Lion Electric (LEV) is a manufacturer of yellow school buses, public transit buses, semi-trucks, bucket trucks, and garbage/refuse trucks. Incorporated in 2008, Lion has over 390 vehicles on the road today with over 7 million miles driven. They are known for having some of the highest quality commercial EV’s on the market, deep connections with Amazon and the the full backing of the Canadian government. With the new Biden EV initiates, Lion is primed to take advantage of incentives in both markets.
With congress passing the bipartisan Infrastructure Bill, the US government is expecting to spend “$39 billion in new funding to modernize public transit and replace thousands of buses with zero-emission vehicles”. Combined with Biden now beginning to issue mandates that 50% of new vehicle sales be EV by 2030, Lion is in an incredible position to expand rapidly. Throw in a potential green reconciliation bill, and things get crazy fast.
You might ask “But Lion is Canadian, how will they get US funding?” They’ll use their brand new 900,000 square foot manufacturing facility in Joliet, Illinois, of course! This facility will be able to manufacture a staggering 20,000 vehicles per year and is expected to come online in Q4 2023, all with a ‘Made in the USA’ sticker. The state of Illinois is giving Lion $7.9 million in tax credits just to create this facility.
Many companies stand to benefit from the inevitable government funding that will fuel the commercial EV revolution. Proterra, Bluebird, and even Lightning eMotors will rocket as the sector rises together. But only Lion has a full catalogue of school/transit busses, class 6/8 trucks, bucket/garbage trucks, and soon ambulances. Lion’s TAM is monstrous, and with their new Joliet facility, as well as their new battery plant in Quebec, they are poised to become the undisputed leader in the commercial EV space.
II. Connections:
The CEO of Lion Electric, Marc Bédard, has been busy building connections both in the USA and Canada. While you might think their strong relationship with the Canadian government or the Illinois state government might be their impressive connections, I believe Lion’s relationship with the richest man in the world is most important: Jeff Bezos.
Lion has deep ties with Jeff, “Amazon plans to procure up to 2,500 all-electric Lion 6 and Lion 8 trucks from Canadian manufacturer Lion Electric by 2025.” More importantly, Amazon has retained the option to purchase up to 20% of Lion Electric. With Biden’s mandates coming in to place, Amazon is sure to use Lion to convert their class 6 & 8 fleet. When this news hits, Lion’s share price is going to go bonkers. I can’t stress how important this relationship is.
Marc’s relationship with Illinois is becoming increasingly impressive as the state becomes a hub for EV manufacturing. Rivian has set up a massive manufacturing facility in the state, and Lion’s new Joliet facility just happens to be right next to a massive set of Amazon distribution warehouses. Lion will no doubt take full advantage of the huge tax incentives Illinois is giving them. As of last month, U.S. Senate Majority Whip Dick Durbin met with Lion to discuss the future of EV growth.
As Lion builds more connections, expect to see them partner with more big names, such as IKEA. If retail monsters like Amazon and IKEA are choosing Lion to electrify their fleet, then surely more big names will follow. As they build relationships with smaller state and local governments, expect hundreds of announcements of orders over the next year, such as the Green Mountain bucket truck order that came out last week.
III. Advantages:
Lion Electric has a long list of advantages over its competitors, which is one of the main reasons why their stock price has managed to hold on into key support levels during the ‘SPAC attack’. These include:
- A superior product: Lion vehicles are known to have top notch quality in the industry. Competitors such as Proterra have a mixed reputation, with many of their vehicles inoperable. Lion has no such PR issues.
- Killer managed team: Heavy hitters like Marc Bédard, Nicolas Brunet, François Duquette, and Brian Piern are the reason Lion forms relationships and wins over big name customers like Amazon and IKEA.
- Dual government incentives: Lion is in a unique position to take full advantage of both Canadian and USA green government incentives. Unlike Chinese EV makers who will not receive any US government support, or US companies that can’t tap into Canadian support.
- Customer relations: Lion has invested heavily in customer relations and offers complete support when customers start an EV fleet of their own. They set up charging, maintenance, and are considered extremely reliable.
- Proprietary technology: Lion holds proprietary tech that allows a Lion EV fleet to store energy during off-peak hours and feed it back into the system during peak hours using bi-direction chargers. This provides huge savings to customers such as school districts and is very attractive.
- Battery Production: Lion announced their $185 million CAD investment in their own battery manufacturing facility, $100m of that paid for by the Canadian government. This will streamline their production capacity and reduce costs, as they plan to pump out a new battery ever 11 seconds.
- Scaled manufacturing: With their new Joliet facility launching in Q4, Lion will be able to produce 20,000 vehicles annually at full capacity. With the monstrous TAM that their full catalogue offers, they are set to become the undisputed leader of the commercial EV space. It will take years for competitors to get facilities of this scale launched, yet alone be at full capacity.
IV . Projections:
Having raised $490 million by going public, Lion has aggressive growth goals for 2023, 2023, and so on. Their preparation for rapid growth combined with the government EV push is one of my largest reasons for this investment.
| Year | Units Sold | Revenue | YoY Growth |
|---|---|---|---|
| 2022 | 2,475 | $668 | 281% |
| 2023 | 7,580 | $1.67B | 206% |
| 2024 | 18,400 | $3.6B | 143% |
You can find the full set of this data on their investor presentation. Spend 10 minutes looking at this document and you’ll see that they are prepped to become an absolute beast.
If you were to call Lion Electric ambitious, that would be an understatement. Fortunately they’ve prepared to meet these numbers with their new Joliet facility, and rumor has it they are looking to expand into a second facility in the USA. As regular earning reports are delivered and Lion proves its mettle, larger institutions will begin taking large positions in this company.
V . Catalysts:
I wouldn’t be holding such a large position in Lion if I didn’t see a large string of catalysts lined up in the near future. I’ve tried to list them in order of stock-price impact.
- Amazon announcement: With 10% of their production capacity reserved for Amazon, and Amazon considering purchasing up to 2,500 vehicles, it’s only a matter of time until this announcement takes place.. When this happens, and even better Amazon announces taking a stake in Lion (up to 20%), the stock is going to go through the roof.
- Biden infrastructure: With billions of dollars being poured into EV, the start of the commercial EV revolution is officially beginning. Knowing that they must start converting their fleets to electric, businesses, school districts, and local government will start ordering the highest quality vehicles in the market, Lion Electric vehicles.
- Earnings: Lion will hold earnings on August 13, and earning calls for a small cap growth company are crucial. As long as Lion has shown an expected number of deliveries, their production will be validated and new money will start moving in. There is also a possibility of the Amazon announcement on this day.
- Big Investors: It’s only a matter of time until Cathie Woods picks up some Lion for Ark. As larger investors gain trust in Lion’s projections and take positions, the company will start gaining public recognition. Remember, Lion Electric is very under the radar.
- Orders: All commercial EV companies are gaining regular orders, and these announcements come out on a weekly basis. However, once a new big name (Like Amazon or IKEA) announces plans to form a Lion fleet, a huge tailwind will ensue. Unfortunately I’m not an insider so I don’t know who this will be, but Biden is basically guaranteeing this will occur.
- New plant: This one is based on speculation and rumor, but supposedly Lion is shopping around for a location for a second US manufacturing plant. This would be huge news and would only serve to validate their presence as the new leader in the space.
- Short squeeze: The hedges went in big shorting every SPAC, regardless of their fundamentals of company strength. And they made a lot of money. Short interest for Lion is huge, and the moment of the above catalysts hits, these shorts will need to cover. You know the rest.
VI. Current Price
Lion Electric has a market cap of 2.737B. Nikola motors has a market cap of 4.094B. Let that sink for a moment. Lion is everything Nikola wishes it was without any of the fraud or scams, yet trades at a fraction of its valuation.
Why?
The Spac Attack
During the Spac craze of last year, a large number of companies went public. Many of these spacs brought healthy companies public, like Lion Electric, Proterra, and Lightning eMotors. But unfortunately, a number of them like Nikola and Lordstown were fraudulent scams which resulted in a terrible event… The Spac Attack. There was a massive rotation out of Spacs and every short seller moved in like a hawk to take advantage of the Spac name being tarnished. The ex-spacs like Lion and Proterra haven’t recovered since and the shorts are still in place.
While this sucked immensely, it has provided us an amazing opportunity to buy the legitimate ex-spacs at a massive discount. (I don’t count Lucid, because they aren’t at a discount.) Everything is in place for Lion to become the leader of the commercial EV space, and we get to buy it for pennies on the dollar.
Lion has actually held up pretty well despite the Spac Attack, managing to maintain its key supports. This is because their investors know Lion has the superior product, management, and growth prospectives. The other EV ex-spacs have suffered from issues like failing vehicles (Like Proterra) or doing absolutely no PR (Like Lightning eMotors.)
VII. The Product
Lion is known in the industry for its high quality products and customer support, and as corporations and school districts decide who to build their fleet with this will become increasingly important.
- Lion offers 7 electric truck and bus models available for purchase today. These include school/transit busses, Class 6/8 trucks, refuse trucks, and bucket trucks. In 2023 they are expanding to ambulances, boom trucks, and even class 5&7 trucks.
- Charging infrastructure: Lion offers full turn-key solutions for charging infrastructure and has an entire division dedicated to managing and maintaining customer projects. Lion times its vehicle deliveries with the completion of charging infrastructure installation which makes the process of moving to electric as non-disruptive as possible.
- Lion vehicles come with a telematics system called ‘LionBeat’ which is a full electric fleet management software system. I haven’t actually gotten to play with this system myself yet, but I understand that it handles performance, prioritization, fleet management, driver management/training, maintenance, and diagnostics. I think it’s really exciting that Lion is developing custom software systems for their vehicles!
- In-House Batteries: At this point Lion has a partnership with BMW to handle its battery needs, but they are investing in a 5GWh battery plant located in Quebec, Canada to produce their cells in-house. Lion will be the first Canadian manufacturer of medium and heavy-duty vehicles to equip itself with its own automated battery pack manufacturing capability. This should really streamline their production and greatly reduce costs.
- Vehicle-To-Grid (V2G): Lion fleets act as energy-storage systems that build up energy during off-hours and feed them back into the system during peak-hours to generate a daily profit. This cost-saving system is a big selling point for school districts and Lion’s proprietary tech in this field is making it stand out from its competition.
Lion’s TAM for medium and heavy-duty urban electric vehicles is 110B in North America. Keep in mind, Lion’s entire current market cap is less than 3B. With its currently facility in Quebec rated for 2500 vehicles a year, and its new Joliet facility rated at 20,000 vehicles a year, Lion is going to take a massive chunk of this TAM. Since EV companies generally trade a much higher multiple of their yearly revenue, you can begin to grasp how massive this trade is.
The Lion catalogue is primed for the EV revolution.
VIII. Popular Opinions
If you take a look at the analysts, 4 out 5 rate Lion Electric a Buy and one as a Hold. Their average price target is $22.48, with a high estimate of $26. To be honest, I don’t really care much for analysts or their price targets. Lion should be trading a multiple higher than these targets, which goes to show you how much of a deal it really is at $14.
I care more about popular investors and their influence on market perception.
- The Dumb Money crew, lead by investor Chris Camillo has turned $20,000 into well over $20 million using their unique investing style called ‘Social Arbitrage’. They hold a $1 million dollar investment in Lion Electric and did a full deep dive on the company. The video is from when Lion was still a spac, but the thesis holds and they still have their position. Check the video out!
- Jim Cramer is a Lion Electric bull, having talked about it multiple times on his show. He even had the CEO Marc Bédard on his show to discuss Lion’s Amazon partnership. While I don’t consider myself a MadMoney fan, once Lion starts meeting its projections Cramer is going to be pumping this to all older investors.
- MeetKevin, a popular investing YouTuber, is bullish on EV companies and mentions Lion Electric all the time. While he’s much more focused on Tesla and Lucid, I’m expecting some good coverage from him when Lion ramps up. Also he actually has a realistic chance of becoming the Governor of California!
- Alex Cutler, popular overall EV bull, talks about Lion quite often and has a position. Unfortunately he got absolutely wrecked during the Spac attack. I think once the rotation back into small cap EV occurs he’ll be getting a lot more spotlight, and his appreciation of Lion is sure to help us moon once we start trending.
While Lion Electric is still very under the radar, already having a number of big YouTubers on board is going to help Lion’s market cap immensely when one or more of the above catalysts hit the news. I would still be as equally heavy in my trade if Lion had no support from popular influencers, but exposure from people like Chris Camillo is only going to help.
IX. My Position
This DD wouldn’t be complete if I didn’t put my money where my mouth is. In the spirit of WSB and to emphasis my conviction on this trade, I’ve put my entire portfolio into long-term OOTM call options.
I own 600 $20 call options expiring 1/20/23, valued at $2.45 each for a total of $147,000. This is my entire life savings accumulated through work and investment profits. I would be holding these contracts to expiration and expect to make 2-3 million dollars off of them, perhaps more.
Why did I buy leaps? Simply put, they provide me much more leverage than owning equity while still giving me a comfortable time buffer for the above catalysts to make this stock run. Since Lion was at $22 within the last month and has an ATH of $35, I consider the chance of them expiring out of the money extremely small. When Lion reached $22 last month my portfolio was worth almost $400k, but these diamond hands ain’t selling.
X. Conclusion
In my opinion, Lion Electric is almost the perfect trade. With a huge tailwind of government incentives on the way, big name clients such as Amazon, and a massive new facility about to come online, I genuinely see this stock going to the moon. As the United States moves to meet its 50% 2030 EV mandate, corporations and local/state government will be racing to get ahead of the game. Lion will be ready to supply their entire fleets.
As legacy auto-makers continue to fall farther and farther behind, a few key US names stand to rise above and take advantage of the coming EV government spending spree. Rivian and Workhorse on small commercial EV, Bluebird and Proterra on busses, and Tesla beginning to produce semis.
But only one company has the catalogue, connections, and production to become the true King of the commercial EV jungle. Lion Electric.
