Lion Electric Co. shares have now collapsed from a peak of $24.21 in June 2021 on the TSX. The company went public that year and has never made a profit.Christinne Muschi/The Canadian Press
Lion Electric Co. LEV-N shares crashed further Wednesday after the Canadian maker of electric school buses and trucks said it would cut another 30 per cent of its work force and lease out excess factory space as it comes under mounting financial pressure.
The Saint-Jérome, Que.-based company, one of Quebec’s big industrial hopes in the shift to electric vehicles, lost 18 per cent of its market capitalization in trading Wednesday on the Toronto Stock Exchange after reporting weaker-than-expected second-quarter results. It outlined a cost-cutting program in a bid to reset its ambitions and get things on track.
Lion shares have collapsed from a peak of $24.21 in June, 2021, to 98 cents on the TSX. The company went public that year and has never made a profit.
“Transition to electric is taking longer than initially expected,” Lion chief executive Marc Bedard said in a statement. “Since the pace of electrifying transportation depends on many factors, including the timing of government programs, we believe that all the changes we have made through the last year, and the ones we are making today, had to be done to successfully align our business model to this reality.”
Mr. Bedard, who founded Lion and is one of its biggest shareholders, is trying to build on the 2,100 vehicles it has already put on the road and cement the company’s market position. The bus maker has struggled to get vehicles out the door because of a series of setbacks in recent years, including supply chain disruptions and government red tape.
It’s now in retrenchment mode. Lion will cut another 300 jobs in Canada and the United States, or 30 per cent of its payroll, in a bid to reduce expenses, the company said Wednesday. This marks the third round of job cuts it has announced this year.
The EV manufacturer said it will also adjust its electric-truck production in light of lower-than-expected demand as well as start selling its battery packs to third parties. And barely a year after opening a new 900,000-square-foot truck and bus plant in Joliet, Ill., with much fanfare, the company said it now has too much space there and will launch an effort to sublease a significant portion of it. It will shift the bulk of production to Saint-Jérome.
The company’s financials suggest the cost-cutting effort is imperative. Lion reported a net loss of US$19.3-million for the second quarter as revenue plunged to US$30-million from US$58-million in the year-earlier period. It delivered 101 vehicles during the three months ended June 30, half the roughly 200 expected by analysts. Liquidity stood at about US$25-million at quarter’s end.
Lion has devoted most of its early attention to school buses, specifically to tap public funding. It’s the market segment in which EV adoption is growing fastest because governments subsidize purchases by school boards and private transporters.
But manufacturers like Lion are at the mercy of government efficiency on when those funds get disbursed. The company said Wednesday its lower deliveries in the quarter were directly related to “the impact of the timing” of the U.S. Environmental Protection Agency’s (EPA) US$5-billion clean-bus school program as well as the “continued delays and challenges” tied to the granting of subsidies in the Canadian government’s $2.75-billion Zero Emission Transit Fund (ZETF).
Lion won grants earlier this year for 97 school buses and charging infrastructure potentially worth US$38-million under the EPA bus program. Its clients were also awarded rebates for 127 school buses and charging equipment worth another US$39-million under the latest funding round. Mr. Bedard said the company is working with customers to obtain formal purchase orders and claim payments from the agency.
Lion enjoys big-name backing and has won repeated support from the Quebec and Canadian governments. Most recently, Quebec’s investment arm pledged a loan of up to $5-million to the company in early July. The manufacturer also won relief from certain debt covenants from its creditors.
The Desmarais family’s Power Energy Corp. is Lion’s biggest shareholder with a 34-per-cent stake, according to data from S&P Capital IQ, while Mr. Bedard holds 11.5 per cent. Power has been involved with the company for years, helping it adopt governance and reporting standards and providing a sounding board on strategy.