV) CEO Mark Frohnmayer on Q4 2021 Results - Earnings Call Transcript

Mar. 31, 2022 9:53 PM ETArcimoto, Inc. (FUV)
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Arcimoto, Inc. (NASDAQ:FUV) Q4 2021 Earnings Conference Call March 31, 2022 5:00 PM ET

Company Participants

Mark Frohnmayer – Chief Executive Officer and Founder

Eric Fritz – Chief Marketing Officer

Douglas Campoli – Chief Financial Officer and Treasurer

Kevin O'Rourke – Vice President of Commercial Strategy and Operations

Jesse Fittipaldi – Chief Strategy Officer

Terry Becker – Chief Operating Officer

Conference Call Participants

Barry Sine – Analyst

Mike Schlonsky – Analyst

Jeff Campbell – Analyst

Eric Fritz

Welcome back, Mark.

Mark Frohnmayer

Thank you. Technical difficulties. Well, are we -- we're live? Are we rolling here?

Eric Fritz

We are. We are live and rolling. Yes.

Mark Frohnmayer

Excellent. In that case, I want to welcome everybody to Arcimoto's first stakeholder webinar of 2022. We're going to start with a short recap video from the Ramp It Up! factory opening event that we held last month. We'll share some short remarks, introduce one of the new members of our executive team, and then open the forum to questions from our guest analysts and stakeholders on the same platform. If you have not seen the full Ramp It Up presentation, I encourage you to watch it at your leisure. There is more good stuff including, doors, and some -- a bunch of different technology advances that this recap doesn't have time for. Okay, with that, here we go. And I would encourage all of the panelists and other participants to make sure you're muted until we're up and running. And Fritz, if you can enable screen share that'd be great.

Eric Fritz

You should be good.

Mark Frohnmayer

Yeah, I see it. I'm going do that again. Always remember to click the buttons area. Coming through. All right here we go.

Unidentified Company Representative

We are going to go into the new building an of the ramp. Come on in, folks. Ladies and gentlemen, the founder and President of Arcimoto, Mark Frohnmayer.

Mark Frohnmayer

We are Arcimoto. We make the best electric three - wheelers in the world for a purpose. Now it's time to ramp it up. Welcome to the ramp. In 2020, we laid out the big hairy audacious goal of opening a new factory by the end of this year that once at full capacity, would be able to build a targeted 50,000 vehicles per year and provides the template for global replication. One bit of housekeeping. Arcimoto is a public company with a public mission. So before I go further, I'd like to draw your attention to our safe harbor disclaimer. We took possession of this facility in Q4 of last year and transformed it at light speed, reconditioning building A where we are now, moving the assembly-line over from the AMP, and booting up our automated plastics line and new machine shop by the middle of the first quarter. In spite of a global pandemic, Arcimoto doubled year-over-year production in 2020 and tripled production in 2021. Even considering downtime due to the transition to our new facility and validation of new battery cells, we plan to triple production again this year, after which we take the big steps up.

The foundation of every Arcimoto we build today, the root of our many shots-on-goal product strategy, is our unique ultra-efficient EV platform, that packs an incredible ride, out-sized carrying capacity, and flexibility for a wide range of daily trips in a right-size human scale footprint. All of our products, the Fun Utility Vehicle for everyday driving, ride share, and rentals, the Deliverator for last-mile delivery, the Flatbed for general fleet Utility, the Rapid Responder for emergency services, the Roadster, a pure on-road fun machine, and the Cameo for filming and events are largely the same, sharing the same production line, parts, and economy of scale.

The key to scaling Arcimoto to mass production, therefore, first and foremost, is to make the platform itself more scalable. At our factory opening event earlier this year, we showed the first computer renderings of 1.X Arcimoto's refined platform design, the ongoing development effort of Arcimoto and its critical industry partners. Featuring both mechanical refinements and major simplifications in the electrical system, 1.X will unlock the big steps up in scale. We're aiming for a 7X increase in production next year, up to maximum output for the facility in 2025. As we accelerate our push to scale, we are also accelerating the growth of our market presence.

The FUV and the Roadster continue to receive rave reviews from demo riders and journalist alike, adding confirmation to our belief that Arcimoto delivers the most joyful ride experience of any vehicle on the road. In order to maximize the number of people who get to enjoy our unique ride and drive exposure for the Arcimoto brand, in the most honored demo rental program. But the long-term goal of turning that first-time new user experience of a vehicle into a profit center for the company instead of a cost sink. Late last year, we began earmarking a significant portion of our limited production output into this program and we plan to accelerate that this year.

For our commercial and government fleet options, early trials of the Deliverator, Flatbed, and Rapid Responder have provided invaluable feedback, as we aim for volume production of these products. And at our ramp launch, we gave the first sneak peek of the Smokejumper initiative, a rapid response first-on-the-scene Arcimoto, augmented with a fire-fighting technology portfolio that uses significantly less fluid to extinguish blazers. We're now working with ecosystem players to flush out the full suite of offerings, including leasing options and broad service to provide turnkey solutions for fleet adoption.

As we look forward, we see the platform itself becoming a key standalone part of the portfolio. We aim to make the platform accessible to a wide array of users, other vehicle makers, schools, and research institutions, and EV enthusiasts. This Arcimoto platform initiative will be a true hardware API for sustainable mobility. And at our Ramp It Up event, we announced that Faction, a bay area driverless vehicle endeavor, is our first API partner as we jointly demonstrated Faction 's driverless delivery vehicle prototype publicly for the first time. All of this is Phase 1 of the Ramp expansion plan. Phase 2, starting next year, is the next step.

This will include a new logistics hub on the site, the reconditioning of building B, lay-in of the automated assembly line we've been designing with Munro and team, as well as an extensive tool up of key parts of the chassis and body that we believe will allow us to achieve maximum unit throughput on this site in 2025 and launch the Robovalet mass-market consumer end game we started teasing last year. Now the conventional wisdom in the electric car space is that the shift to clean transportation is constrained by raw materials. The precious extractive, highly refined metals, and rare earths in the battery and in the drive train.

Let's unpack that. It became public earlier this year that GMs new electric Hummer Clarkson at a whopping 9,063 pounds. That's enough material to build two model-wise. We hit our 1.X targets, will be enough to build eight Fun Utility Vehicle s. We truly want to move through a sustainable transportation system. We do. Electrification of the drive train is only one part of the solution. Rightsizing the footprint is equally critical. And while an AidEx improvement over GMs flagship is a good start, we believe we can push the envelope way further.

In order to take the next order of magnitude leap in terms of efficiency, size, and use of materials on a three-wheeler while maintaining stability, it needs to lean. In early 2021, Arcimoto acquired Tilting Motor Works and its world-class Tilting Trike technology portfolio. At Ramp It Up earlier this year, we showed the true fruits of this collaboration for the very first time, Arcimoto's mean lean machine.

Unidentified Company Representative 2

So the feeling of riding it, it's very natural just like a bicycle. You have an enormous amount of stability at high-speed and low-speed, a lot of this is imported from the Tilting Motor Works expansion. So each wheel is equipped with a high tour other motor. Tour vectoring will allow us to deliver the exact amount of breaking force or driving force that each wheel needs and vehicle that adapts to the conditions of this will provide greater stability, shorter stopping distance, better tuning, and better acceleration. In terms of traction, your front wheel traction is incredible. I've written it on a graphical on wet rose on ampisock, it still tears out every second. You kind of forget that the world is slippery and bumpy, and the seal of telling this thing is extraordinarily. Notice and of course, there's nothing to throttle. I don't have to shift, I don't have to think about throttling blips, I just had and it goes.

The panel generators are putting useful energy into the drive trend. It can also be use in stationary mode to reach our spattering, without moving this trend. Its economic, its stable, there's no learning curve, but this is the version three prototype. The final model will have a battery package in here to drive train will be contact and enclosed, there will be score double cedar. So you can have a passenger and flipped down foot pegs. So the team is Arcimoto is super excited to bring this to market and deliver an excellent product unlike anything you've written before.

Mark Frohnmayer

The MLM will be an e-bike class vehicle like no other, including features never before seen in a vehicle of this class. At the heart of the MLM is a new technology platform we call micro future drive, which includes Arcimoto's new cylindrical cell battery design and co-packaged electronics, suitable for a wide range of micro mobility solutions. Available for a pre -order now, we plan to launch the MLM into market before the end of the year. Going back to the bar graph. One Hummer, two Tesla s, eight FUVs, the same amount of material can be used to produce 100 Mean Lean machines. For transportation, sustainability is micro mobility. And this transition doesn't have to be a sacrifice. The move away from the idea of the car is more fun, less hassle, and more livable for us all. And I hope you enjoy it.

Alright. If I summarize Arcimoto in one word right now, it would be momentum. The team is rocking and this has been just super exciting for me to be a part of, I think part of this is our focus that we started talking about last year on culture, on leadership development, on process is starting to pay big dividends in terms of the accelerating pace of the team. And also, we continue to attract really amazing talent to the venture as we move forward. I am incredibly proud of the Arcimoto family that continues to deeply embrace our mission to catalyze the shift to a sustainable mobility and step-up every day to meet the challenges of a growing endeavor.

We're also really leaning into distributed worktools tha have been become common during COVID to desilo, even as we grow and deepen our share connection, even as we expand the geographic footprints of the team. So I'm going to start out with just a couple of notes on -- first on the Meilin machine. Interest in the Meilin machine has been considerably higher than I anticipated. I was targeting in my head about a thousand pre -orders by the time we launched production in just I think about five weeks, we now have more than 700 and I attribute that to a few factors.

One, it's totally kick ass as a career product developer, I can say it is always awesome when an early prototype exceeds your own expectations. Second is that the e-bike market continues to rocket, fueled by the rising gas prices I think in a growing awareness that we as a culture need to right-size mobility. And then the third thing is that we see a huge potential for commercial delivery using this platform. A number of the organizations we are talking about -- talking to about large deployments of the Deliverator are saying, oh hey, we would also like to look at the mainly machine for areas where we're currently using e-bikes for delivery, better carrying capacity, more stable, higher-speed, there's a lot of benefits that the Meilin machine will have versus current electric bikes in areas where -- very dense metropolitan areas. We are aiming for our first MultiProto -type run in May. That's coming up real soon. And while we won't announce actual final pricing until we get much closer to launch.

For stakeholders to think about our strategy here I'm anticipating a tiered approach. So if you look at the e-bike marketplace today, you have very premium e-bikes in the $8 thousand and up range. Of course, we think the Mean Lean Machine, it is going to be a premium vehicle in this class, like no other. Then the sweet spot that we see in the market is in that -- anywhere in the 3-6 range. And again, we would see that mainline being probably closer to the high end of that range.

As we get to true mass production of the Mean Lean Machine, we want it to be -- and this would be more of a very base model, we'd be aiming in the 2K, 3K range. So just as you start thinking about this from a numbers perspective, we think this is -- the MLM is going to be a big boost to the already significant financial potential that we see of the FUV platform family. If you think that vehicle graph of one Hummer, two Tesla's, eight FUVs, a 100 Mean Lean Machines, and then look at it through the lens of revenue per pound of material. I think the EV Hummer is like a 115K to model-wise today, maybe 130, at -- the scale production of the FUV is more like 150.

For that same amount of material, we should revenue potential in the $400,000-$500,000 for the Mean Lean Machine. So big win for the planet, big win for the bottom line. And speaking of financing, this is a topic that comes up regularly for our stakeholders. For 14 years, Arcimoto has been financed incrementally, building value far in excess of us spend and our ATM facility we have a Canaccord services really is a backstop for this approach. It lets us be opportunistic when conditions are favorable for our investors, without entangling us in toxic deals that plug the microcap market. That being said, we think the time is right for a holistic solution to fully fund the business plan to scale, including the right tools for the job. This includes targeting the DOE for big production capital expenditures. And most of that will land in what we're calling phase two of the ramp development process, the build-out of that does not start until next year.

Also, fleet financing for our rental vehicles, proper real estate financing, and then also long-term strategic equity partners. I've great confidence in the team that we have assembled to tackle this effort. And I look forward to sharing more on this front soon. And then finally, my last note, and then I will turn it over to Kevin, is that Arcimoto continues to grow its executive team, with Key top-level hires to help lead the extraordinary growth path ahead. For the stakeholder updates, we're going to start rotating in new members of the executive team to give added color on the areas that they're leading. And so today, I would like to introduce our new VP of Commercial Operations and strategy, Kevin O'Rourke. Kevin, meet our stakeholders.

Kevin O'Rourke

Thank you, Mark. And more importantly, thank you to all the stakeholders that have joined us here this afternoon. My 15 years of experience in the automotive industry comes in many different arenas. But for the last five years, my focus has been on helping fleet operators, decrease their costs and maximize the potential of their assets out in the field. As a recent addition to the Arcimoto family, I feel it's important for each and every one of you to understand what brought me here. The answer to that question is vision. Arcimoto is set forth on a journey to change the way that the world views commercial fleets, the last-mile delivery and sustainability as a whole. So what does that mean? And how does Arcimoto provide a product that will ensure companies can not only meet their electrification goals, but do so in a profitable way. Right-sizing of a business's fleet can drastically change their efficiencies for the better in day-to-day operations.

We all see large diesel delivery vehicles every day trying to navigate through dense traffic and narrow streets. But the expense of fuel, maintenance, and upfront acquisition costs, the impact of these types of vehicles have on businesses and consumers is obstructive, not to mention the amount of raw materials required to build the vehicle itself. Now let's look at Arcimoto. We have the ability to provide a fully customizable solution to our commercial customers, that will not only help them deliver packages or provide services, but to increase their bottom line profitability.

How do our platforms do that? By providing a substantially lower acquisition cost, decrease in vehicle maintenance, eliminating the use of expensive fossil fuels, and allowing for additional vehicles to be added into the fleet to increase productivity. No, how do we take that one step further?

We're looking at ways to provide our customers with an all. I'll encompassing vehicle package that not only provides the vehicle itself, but maintenance, logistics, telematics, insurance, and much more eliminate the need for fleet operators to control expenses with many different vendors and provide them with a way to do everything in one place. The voices of fleet off operators around the globe have been heard. And now it's our job to help them get it done. Before I turn the call back over to Mark, I'd like to touch on one more thing that's extremely important to me. And that's our team. As you heard earlier, I refer to Arcimoto as a family because that's what we truly are.

The members of this family bring the experience knowledge, and dedication that is desperately needed to make the changes to this industry that I previously spoke about. I'm truly honored to be here and I'm looking forward to all that we're going to accomplish together. So Mark, I turn it back over to you.

Mark Frohnmayer

Thanks, Kevin, and man, it's very good to have you on the team, you've been making a dent in our universe in very short order, so great to have you onboard. And all -- I will introduce the rest of the executive team for those who are here today that you -- and those of you who have been with us for a long time. Know Eric Fritz, our Chief Marketing Officer, Douglas Campoli, our Chief Financial Officer, Terry Becker, our Chief Operating Officer, and Jesse Fittipaldi, our Chief Strategy Officer. We're going to take a few questions that came in from stakeholders over say and then we're going to bring on the rest of our panelists -- our analyst panelists, and get into Q&A that's live. I would also offer that for those of you in the Wall Street analyst world who are following along and on the call, who would like to be a part of a future panel, please email investor@arcimoto.com, and we will bring you into the fold.

Question-and-Answer Session

A - Eric Fritz

Already looking at say, let's get a few questions rolling here. What do you see as the greatest challenges to scale up to mass production?

Mark Frohnmayer

For me, I would say probably the biggest challenge of scaling up to mass production from my vantage point is getting an ever-growing team to continue to work together better and better to hit the goal. And that's -- when -- what I talked about a little bit earlier in terms of our focus on leadership, on culture, on process, that's all about accelerating our individual contributions even as we scale the size of the venture. And I guess I would say I'm incredibly pleased at both our -- the talent that we continue to bring onboard. And then the way that we are growing together and working together gives me a lot of confidence that we're going to be able to tackle this problem. And then you add -- layer onto that things like we're facing a topsy turvy supply chain for the next several years, depending on which piece you're looking at, chips or batteries or everything else you've got.

Geopolitics that play a role in that, sometimes in very negative ways, and then just the challenge of continuing to develop and refine super cutting-edge products and then bring them into series production. What Terry has talked about is that -- And then production is one piece of that, right? So their production is cranking them out the door, but then there is logistics of getting them to customers, there's ongoing building out of the service network and then continuing to build the market presence required to actually support that production operation in the first place. All of those are big challenges, but it starts with leadership culture process.

Eric Fritz

How long until the FUV can be sold at sub 15K prices?

Mark Frohnmayer

We have targeted sub 15K entry-level based model price for when we are at that full capacity output of the ramp, which is 2025 is where we are targeting that kind of maximum output capacity. I would say this, no need to wait. You're talking about a few thousand bucks versus couple of years of delayed joy. Not worth it.

Eric Fritz

Tesla said they will be letting other providers use their charging network. Will Arcimoto be able to use Tesla chargers?

Mark Frohnmayer

This is something that actually a number of our customers have asked for. We have -- many of our early adopters are also Tesla customers. And so to us, it makes a lot of sense that they would be able to share the same home-charging plugs. And then as we look at the 1.X program, we're looking at being able to add much higher capacity charging to the FUV. So that would be -- you can do more of a DC fast charge, at that point it would make a lot of sense. And then it's a matter of just building the business relationship to make that happen. So we're strongly in favor. I think Tesla has done an absolutely outstanding job in terms of building out a charging Network that covers the world. And it's very easy to use trip planning. They've really made that piece of the puzzle elegant and simple and that's something we would like to support and be a part of.

Eric Fritz

Are there any plans to expand in America or build factories in India or China where Motor type vehicles are extremely popular?

Mark Frohnmayer

Yeah. We see the world as ultimately the Arcimoto market. It makes the platforms we're building, whether you're talking about Europe or Southeast Asia, you've got dense cities with crowded streets and already high adoption of smaller-form vehicles. We build vehicles in that category that are super awesome and so we think those markets make a ton of sense, not just for distribution, but for production as well. And we hired Dilip Sundaram, who is our Chief International Business Officer last year, and I think later this year, we'll have some interesting stuff to talk about on that front.

Eric Fritz

When will the ramp start rolling out new units? And what is the expected output by Q3, Q4, and into next year?

Mark Frohnmayer

So we -- ramp has actually already output new units. We are the two pieces of that Q1's production that will -- that are keeping that very constrained R1 was that the shift over to the ramp and then second, the validation of new battery modules. The move over is done, the validation of new modules is almost done, and we expect that early in Q2. So we are slow rolling out the door, today. But starting I believe -- the internal target is April 20th for the new modules to be begin production again, and at that point will be cranking it up. We have not given guidance and are not giving guidance on quarter-by-quarter this year, but we are as I said in the video, we're planning on basically tripling production this year, which is so we did 331 units of production last year, Doug, is that right?

Douglas Campoli

Yes, that's correct.

Mark Frohnmayer

All right. So we want to break into four digits in '22, and then as we get 1.X on the road, that's going to be what unlocks our big scale steps forward. So aiming for a 7X of this year, next year, up to maximum capacity by 25.

Eric Fritz

When will the new project launch? And I assume that's referring to the Mean Lean Machine.

Mark Frohnmayer

That would be my assumption as well. We're targeting end of the year for the official launch and sale of the first units of the Mean Lean Machine. And again, we're likely to start with what I would call a very signature series version of that product. When we show you what we're doing with the next round of prototypes, I think you will understand why.

Eric Fritz

When do you plan on getting doors with windows?

Mark Frohnmayer

So we actually showed doors with windows in prototype form at the Ramp It Up event of a few different varieties. And some of those -- we're testing a few different approaches for the current FUV platform, one or more of which may make it into production. And then as we look to the products built on 1.X, those will have windows as an option out the gate.

Eric Fritz

Can you go in-depth on how our Arcimoto could license its new technology to other manufacturers. Between batteries, general assembly, and other patents, how large of an opportunity do you see this being an accelerating growth and financial stability?

Mark Frohnmayer

There are a few pieces to this. The Arcimoto platform initiative really is all about driving adoption of the Arcimoto platform by other companies, by research institutions, even into the enthusiast realm, so that people who are really interested in making experimental vehicles could be a part of that effort. The one piece of we sort of really teased at the end of the Ramp it up presentation was that both the new cylindrical cell battery pack architecture that we're developing and the agreement that we have entered into with DW Fritz to explore pairing both the license of the design with the actual automated production line that goes along with building those batteries. And so we're exploring that, that will be likely the first real exploration because we see that as that new pack architecture is really having the potential to be an industry-leading solution that has application for anything from micro mobility devices all the way up to very large vehicles. And what we will have, we've still got a lot of work to do to get our get our own piece of it into production and truly prove it out. And but I expect that we will have a lot more share on that topic later on this year.

Eric Fritz

Where is our [Indiscernible] in the ATVM loan process and when do you expect a decision?

Mark Frohnmayer

What -- As I mentioned in the financing section, there are couple of pieces, one is that what we are putting together today is really a holistic approach to fully fund the business plan to scale. The ATVM is one part of that. We see that really coming in. And Jesse, I think you can add a little bit of color to this, which is that as we have continued to bring on Rockstar challenge and refine with Munro, it's really meant a cost shifting of a lot of the big, expensive pieces of the program until next year and beyond

Jesse Fittipaldi

I think you can handle it, Mark.

Mark Frohnmayer

That not -- I'll take that not as the additional color. All right, perfect. Well, let's say the -- our OG analysts have been very patient. Let's bring them on.

Eric Fritz

You want to call on them Mark so they know [Indiscernible]

Mark Frohnmayer

We got Barry Sine, Mike Shlisky, Jeff Campbell. Is that -- there were -- did we get -- I think there were a couple of folks who were dialing in, are they -- did they get booted somehow? Well, all right.

Eric Fritz

If we have Craig, Irwin or Jim McIlree somewhere in the chat, let us know.

Mark Frohnmayer

All right. Jeff are your camera ready? You can complete our Hollywood Squares here if you are. All right. Well, Barry since you came out and joined us for Ramp it up, why don't we start with you.

Barry Sine

I was going to say it's more like a Brady bunch Timeline layout. Either way, I have two questions, if I can squeeze in, please. One of the things I was able to talk to dozens of our Arcimoto people, and just a great attitude. And one of the things and I heard quite a bit that you didn't talk too much about today, was the rental program, and rental will give you a recurring stream of revenue, you've talked about rental cars. Think there's two company-owned locations and then five partners that you've said you want to pun intended Ramp up that program as well. So could we talk a bit more of that about that and how significant might that be in terms of revenue generation in '22 and '23.

Mark Frohnmayer

Well. I would say the first goal for us is -- and I think we're now up to eight rentals either or company stores or rental partners in the market. We have Hawaii coming online here very soon. I believe we're targeting May 1, to get our lease in place and then that's going to let us actually unlock Hawaii, both for sales and for rentals. Hawaii, Southern California, Florida. Those really are beachhead markets, no pun intended. But the first goal is brand awareness and sort of the try before you buy.

That is pretty much of requirement for almost everybody purchasing a motor vehicle, almost everyone wants to actually try it before they are willing to sink a lot of money into a purchase. And we think that long term, that rentals is not just a way to provide an away for people to try it in beautiful places, enjoy it for a day, but actually to become break even and then ultimately profitable. The typical new user -- first-time user experience of a vehicle actually comes at great cost to a traditional vehicle manufacturer.

Whether you're talking about the franchise model of automotive or the company store model of every, I mean, this is -- Tesla has been a real pioneer here, but then you've got Rivian stores and solar stores and Lucid stores. So you're -- in those scenarios, you are either putting out a chunk of the margin or you're putting out a lot of OpEx and CapEx that never comes back other than the sale of the vehicle. And we see that rental model is being, why don't we turn that pieces of business into a profit center? We are -- so our first goal is parts and seats, next is drive awareness on the road, and then third is profitability for that piece of business.

Barry Sine

And if I can squeeze in just one more, please. The -- getting the profitability starts with a positive gross margin. So I wanted to talk about that and maybe see you guys expand upon that a little bit. There's a couple of things that I'm wondering about. At the Ramp It Up event, I was able to spend a lot of quality time with Sandy Munro and his team. And you've talked about vehicle designs. The second thing is, and I was able to get a firsthand look at the new assembly line, but there's more to come with automation. So automating the assembly, that would be the second part, and the third part, you've talked about getting the volume unit numbers as you put more volume to that line, a big part, Doug, of the cost of goods sold is always fixed cost depreciation. So it seems like there's a lot of drivers in place to get to positive gross margin and then that would be the key to getting depository EBITDA and then EPS. Could you talk about that please?

Mark Frohnmayer

Yeah and I think Barry the one I would add to that. So it's volume, it's assembly optimization. But -- and then -- it's sort of the out -- the hertz vehicle design that is simplification of things like the chassis and then ultimately, as we move to that mass production stage, it's really a change in material production method. But what we have -- as we look at the bill of materials today is the big chunk is battery, electronics, motors. I mean, that's our -- that's the majority of the cost in the vehicle. And that's really what's the 1.X program is all about.

So it's really driving the simplification and ultimately automation of those core components of the platform that will be the first big step in the push deposit margins. The other piece of that is that -- and this is really where, the work that Kevin and team are doing on growing the commercial opportunity is that when you look at the pricing structure of our commercial offerings, they're actually higher than our consumer offerings by a good stretch. And as we put in place the tools that let fleet adopters actually adopt automotive vehicles as an OpEx rather than a CapEx. Then you start to look at it in terms of what is total cost of ownership, but then also what is my monthly on the Arcimoto solution versus a delivery truck or a van or whatever. And we think that even with a higher sort of intermediary retail price, that we're going be able to deliver a dramatically lower cost to businesses for those solutions. And that's why I think as we go particularly into next year, that's going to become I think a very big part of the business story of the FEV family.

Barry Sine

Okay. Thank you. I'll let somebody else ask questions.

Mark Frohnmayer

Mike.

Mike Schlonsky

Hello, Mark. How are you? Everybody else, how are you doing? So maybe I can start off with a question just on [Indiscernible] the cash outlook for the margin outlook for the year. Any kind of feedback you could give us how much you've grown this year would be appreciated.

Mark Frohnmayer

Alright. So Doug, you want to take a swing at that one? In terms of what we've looked at, and I will just preface it with, as we look at the spend over the next 18 months to get to what we see as positive run rate on the company. We look at that total over 18 months of being in the -- I want to say 100 million ballparks, the bulk of that is in CapEx. So I don't consider that burn that is -- and actually I don't consider even the spending on the people on development but I consider investing in the future.

But that's -- as we look at all of the different pieces of that holistic financing puzzle, that's the number that we're landing on. And that gets us -- we believe if we execute well, and this team has been executing at peak performance, that we think we get -- that would get us to a positive run rate for the company. Now, there will be additional scaling and investment that happens after that, but that's a significant near-term milestone.

Terry Becker

It's not lost on me that your outlook for 2023 is 21X that was saw in 2021 as far as production. Was suggesting that that would be a good level of cash-flow positive?

Mark Frohnmayer

That's -- that is our goal. And I think that's what we put in our K, if I recall correctly. Doug, is that right?

Douglas Campoli

Yes. And if you look at our operating expenses in R&D, the R&D is increasing substantially and that's part of the investment in the future that Mark was just talking about.

Terry Becker

Okay. I don't want to ask for any quarterly guidance for the [Indiscernible] on March 31st, could you tell us maybe how many you might have produced your ships in the quarter of attending in a few hours?

Mark Frohnmayer

Terry, how many did we build in ship out of the Ramp, these are not audited numbers for 2022, but if you've got a ballpark, I -

Douglas Campoli

We built and completed about 25 vehicles in Q1, in spite of the fact that we were moving from one factory to another, setting it up, doing all of that. And I think about eight of those have come off the line in the Ramp. But that's where we're at, it's all testing, it's dialing in processes. It really wasn't even expected to be any this quarter but in the act of making the move and dialing it in, it pulled that, that many [Indiscernible]

Mike Schlonsky

Total goals get to the four figures, side.

Terry Becker

Yes. How many went out the door there could have been some left from Q4 last year that went out the door in Q1 so I don't know the final number of what actually went into revenue in Q1.

Mike Schlonsky

Got it. So clearly their is going to be a much better run rate, probably in Q3, Q4?

Terry Becker

Absolutely.

Mark Frohnmayer

This is consistent with what we talked about on our Q3 call, was we were really expecting basically zero output in Q1 with the move, and with the battery validation. So I certainly look at this as the team actually getting vehicles out the door in Q1 in addition to those steps as being a good thing. But we see the bulk of the output coming in Q2 and beyond.

Mike Schlonsky

Thank you for that Mark and Terry. My last question is on the Smokejumper product, and I recall I asked you this question before. But do they go through any special certification or special R&D to make sure that that is available to license fire-fighting operations or it's going to be the product customers that can afford or a non-government entity. Jesse is really being leading the charge on Smokejumper. So I don't think that we've got into that stage yet. But Jesse, if you can offer any more on the programming, that would be great.

Jesse Fittipaldi

Yeah. Mike, we've got a team that we just brought in to help us understand the requirements of that product officially from the standpoint of the folks who actually use it. So it's just become -- as you know, it's become more and more of an exciting product offering that we have that has a lot of potential for it. And so we've -- over the last couple of months, we've been working with some down in California to kick that off and make it real, both on the testing side more configuration and then whatever the regulatory stuff we have to go through.

Mike Schlonsky

Got it. That's great color. I'll pass along if there's somebody else. Thank you so much, guys.

Mark Frohnmayer

All right. Jeff, you're up. You're muted. All right. While Jeff works with technical challenges, Barry, you got any more?

Barry Sine

Let me unmute. Yeah. A lot of questions on the ATVM. Not sure about the -- what is the government process, who goes through that? When do you submit the final? And then what steps do they have to take to vet that out and what might the timeline be? And I assume once you submit the final, we'll see a press release on that?

Mark Frohnmayer

I would expect that we would let our stakeholders know when we submit that final application. And I -- to me, this really comes down to -- Submitting an application is not the actual goal, submitting a successful application is the goal. And that means basically making sure that we have the holistic package put together to fully fund the business to scale, and that -- part of that comes down to obviously the continued development of our market. And then also that we have -- the pieces that the ATVM can't pay for, that those are covered by other sources of capital. So those are all elements that are going to come into play we think in the very near future, and that's -- so that's another one where -- We've got another call coming up with stakeholders in six weeks and I expect that we'll have more updates on lots of good stuff at that point. But as we said at Ramp It Up, we've got I think a plan for continuing stream of good developments, a lot of that have been cooking for long time, so certainly stay tuned. And it looks like Jeff got it figured out. Jeff, welcome.

Jeff Campbell

Can you hear me?

Mark Frohnmayer

We can.

Jeff Campbell

Okay. Great. Ignorance is trying to buy technology here. I've noted that the 2021 R&D investment was significant with the Mean Lean Machine development apparently well along. Do you expect a similar R&D spend in 2022 and if it's possible, will the trend continue in 2023 or do you think it'll moderate?

Mark Frohnmayer

Well, I think when -- I guess I would say to that, is that the R&D spend of Arcimoto or the actual the spend of Arcimoto as a whole relative to the industry that we're in. The problem that we're trying to solve and the potential for the products that we're building in the market is so much smaller than any other organization that we see in this field. And yet the yardage that we make continues to, I would say, I think that we are -- that our accelerating pace and the super-cool stuff we're coming up with says that we are deploying those resources wisely.

Now the -- to the point of the Meilin machine, that's actually a very small part of our overall R&D spend, although we do see giant potential for that product. And although you'd certainly have to factor in the acquisition of Tilting Motor Works when you think of the cost of the Meilin machine development program. But that's a small piece. When it comes to scaling up to mass production, when it comes to developing with partners, our Robovalet initiative. I think we're going to be continuing to invest in the future and in the mission going forward, likely at levels equal to or exceeding what we did in '21.

Douglas Campoli

A lot of the investment in 2021 was improving the electronics and the existing FUV vehicle too, to make it more cost effective.

Jeff Campbell

Okay. That's helpful. Thank you. And I just wanted to follow-up with a -- that's a financial one, I thought the directive technology spile in Australia was quite interesting. I was just wondering if you can speak about the timeline there and also what might be involved in the ''eventual homologation to Australian safety standards that was mentioned in the press release.''

Mark Frohnmayer

So I've been on now several calls with the directed team and with some of their customers. And I -- without violating confidence, I can say I've -- just the excitement that they've expressed not just for the Deliverator family, but moving into the Meilin machine space as well has been very high. So we see -- I think our challenges is going to be just making sure that we are able to tune the product family to their requirements. And that we've got a bit of -- what's the term? Belt and suspenders work on getting the homologation pathway figured out, for that market. I don't have a lot more detailed to share other than that we are in very active conversation with them, and we see that as a huge opportunity for Arcimoto, for the Deliverator, for the Meilin machine family. And that we're super excited about it.

Jeff Campbell

Okay, great. Thank you.

Mark Frohnmayer

You want to add, Jesse?

Jesse Fittipaldi

I just -- a little bit more to add to the ATVM maybe. I'm seeing some chat stuck in there. There might be some confusion of what the ATVM LP funds can be used for. That program is for scale. And what Arcimoto has done really well over the last two years is organically growing the company in a way that we think we can achieve success on our -- mostly on our own and use the funds of the ATVM to build out the factory and scale from there. So that it's -- those funds get used next year. So again, to Mark's point about the mission is a successful application to the ATVM LP and the DOE program so that we can show them we have a really good plan and that we can execute something that that program was intended for.

And with adding people like Kevin on the team and getting his knowledge and understanding about how fleets work and how we might be able to pivot the company a little bit here in there to have a better plan, has been what we've been working on. So it has been getting worked on. There is a lot of documentation that we have in the works and ready to submit. And I'm feeling really good about where we are with that. So little bit more time is worth it and I just -- this is going to be good.

Mark Frohnmayer

Thanks, Jesse. And I understand that as we progress along, we are certainly a learning organization and we adjust accordingly to hit the plan that we think is going to be best to achieve the mission. And I'm going to go ahead and leave it at that and wrap up the call. But just to say, once again, we -- Arcimoto would not be here without the support of our stakeholders. You all have brought us from a napkin sketch to a production vehicle operation with we think global impact potential, a product family that is world-class in terms of environmental efficiency, footprint, utility, and certainly the fun factor. And we -- Yeah, I just want to say thank you again to everyone out there who has continued to push us along, continued to fight with us. You guys have a fantastic rest of your week and we will see you next time. Cheers!

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