Entering text into the input field will update the search result below

Avoid Arrival - Management Needs To Show Some Execution

May 02, 2022 6:30 PM ETArrival (ARVL) Stock34 Comments
Georgy Shishkov profile picture
Georgy Shishkov


  • Since going public a year ago, Arrival's market cap fell by 90%. Although market dynamics were adverse for all high-growth small caps, Arrival had its own reasons for the decline.
  • I believe that “minor” production delays hide serious production issues, warranting a look at the nuts and bolts of recent business performance and pipeline execution.
  • The business model promised a short buyback period. However, Arrival has raised significant external funding and will need further raises to support growth.
  • The valuation discount is explained by uncertainty regarding the production launch and further share dilution. Steer clear of the stock until the first vans are entirely built at a microfactory.

Editor's note: Seeking Alpha is proud to welcome Georgy Shishkov as a new contributor. It's easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Active contributors also get free access to SA Premium. Click

Weiße moderne Lieferung kleine Lieferung Fracht Kurier Van bewegt sich schnell auf autobahnstraße in die Stadt Vorort. Busines Distribution und Logistik Express-Service. Minibus fährt an sonnigem Tag auf der Autobahn
Kyryl Gorlov/iStock via Getty Images

This article was written by

Georgy Shishkov profile picture
Welcome to my page! My name is George and I am passionate about analyzing stocks. My seven years of experience in investment banking and the CFA II exam allow me to provide a fresh perspective to subscribers. My research is focused on opportunities in the Energy and EV space and I love using those findings to challenge extremely optimistic business assumptions and forecasts frequently presented by the management. I also believe that you need to follow cycles to earn in the markets. I focus a lot on the macro-environment in my research. My Master's Degree in Mathematical Methods in Economics equipped me well for diligent analysis.  Feel free to enjoy my articles. I'm sure they will help you get less stressed and earn more in the markets.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (34)

It's a very pleasing observation. I subscribed to you! I will be happy if you judge GOEV too.
Equities Ghoul profile picture
@Georgy Shishkov Great write up on $ARVL. What are your thoughts on $REE? Ex Tesla engineering exec is now the COO of REE.
Georgy Shishkov profile picture
@COREBTC, thank you. I will look at $REE; thanks for bringing it up. No view currently.
I don't know if they will succeed, but there are a couple of things not discussed, or misunderstood: As Musk said - making a lot of things is very difficult. Arrival is a as much manufacturing process as a product maker. The key is modularity, so when you discuss a bus factory, and then a van factory, the error is that it is one factory. One factory can produce any Arrival varient as needed.

As to raw materials: Their design modularity works here as well - each product is not an entirely different entity. Also, they are focussed on weight, because lighter weight, means less materials, particularly battery materials, to achieve the same range. Less materials means less bottlenecks.

Let's see how it plays out, but I like the concept, and execution is ongoing, and they have some large orders. When I look at Rivian and Lucid - they have the design, but they don't have the manufacturing. By making manufacturing/product symbiotic, when Arrival gets up to speed, they will truly be up to speed.
@appliance Look at Tesla, it most modular car maker we know but it take it few years to move from one model to the other.
@danirak Curiously it is not very modular. Difference between modular design and vertical integration. The S/X have little to do with 3/Y. There are at least 2 versions of the Y(4680 and the other one), and truck is its own thing. Arrival and Canoo are modular concepts - I hope they succeed.
Equities Ghoul profile picture
@appliance $REE has perfected the micro factory with help of Tesla former Executive Josh Tech and has a much more advanced EV platform that was just unveiled to bank analysts and customers and investors this past week.
28 Jun. 2022
Got the bus and Van certificate now. Production to start soon
Georgy Shishkov profile picture
@S2015 yes. If they manage to start production in Q3 it will be a short-term catalyst
I wish I hadn’t cut my short at 5. It’s going to 0.
Inflexion profile picture
@A2015 Take the profits and run. The mentality on this board is management is fully responsible for the delays and the stock is too risky. I have experience in this sector with govt approvals so I can affirm: Since Covid, already inefficient and slow government employees have used the "epidemic" to double the time for approvals or denials.
Even the local County building department in Commiefornia has gone from 1 year to 2-3 to get a permit for a new home.
Arrival will be successful mainly because they are a commercial niche player with a demand product.
Equities Ghoul profile picture
@A2015 they are starting production soon
@A2015 Of course shorts also help to kill any innovation - the author ought to put that in the first paragraph.
pat45 profile picture
not sure any good news from earnings...anybody see any?? Financials still look worrisome
Georgy Shishkov profile picture
@pat45 earnings were in line with the expectations. Therefore, the share price did not react substantially. Arrival makes some progress towards van production in a robotic cell.

I did not like the following. They promised to get Bus certification in Q1, but they got it in Q2, although announced at the Q1 earnings release. Therefore, they made an impression that everything was on track. In reality, the certification approval was delayed by a couple of months. Another point, I am not 100% sure that EU certification is acceptable for the UK, where the first bus customer is located. I need still to do some research.

I think that if Arrival manages to produce the first van in Q3, then some speculative demand can arise. It could be a risky option for a short-term buy. Why risky? First, there is no certainty that a van will be produced in Q3. Second, Arrival needs to leverage positive news to raise capital and dilute shares. So you will need to be quick.
Arrival Bus Gets European Vehicle Type Approval, EU Certification


Georgy Shishkov profile picture
@springfwd great that have achieved it.
But it was interesting when they announced it—just a couple of days before the Q1 earnings release. So at the earnings call, they will make an impression that everything is on track.
It should have been achieved in Q1-22, i.e., two months earlier. Again, a delay.
@Georgy Shishkov Theis Q1 - Q2 fixation is very short term thinking and unique to the American Stock Market. Let it stretch a bit - it is not really a barometer of success or failure in the longer term.
A recent article in the British "The Guardian" about ARVL

After the management withdrew projections, there has been no update on the extent of delays or what are the new likely production targets.

The proving ground trials for the bus started in December 2021. At that time the company stated 'Following proving ground trials, Arrival will commence public road trials of the Bus with First Bus - one of the UK’s largest transport operators - in Q1 2022'. There has been no update on the company website about how the proving trials have been progressing for more than four months now. Also, no news about public road trials which were to start in Q1 2022.

The van has letter of intents, not firm orders. No news from the company of what stage the van development is in.

As a result I agree with the author of this article that the management needs to prove itself and deliver.
@Georgy Shishkov I agree with the agreement of the author agreeing with agreement of the commenter agreement. no I don't.
gametv profile picture
OK, so I looked at your numbers a bit more and there is a gapping hole in the logic of your projections. Your assumptions on the ramp up of the production speed for the microfactories is insanely and unrealistically slow.

Microfactories are a non-linear production method, which means that a single process that is running slow will not slow down other processes. Each of the cells is timed to complete many taskis in 22 minutes, so if there are proceses that are slower than the engineers originally projected, the gap can be offset by optimizing other processes within that same cell to run faster than the original specs. So the ability to continually work on refining production processes to speed them up and get to AT LEAST 10K units is an on-going task. This is different from traditional car manufacturing, where a single slow process can cause production to come to a grinding halt because each process must run at the same speed in the production line.

With Arrival, there will be engineering problems that need to be overcome early in production process(most of that has already happened), but once those are overcome, the ability to scale up the speed will be a daily process that does not require the whole factory to shut-down. So they are going to see very rapidly evolution of the speed once they have solved basic engineering problems and got all the robots working. The real technology risk with Arrival is all on the front-end, just getting all these new processes up and running to make a vehicle.

There is simply no way that they will be operating at 60% of projected speed through all of 2023 and then 80% in 2024. It is much more likely that they actually reach 100% and then move beyond it. Or if they dont reach 100%, it is likely they will be at 80-90% going into 2023, and then continue to continuously improve until they hit 100%+ by mid-2023 at the latest. I do think that it might take them well into 2023 before they get the factory economics up to an operating profit of 100 million, as this might require additional optimization of the supply chain pricing.

I also believe that many of the core technologies (programming routines) that Arrival uses are common across many cells and that as they speed up a core technology, it works across multiple cells. For instance, improved vision recognition of parts might speed up multiple processes.

The greatest risk for Arrival is that they cant start production in 2022 and get closer to running out of cash. The current expected start date for production is early September.

I fully expect that they will announce on May 10 that most of the cells have actually been able to perform the tasks to complete a full vehicle and that at least a couple of the cells are running at least 80% speed. It could be that they have already got the skateboard running at close to the 10K projected speed, we will need to see. Either way, they have another 4 months before the Sept SOP date to figure it all out.
gametv profile picture
At least this article is a pretty thorough explanation of the short thesis, but it really is fundamentally flawed in a number of areas.

- The article really just misses the whole point about microfactories, which is that once they have been optimized, you can stamp them out quickly and fulfill the demand that exists. You dont really look at the ramp up potential for 2023 or 2024 in any realistic manner. And you dont look beyond 2024 at all, which is really where Arrival could become a monster in terms of financial performance. Elon Musk said in the past that their future moat was in manufacturing, and he has actually proven that to be true, they are really alone in their ability to crank out vehicles. But Arrival's potential to grow faster than any other car company due to manufacturing advantage is far greater than Tesla.

- There is zero mention of the LOIs they have already received. This shows the overall demand potential for Arrival is huge. I do agree that the demand for buses has a lag factor and that is why Arrival is not going to launch an American factory for buses right away. I think bus operators are much more risk adverse and Arrival realizes that building out the van production is a much better place to put capex.

- Your assumptions about gross margin is very suspect. Arrival has stated in previous conference calls that they will be monitoring expenses and could need to adjust pricing upward. Yet, Arrival will still be the lowest priced EV in each segment and will also be the lowest TCO. So if they have more demand than they can meet with production, they will be able to raise prices and make the vehicles with the highest profit margin. I really doubt they will only achieve a margin of 17%. You really have no proof points on this.

- The founder owns 72% of the company. This is to the advantage of shareholders. His interests align with shareholders and he will not want to dilute the shareholders with lots of stock options and lots of new share issuance. There have been mentions by management of different potential financing arrangements. Keep in mind, another of the benefits of local production is that it creates good jobs. Once the basic factory production is proven, they will explore many different financing options and I think Sverdlov will only use equity financing once the stock price is much higher and dilution much lower.

- When the new CFO was hired he made alot of sweeping changes - eliminating the guidance, raising capital and de-risking the execution. This does not mean there is still not the potential for delays, these actions cut the stock price dramatically, but they also reduce the production risk. They company has done many things - bringing logistics in-house, creating their own battery module factory - that have removed risk of vendors failing to produce what they need.

- The new guidance from management is based on just one shift during 2022. This is simply a way for them to be conservative in projections. It also allows them to continue to optimize the production until they meet their production targets. This creates a much higher probability of upside surprise in 2022. The non-linear production method of Arrival is unique suited to continual improvements, and there is no reason they will just stop at 10K units per factory. Adding a third shift to factories could be another way to increase output, particularly if they are trying to squeeze every last cent of profit out of factories to help fund new factories. By the way, there are interviews with Arrival management where they talk about a factory 2.0 where a vehicle is produced by a single cell. The technology of the current Arrival factory is really the infancy of the microfactory business model. There will be a 5 year time period where they can rapidly evolve this production method. And Arrival will be at least 3-4 years ahead of the overall vehicle industry.

- The valuation methodology is also really suspect, since it does not take into account the future beyond 2024 and is based on incredibly negative projections for 2024. If you took ANY EV maker and looked at the near-term projections, they would be highly over-valued. Arrival's growth curve is a little behind the companies you compare it to, but the potential for that growth curve is much larger over a longer term.

I will need to dive a little further into your calculations a bit further, but overall, this is at least a very detailed look at the short thesis on Arrival.
Georgy Shishkov profile picture
@gametv interesting opinion. We can argue about the ramp-up period, but the main question is if Arrival manages to produce a van in a robotic cell before year-end. The second would be if they can stick to the announced gross margins. And the third one is when intangible Capex goes down. A positive answer to the first two questions can make the stock investable. But as you rightly said, Arrival should be quick with responses. Otherwise, they lack cash.
It is strange you look at the headline which is completely negative, the way these articles are always written just before earnings, wonder why it couldn't wait one week! It makes many assertions without any facts, did you ask the management for comment before publishing? Also some of your data is in accurate and you miss quote maybe deliberately some of the quarter reviews. And your conclusion: "One quarter without any delays would already be a positive sign. Arrival will report Q1-22 results on May 10." So again why not wait until 10th before publishing this article with a poison pen headline?
@normany001 they dont have earnings or revenues so the report is whatever. they can issue production news any time they wish. An article positive or neg on SA for this company isn't going to move the needle. The author has 6 followers just as an aside...not saying he is good or bad just informing. SA isn't crushing this company, they are doing that well enough on their own.
Georgy Shishkov profile picture
@normany001 I bet that the Q1 earnings release would not be so promising given constant production delays in the past. The market thinks the same, therefore the valuation discount is crazy. You can buy now and earn a lot after the Q1 release if you feel differently.
Have been following them since the SPAC, and finally took a small bite at 2.10$ after the recent fall in heavy volumes.
I even wondered if the recent drop was linked to the CEO / Founder Denis Sverdlov being Russian, and some institutions jumped out because of it ?


Very heavily shorted as well (28% of float)
Georgy Shishkov profile picture
@jmdc33 CEO emigrated quite a long time ago from Russia, and he made a statement in Q4 highlighting the fact that he was not linked to Russian officials.

I looked at glassdoor.com, and there were some very negative comments at the start of the war in Ukraine. Employees called the CEO an oligarch and a lousy manager. I think that these comments were more driven by emotions. I also have not noticed any extreme sell-off during early March. On the contrary, it was surprisingly stable:)
Bought lordstown there was literally no institutions holding this.
arcfast1 profile picture

There are a few but not a high percentage relative to overall stock float.

As of March 30

Top Institutional Holders
Holder Shares Date Reported % Out Value
Wellington Management Group, LLP 38,136,614 Mar 30, 2022 5.97% 61,018,583
Capital World Investors 30,356,905 Mar 30, 2022 4.76% 48,571,048
Blackrock Inc. 15,676,012 Mar 30, 2022 2.46% 25,081,619


I have no position but was curious about this too.
Georgy Shishkov profile picture
@arcfast1 cool info. Thank you!
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About ARVL Stock

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on ARVL

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.