Arcimoto, Inc. (FUV) Q2 2021 Earnings Call Transcript

Arcimoto, Inc. (FUV 0.48%)
Q2 2021 Earnings Call
Aug 16, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Mark Frohnmayer

Good afternoon, I'm Mark Frohnmayer, CEO and founder of Arcimoto, and I'd like to welcome you all to Arcimoto's Q2 2021 stakeholder webinar. Arcimoto is an Oregon C-Corp founded in 2007 with the mission to build products that catalyze the shift to a sustainable transportation system. These quarterly webinars held in tandem with our filings with the SEC are intended to give our stakeholders a clear and current picture of the company's progress as seen by Arcimoto's leadership. I'm going to run through a presentation, starting with our latest company video, discuss the context, the quarter, recent updates, and goal progress, as well as a bit of the road ahead, after which I'll be joined by members of the executive team to take stakeholder and analyst questions from Say.

You can find supplementary information, including our earnings press release, financial filings, presentation materials, transcript, and a replay of this webinar that will be posted later on our investor relations page at arcimoto.com/ir. You can also sign up for investor updates at that link. Before we begin, I want to call your attention to our safe harbor disclaimer regarding forward-looking statements. This note identifies risk factors that may cause our actual results to differ materially from the content of our forward-looking statements for the reasons that we cite in our Form 10-Q and other SEC filings.

That said, let's dive in.[Commercial break]

To set the frame, the IPCC just issued a code red for humanity, and we are in the middle of a global pandemic. More infectious and harmful variants of COVID-19 are circling the globe. Every organization we interact with, all the people, are under significant stress as the fragility of the global supply chain has been laid bare and as our patterns of behavior are showing an ever more clear perilous toll on our home. At the end of the day, sustainability is a social networking exercise.

The rightsizing of our relationship with our planet is going to take all of us working together to accomplish. We are heartened that leaders around the globe are advancing targets for carbon reduction, including the Biden administration, our Oregon congressional delegation, and state and local leaders around the country. More specifically, much of what I'm going to talk about today in the context of Arcimoto's rapidly accelerating pace of innovation toward its mission is reflective of a shared commitment to maintain a livable planet. But first, the numbers.

The second quarter wasn't all roses. As I have cautioned in several prior updates and as anyone who is following the automotive industry already knows, we are subject to a topsy-turvy supply chain in an emerging field. Two prominent examples. During Q2, one of our critical supply components had both production and transportation setbacks that would have resulted in an extended production shutdown starting mid-August on our earlier planned path.

And another key components update exhibited a software error that prompted a delivery pause for several weeks as a multi-organization Tiger team dissected root cause and solutions. Consequently, we adjusted our build rate and have revised our planned mainline target of production output to 425 FUV platform vehicles in 2021. This will -- in the context that our planned marketing efforts I'll discuss shortly, this will impact total planned customer deliveries in 2021 as well. That said, by the financial metrics that we see as most important to the achievement of Arcimoto's mission, Q2 was far and away the company's best quarter to date.

Our balance sheet is the strongest in the company's 14-year history. We continue to maintain a disciplined approach to resource expenditure, and we've made substantial forward progress on critical fronts for the company's growth. In Q2, we submitted a first draft of and are presently refining our application to the Department of Energy for a loan to fund the substantial portion of our planned expenditures for next stage production. And further, the ATM facility we put in place this year in partnership with Canaccord Genuity, allows us to continue to fortify our position at current market prices and times we believe are in the best interest of our stakeholders.

Contemporaneously, as our balance sheet has strengthened, we have noticed a meaningful rise in the number of market bets against the company. You can refer back to our last two webinars if you want more color on some of the knock-on ecosystem effects of such activities. But to provide some perspective on relative size, the time of the last NASDAQ report, short sellers of our stock collectively had short positions that totaled almost double the amount of funding the company is presently contemplating requesting in its next ATVM loan application revision. Moving on.

We have three broad top-level goals for 2021, the first we laid out one year ago during 2020's Q2 report to get to mass production in a new facility starting by the end of next year with a targeted capacity once at full output of 50,000 vehicles per year, that provides further a pattern for yet higher scale replication. Second, continue to build the market for Arcimoto's products to support that level of production and ultimately, way beyond. And finally, showcase the full presently contemplated range of Arcimoto solutions for sustainable mobility. I'll go into the progress to date on all three fronts.

The push to volume production is our most important overarching objective, bar none. We believe achieving scale will allow us to reduce vehicle cost, to the point where the Arcimoto is affordable to almost everyone while providing the positive cash flows necessary to sustain the business long term. And I'm pleased to report that in the second quarter through present, we've made significant headway toward this primary goal. We closed on the purchase of a new facility, more than 200,000 square feet under roof on 10 acres of land.

We landed our new plastic thermoforming cell in a new facility and are aiming to have it operational before the end of this year. We have completed the first phase of construction planning, and that building will commence when the prior owner completes move out, targeted at the end of this month. With our partners at Munro & Associates, we have completed architectural down selection of all major vehicle subsystems, essentially the materials and manufacturing method choice for the parts of the vehicle for volume. And engineering and assembly planning are now moving ahead full steam.

And as I mentioned earlier, in Q2, we submitted our first draft to the U.S. Department of Energy for a vehicle manufacturing loan and are now in regular conversation with their team, expecting to submit a refined draft imminently that takes into account their feedback and requirements, as well as our ongoing engineering refinement efforts. In summary, on goal 1, significant progress, mountain of work ahead. On the marketing front, one thing is clear.

The more people get a chance to drive an Arcimoto vehicle and experience their one-of-a-kind electric performance, the more our market grows. In addition, to test drive and media events across the West Coast, we've also held large-scale test drive event at the Portland International Raceway in July and continue to receive positive product reviews from top-tier EV press, including a review on Forbes.com last week, which stated: "The FUV made more people smile than any other vehicle I've ever reviewed." We've also grown our rental operations in key markets, opening our first two company-owned stores in Eugene and San Diego. We will also be delivering additional rental vehicles to GoCar Tours in both San Francisco and San Diego. We continue customer deliveries in Oregon, Washington, Florida, and our home state of Oregon and are preparing to open sales and rental in Hawaii, Arizona, and Nevada, where we expect to begin taking reservations from our preorder customers in the coming months.

We have recently relaunched the FUV configurator tool on our website in order to further streamline the ordering process, the first of several major planned upgrades to the initial user experience for prospective customers. We are actively working with both city and state officials with the goal to electrify government fleets. The city of Encinitas in California is testing Arcimoto vehicles for use by Encinitas Lifeguards and Infrastructure and Sustainability Departments, continuing Mayor Catherine Blakespear's efforts to reduce carbon pollution and advance sustainable transportation in Encinitas. This week, we will begin our statewide pilot program in the state of Tennessee, introducing Arcimotos in Memphis, Knoxville, Chattanooga, and Nashville, with test drive events this month.

In addition to retail sales and rentals, we believe a key path for Arcimoto vehicles is in shared mobility and have engaged with multiple potential partners to begin rolling out vehicle share programs. As the population in cities continues to grow and as vehicle ownership in urban areas declines, the need for right-sized, shared, sustainable fleets becomes ever greater, and our vehicles offer clear environmental efficiency and economic advantages over current car share options. We continue to work with state governments across the country to improve access to Arcimoto vehicles, most recently, successfully advocating the removal of special motorcycle endorsement requirements in Florida, Hawaii, and Louisiana. So the customers there can operate an Arcimoto with a standard driver's license, thereby modernizing legacy three-wheeled legislation with a common-sense solution.

And as we look globally, we've begun developing a measured strategy to enter the world market, starting with countries that fully accept the United States Federal Vehicle Motor Vehicle Safety Standards. In summary, on goal 2, significant progress and a mountain of work ahead. Finally, Arcimoto has continued to rapidly accelerate its pace of innovation in order to demonstrate the full range of our solutions for sustainable mobility. At our summer event just a few weeks ago, we launched our first production Roadster, showed the long-awaited half-door accessories, and showcased with partners some of the truly exciting technologies now in development.

Torque vectoring to dramatically improve low-speed steering, as well as vehicle handling; driverless capability; [inaudible] heated storage Deliverators for meals; and finally, battery recycling, in line with our long-standing goal to create true cradle-to-cradle products. By the way, it's not lost on us that the top three best-selling cars in the U.S. last year were pickup trucks. I'll explain all the excitement around Cybertruck, Rivian, Ford's Lightning F-150, and others.

Well, now Arcimoto has a pickup truck. We showed the first prototypes of the Arcimoto Flatbed, and it's awesome. Same-base, scalable Arcimoto platform, incredible configurability, and volumetric carrying capacity in a small footprint. We aim to begin piloting the Flatbed later this year.

I want to emphasize again the importance of partnership and collaboration. Munro & Associates, Stoffel Systems, SherpTek, Redivivus, BIB Technologies, and so many others have pitched in their brilliant minds and hard work toward our shared purpose. On that note of partnership, just shy of a year ago, I reached out to Bob Mighell, founder of Tilting Motor Works, about an idea for a new micro-mobility product line that would leverage their expertise in tilting trikes with Arcimoto's electric vehicle capabilities, and I'm incredibly excited to report that the first prototype from that collaboration is now on the road. We're not ready to show the product yet, but I will tell you, I got to write it for the first time on Thursday, and on that first ride, I leaned it way farther than I've ever leaned a bicycle.

It was easy, smooth, and stable, and I can't wait to show it to you in product form. This mean, lean machine is chockful of new electric vehicle technology. We are actually reinventing the wheel this time, and it's targeted squarely at the rapidly growing e-bike and e-scooter marketplace. We believe it will perfectly complement our go-to-market strategy of rentals and rideshare and will set a new bar for efficiency, utility, and affordability for a wide range of transportation tasks.

We acquired Tilting Motor Works at the beginning of this year to accelerate development of that program. But I want to take a moment to talk about what else we got in the deal, an existing product line for motorcycle riders who don't want to fall over anymore. Our Trio accessory transforms a motorcycle into an amazing three-wheeled tilting machine, and we see giant market potential for this product. In the U.S.

alone, there are more than 12 million motorcycles in use, and the Trio is already adapted to the leading big bikes, Harleys of which 180,000 were sold last year worldwide; Indians; Gold Wings; and most recently, the Lightning electric superbike, which we intend to -- with which we intend to compete for a land speed tilting three-wheel record at Bonneville next year. In summary, Arcimoto is shipping and continuing to further develop, kickass, ultra-efficient three-wheelers alongside a world-class team with whom we share a mission to rightsize mobility as we grow our market presence in preparation for volume production. We must continue to improve the experience for the Arcinauts, our early customers and riders, their vehicles, the first-time user experience, and sales, service, and communication processes. This means listening closely to feedback we receive from customers and pilot partners to improve our offerings for scale.

We must continue to cultivate our leadership skills as our team and demands expand. Arcimoto is more than 200 people right now, about double where we were one year ago. And this means continued emphasis on process, culture, and our core values of continuous improvement, environmental efficiency, and fun. We must maintain our focus on the health and safety of our team during an ongoing pandemic, encouraging good life choices and bolstering our resilience to the road ahead.

The plan is not waiting around. The IPCC's code red is our call to action. We must continue to step up our production pace amid the churn in order to make the contribution for which we are called. And with that, let's bring on the rest of the C-team, except Terry, who is on his way back to Eugene, and dive into Q&A. All right.

Guys, you need to turn your mics and cameras on.

Unknown speaker

I can't turn my camera on, Mark.

Mark Frohnmayer

Mics are on. You may need to enable a camera option for panels. OK. Well --

Unknown speaker

And if not, you can just listen to our disembodied voices.

Mark Frohnmayer

Perfect. Perfect. Let's start there. OK.

So, I just want to give a little bit of background here. We are -- this is our quarterly stakeholder webinar. We do quarterly webinars in tandem with our filings with the SEC. There is sort of the modern-day replacement for the conference call, dial-in and operator, and stuff like that.

We're aiming to modernize that approach in order to give our stakeholders a clearer picture of the company. So, we're still continuing to experiment with the format. And of course, if stakeholders and analysts have any feedback on the format, feel free to send it in to the company, and we will adjust accordingly. And with that, let's take our first question from Say. 

Eric Fritz -- Chief Marketing Officer

All right. In regards to the ATVM loan, what time frame does Arcimoto believe they might get access to funding. Also, what percent of the Arcimoto project you believe will be covered by the ATVM loan?

Mark Frohnmayer

So, very good question. We are anticipating submitting our next draft revision of that application, with -- imminently, within the next week or two. And we anticipate that it would likely be somewhere in the vicinity of a four- to 10-month process from there, should the department decide that Arcimoto is worthy of that loan. In terms of what percentage of the project it would cover, as I mentioned earlier, we are in the best balance sheet position we've ever been in.

We have plenty of cash on hand to move forward. Ultimately, we're -- I think we'll end up asking for the ATVM to cover something like 80% or a little bit less of the overall total project cost for scale production, which is what we're now calling 1.X.

Eric Fritz -- Chief Marketing Officer

Great. Once Arcimoto's second facility goes into production, will the current AMP facility be converted into a production line for Platform 2 vehicles? 

Mark Frohnmayer

We -- no. On our current plan, we have -- our current facility will still be doing production targeted at Platform 1. So it is -- we're going to be playing a little bit of musical chairs as we move forward over the next 18 months or so. I guess less than that.

Next -- well, yes. Next year and change is that we're going to be moving certain components that are presently in the AMP into the ramp, and that will make space for some new development programs that are going to come online to support the scale production version in the AMP. We've not yet selected a facility for the manufacturer of our Platform 2 product. 

Eric Fritz -- Chief Marketing Officer

When does Arcimoto believe that we will be able to implement Faction's remote-controlled systems into a type of shared vehicle network? And related question from chat from Ed Hurley. Curious if that technology will be available as an upgrade for existing vehicles to allow existing owners to use a rideshare service or will it be limited to company-owned vehicles?

Mark Frohnmayer

So the -- and is that -- is the question really around will -- so around shared use, something we've talked about for a long time, is the potential for Arcimoto customers to share out their vehicles to others, basically set rental rates and let their neighbors go get groceries with their Arcimotos. That is still in -- certainly in the long-term plan. And in terms of really more the driverless component technology that Faction demonstrated using the Arcimoto platform, in terms of when that is going to be meaningfully deployed in -- even in sort of like on-road pilot form, that has yet to be determined and certainly yet to be announced. So stay tuned on that front.

We are very heartened. I mean this is -- Faction was able to take an Arcimoto, provisioned with our intermediary torque vectoring and driverless layer, and get those vehicles up and running inside of about four weeks. So those guys were -- are moving fast and certainly very motivated, as we are, to get rideshare working in an actual useful way out in the world that leverages that tech. And what that really does, we think, is it will make it more convenient for vehicle sharing customers to get vehicles, having a vehicle sort of delivered to you without paying for somebody to actually drive you once you're in it.

And we think that that is a very compelling future model for vehicle sharing that we are pursuing aggressively. 

Eric Fritz -- Chief Marketing Officer

I see a follow-up question for Med regarding the phone app and when we can expect to see that come online. 

Mark Frohnmayer

It is in development. We have mapped out the sort of initial stages of sort of the Phase 1 requirements. It's in development now, and it will be ready when we release it. So we don't have a fixed timeline that we have announced yet.

But we -- it's a critical piece of the puzzle. So something that is -- we are definitely pushing on. 

Eric Fritz -- Chief Marketing Officer

When will the FUV get over-the-air updates? And how much do you anticipate this will end up saving Arcimoto in service costs?

Mark Frohnmayer

It will save -- I have not run the numbers on what it's going to save us, but it's just such an obvious win. In terms of when that's going to happen, we're balancing that with a number of different priorities. And so again, we don't -- we have not announced a timeline on that as one of our top-level goals, but it's something we're pushing forward on. 

Eric Fritz -- Chief Marketing Officer

When will owners get a personalized Arcimoto portal account to track service and referrals? And will it show data like battery health and mileage? 

Mark Frohnmayer

My goal is that the -- so we've talked about this a little bit in terms of the FUV.life portal, that's both an owner portal for getting more details on vehicles, tracking service updates. It's one of the critical pieces of customer communication that we want to bring online. My goal is to have the first incarnation of that online this fall at some point. And this would be -- this is going to be a pretty rudimentary first step into both the sort of owner portal, as well as some of the, I would call it, virality pieces of the puzzle.

So, as any owner of an FUV knows, you are constantly bombarded with questions about the vehicle whenever you park and it just draws a ton of attention and a ton of questions. And what we really want to enable on that side is to have our owners as ambassadors be able to point someone to a QR code on the side of the vehicle that sort of tracks them on a high scoreboard and lets us all participate in the sharing of the Arcimoto product family idea.

Eric Fritz -- Chief Marketing Officer

How has your partnership with Munro & Associates had an effect on the FUV product and your ability to quickly scale mass production? 

Mark Frohnmayer

Well, we are -- it's been a substantial impact. Having the Munro team really jump in with both feet to help push the Arcimoto to scale has been a huge shot in the arm for Arcimoto. They bring a whole different lens of expertise focused on mass production of large automobiles and the technologies and materials and capacities for pulling that off in an expedited reasoned manner. And so we are working with them hand-in-hand, week in, week out to push this project forward.

We're still targeting having the ramp open and shipping vehicles at the end of next year. It will be obviously a continued ramp-up in terms of vehicle output at that point to achieve maximum capacity. We're planning multiple systems that will come online and programs that will come online over the next years in order to continue to drive down cost and ultimately, provide a foundation for true global scale. Yes, they've been pivotal help to the company.

Eric Fritz -- Chief Marketing Officer

What is the status of the doors and their effect on the ATVM loan application and approval process? 

Mark Frohnmayer

So some astute folks out there have noticed that the ATVM requires what they call fully closed compartment vehicle. And so the vehicle that we are applying for funding and the factory that we are applying for funding for is to deliver squarely on that requirement. In terms of the half doors that we demonstrated the production version of just a few weeks ago and plan to ship to first customers this quarter, that is -- it's a piece of the puzzle in terms of understanding closures, but the full-scale version will -- and this is a product that we haven't actually shown yet. It's -- if you recall from our last earnings call, we sort of ballparked about 75% completion in terms of showcasing new products on the Arcimoto platform family.

This is one of them. There's another one that we also have not yet shown, and we are aiming to at least display where we're going by the end of this year. 

Eric Fritz -- Chief Marketing Officer

Does Arcimoto have plans to export or build a plant in Europe? That would seem like an excellent market. And then kind of perpendicularly related, from Jeffrey Campbell in chat, can you point out a country or two that would meet the requirement to be receptive to U.S. standards? 

Mark Frohnmayer

Sure thing. And actually, hey, we've got Dilip Sundaram on the line, our chief international business officer. And Dilip, would you like to give a little bit of color on to that question?

Dilip Sundaram -- Chief International Business Officer

Yeah, absolutely. Thanks, Mark. So, yes, thank you for the question. As mentioned earlier, I think Mark had mentioned earlier, we are developing a very potent and a comprehensive strategy to enter global markets.

Our first priority, of course, will be to focus on countries that fully accept the U.S. Federal Motor Vehicle Safety Standards. And to answer the second part of the question is basically, it is countries like Mexico, Belize, Barbados, Bahamas, Honduras, Guatemala and there's a host of others. Now this FMVSS market itself represents a huge market.

Now this will be followed with the homologation of our products to meet EU standards and that will make it possible either to export, which is definitely, again, with -- Europe is a large market, so which would be more quite likely export. Otherwise, it is quite likely also that we might find a partner to manufacture in Europe.

Mark Frohnmayer

And to add a little bit on that, we also see Europe and actually the entire global market as being very ripe for our Platform 2 efforts. So again, Platform 2 is aiming at something yet again, an order of magnitude, more efficient and less expensive than the Platform 1 product family. And so we see true global applicability for that product as well. 

Eric Fritz -- Chief Marketing Officer

Tesla is opening up the Supercharger network to other EVs. How and when will the FUV be able to take advantage of this? What are you doing right now to make the platform long trip-capable? 

Mark Frohnmayer

Great questions. We have not talked in specific detail about product features of what's coming off of the 1.X development effort. But what I would really like to see is just that customers get the choice of what charge port they want and can have options for things like higher capacity charging. I mean that's sort of a no-brainer and it is certainly on the road map.

But to me, it would just make -- we've got a bunch of customers who are also Tesla drivers, and so having the same charge port, the same capabilities to us, just makes a lot of sense. Tesla has done an absolutely fantastic job building out a global charging network for electric vehicles, and we're super thrilled that they are now looking to open that network to makers of other vehicles. 

Eric Fritz -- Chief Marketing Officer

Have there been any discussions with large food retail chain operators about the Deliverator and possibility of a fleet acquisition?

Mark Frohnmayer

We have discussion -- yes, is the short answer to that question. No details that I'm willing to talk about now other than we did have a pilot at a franchise here in Eugene and just got phenomenal feedback from that operation for the Deliverator as a food delivery vehicle. And if you look at what BIB Technologies has done with the platform, they have taken what we're calling Project Hotbox. They have built a Deliverator that is a -- serves up piping hot food.

So it's -- we are definitely looking in this sort of -- in the early pilot phase, at getting as much feedback from prospective customers to really fine-tune those offerings for the mass production versions of the vehicle platforms.

Eric Fritz -- Chief Marketing Officer

Production is slow. Can we focus on production and getting vehicles in customers' driveways? When will we see at least 100 a week being produced and delivered? And then there's several kind of related questions in chat, just related to the earnings results. Maybe you can provide a little color on revenue projections versus actual. I know you mentioned some of the struggles in the presentation, but perhaps a little bit more on plans for delivering revenue projections and the amount of inventory on our balance sheet.

Mark Frohnmayer

Sure. So as we -- again, and I did touch on this at some length at the beginning of the presentation, we are definitely still within the COVID-19 pandemic. That is still having substantial effects on our supply chain, and that does impact production. We think we have got clarity for the end of this year in terms of our planned production output of 425 vehicles.

A portion of those will go to customers. Where we see -- particularly in the stage that we're at right now, we think it is very important to get as many sort of demonstration and rental vehicles into the market as well. We have had, in Eugene here, just our local rental shop of Arcimotos, we've had fully subscribed vehicles on many days. About a quarter of the days that we've had the Eugene rental shop up, and we've had all of our rental vehicles fully subscribed and utilized.

And that's -- what we're really going to end up having to balance is delivery to early customers versus building -- seeding the marketplace for scale using rideshare pilots and rentals. I'm expecting a substantial increase in output in 2022, beyond what we are building in 2021, and we are still fine-tuning those numbers. So I would expect that on our next quarterly stakeholder update that we'll have more guidance about what 2022 looks like. But this is still -- again -- and this is in advance of our push to mass production, which is where we would start to see numbers like 100 vehicles a day.

Eric Fritz -- Chief Marketing Officer

What are some of the current biggest risks that would delay start of production of the new facility? And how is the Arcimoto team taking steps to ensure the schedule stays on track?

Mark Frohnmayer

So the biggest risks that I see are sort of unnecessary couplings between vehicle systems and cost reduction efforts. And so we've taken great pains over the last couple of months to really identify -- and this is what the 1.X program is all about is identifying what the long-lag items are and making sure that we decouple those from the scale improvement and cost reduction programs that we can execute sooner. And there are any number of potential risks, whether you're talking about construction slowdowns to compliance testing that can always take longer than you think. Now, I think the advantage that Arcimoto has is that we have already gone through that with our first platform vehicle.

We're very familiar with that terrain, and so I think that is a risk reducer for us. But as of now, we are still targeting end of next year for first vehicles emerging from the ramp.

Eric Fritz -- Chief Marketing Officer

We talked about ATVM earlier, but I'm not sure this question was addressed, what exact stage is the loan in.

Mark Frohnmayer

So we are in the pushing toward the substantially complete application phase. That's what we are aiming this next piece to accomplish. And then there are, of course, multiple gates beyond that in terms of conditional commitment and then ultimately funding of the loan.

Eric Fritz -- Chief Marketing Officer

A delivery vehicle needs to operate in all weather conditions, are there plans to fully enclose the Deliverator and make it viable for four-season use? And a related question in chat is wondering about the full-sized full doors and what the timeline might be on that?

Mark Frohnmayer

Totally. Well, I mean, the assumption that -- I mean, I guess, a question on the basic assumption since there are plenty of deliveries being done on bicycles and motorcycles and so on. But to the point for a full all-world, all-season vehicle, yes, you need full closure. And so same thing with -- sort of the answer a little bit back on the ATVM loan regarding close compartment, that's part of that program, and those doors that will apply to the fun utility vehicle will also work on the Deliverator.

We've designed them to work for both.

Eric Fritz -- Chief Marketing Officer

Can production and profit be increased by eliminating the options to the customer when ordering and build the same design over and over?

Mark Frohnmayer

In theory, there are multiple ways that profit could be increased, but actually options are where we see a real opportunity for higher profit margins. So -- and ultimately, we see the Fun Utility Vehicle as having that optionality is a big part of the selling features of it, particularly when we actually have our full accessory family launched. So, as we've looked out at other vehicles, I mean, I think we've -- it's hard to find, except perhaps like the Model T product family that has -- where optionality was issued and not a part of the profit story. I do think that one of the things that we are really focused on is streamlining that process of option selection, just to make it easier to get through that whole piece of the puzzle.

Eric Fritz -- Chief Marketing Officer

What opportunities do you see in last-mile transportation, specifically with e-scooters and e-bikes that FUVs platform, too, will be uniquely enabled to address?

Mark Frohnmayer

We'll talk more about it when we actually show the product.

Eric Fritz -- Chief Marketing Officer

All right. Is there anything specific that you hope to learn in the upcoming Tennessee pilots that might be different than pilots in Florida and California? Or are you looking for patterns of repetition in all three efforts?

Mark Frohnmayer

I think probably a little bit of both. We expect that there's largely people who get in the FUV and Arcimoto platform vehicles, there's a lot of the same feedback, particularly regarding the enjoyment of the ride and the sort of that unique FUV experience. But every pilot that we've done has provided specific option -- sort of specific enhancement requests related to how they use vehicles. And I would expect that the fine folks that we talk to in Tennessee will have lots of good ideas about how we can make Arcimotos better for them.

Eric Fritz -- Chief Marketing Officer

Are CAFE credits being used in future cost calculations as a credit when estimating a reduction of retail price? Is this a large portion of the tactic to reduce consumer prices?

Mark Frohnmayer

No. So the -- in terms of like card credits, there is now a discussion about bringing motorcycles into that regime, but that's going to take some time, and we have not modeled it as part of our as part of our sort of profitability story. We do see a near-term opportunity in terms of end-user tax credits at the federal level. We think that the substantial pronouncements that the Biden administration has made, as well as congressional leaders, support a much higher tax credit for Arcimoto-type vehicles.

We think there is a very strong argument that affordable vehicles that are super, super-efficient and don't take up a lot of space should benefit from the same tax credits at much larger, much more expensive full-size cars get. So, that's an area of advocacy that we are continuing to push on with partners and with others in the field. And if you think about it, I mean, that could have a truly dramatic impact, particularly in the near term, on the affordability of Arcimoto's products for the wide market.

Eric Fritz -- Chief Marketing Officer

Any plans to change battery chemistry or format since a lot has changed since the first FUV introduction? What order would you write your battery priorities, reduced weight, reduced costs, or increased range?

Mark Frohnmayer

Well, I should say that we have some very interesting battery developments in the works, something we will be talking about on future earnings calls and stakeholder webinars. But versus -- a priority for me at this point would be a reduction of cost and improvement of range. The battery is actually in a really good spot in the vehicle. We -- and we will likely see -- as energy density continues to incrementally improve, we will see batteries that are essentially the same weight that go farther, have higher volumetric energy density.

And we're also seeing continued push down the cost curve of battery cells. So we got a lot of good stuff coming on that front. I would say, from the customer perspective, it really is about just incremental changes over time for the foreseeable future.

Eric Fritz -- Chief Marketing Officer

Has Arcimoto been testing with any other company's software for autonomous vehicle arrival?

Mark Frohnmayer

None that we've talked about publicly yet.

Eric Fritz -- Chief Marketing Officer

All right. Going -- shifting over to chat. I kind of touched on this already. Can you comment on why retail sales were only 30 units last quarter? The number of consumer spend, plenty of people drove Arcimotos this quarter, weather is perfect at springtime, why didn't you sell more?

Mark Frohnmayer

It's -- again, we are now in a position where we are constrained on the production of Arcimoto vehicles. And as we looked at our options and what we need to do to execute the growth of our market plan, we allocated a significant number of our vehicles to things like our open rental stores in Eugene and San Diego. I also mentioned that there was a delivery pause for several weeks due to a software glitch. That did impact those sales numbers as well because we actually count the sale when we deliver the vehicle.

And again, I think what we're going to see in terms of end-user sales is that Arcimoto has to balance the growth of our market growth plan with the sales to existing preorder customers and new customers who want our vehicles.

Eric Fritz -- Chief Marketing Officer

As a stakeholder, it's critical to understand in greater details issues related to the supply chain, can we hear how precisely Arcimoto plans to jump production in Q3 from 75 units to 150 units?

Mark Frohnmayer

So, while we -- it is looking like we are in good shape today for Quarter 3 and Quarter 4 in terms of hitting that target of 425 vehicles produced this year. There are some challenges that Arcimoto has that are unavoidable in the supply chain at our scale. We have parts that are single-supplier sourced. We are producing at a low enough volume that, in a lot of cases, we have only a single supplier who supplies a particular component for the vehicle.

As we look to higher scale, obviously, those are elements that we are going to address and make much more robust, but -- and again, this is caution that I put out, I believe, over at least the last couple of quarterly stakeholder webinars is that we expect a relatively flat growth curve quarter over quarter with the potential for lots of choppiness due to the supply chain. I mean, just as one example, we had what was a -- I mean, not quite a port shutdown that one of our suppliers uses, like an eight-week delay. We've had multiweek delays at the port down in Los Angeles. And then suppliers, as well as us face always the questions around the movement of the pandemic and now more and more related to extreme weather events and things like -- things you wouldn't even normally expect, like the Texas Freeze that shut down petrochemical plants in Texas, actually had an impact on our gearbox and the seals that we use.

So, it's -- we are going to continue to use absolutely best efforts to make sure that interruptions are as least problematic as possible while executing our market growth plan continuing to deliver vehicles to customers, opening up rental locations, but it is -- we are still amid choppy seas in a global pandemic.

Eric Fritz -- Chief Marketing Officer

When will we --

Mark Frohnmayer

One more thing, actually, Fritz. Yes, just as a way to look at this, particularly given that Arcimoto is -- we are one of a dozen nascent EV companies here in the U.S. that are targeting -- bringing clean transportation solutions to the world. One of the real advantages that Arcimoto has in building toward that mission is that we are already in market.

We are in market today. We have vehicles out for demonstration. The constraints that we have on production at very low volume certainly have an effect on near-term measures of the company's progress. But our really next-stage goals are to step up to much higher production and volume and to do so in a time window when we've got a lot more clarity on things like the global chip shortage, battery supply chain constraints, and all the rest.

I think that really positions Arcimoto well, certainly versus others who are attempting to launch scale production of vehicle programs toward the end of this year. So, we've already got vehicles on the road. We're definitely doing our absolute best to deal with the supply challenges in the near term. But our -- again, our overarching focus right now is the push to scale, the planning for scale, building resilient supplier relationships for the scale production version of the product family.

And so everything that we are doing in the near term really needs to be balanced through that lens.

Eric Fritz -- Chief Marketing Officer

When will Hawaii get a rental facility? And which Island in Hawaii?

Mark Frohnmayer

Which island singular? I think there are multiple islands in Hawaii that certainly that Arcimoto team members have volunteered to go spearhead. In terms of timing, we are waiting on the acceptance of our vehicle manufacturing license for Hawaii so that Arcimotos can be easily registered on the road there. But we see tourist season and sort of the winter tourist season as being a good time to get first rentals going in Hawaii. And so we're -- that's -- we -- I'm not -- I don't have a fixed timeline for you today, but we're pushing hard.

I would like to have at least one of those facilities opened up right around the end of the year, the beginning of next. And in terms of what islands, we see opportunity on -- in Honolulu, on Maui. Really, I think the Arcimoto platform vehicles are just going to be phenomenal vehicles for that marketplace, both for people who live there and for people who are visiting. 

Eric Fritz -- Chief Marketing Officer

Arcimoto expressed support for Black Lives Matter last year. What has been done to increase African American employment at the company? The national average is approximately 15%. 

Mark Frohnmayer

So, what we've done put in place at the Board level is a real push for getting diversity programs in place. I would like to report that we've made more progress on this front than we have, but it is still certainly a key piece in terms of -- Arcimoto at its root is all about transportation, clean transportation, and ultimately, transportation equity. And so making sure that we, as an organization, take that seriously in terms of our own composition is really important.

Eric Fritz -- Chief Marketing Officer

Can you comment on the status of customer preorders? Is the backlog growing, holding, or declining?

Mark Frohnmayer

We actually saw a meaningful rise in terms of indications of interest in Quarter 2. And I'd refer you back to our 10-Q. If you want to look at that exact breakdown of numbers -- Doug, do you have that right in front of you?

Doug Campoli -- Chief Financial Officer

It was approximately 700 vehicle -- or 700 preorder increase.

Mark Frohnmayer

Yes. And again, just a note about preorders, we look at preorders as strong indications of interest in the product. They are either refundable, nominal deposits or they are things like letters of intent from commercial customers and so on. But we definitely do see them as a meaningful indicator of future market traction for our products.

So seeing a big substantial step-up is not a bad thing.

Eric Fritz -- Chief Marketing Officer

And then what looks to be the last question to chat here, any opportunity for alternate controls of the vehicle?

Mark Frohnmayer

Well -- and is there any indication there about what --

Eric Fritz -- Chief Marketing Officer

There seems to be some trepidation toward the handlebar controls, specifically. But I would say that there has been several questions about alter-enabled folks and other opportunities for an alternate control system. 

Mark Frohnmayer

One of the things we've heard from alter-abled folks is that actually, the handlebars are a real advantage there. And it will -- for folks who have limited lower body mobility that would require certain special hardware to be added for, for example, for the hydraulic brakes to be able to move them to the handlebars. I was -- the one thing that was really cool that we saw at the summer showcase was the work that Stoffel Systems has been doing on torque vectoring. And what that -- the implication of that for the FUV is it's just a much smoother experience on the handlebars, particularly at low speed.

But for anyone whose trepidation is about driving the Arcimoto, I mean really, it takes a very short time to get the hang of it. If you've ever ridden a bicycle, it's a piece of cake. And what you end up ultimately feeling is like the -- sort of like the vehicle becomes an extension of your will to move. We are going to continue to refine that user experience, particularly through the software controls work that we are doing with Stoffel, but we have no present plans to change to something like a steering wheel.

In fact, it was the switch from a steering wheel that really unlocked the true win of the Arcimoto platform in terms of being able to carry an awful lot on a small footprint vehicle, and the move to handlebars was actually a big piece of that.

Eric Fritz -- Chief Marketing Officer

All right. A couple more rolled in. How are we doing at time? 

Mark Frohnmayer

I think we got time for one more, and then I'll wrap it up.

Eric Fritz -- Chief Marketing Officer

Have you considered making an electric alter-enabled vehicle similar to the Tesla Cyberquad? How about that one to end it off? 

Mark Frohnmayer

Short answer on that one is yes, we have considered making a number of different types of vehicles. For the moment, we are very focused on bringing our current product offerings to scale and focusing heavily on the daily driving problem, as well as vehicles that sort of fit in that same go-to-market approach. So one of the things I really like about Platform 2, again, is that it -- we think those vehicles are going to do very well in our rental shops. We think they're going to do very well in terms of the rideshare conversations that we're having.

And so where you get that overlap of business model, it becomes easier to move multiple products through it. When I look at off-road, I think the platform has real opportunity there, particularly at least constituent elements of that platform. But it has a whole different go-to-market approach and a lot of additional engineering work to make it happen. So we want to keep Arcimoto as focused as possible, particularly right now in getting our existing product lines refined, getting our new factory up and running, and really pushing to scale to deliver on the mission. 

Eric Fritz -- Chief Marketing Officer

All right. One more since we've got a question couched in a compliment. Arcimoto is the second-largest pure EV maker in production in the U.S. behind Tesla, with extremely low cash burn compared to other EV makers.

Can you explain how you've managed this success?

Mark Frohnmayer

Wow, that is -- thank you for the question. I do think that one of the things we pride ourselves on is focused on a meaningful solution that is simple, lightweight, ultra-efficient, and we just abhor waste. And I think that has kept us -- we -- Arcimoto was a -- for our first seven years, I was the first funder, I'd put in the first couple of million. And I sort of treated every additional investor dollar going in as though it were my own in terms of really trying to get the most bang for the buck.

I mean, that meant that we basically got into production with, I think, a total spend, over our first 12 years, of about $42 million. So zero, napkin sketch to first production vehicle on $42 million for a next-generation EV company is fairly impressive. So I also -- we have an Oregon ethos of building start-up companies into more mature companies, and that has also been -- the Oregon has a -- it's very collaborative, but also use -- to be very capital efficient. So -- and just one example, I mean you think about building out marketing and sales, we've really focused, particularly in the early years and up to production launch on the vehicle, on getting the product really dialed on getting something that we think is going to sell itself once we can really get it to scale at the right price.

And so that is -- that's another element of it, I think, is just focus. Shall we wrap it up? We're a little bit over time. I wanted to thank you guys all for attending. This officially concludes our 2021 Quarter 2 Arcimoto Stakeholder Webinar.

I would add that I got a little something special for you. If you all could have been there at our summer showcase, you would have seen some truly impressive things. Tilting -- toric vector, driverless vehicles, tilting joyrides, and a community of peers growing together toward a brighter future. You also might have caught Uncle John and the From Here band serenading the crowd with another fine-tune.

Now, John couldn't make it back down for the call today, but in honor of him, Sandy and all the fine companions, who joined us on our quest, Emily Jensen, founder of -- and CEO of Thinking Tree, yours truly, and Rich Lomas, the best stand-in -- standup guy I only just met, played again the song we penned for the showcase. Of course, for anyone of the opinion that good fun tunes have no place in a stakeholder webinar, now is your queue to hit the log out button.[Commercial break]

Duration: 57 minutes

Call participants:

Mark Frohnmayer

Unknown speaker

Eric Fritz -- Chief Marketing Officer

Dilip Sundaram -- Chief International Business Officer

Doug Campoli -- Chief Financial Officer

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