Arcimoto, Inc.
Q3 2020 Earnings Call Transcript

Published: 16 Nov 2020

[Mark Frohnmayer:]

Welcome to our 2020 Q3 Corporate Update Webinar. I'm going to start out by playing a slightly remixed company intro video. And then Chief Strategy Officer, Jesse Fittipaldi, and I are going to run through some -- a short slide deck. And we're doing something a little bit different this time. We brought together a panel of analysts. So the management team and analysts will engage in a discussion for the balance of the call. Eric Fritz, our Chief Marketing Officer, will be minding the Q&A through the Zoom interface. So if you have questions, those will get interjected into the mix as well.

[Jesse Fittipaldi:]

Cool, Mark. That leads well into this conversation here. The mission for Q3 and Q4 for Arcimoto is -- has been to deliver a reliable products on time to happy customers. We believe that fulfilling that mission and building a foundation of a company that can do that allows us to successfully scale. So I think that video is a good visual of the happy customers in them, their feeling of our product. We have had to get the other issues before you get to scale is your supply chain. So that -- getting all that in order and our quality team, customer service, sales, all the things that people don't see that are required to deliver a reliable vehicle with really good success in Q3.

[Mark Frohnmayer:]

Awesome. Yes. And I would say, just to add on to that, the -- we have definitely faced channel bottlenecks in the process. And that is to be expected in any scale-up of an operation. And this, of course, has been compounded by the fact that we are in the midst of a raging pandemic. And that has affected us in a very, I would say, a small amount in that we have had to really rethink our production processes and our health and safety processes, but it's also been a hit to some of our suppliers. And we're expecting that those will largely be alleviated in Q1. And probably our most significant hurdle has been the manufacturer or vacuum-formed plastics. And we are in the process of vertically integrating the build of those components. And that's going to have an effect, both on our ability to move material smoothly through the process. It's going to be a substantial cost reduction for the vehicle, and that's going to come online in Q1. So the elements that we talked about in the Q2 call we're targeting 3 per day consistent by the end of quarter four. We believe we are still on track for at least 1 week of continuous 3-day production by the end of this quarter. We aim to sustain that throughout quarter 1. And then by the end of quarter 1, we believe we are still on target to get to 4 per day. So again, the targets that we outlined in Q2, we believe we are on track. And again, there will be just a heavy caveat to that in terms of the progress of the pandemic which leads into the pandemic update. So again, this is going to be near-term revenue uncertainty and full speed ahead for scale planning. So we believe that the health of our team and of our broader community is paramount. We are reliant on every single member of the Arcimoto team to help us get to this next major step of the company. We have, to date, had 0 confirmed cases of COVID-19. And we attribute that both to the general focus of this within our broader community as well as the fact that we are taking it very seriously and that our team is taking it very seriously.

[A - Mark Frohnmayer:]

Here we go, Sameer is first.

[Sameer Joshi:]

So just confirming, you shipped 31 vehicles in September. So is it around 36 total vehicles during the quarter?

[Mark Frohnmayer:]

Doug, do you have the number for total vehicles in the quarter?

[Douglas Campoli:]

We shipped 31 during the quarter.

[Sameer Joshi:]

During the quarter, okay. And so stepping back, will you just help us understand, for customers who are on the preorder list, what is -- how do they -- like do they automatically get the notification that they're going to receive this vehicle? And who are these customers? Are there any fleet customers in this list?

[Mark Frohnmayer:]

So Fritz, do you want to take a stab at that, the preorder to order process?

[Eric Fritz:]

Sure. As we open up states for delivery, and currently, we are delivering to Oregon, Washington, California, we reach out to the preorder customers in order on that list to give them the opportunity to reserve a spot in our production queue. And it just keeps going until we fill up the production queue. They stay in the order that they were in on preorder list. And then as we open up more spots in the production queue, we go further down that list. And as we open up new states, we will reach out to those folks in turn as well. We do have some fleet customers on -- in that list, and we are filling those as we come to them as well.

[Mark Frohnmayer:]

And to add on to that, we have -- we opened up reservations for quarter four production and delivery, I want to say, right at the beginning of October and that we have now fully subscribed our production for Q4. So we're fully booked through Q4. We'll be opening Q1 here soon in tandem with some announcements coming up.

[Sameer Joshi:]

Maybe I guess just one more question. You have started these pilot programs at HyreCar and Wahlburger. Do you have any sense of timing on when those pilots will progress and what the next steps are in that?

[Mark Frohnmayer:]

Sure. Yes. So -- and actually, the Wahlburger's pilot was actually a sale of a pilot delivery. So that is going to be ongoing for -- I mean they're using it for the foreseeable future down there in Key West. HyreCar, we don't -- we haven't picked a terminus of that program. We're basically still in development of the production Deliverator, which is going to be where we -- we're sort of building them. We take -- right now, we take an FUV at the end of the line with a slightly modified frame. And then our R&D department builds back end in a pretty labor-intensive process. So the production Deliverator will be built using vac-formed plastics off of our own automated vac-formed plastic facility within the manufacturing plant. So that's -- I would expect that all of our pilot programs will wrap up once those production Deliverators are coming off the line. All right. Galileo, I saw your hand up next.

[Galileo Russell:]

Yes. I was just wondering if you could give us any clarity on the gross margin sort of now that we're hitting like production ramping economies of scale? How do you expect like the gross margin to trend? Like at what point, I guess, is every FUV rolling off the line a positive throwing off cash for us, I guess?

[Mark Frohnmayer:]

So I would say gross margins in Q3 were ugly, and that really has to do with -- we have fixed costs for production and we were -- had a lot of fits and starts there. I expect that's going to continue through Q4. And then substantial cost reduction programs that we have been working on will start to come online in quarter 1 and quarter 2. And my hope is that by the end of quarter 2 that we're making, I think, good-looking gross margins. I think it's going to be driven by a couple of things. One are the cost reduction programs that we have in place. And then 2 is the addition of the Roadster to the mix. Because that should be a driver of higher margins in the near term. And then, of course, I would caveat everything that I just said on the basis of the progress of the pandemic, because again, any supply chain disruptions in the near term are going to impact production scale and then also impact margins.

[Galileo Russell:]

Can I squeeze in one more?

[Mark Frohnmayer:]

Sure.

[Galileo Russell:]

Yes. I thought it was excellent progress. I even bought more stock this week or this last week. I was so pumped. But I was curious, could we -- if I was an SUV Deliverator customer or, I guess, preorder customer, not necessarily Deliverator, and I wanted to get one of these Roadsters instead of a normal SUV, is that potentially like a Q1? Like when you send out these Q1 batches, will people start to be able to get Roadsters then?

[Mark Frohnmayer:]

So we have not announced delivery time frame for the Roadster. So look for that announcement soon. But I'm optimistic that we're going to be developing it in pretty rapid succession. I mean we -- so we basically shot that Roadster video 1.5 weeks ago, and we put the Roadster prototype on a truck on Tuesday. It went to Corbin-Pacific for seat development. Mike Corbin took one ride of this -- and if you're not familiar with motorcycle industry legend, Mike Corbin, he has been developing seats and saddles since before I was born, set the land speed record for electric motorcycles at Bonneville in 72. He said, he took one ride and said this is the best riding 3-wheeler I have ever ridden. And their team is just jamming on, moving forward on what we think is going to be a really nice saddle and storage solution for the Roadster. So they're cooking, National Cycles is cooking, and then we're going to do our part in terms of building the platforms. All right. Michael?

[Michael Shlisky:]

Okay. I kind of want to get a feel for some of the numbers about expenses going forward. I saw R&D was up quite a bit from the last quarter. This is a post-pandemic number. I mean, you do have 2 more major platforms or vehicles that are in development right now. But even sales costs were up a little bit in the quarter from the previous quarter. Can you give us some sense as to what this trajectory might be Q4 and the first part of next year? And what's behind those costs? Is there any higher marketing costs? And a little bit about your cash burn expectations as well going into that first part of next year?

[Mark Frohnmayer:]

So I would say -- I would expect that our marketing expenses and sales expenses are going to go up slightly in Q4. R&D may track upwards a little bit as well, because again, we're really doing -- we're developing or continuing to develop our -- the FUV, the Rapid Responder, the Deliverator, now Roadster, although most of that development work is happening with our partners. And then we are also in the process of planning for scale production. And those are going to have ongoing costs as we get up to scale. But we are going to keep a real tight leash, particularly on sales and marketing. We've now fleshed out a fantastic marketing team, and I think you can see that from the output that has happened from our marketing department in just the last 1.5 months. So I don't see that as growing significantly. Jesse, do you want to add anything here?

[Jesse Fittipald:]

I think that you're going to see those costs equal out pretty well when the production starts stabilizing too. So Q1, it's -- that's just we're building the infrastructure and the foundation for that Q1, Q2 production schedule.

[Michael Shlisky:]

Can I ask another one here, Mark, while I have you here? You've got a bunch of new preorders. Your backlog and sales are up, I think, about 10%, 11% from the prior year here. What is in those newer orders or preorders? Are they Deliverators? Are they -- do you not even know what they are when you get them? Are they HyreCar? Can you just touch on what's in that in your most recent orders there?

[Mark Frohnmayer:]

I would say that probably the bulk of them are Fun Utility Vehicles, but we've definitely had Deliverator -- orders come in as Deliverator preorders. And we'll have -- I would say in the next several months, we're going to have a much better picture of what our full preorder list looks like in terms of balance of products. But we really -- again, we -- preorders is something that we don't actually push on. We are -- those preorders are coming in either by word-of-mouth or by earned media. And so we see it as a very good thing that we have had quarter-over-quarter increases in preorders really through years and years. Jim?

[James McIlree:]

Mark, similar to -- or following on to Michael's question. Since you're not really actively marketing for new orders right now, when do you think you're going to have to start doing that in order to get the kind of volumes that you would like to get in the next couple of years?

[Mark Frohnmayer:]

So I would say that the primary marketing that we believe we are going to have is word-of-mouth from our customers that we are -- and if you look at what we did with the customer testimonial video, that's an example of really letting our existing customers speak for us and speak for the product. What we have found in -- so the limited advertising that we do is really just all about telling the company's story. So we're going to be very, we think, very smart and targeted about where we put the Arcimoto message. So far in the programs that we've run on YouTube and Facebook, we see incredibly high completion rates of video watches. If you think about that, we build rides video that you saw at the beginning of the call. Approximately 10% of the people who see that video on YouTube as an ad watch it all the way to the end. So 5 minutes. 1 in 10 watch that all the way to the finish. And we think that, that is going to be -- our advantages will be word-of-mouth through customers, very low cost of customer acquisition. We found that when we launched our product video back in 2017 is that preorder acquisition cost us like somewhere between $25 and $50 to get a preorder when we were actively soliciting for orders. And that was for a company that was not actually delivering products. That was when we were still years away from production. So we think that as we get a lot of very positive customer responses as we get vehicles out in the field and when we talk to our customers, they're saying I'm selling this thing every day. People are always asking me questions, get tons of thumbs up. They're very excited to learn about the product. And I think Tesla is famous for doing 0 advertising at all. That's not to say they don't spend anything on marketing. But we're -- I think we're going to be very efficient about marketing even as we jump to scale.

[James McIlree:]

And you've given production targets for the end of this quarter and the end of next. Can you give a production target for the end of next year?

[Mark Frohnmayer:]

So we -- our production target for the end of this year, for Q4 is to eclipse what we did in Q2 and Q3. So we want to do greater than that number added together, and again, jump up to 3 -- excuse me, to 4 per day by the end of Q1. And then sometime over the summer, we plan to step up, basically double from there. And it's at that point that we think with the right product mix, as we really push units out the door by the end of the summer with the right balance of units, assuming that our cost reduction programs succeed where they will, that's where we think we could conceivably reach positive cash flow. In terms of the number of units, we have not put out guidance for full year for next year. And I don't -- I'm not going to do that on this call. We're just -- I think the timing of those jumps is going to have a significant impact. But I would say, if you run those numbers and are very conservative about it, I think that would provide a reasonable lower bound. And you were spot on for Q3, if I recall correctly. So -- yes. Jed?

[Jed Dorsheimer:]

It's a first in terms of this format, but I guess you're breaking all sorts of bounds.

[Mark Frohnmayer:]

Wait till the end of the call.

[Jed Dorsheimer:]

So I do have a couple of questions for you. So first, if I just look at the production numbers, so 3 a day on a 3-day work week gets me to about an annualized about 500. When you jump up to the 12 per week, sort of 650 type of level. So if we look at production and kind of unpack the relationship you have with Sandy and how he's helping you kind of scale to that 50,000, which is a huge jump from where you're at right now, I guess, I'm curious in terms of your strategy to introduce the Roadster. Because it would seem like the margin profile for the Deliverator and the Rapid Responder is the greatest. So until you get to that scale, why not focus on those vehicles to kind of help you get there versus introducing a fourth product offering to the mix here?

[Mark Frohnmayer:]

So I would say there are probably 3 reasons why. One is that we believe that the margin profile for the Roadster is going to be better than the Deliverator and a Rapid Responder. It is -- we are going to position it as a halo product for the brand. It will be more expensive than -- or equal in expense to whatever else we're selling. And we think it is going to compete well in the fun vehicle space. And I should say, with the Roadster, what surprised me most about actually riding the prototype was how surprised I was at how awesome the ride is. And you can take my word for it. You can take Mike Corbin's word for it. You can try it yourself. It is an experience unlike anything else on the road. And for people who are looking for a super fun machine, we think it's going to be a very good option. And if you look at -- so I read Polaris' Q3. And they have seen a significant increase in motorcycle sales, a significant increase in Slingshot sales. What you're having with the pandemic started off at last-mile delivery going to the moon. And now I think a lot of people just are looking for outlets for fun. And if you think about the 10,000 people a day who turned 65, that is a giant market of fun seekers out there who we think will be good candidates for the Roadster. The second thing is that the Roadster is a simpler vehicle for us to build. That by taking away the upper frame assembly, that is a big component for us, both the assembly process and then the subcomponent assembly. So we think we can actually do higher output of vehicles with the space that we have now with the Roadster in the mix than without it. And then finally, as we look to build the overall scale production picture, we want to make sure that we have a sales pipeline that hits -- that fills to that 50,000-plus units per year, and we think the Roadster is going to be a nice piece of that overall puzzle.

[Jed Dorsheimer:]

So if we think -- I mean you do have some control over your -- based on how you price the models accordingly in terms of what that demand profile and your pipeline looks like in terms of that build. Should we then think through the strategy of kind of when you look at the cost of the Roaster that you're aggressive on that than the Deliverator and the Rapid Responder just based on the contribution margin of those? Or are you going to be equal across?

[Mark Frohnmayer:]

So I think -- yes, I think the Roadster will have a higher margin than either the other two. Although Rapid Responder is another one where we think that the market is going to be a little bit less sensitive to the price. Ultimately, for delivery -- for the Deliverator to really work as a mass fleet solution, we think it needs to be aggressively priced. And so that's a volume play that really comes in as we hit those mass production volumes and then becomes a really viable option for gig drivers and for large fleet deployments. So the idea here is really to synergize in time our product introductions and ramps to maximize both near-term margins as well as -- I think the -- it is important to have a halo product in the family, something that really goes that people are going to really jump on to in terms of the -- just the pure thrill and joy of riding it down the road. We have that with the FUV. And the FUV is an incredibly fun vehicle to drive as all of our customers say. But when you take away that upper frame and you put the rider in a more aggressive stance where you're really connected with the machine, it takes you to a whole new level.

[Jed Dorsheimer:]

Got it. One last one from me, then I'll jump back in queue. So if I just look at deposits, deposit number was down year-over-year, but the number of preorders was up. So can you just help myself and others in terms of the math there?

[Mark Frohnmayer:]

Yes. So we include -- there are -- we have two distribution agreements that are a piece of that for other areas of the world that don't fit into our deposit category. All the rest are individual customer preorders. And so that's where the balance of that comes out. Fritz, got anything from the audience that ties in here?

[Eric Fritz:]

Quite a bit actually. And my apologies in advance to anyone's -- who I specifically call out that I butcher their name, but here we go. Quite a few questions about Munro & Associates. And can you describe in any sort of detail the fruits of that relationship, the timing that we might see on improvements and specifically from Eric Eigenmann. While I have no doubt that Munro & Associates will be able to help you going forward, scaling the operations, I would like to know how you ensure that the know-how stays with Arcimoto and you will not be dependent on Munro going forward?

[Mark Frohnmayer:]

Yes. I think that last question is really fundamental. And I would say two -- what is so cool to me about Munro, of many things, is that their whole philosophy is to teach the teams that they work with. So that when they leave, they're not just walking out the door with all the -- what they're doing is they're helping us really level up our production thinking as we go to scale in addition to diving in on some very key engineering challenges as we go to scale. And I talked a little bit about this earlier in the slide presentation. We now -- where we started over the summer was kind of an exhaustive set of workshops about all the bits and pieces of the vehicle. And now we've actually -- we're actually diving into the real engineering projects. So we have a master services agreement with them. We've -- we're diving in on our first piece of 3 pieces of work, and we expect those to continue over the development towards scale production. All right. Back to -- do you want to maybe throw in another 1 or 2 there, Fritz?

[Eric Fritz:]

Sure. Let me see here. Robert Goff , I see there is incredibly positive, the same quarter prior year increase in revenue of about 1,818%. What kind of demand in the form of sales have you seen for your vehicles per segment? And then follow-on, what kind of demand increase do you forecast over the next 5 years?

[Mark Frohnmayer:]

So for the next five years, that's a big question. I would say, I think it is promising that we again have had quarter-over-quarter net increase in preorders. We hope that, that continues. We are also seeing that once we open production reservations for quarter four, we quickly filled those production reservations and we're now fully subscribed for quarter four. So our goal over the next 5 years is to scale into the hundreds of thousands of units globally. And I think it is still early to predict -- way too early to predict what the clear segmentation of that will be in terms of our overall product family. But I expect that both Deliverator and Fun Utility Vehicle are going to make up kind of the significant scale of that -- of our scale production, that Rapid Responder and Roadster will be narrower slices, but higher margin of the overall scale picture.

[Eric Fritz:]

Robert Goff , as long as we're on his name, had another question. I see also that you have roughly $17 million in cash and cash equivalents, a solid increase from the end of 2019. If you would, please describe your approach to capital allocation, including major uses and sources of cash over the next 3 to 5 years and explain how actions taken this quarter have contributed to that plan?

[Mark Frohnmayer:]

Yes and we touched on this a little bit with Mike's questions. We're expecting modest increases in R&D, very modest increases in marketing. Where the bulk of the cash that we spend is going to go is in capital outlays to go to scale production. And that will include expanded facilities, higher automated assembly line, tooling for scale production processes that are going at a higher rate. And so -- and in terms of what we've done and are doing this quarter is the big action item there is to get our Advanced Technology Vehicle Manufacturing Loan Program, loan application into the Department of Energy. The process of the federal government has been moving quite slowly, particularly on the political side in the build-up to the election. We think that there is going to open up a window in the near future where things are moving much faster. And so we want to be ready with an application. And so that is a lot of our work, both internally and with Munro, is the planning and really getting our arms around what needs to go in that application. And so we're -- after this earnings call, that becomes the full quote press from the finance and manufacturing teams on the planning side to get that application in.

[Eric Fritz:]

All right. Back to the top, Sameer.

[Sameer Joshi:]

So correct me if I'm wrong, but it seems that the inventory has been going up a little bit. Does this -- is this because of quality issues that you are trying to address with parts that you know may fail and come back? Or is it that you're building up supply to address the supplier issue?

[Mark Frohnmayer:]

All right. I would say probably a bit of both. But Terry, maybe you want to put a little more color on that.

[Terry Becker:]

Sure. If I understood your question, it had to do with the level of inventory?

[Sameer Joshi:]

Yes.

[Terry Becker:]

Yes. It takes a lot of parts to make a vehicle, of course, and you have to have all of those parts. So as we've struggled with the supply chain just in a couple of areas that have stuttered either due to COVID pandemic or to quality issues, the other parts continue to come in. And as you may know, we plan on having all of those parts end up in vehicles and leave sooner rather than later. So that causes the inventory to pile up just a little bit. But going forward -- the advantage going forward is we take our foot off the gas just a little bit with the parts that we do have stockpiled. And we're doing a good job of relieving the roadblocks that are making us stutter just a little bit. So it will even out. But the year 2020 has been one of the more difficult forecasting and evening out years. Well, certainly, the most difficult what I've seen.

[Mark Frohnmayer:]

Yes. And to that, I think, to that point, our goal right now over and above anything is good customer -- really good customer experience and then smoothing out all the bottlenecks in the process from materials all the way through to vehicle delivery and service after delivery to make sure that what's now a pretty stutter step process is a smoothly flowing river. And we think that we're seeing light around the corner on that. It's certainly still going to be a challenge in Q4 and likely into Q1, but we're working diligently to alleviate those bottlenecks at the same time that we're driving down our cost of goods sold.

[Sameer Joshi:]

Just a quick follow-up on the quality issues. Can you give us an update on what kind of issues you are facing? And how soon do you -- how quickly are you addressing those?

[Mark Frohnmayer:]

So we've had -- it really runs the gamut. There have been a few -- and I would say, probably, Terry, would you say plastics has been our biggest pain point there?

[Terry Becker:]

I would say that the biggest problem we've had has been with bodywork. There are a lot of bodywork panels. And I would also say that the supply chains that we used to receive that bodywork has been hit by workforce problems through the pandemic probably worse than any other supplier we've had. The good thing going forward is the thermoforming capability is what we're bringing in-house in Q1, which we will -- and I've seen a couple of questions about how much do you intend to vertically integrate. That's our next vertical integration play is to bring in the thermoforming piece of the puzzle, which puts it squarely into our own capability. We'll be in control of the entire schedule of that. And it will also take some cost out, because our margins will improve on those parts and pieces.

[Mark Frohnmayer:]

All right. We're going to have to do a rapid fire around Galileo. Do you have another quick one? All right. Mike?

[Michael Shlisky:]

All right. Thanks, Mark. You both lowered the price -- the base price of the vehicle recently with your new Configurator service. And I'm kind of curious whether any of your more recent orders have been at those lower prices or people added all the options on to the higher-priced versions?

[Mark Frohnmayer:]

Fritz, you want to hit that? Has anybody ordered just a base model?

[Eric Fritz:]

There have been a few. Just a couple. Terry is shaking his head. I believe we currently have an average selling price as configured of around $21,000 to $22,000. So many of them are using the options to upgrade, but there have been a couple at the base price.

[Michael Shlisky:]

So is it actually a higher ASP now since you launched the Configurator rather than lower?

[Eric Fritz:]

Well, the evergreen was priced at $19,900, but it actually had options for customization on top of that as well.

[Mark Frohnmayer:]

That was one of the things that actually surprised us was the Evergreen was originally supposed to not have options, and customers kept demanding them, so we added them in. And one of the things that -- and Galileo's question early on about the margin that I think was a really good milestone that we met in the third quarter was an average sales price of about $22,600, at which got us -- and the reductions in the materials cost and the bill of materials got us to a positive gross margin as far as the materials in the quarter. That was a very good milestone, I think. All right. Jim?

[James McIlree:]

When do you think you're going to get the bulk of the Munro recommendations implemented?

[Mark Frohnmayer:]

I think that's going to be an ongoing process for the next 20 months plus? We're going to -- we plan to be working with them hand-in-hand through this scaling process. All right. Jed?

[Jed Dorsheimer:]

So if I just look at the numbers and I do some quick math, $20,000 ASP for the quarter, the vast majority of our your FUVs -- your losses -- I mean, anyone who's buying a vehicle at this price is getting a fantastic deal when I look at your cost structure right now. So kind of a follow-up to Jim's previous question about Munro. Again, strategy-wise, why not focus on the Deliverator and the Rapid Responder. Maybe the Roadster has a lower cost, but I would think you almost want to steer people away from the FUV until you can actually get your cost structure at a much more reasonable level. So you're not basically giving -- or I don't want to say giving away, but you ostensibly are. I mean people are getting a fantastic deal at these levels.

[Mark Frohnmayer:]

You don't want to ship money in the truck. There's no question about that. And when we're at a very low unit production, which was Q3, there's no avoiding that, given the overhead of the business and the efforts to get to scale. To your point, driving people away from the FUV and to other offerings, we think that the Roadster is going to be a great product for some of our FUV customers. We are also planning on having the Rapid Responder be essentially production-ready before the end of the year, where it's through or in an up-fitter vetting process. And again, that one is going to have a very different market to go after. So that being said, we definitely have 3 other customers who've been waiting a very long time for Fun Utility Vehicles, and we want to make sure that they are satisfied as well. The margins don't start to look good on the Deliverator until we are -- have that vertically integrated plastics production. And we're back-forming those panels rather than making as art projects. And that is coming soon. So again, I mean we're -- I look at this all as still start-up phase, building out the market, building out the product family, prepping for scale. And then on the other side of that, just a giant market opportunity and a real solution for the world. So it's going to take investments on our part to get there, and part of that is reflected in ugly upfront margins. All right, Fritz, we're almost to the end of the hour. You got a couple last questions from the audience.

[Eric Fritz:]

Yes, several questions on the DHL partnerships and what that means for nationwide delivery timing?

[Mark Frohnmayer:]

As we talked about in -- the near-term plan is that we will have announcements in the near term, in the near future about additional markets that we're going to open. So while DHL has the ability to ship to all 48 states almost right out the gate, we still need to make sure that we have the proper care and maintenance capabilities online in each market that we go into. So that's going to be the major gating factor is getting our service scaled up. And what we are doing right now is we are building really the comprehensive service training materials. Our vision for service is that we rely on end market partners for a major piece of that in markets that are populous in terms of Arcimoto customers. We'll also have mobile service hitting new markets. But I would say, stay tuned on new markets that we're opening. Probably most critical for us in the near-term is Florida. We have a ton of preorder customers in Florida. And so that's one that we're working on in the very near-term and then also some spots up in the Northeast. With the goal that we want to -- obviously a lot of folks out there have been waiting a very long time to get their Arcimotos. We feel that the pandemic has been a major slowdown for us in that regard. But we are working very diligently to get to the point where we can deliver nationwide and get everybody's orders in their driveways. Any more?

[Eric Fritz:]

We also have several questions about technology. It seems like we have a lot of Tesla fans out there in the audience. Questions about potential partnerships, integrating technology, whether it be battery technology or autonomous technology?

[Mark Frohnmayer:]

Yes. Great questions. If you didn't catch Tesla's Battery Day presentation, they just put out a mind-blowing presentation for anyone who has been in the field for a long time in terms of what they are doing, both on the vertical integration of production of battery cells, on the sustainability components of battery production, not shipping the same granite sand around the world 6 times and then the sort of digging ditches and filling them in that has been typical of the battery production process for lithium ion batteries. They've figured out ways to get around a lot of that. So that's a major cost reduction driver. It's core to the mission of sustainability of Arcimoto that we have sustainable constituent parts. So at the point that Tesla decides that they want to sell and supply cells to the broader market, if they ever get there, that is a conversation we would certainly be willing to entertain. And when it comes to autonomy, we think that the Arcimoto platform will make a fantastic platform for autonomous driving, both for delivering people and for delivering products. The same thesis of the Arcimoto platform, which is that it makes no sense to drive a 4,000-pound vehicle to carry on a good day a 200-pound dud around town, we think that, that thesis holds in the autonomous world. Now we are not -- we have never been capitalized to go after the sensor and software problem in addition to getting production up and running. So our focus is get to scale production of the platform. But we think that at that point that this platform will be a good host to autonomous technologies and what Tesla is working on. There are any number of players in the field who have very promising solutions that are coming to the fore. And so we think Arcimoto is going to be in a good position to offer a pathway into the market for those technologies. And I think with that, we're over time.

[Eric Fritz:]

Real quick. Let me just say there's not one more. There's just plenty of questions that we didn't get to. So if you didn't get it answered, go ahead and send us an e-mail to [e-mail], and we'll try and answer it for you.

[Mark Frohnmayer:]

Yes. [e-mail]. If you're not signed up for our investor updates, you can do that on arcimoto.com/ir as well as our newsletter, arcimoto.com/preorder if you haven't gotten in line yet. And there was one final question from the last earnings call that I didn't get to, which is that somebody asked if those instruments ever come off the wall and I play them and asked to play a song So this time, we're going to do something that we think is unprecedented in Nasdaq earnings calls, which is an Arcimoto sing-along. I'm going to share the lyrics. Everybody else on this call should be muted. And this was a song written by my uncle John who happens to be a -- see -- here we go. This is a -- what's this to the tune of, John? The Fox. So this is to the tune of The Fox. And I have a couple of guests out in the front porch. Got the -- I'm new to the band, Joe. So I'm going to be plugging along, but feel free to join in. I'm joined by Julia Franz, who is a fantastic violinist with Eugene Anthony; John Frohnmayer, world-class former Chairman of the National Endowment for the Arts. And we're going to play you a little Arcimoto song. Well, that's all we know. That's what we got. Wishing you all health in the holidays and a bright road ahead. And we'll see you soon.