British electric van startup Arrival has hit many road bumps in its quest to become the next Tesla. With the $283 million it should receive from a merger with special-purpose acquisition company (SPAC) Kensington Capital Acquisition Corp V, Arrival will focus on just one U.S.-produced vehicle for now – a larger Class 4, or medium-duty, delivery van. This vehicle will bring customers a $40,000 IRA subsidy, far above the $7,500 for smaller electric vans.
Crucially, Arrival says early investor UPS is still an anchor customer – it has ordered up to 10,000 vans. The IRA, which took effect last August, has provided enough of a lifeline to Arrival to attract new investors. It includes customer tax credits for purchases of certain EVs.
Arrival now aims to begin producing its medium-duty XL Van at a “microfactory” in Charlotte, North Carolina, by late 2024. The company has so far made three prototypes of its smaller L Van at its Bicester plant in the United Kingdom.
Class 4 vans are more appealing than smaller models “because the prices and margins are so much higher,” said Michael Abelson, head of Arrival’s North American unit. With price tags for medium-duty electric vans targeted to start from around $175,000, the segment represents a potential market worth $5 billion or more.
The rare double SPAC is being watched by others in the industry to see if it is worth replicating. An executive with experience running SPACs said Kensington’s deal was an “an absolute lifeline” for a startup in Arrival’s situation. With the IRA providing a lifeline, Arrival now has a chance to make it happen.