Lordstown Motor, the start of an electric pickup truck that became a billion-dollar business after being in public, sees its hype train slowed down after a prototype caught fire and its extensive order book is called into question .
The company was formed a few years ago from an agreement to take over GM’s Lordstown factory, and they plan to bring an electric bakkie into production this year.
We said earlier that the timeline was extremely ambitious because the factory needs to be completely refurbished, and Lordstown is trying to market the first passenger vehicle with the wheel hub motors, which is an untested technology in pickups.
Lordstown was announced by a SPAC deal last year and has seen its valuation rise to $ 4 billion.
The company has seen its share prices on several announcements, including the fact that they have received more than 100,000 orders for their Endurance pickup.
Now the rise of the stock market in Lordstown has stopped in its tracks as the stock has fallen by 45% over the past month and the market capitalization of the company has dropped to $ 2 billion.
Part of the decline is attributed to a report by Hindenburg Research, which made a name for itself last year by taking down Nikola Motors. The firm highlighted many issues with some of Lordstown’s claims, as well as a major setback in its testing program.
They shared a police report describing one of Lordstown’s very first prototypes that was set on fire in Michigan in January.
The officer writes in the report:
Upon my arrival, I see the truck completely engulfed in the cast 12 Mile Rd. lanes just east of Copper Creek Lane.
I spoke to the driver of the vehicle. Pirakalathan Pathmanathan, who advised me that he was the director of driving force for Lordstown Motors. Pathmanathan explained that the vehicle was a 2021 Lordstown Endurance that cleared the test inside the facility. Pathmanathan said it was the first road test for the Endurance and added that it is a fully electric truck. Pathmanathan said he took two of his co-workers, Simone Palombi and Akshay Sharma, along for the road test, and they were in it for about ten minutes before it caught fire.
I asked Pathmanathan what happened and he said they were driving the vehicle and noticed that the truck was driving strangely. Pathmanathan said he and the Endurance pulled off [caught] on fire from under the truck.
Here are some photos from the incident:
Lordstown said the problem was due to a ‘human error’ and the assembly of the vehicle and claimed that the process was now automated, which should rectify the problem.
However, it’s hard not to see it as a setback in Lordstown’s test program, which was completed just a short time before production.
But the incident was not really the focus of Hindenburg’s report, which mostly deals with the quality of Lordstown’s ‘orders’ for the Endurance pickup.
Hindenburg has entered into some of these agreements to show that most of them are not binding, and in some cases they have even spoken to the companies that placed those ‘orders’, and they have admitted that they do not intend to is to execute the orders:
- The company consistently pointed to its 100,000 pre-orders book as proof of the huge demand for its proposed EV truck. Our discussions with former employees, business partners and an extensive document review show that the company’s orders are largely fictitious and are used to raise capital and provide legitimacy.
- Lordstown recently announced a deal for 14,000 E Squared Energy trucks, which is believed to represent $ 735 million in sales. E Squared is based on a small apartment in Texas that does not operate a vehicle fleet.
- Another $ 52.5 million order for 1,000 trucks comes from a two-person startup working from a Regus virtual office with a mailing address in a UPS Store. We spoke to the owner who admitted that he would not actually order vehicles, but rather described the ‘pre-order’ as a marketing relationship.
- Another company, which is expected to buy 500 lorries from Lordstown, told us: ‘… The letters of interest are not binding. It is not as if you would oblige a pre-order or that you would contractually commit to the purchase of this truck. This is not what they are. ”
- Lord Burton’s CEO Steve Burns called these arrangements ‘very serious orders’. The actual customer agreements, which we are offering for the first time today, require no deposit and are not binding. Many of the alleged customers do not have fleets, and many also do not have the means to do the sales.
The firm does present important evidence of these allegations in its report, but it does make it known that the publication of its research is motivated by a brief stance that they took in about Lordstown’s inventory.
Following the report, the SEC apparently launched an investigation into the company, which takes place in a very similar way to the events following Hindenburg’s report on Nikola Motors.
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