Lion Electric’s stock surges after school bus orders get a boost

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Lion Electric Co. shares rose 12 per cent after the company reported an increase in orders and deliveries.

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The electric truck company’s stock price reached $4.85 at 2:45 p.m. Toronto time on Friday, and has climbed 12 per cent this week following the release of its third quarter results. However, shares are still down around 60 per cent for the year.

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Though the company reported a net loss of US$17.2 million, investors appear enthusiastic about the company’s order book, which includes 2,408 electric medium- and heavy-duty vehicles, valued at $575 million. That’s an increase of 51 orders from the previous quarter.

Lion got a boost from the U.S. Environmental Protection Agency’s Clean School Bus Program, which will award US$1 billion to 389 school districts for electric and low-emission school buses. It’s part of President Joe Biden’s Bipartisan Infrastructure Law, which will allocate US$5 billion between 2022 to 2026 for the purchase of clean school buses. The funding is part of a broader effort to “rebuild America’s roads, bridges and rails, (and) expand access to clean drinking water,” the White House website said.

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School districts across the U.S. filed applications for EPA vouchers through Lion. The districts were awarded 207 vouchers totalling US$82 million to go toward the purchase of Lion Electric school buses, said chief executive Marc Bédard in a press release. The company has received orders for 49 school buses to date. “We are confident that this number will increase between now and next April, the deadline to place purchase orders,” he said.

Deliveries are up, too. The company delivered 156 vehicles in Q3, an increase of 116 compared to the 40 delivered in the same period last year. “For the fourth quarter in a row, we delivered a record number of vehicles in the history of Lion. This proves that the switch to electrification is happening, today,” Bédard said. He added that the company is nearing the start of production on their U.S. manufacturing facility and battery plant. 

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The company’s revenues increased US$29.1 million from the year-ago quarter, thanks to the increased sales volume. However, supply chain issues continue to slow the rollout of the vehicles. The company couldn’t finish assembly of certain vehicles and had excess inventory as a result.

Management remains optimistic that the worst of the supply chain difficulties are behind them. “We continue to see improvements as compared to the peak of the pandemic,” Bédard said in a call with investors Thursday, though he added that he expects issues to persist through 2023.

The company is building up its manufacturing capacity, which is having a negative impact on gross profit margins. But CFO Nicolas Brunet said that as the company scales production, profit margins will improve.

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