Smith Electric Vehicles is looking for a $76 million jolt to keep its electric truck business alive and growing. The struggling manufacturer launched an initial public offering on Sept. 6, putting more than 4.2 million shares on the market at $16 to $18 each.
At the same time, SEV said it plans to open an assembly plant in New York City in the fourth quarter, the first in what CEO Bryan Hansel envisions as a network of local manufacturing facilities that will bring SEV to urban distribution markets. “Localization is fundamental to our strategy,” Hansel told The Journal of Commerce. “This is the first demonstration. By being in the local market, you open up opportunities. We’re trying to drive demand by being present” in New York.
New York has become something of a testing ground for SEV, the only manufacturer of a battery-powered medium-duty commercial truck in the United States. While SEV prepares its plant in the Bronx, however, its future may be decided on Wall Street.
The Kansas City, Mo.-based company hopes the IPO will generate enough cash to pay off debt and fund the expansion needed to turn its business around. Despite a well-received product — the 26,000-pound gross vehicle weight Smith Newton medium-duty electric truck in the U.S. and a lighter truck in Europe — and customers such as Coca-Cola, FedEx, Frito-Lay and DHL, SEV is losing money.
The company reported a net loss of $52.5 million on $49.9 million in revenue last year, following a $30.3 million loss in 2010 and a $17.5 million loss in 2009. SEV had a $27.3 million net loss on $16.8 million in sales in the first six months of 2012. “We have had net losses in each quarter since our inception,” SEV said in a prospectus filed with the Securities and Exchange Commission on Sept. 6. “We expect that we will continue to incur net losses through the second quarter of 2013.”
That’s something of a shock to those who see SEV, which has been producing electric vehicles in Britain since the 1920s, as a leader in the drive to develop more sustainable medium-duty trucks for urban delivery fleets in the U.S.
SEV hopes investors will accept those past and projected losses as a cost of building a manufacturing operation from scratch and bank on the potential market for electric trucks, as the company cuts costs and restructures its supply chain.
Citing a report from Pike Research, SEV said as many as 16,000 electric trucks are expected to be sold globally by 2016. That represents a 41.4 percent compound annual growth rate from the 4,000 global sales Pike anticipates this year.
Smith expects to produce 380 trucks in 2012 — a major cutback from early projections of 620 trucks — and as of June 30 had a backlog of 404 vehicles, up from 145 trucks in March. In its prospectus, SEV said it sold 360 vehicles in the 18 months through last June. SEV cut its production plan in the first quarter to focus on “existing customers, our limited cash and significant near-term challenges.”
The most significant of those challenges “is the limited and underdeveloped supply chain for many of the key components used in commercial electric vehicles, including motors, control electronics units and batteries,” the company said.