Arrival or departure? The rise and fall of Britain’s EV unicorn
Special report: How Arrival went from a £9.5bn valuation to the cusp of insolvency
I received an email in April last year with the subject line “UK EV maker Arrival - building a resilient model”. It was from a PR agent representing the new electric vehicle maker which had surged to unicorn status in the 18 months prior.
The agent explained how Arrival had a “unique manufacturing model” that was responding to the changing landscape brought about by the EV transition. They added that Arrival “make everything in-house” from the software to the materials to build them, uses a modular construction method, and that all their vehicles will come from “microfactories” – which are quicker to build and cheaper than traditional car plants, plus can be located close to areas of demand.
Like many, I was already familiar with Arrival and the innovative approach they were taking, especially after their listing on the US Nasdaq in 2021, which was the UK’s biggest stock debut in history, receiving a valuation of £9.5 billion - solidifying Arrival as a pioneer in the EV transition.
Alas, heavy is the head that wears the crown, and in the face of huge demands from customers, desperately trying to prove its approach to investors, and dwindling funding, Arrival is on the cusp of being the EV industry’s next big collapse, after the failure of Britishvolt earlier this year.
Arrival’s stock currently trades at around $1.60, which is down 97% compared to last year, and the share price has remained under $2 dollars since mid-August. If it dips below $1, Arrival could be delisted - and has already received a warning from Nasdaq once before.
The reason for this fall is that Arrival has repeatedly failed to deliver vehicles. And that moment is still allegedly about one year away. Although, that’s if their cash reserves don’t run out first. To prevent that from happening, the company has spent much of 2023 trying to line up a new financier.
After a false start earlier this year, Arrival said in late August that it’s engaged with a new partner. And now, only last week, a quick succession of updates to Arrival’s Companies House page suggests the company could be about to receive a fresh injection of cash.
However, to do this, Arrival has seemingly placed all of its intellectual property up as collateral in order to secure new capital.
It’s a big change from two years ago, and the real question is how such a shining success ended up putting its assets on the line to survive. To understand, I’ve gone back through hundreds of articles and comments to chart Arrival’s journey over the past three years, including its early success, the moments it began to unravel, and what the future may hold.
A short history…
Arrival was founded in 2015 by Denis Sverdlov, a Russian businessman who made his fortune working in telecoms and at the Kremlin. The idea was to create an EV manufacturer that would produce vehicles for commercial purposes, such as vans and buses. Back in 2015, the EV industry was vastly smaller than it is today, and the true impact of the transition on the automotive sector was not yet known, so Arrival was early to the party.
However, the really ingenious idea that Sverdlov and his team started working on was a radical rethink of manufacturing – they planned to develop a network of microfactories, rather than spending years and hundreds of millions to create one big vehicle plant.
The idea still has not really taken off amongst manufacturers, though the concept has been around for a long time. It was first discussed in 2000 when two professors working at the Centre for Automotive Industry Research, Paul Nieuwenhuis and Peter Wells, proposed a ‘Micro Factory Retailing’ process. Nieuwenhuis noted to Autocar in 2021 that their approach was similar to that of Arrival’s.
The firm slowly grew the operations of its first microfactory in Bicester, Oxfordshire, and soon began to attract serious investor interest, particularly after in mid-2020 when they announced that UPS, the American delivery firm, had placed an order for 10,000 of its electric vans. In an interview with the Fully Charged Show, Arrival’s then Chief of Product suggested there were “many, many more like that to come”.
By the end of 2020, EVs hit the mainstream as then Prime Minister Boris Johnson revealed the UK’s plan to fully electrify Britain’s personal and commercial vehicles by 2035. Shortly on the back of this, investors, which included Hyundai and Kia, supplied Arrival with £85 million – which overnight turned it into a unicorn, with a valuation of £3 billion.
Peak hype arrives…
Getting such a big valuation so quickly on the back of a major industry shift sent interest in Arrival into overdrive. The team launched into an array of media activities to talk up their microfactory approach, working to build its image as a proper carmaker, as well as demonstrating its prototype van at numerous events, such as Goodwood.
In March 2021, Arrival hit the big time after conducting a Special Acquisition merger – which at the time had become very popular for new start-ups raising capital – and led them to listing on the Nasdaq with a £9.5 billion valuation – making it the biggest listing for a British company in history.
Importantly, Arrival was also able to drum up around $660 million in cash from the float.
Perhaps unsurprisingly given the stock debut, a couple of months later, Denis Sverdlov, as CEO and founder, was listed in The Sunday Times Rich List 2021 with an estimated personal fortune of £6.2 billion.
At the time, Arrival was still yet to produce a single vehicle, and in a profile of Sverdlov, The Sunday Times wrote he was “either one of the greatest visionaries of British business — or a guy who is about to crash and burn big time.”
The struggles begin…
Arrival seemingly stuck its head down and got to work for the rest of 2021, though at the start of 2022, lingering supply chain issues from the pandemic led to a pinch on the automotive sector. Additionally, the war in Ukraine by Russia led to a worldwide energy price spike. As a result, inflation started to rise, and business confidence dropped.
These factors led many commentators to question how the ‘new wave’ of electric car makers that had risen quickly in the pandemic, such as Rivian, Lucid and Arrival, were going to move from prototype to scaled production in the face of tough economic reality.
By Spring 2022, Arrival was already months behind in producing its electric vans and said it could only produce 600 vans in 2022 – which is half it had initially promised investors and analysts in 2021. Arrival blamed the time it was taking to get its plant running in North Carolina, meaning the UK microfactory at Bicester would have to carry the load.
However, as Summer arrived it was still behind, and cash started to get tight. Under the pressure, Arrival announced it would cut costs by a third – leading to around 800 of its 2,700 employees losing their jobs. It also ended side projects, such as developing a ride-hailing car with Uber and an electric bus. The focus was now solely on producing its van.
By the end of Summer, things got worse for Arrival as it was forced to lower its van estimate further, going from 600 to just a mere 20. This led to serious questions about Arrival’s microfactory approach. What the company really needed was a win.
Fortunately, one arrived in September last year as the company revealed its first all-electric van to have been produced at its microfactory in Oxfordshire. Arrival said it proved they were onto something, though Sverdlov conceded it was “more difficult than expected”.
Celebrations around the first van were short-lived, as Autumn 2022 arrived, the manufacturer experienced a near-total meltdown.
It started soon after the news that the company would relocate van production from the UK to the US and make a 'sizeable' reduction to the British workforce. At this point, there were 1,900 staff and the amount of cash left was in the region of $330 million.
The move had been long in the works – as Arrival had started building up its base in Charlotte, North Carolina – and the favourable incentive scheme for EV manufacturers under the US’s then-new Inflation Reduction Act was the likely reason for the move.
However, after the second job cut in just a few months, staff at Arrival let their frustrations with the management spill out into the mainstream in a series of leaks. They culminated in a now infamous Financial Times article that described looting of tools by staff, misuse of commercial information, but most tragically that the company’s first van had been built by hand – and not using the automated microfactory process it had drummed up.
There were also rumours that during a demonstration for UPS, its largest customer, one of its vans set on fire, melting the ground where it was parked. In response, Sveldhorv emailed all staff accusing anyone leaking stories of "betrayal".
These leaks didn't just reveal typical ‘start-up’ challenges, but some of them also called into question the broader strategic direction and grasp of the board. Firstly, it became known to staff that the CEO had secretly allocated funding to develop a jet plane, and secondly, executives discussed an idea to set up an office on the tropical island of Mauritius, where staff could work for several weeks a year.
These stories alongside continued reports of dwindling cash reserves led the stock price to fall by more than a third. By the end of November, Arrival's founder Sverdlov stepped down as CEO, and the President, Avinash Rugoobur, followed shortly after this. Arrival then issued a warning that it would run out of cash in 12 months without a new injection.
It was about this time that Arrival ceased much of its external communications. The firm has not shared anything on social media since October, frustrating retail investors who feel left in the dark - causing some to have even turned up at Arrival’s factory to try to get answers.
For Arrival, 2022 had surely been an annus horribilis, but this year (2023) has spared them no better. It began with the EV maker cutting 800 more jobs, and also the revelation that the company would now not produce a van until the second half of 2024.
By April, Arrival had already secured a $300 million injection from Westwood Capital, but it also had its eyes on undergoing a rare second SPAC with Kensington Capital Acquisition Corp. The SPAC would have unlocked hundreds of millions of pounds for Arrival to use. By this point, the company was still burning tens of millions each quarter, so was in desperate need of money. However, in July, the deal fell apart. The reason given is that Arrival wanted to "pursue alternative avenue that will provide the company with additional liquidity."
A short while after this decision, a Sky News article suggested Arrival had drafted in consultants Alvarez & Marsal to advise for possible insolvency. Meanwhile, in Charlotte, where Arrival had set itself up to mass-produce vans, a report by Axios revealed that Arrival had ended the lease on its US office. Axios also reported that emails to Arrival employees received bouncebacks. In response, a US spokesperson said the EV maker "remains committed to our U.S. strategy, and we look forward to starting production at our Charlotte factory location in 2024".
In late August, Arrival quietly published a news update saying the company is "in active negotiations with a strategic financial partner". As of last week, a series of ‘charge’ updates on Arrival UK’s Companies House page indicated it has offered up its intellectual property – such as patents and domain names – as collateral against a possible new loan.
It’s a sad position that Arrival has ended up in, still far away from producing any vehicles. But, based on these recent updates, it seems likely it could go on a bit longer. However, will the EV maker that was due to shake up manufacturing globally ever truly arrive? Or should we expect to see its departure?
The firm is expected to deliver a second-quarter update to investors this month. Meanwhile, according to Sifted, after his net worth fell dramatically, Sverdlov, the founder who led Arrival until last year, has been quietly selling his shares in the company.
Arrival did not respond to a request for comment.
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