Arrival

Well, hello, everyone, and welcome to Arrival's third quarter 2021 earnings webinar. My name is Kelsey, and I will be your operator today. But before I hand the webinar over to the Arrival team, I'd like to go over just a few housekeeping notes for the program. As a reminder, this webinar is being recorded. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please use the raise hand function located at the bottom of your screen. If you plan to ask a question, please ensure you've set your Zoom name to display your full name and firm. We thank you for your attendance today, and now I will turn the webinar over to Mitesh Soni and Best Relations for Arrival. Mitesh, over to you.

Thank you all for joining us today for Arrival's third quarter 2021 financial results. My name is Mitesh Soni, VP of Investor Relations, and with me today is Dennis Spedloff, Arrival CEO, Avinash Raghubur, President, Mike Abelson, CEO of Automotive, and John Wozniak, Before we begin, I'd like to remind everyone that certain statements made on this call today are forward-looking statements. These statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions, and the information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Description of these factors and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC and our third quarter earnings release issued today on the 8th of November. During the call, we also refer to certain non-IFRS financial measures. This should be considered in addition to and not as a substitute for or in isolation from our IFRS results. For further information, please refer to our investor relations website at investors.arrival.com. With that in mind, I'll turn it over to Dennis.

Thank you, Mitesh, and thanks to everyone for joining us today. We are on a mission to replace all vehicles to electric. I would like to use this opportunity to remind everyone that Arrival is unique. It is not an automotive business. It is a platform technology business. We have invested in enabling technologies, software, components, materials, robotics, and microfactories that provide strong competitive advantages for us. We are doing things that have never been done before and expect our powerful technologies will change the fundamentals of automotive industry. These transformative technologies are coming together in our first micro factories and we like what we see. Our first bus to be used for validation has been completed, which is an important milestone for the company and I can share it is a remarkable product. We have hosted a number of events around the world where customers were able to experience our van firsthand. The car is progressing well and its exterior is developed to the level where we are happy to share it today. Start of production for the bus and the van are unchanged. We are currently developing five vehicle platforms, van, large van, bus, bus for emerging markets and car. But to achieve our mission to replace all vehicles with electric, we want to create tens of vehicle platforms and produce them in hundreds of micro factories. We have revised our 22 expectations with a more conservative view. However, I'm very confident we are well positioned for significant growth in the next several years. We believe that the size of our business will be defined by the number of micro factories we deploy, and the number of micro factories is primarily defined by the capital we have access to. It could be tens of micro factories or hundreds, and for this reason, we withdraw our long-term forecasts. We have over 2,400 employees who share Ravel mission and values and have a strong sense of purpose. With that overview, let me now hand over to Avinash, President of Ravel.

Thanks, Dennis. In Q3, our teams have been working tirelessly towards our product and Microfactory launch dates. Alongside this, we have also been executing in other vital areas of our business as we ramped to first production. As we progressed to launch, we wanted to update the market on changes to our 2022 forecasts. John and Mike will go into the details, but the main message is we have decided to adjust the timing of our fourth Microfactory as well as the launch of our large van to invest further in our platform technologies and start of production for our bus and van. Our current non-binding orders, NLOIs, reach 64,000 vehicles, and we have added a number of high-quality customers to our pipeline. These LOIs continue to be weighted toward our van program at this stage, as as previously communicated, bus sales typically require public road trials. Our first of these will start early next year. We continue to build vans and buses as we prepare for launch and today I'm pleased to give you a first look at our all new bus. From the wraparound screens inside and out to the use of ambient lighting, reconfigurable seating and the ease of maintenance to name a few, we believe the Arrival Bus brings a whole new level of experience to the drivers, operators and passengers. Our bus, van and car use the same in-house developed components, composite material for body panels and are all connected through the cloud to our backend ecosystem. We believe Arrival's method creates truly compelling products for our customers at a competitive price point, and the feedback to date has been very positive. You will see these buses on road trials in the UK early next year. Arrival Car is progressing well, and we are also giving a first look today with a first prototype expected by the end of this year. There were several highlights in the quarter, but to pick a few, we provided UPS with vans to be used for deliveries at the Dubai Expo, where UPS is the official logistics partner. We were chosen as one of the Green Dozen companies at the Global Investment Summit in London, selected for our pioneering green technologies. The summit was hosted by the UK Prime Minister and supported by members of the Royal Family. bringing together 200 of the world's most prominent decision makers. We also announced the Arrival Service Network program, using our in-house digital service platform, which trains and certifies technicians to service our vehicles. The service platform uses data from Arrival's vehicles and proprietary algorithms to enable existing service providers to repair and maintain our electric vans and buses. We have recently announced eight partners in the U.S. and Europe who have signed up to repair and maintain our vehicles through our program. These initiatives serve to highlight the ways in which Arrival has captured the attention of large global companies and organizations around the world. We have also been ramping up our sales efforts and hosted a global tour of the van in the US and Europe for our customer base. This was very well received and gave us a chance to showcase Arrival's unique vehicles and customer value proposition. I want to remind everyone that Arrival is the only company with a new method in the whole industry. We have focused on developing enabling technologies components, platforms, materials, micro factories, software, and robotics, and we utilize these technologies in all of our products. We see Arrival as a pioneer in the EV space, leading the transition to EVs globally by creating products that are zero emission, more desirable, more sustainable, and more equitable. ESG is at our core, and I am proud to say that in Q3, as part of our engagement here at COP26, from which I am currently joining this call, we have announced our pledge to reach a net zero carbon position by 2040, helping to achieve the goals of the Paris Agreement 10 years early. As the management team, though, we are looking into how we could do this even faster. Our CEO of Arrival Automotive, Mike Abelson, will now give us an update on our program development and microfactory status. Mike.

Thanks, Avinash. I want to begin by reiterating that we continue to expect starter production for the bus in Q2 of 2022 and starter production for the van in Q3 of 2022. This slide shows our upcoming program milestones, and the milestones remain unchanged from when we presented them in our Q2 earnings call. It won't surprise anyone to hear me say these milestones are the priority for the entire arrival organization over the next three to four quarters. Equipment installation has begun in Rock Hill and will be substantially complete by the end of the year. Since Bister is used as our process development microfactory, we've been installing equipment there for some time and expect it to be substantially complete by the end of Q1 next year. Charlotte will be our third microfactory in 2022 with starter production there expected in Q4 of 2022. Bister is a unique facility because it serves a dual purpose as Arrival's global center for robofacturing and as the company's first van microfactory. As such, you can think of Bister as our version 1.0 van microfactory. One of the advantages of the microfactory approach is the ability to further optimize the layout, equipment, and operations of each subsequent microfactory. At Bister, we are already installing the second generation of our composites manufacturing line, and have recently installed six of our third generation technology cells in the assembly area. We are now assembling our fifth generation of autonomous mobile robots, or AMRs, the mobile robots used to move vehicles and parts through the microfactory. This latest generation AMR has a two-ton payload capacity, and it's capable of coordinating movements wirelessly so that multiple robots can be used to move a vehicle or component that's too heavy or too large for a single AMR. Given all of this ongoing development, we know that Bistro does not represent an optimized band microfactory, but only the first version. On the product side, as Dennis and Avinash have already noted, we've completed assembly of our first gamma phase prototype bus. It's great to see the bus come to life. The impact of both the exterior design and the experience inside the bus are just as dramatic as we've always expected. This bus is the first of several that will be used for final product validation, and we have a number of buses in build right behind it that will be completed in the next few weeks. We've also completed the first accelerated durability test for our van, and have completed two of the European certification tests for BUS. From a cost perspective, this slide highlights the cost we expect to incur at our first two microfactories, which include production equipment and non-production CapEx, such as site readiness and logistics. Total CapEx for Rockhill is expected to be approximately $50 million, and CapEx for Bistro is expected to be approximately $75 million. As I said, Bistro is our first band microfactory, and because we've been simultaneously developing our product and our manufacturing process, Spending at Bister is now higher than we originally forecast. An additional contributing factor to the higher CapEx is the fact that we've decided to bring the majority of logistics operations in-house. Since logistics is such a key component of the microfactory operational costs, we prefer to have this under internal control for our first microfactory. We are still evaluating different operating models for logistics at future microfactories, and the optimal approach may actually differ by regions. We anticipate that Charlotte and other future band microfactories will have a more efficient footprint and improve processes compared to Vistar. With the microfactory method, we have the opportunity to further optimize each microfactory as it's deployed. Charlotte will be the second version of our band microfactory process, and we therefore expect total CapEx to be lower than Vistar. We've also decided to bring our battery module assembly in-house. As a reminder, in the Arrival Battery Architecture, battery cells are assembled into battery modules that are shared across all of our vehicles. The battery modules are then assembled into vehicle-specific battery packs at the microfactory. The first battery module assembly facility will be in the UK and will support initial production at multiple microfactories. To date, we've already manufactured more than 1,850 high-voltage battery modules to support our prototype builds. I'll now turn it over to our CFO, John Wozniak, to go through our financials and provide more detail on how these updates impact our projections. John?

Thanks, Mike. First, I'll cover our Q3 financial results before moving on to longer-term trends. The loss for the period was 26 million euros compared to a loss for the period of 22 million euros in the third quarter of 2020. The adjusted EBITDA loss for the quarter was 40 million euros compared to a loss of 18 million euros in the third quarter of 2020. Administrative expenses were 38 million euros and non-capitalized R&D expenses were 9 million euros compared to administrative expenses of 20 million euros and non-capitalized R&D expenses of 1 million euros in the third quarter of 2020. Capital expenditures in the quarter were 81 million euros compared to 21 million euros in the third quarter of 2020. We ended the quarter with cash and cash equivalents of 381 million euros or approximately $440 million. We expect CapEx for Q4 2021 to be between 110 million euros and 120 million euros and adjusted EBITDA for the fourth quarter of 2021 to be modestly higher than Q3, reflecting our headcount. We have decided to make additional investments in R&D and tooling to improve our platforms, to bring battery assembly and logistics in-house, to secure battery lines for multiple years through prepayments to our supplier, and to add resources to our sales, finance, and legal functions. We've made these investments in areas that we believe better prepare us for our first product launch and makes our business stronger overall. and more resilient for when we scale. We are also experiencing price increases in certain raw materials, including aluminum and petrochemicals. Because we are investing more in our platforms, we have revised our microfactory investments for next year. We now plan three microfactories in 2022, Rock Hill, Bister, and Charlotte, and have moved our fourth microfactory to 2023. We continue to expect van microfactories to produce 10,000 vehicles per year at full capacity on two shifts, though we are expecting a more conservative production ramp next year as we start each microfactory on one shift and are not planning to reach full capacity until early in 2023. As a result, we expect both vehicle volumes and revenue to be modest next year. Revenue is expected to start in the second half of 2022 and be weighted towards the fourth quarter. As Dennis mentioned, beyond 2022, revenue growth will be dependent on the number of micro factories we can deploy, which is a function of the timing and availability of capital, the quantum and timing of which is uncertain at this time. Given this and the rapidly changing nature of our business, we no longer believe prior long-term financial forecasts should be relied upon. We will continue to update you on key operational milestones, including the status of our vehicle programs and our planned microfactory rollout, which we believe are the key indicators of the progress we are making. We also expect future volume mix to be even more weighted towards VAM, which is consistent with the robust LOI activity we continue to see for this product. From a cost perspective, we expect 2022 adjusted EBITDA and CAPEX will be in a range consistent with the third quarter of 2021 on an annualized basis. We are forecasting marginally higher SG&A costs associated with adding sales and finance resources. Over the next several years, we will continue to capture additional efficiencies in our microfactories. and expect to achieve total required CapEx per micro factory of approximately $50 million. We will also continue to lower the OpEx requirements at our micro factories and expect long-term production and assembly OpEx of approximately $15 million per micro factory. Initial operating costs for logistics is approximately $10 million for microfactory. However, we expect to optimize our logistics model as we scale the number of microfactories to significantly reduce this cost over time. From a working capital perspective, we have proactively secured two cell lines and are continuously evaluating opportunities to further de-risk long-term cell procurement. In general, as we scale, we believe our working capital terms will improve through larger volumes and better leverage with our suppliers. I'll now hand the call back to Avinash for our conclusion.

Thank you, John. To repeat our message, Arrival is unique. We believe our new method will change the fundamentals of the auto industry. We reconfirmed our key milestones for the bus and van. And today we showed you the outstanding bus, the van, which is a great product the market needs, and gave you a first look at the Arrival car, which is an important vehicle for shared mobility. Arrival is not a traditional OEM. We are developing technology platforms that allow us to create multiple products and build them in local micro factories with relatively small resources. Arrival is on a mission to replace all vehicles with electric. We continue to see strong growing demand from customers all around the world, and we expect this to continue as we bring our remarkable products to market in the coming months. The commercial vehicle market is in the beginning of an enormous and imperative transition, and we believe we are coming to the market at the right time with our transformative new method of production and superior products. Thank you. We'll now move on to Q&A.

Thank you so much. And again, everyone, as a reminder, if you want to ask a question, please use the raise hand function located at the bottom of your screen. Once you've been called on, you'll have the ability to unmute your audio. Again, please use the raise hand feature at the bottom of your screen. And Dennis, if you'll go ahead and start your video for me, please.

Hello, everyone. I shared my screen. Can you see my screen now?

Yep, we sure can. Thank you, Denis. I appreciate it.

Yeah, so actually it's quite important for our company, Q3, because we didn't show the out... We were working hard to develop exterior of our car, which we do together with Uber, as you know. And it's the first time we're showing the exterior of the car today. We're quite happy. We're extremely actually happy about this product. And it's quite difficult to understand from this picture, but actually the height of the vehicle is much higher than like a normal car, which creates a totally different experience for the passengers inside, in terms of leg rooms and the space overall. And actually in the left bottom corner, we have a sketch of our... bus for emerging markets. So it's a high floor bus. It's a derivative from our low floor bus platform, which we're developing now. We announced in Q2 that we started to develop this type of product using our Indian R&D center. And we also very pleased to say that this product is developing really well. So, That's probably, yeah, so this is the car. That's a big picture. So we are happy to answer your questions.

Thank you so much, Dennis. And again, everyone, please raise your hand using the icon at the bottom of your screen to indicate you have a question. We'll hear first from Jeff Osborne with Cowan.

Yeah, good afternoon, guys, or good evening for you. A couple questions on my end. One, you know, what, you know, just in light of the slowdown of the build-out, given the capital situation as well as the bus market, can you give us a sense of future capital needs that you'll have? I was under the impression that, you know, in particular for the bus market, some of the municipalities would be participating in the funding around the world. Is that still an opportunity or not so much?

So in terms of the market, Jeff, absolutely. Fundamentally, I think we're going to be capacity limited, not demand next year. We're still seeing enormous interest in it. And we just showed you a glimpse of our new bus. That's actually going to be going on to trials next year. Just to remind everybody, the sales cycle of the bus is such that the trials comes first. So really, I think the bus market will continue to heat up. This transition is occurring right now. I'm at COP right now, and I'm sure we're going to hear further announcements from governments around the world about the need to electrify public transports and fleets in general. In terms of capital needs, John, do you want to comment? Sure.

Obviously, we have a variety of financing options available to us, which we continue to review regularly. I think it's important for everyone to remember that unlike a traditional OEM, we don't have a significant upfront amount of capital. It's not billions of dollars that we need to put in the ground immediately, which gives us greater flexibility, which I think you've seen as we've prioritized capital this year and into next year. We've certainly accelerated some spending on our vehicle platforms, as we mentioned in the script. The purpose of which is really to make those platforms more resilient as we prioritize startup production next year. So we believe that we have a lot of flexibility as we look ahead. As we think long term, our view of capital is that our growth is really tied to the amount of capital that we can raise to deploy new micro factories. And as a management team, we believe we'd like to be very aggressive in that deployment. And that'll all be dependent on when we tap the markets and we'll be opportunistic in that regard.

I also would like to give just a few comments. Jeff, the way how you asked the question, you mentioned about the market condition. Actually, market conditions are great. So we have a strong tailwind and we see a huge demand on our products across all our portfolio. So that's not even a challenge like now. In terms of our prioritization, we had, as John said before, some events like when we did the advance payments for the batteries to secure our volumes. You know that it's extremely important for any EV company today. And some other strategic decisions which we made. And answering your question directly about Other funding opportunities, we obviously, every microfactory could be SPV in some way, right? So, and actually we have a lot of different opportunities how the capital for microfactors can be raised. It's not necessarily the capital coming from the public markets for that.

Got it. And very quickly, could you just give a few examples of the 10 million in OPEX for logistics at each microfactory? Why bring that in-house? What are some of the things you'll be doing that you were using third parties for?

We just know that they're Mike, I'm sorry. Very good. Yeah, please. Yeah.

To your point, you know, we've had a lot of questions about logistics because the micro factory model is different from a logistic standpoint than a traditional model. And so as we looked at how we're moving parts and subassemblies around, on-site in the micro factory, how they get presented to the automation inside the micro factory, even how we receive them from suppliers, working with suppliers on packaging that's friendly to automation. We saw so many different aspects of logistics that we thought we could do better if we had direct control over them, that we could optimize it for the micro factory method. Obviously, when we go out and talk to 3PLs, They don't know what we know about microfactory methods. So that was why we decided we really did want to bring this all in-house. You know, the $10 million covers a variety of expenses, obviously heads, but also other expenses around packaging and so on.

Thanks, Mike. That's all I have.

I would like to add here that, as Mike said, first of all, we want to control that process now because it's the first time we're running that and we just want to control every aspect of that. It's reduced our risks to run first factories. And the second one is... Which is also quite important is that we, like, obviously if logistics is an external company, we're reducing our margins on the product. So for us, it's actually a better decision to make a bit more capex, but actually have better margins.

Makes sense.

And again, everyone, that is using the raise hand function if you'd like to ask a question. And we'll now move on to Michael Filatov with Berenberg.

Hi, guys. Can you hear me? Yes. Hi. Thanks for taking my question. Just a quick question on the non-binding orders and LOIs. You probably provide a little bit of detail, but maybe you could talk about sort of the timeline for some of those LOIs and orders and maybe potential... what the sort of revenue opportunity would be for those.

Yeah, so we've announced 64,000 LOIs to date. It's probably worth just reminding everybody that for us, LOIs aren't early stage conversations. They're still non-binding, but they're typically more extensive discussions that have gone on where we sign contracts from both parties with a number of indicative terms, such as the range of volumes, over how many years, the base pricing, and when the vehicles would be due. And then we move them to vehicle agreements where we have the pricing laid out and also the spec and the timing. So to answer your question, when we look into, without giving the exact numbers, when we look at next year, as I mentioned earlier, if those LOUs convert to orders, we've essentially sold more than we can produce next year. So we're in an extremely healthy position on demand in the longer term. And those values typically span anywhere from three to five years in terms of the range and the timing for the orders. And if you look at what's happening in the market with, as I mentioned earlier, not just governments, but companies themselves needing to transition, I think we're just in a very healthy place on demand. So next year in terms of orders right now, we're very healthy and it's only just going to grow. I really, believe we're fundamentally right in the early years capacity limited. So our role is to really bring out as many micro factories as we can and increase capacity.

Got it. Thanks. Another quick question. You know, one of your competitors on the bus side puts out, you know, sort of a public market bid universe for the buses. And I'm wondering if you could comment on sort of the pipeline of bids in the bus universe that you're seeing. Right. And how that compares to sort of the volumes you were expecting over the next couple of years.

Yeah, it's a great question. We're seeing that many companies, you know, have had the RFPs out for the bids. We did just announce, for example, that we won the Anaheim contract. So we're going to see more and more of that. Our team is heavily at work in submitting for bids, organizing trials for customers. Our first trial is early next year. And so in terms of the I would say the amount of RFPs coming out right now, it's quite significant because the bus operators are needing to shift. That could be driven by a government mandates or incentives, but it's also the fact that one of the interesting things, for example, if you look at the arrival bus and its price point, which is extremely competitive, well, we believe it's fundamentally the best price electric bus on the market. It also means that the residual value of the diesel buses over time uh, will go even lower. And so it's, it's forcing, you know, I believe it's forcing more, uh, higher turnaround in the early years.

I just add on, on the pipeline, obviously in the build back better bill here in the U S and Avinash's point, uh, at the COP 26 conference, we expect to see a very sizable upswing in support for electrifying bus fleets. As far as, um, Talking about specific RFPs on the rise, and we haven't named those. There are associations both in Europe and the U.S. that when you join, you get a view of the entire RFP pipeline across all municipalities. So basically every bus manufacturer has access to that same information.

And also just to end on that, Michael, that, I mean, this is global. The interest in our products, bus, van manufacturers, And microfactories, it's, you know, our team is covering, I would say, every inch of the globe right now.

Got it.

Thank you.

Rod Lachey with Wolf has the next question.

I think you can hear me now. Can you hear me? Yes. Okay, great. Look, it sounds like there's absolutely zero question about the demand for the buses and vans or frankly, any of your products at this point. I just wanted to, I was hoping you can maybe elaborate a little bit more about firstly, what has led to the slower ramp? I didn't quite understand that. And maybe what kind of volumes do you expect to hit at your, maybe your exit rate from next year?

If I may, I'll probably start with the answers. So first of all, what is important is that the document which we were referring before, we were creating this in the middle of 2019. So it's actually like two years ago. And of course, during those two years, we've learned a lot about the process and other things. So that's the important point here. And the second part of the point is that Look, we obviously want to produce as much as possible. And we're putting the capital for the parts to procure and receive all those parts available for us to produce as many products as possible. But because we're just starting those operations for the first time, so instead of... pushing the quantity we want to kind of focus on the perfection of the processes and do it first we want to kind of do everything perfectly and then like scale after that so that's like a major reasons why we've taken a bit more conservative view on 2022 I would not call it as a slow down I would say it's just more careful I would say approach to the start of production

That's right. And I think, you know, 2022 expectations, we should not imply from that or overestimate its impact on future periods. Once we ramp the micro factories, particularly the van micro factories to full production, we still expect to be able to produce 10,000 vehicles at full capacity on two shifts. Next year, we're just taking a more conservative view of our initial ramp because, as Dennis mentioned, we want to make sure we get it right. That's absolutely the most important point that we have here is it's about getting it right so that we're in a good position to scale. And post-2022, our expectation is that we would like to deploy microfactories as quickly as we can.

So with the run rate, if you're successful, it sounds like it's just you have better visibility on what it's going to take in the initial ramp, not any kind of real technical issue or supplier development issue. Absolutely. If you were to exit, if we think about your exit rate next year, would we be thinking that maybe with one shift, you're at a run rate of maybe 5,000 or so per microfactory, something like that? I was hoping maybe you can just clarify for us how we should be thinking about whether the extent to which the economics at the plant are changing. So you're saying that the 15 million of OpEx, that sounds to me like that's sort of comparable to the 12 million that you were originally thinking in your plan. The 10 million of logistics, Is that sort of shifting from one bucket to another? So really the economics aren't changing. It would have either been in your supplier's costs and bill to you or you're taking that in-house. Can you just maybe clarify that aspect?

I think it's important. You mentioned 50. That's not OpEx, right? That continues to be our expectation for CapEx.

I said 15, 1.5.

Yeah, so 15 is our OpEx expectation relative to numbers we published a couple years ago, which was 12. We continue to expect to have very competitive OpEx in the microfactory. We are seeing higher initial logistics costs, and I think it is Fair to say that when we were initially thinking about that, we were expecting a large portion of that to be outsourced and potentially come back to us in the form of component part, if you will, or inventoryable cost. So we do expect that there is a large element of that, which is moving between buckets. But also we believe that that cost will reduce significantly over time as we scale. And we would have expected to see the same thing even on an outsourced basis.

And I think the last point, Rod, that John made is an important one that, you know, with us handling a lot of this in-house, we also then can study how to bring it down quickly. Whereas when we looked at the 3PL model, it wasn't as clear to us how we establish a path to continue to work on logistics going forward.

Okay. And just one last thing, you know, one of the things that is really interesting about your business model is it is, it's so much less capital intensive than any other manufacturing of similar products. And that kind of leads you to the conclusion that it just doesn't take a lot to get to cashflow break even, but you're going to, you're going to go through this period. And I just want to make sure I understand kind of the investment phase of So you mentioned a run rate of $40 million of EBITDA per quarter. So am I correct in thinking about a $200 million negative EBITDA over the next five quarters? And it sounded like you referenced 80 million per quarter of CapEx. It's another 400 from that. So I guess between those two and a little bit of working capital, is that sort of the work the capital needs as we think out over the next three years?

I think it's important that the numbers you referenced, so we're clear, are euros, not dollars.

Oh, sorry. Yes, sorry.

Euros. But roughly, that's our expectation.

Yes, and actually what is important about our business model is that it's very modular. So you're absolutely correct to list those elements of the module. So one part of economics is the unit economics microfactories, and we extremely focus on that. Microfactory is a product for us, and we see it not only as attributes in terms of production rates, but also every cent we're spending there in terms of OPEX and CAPEX. It's very much controlled. Other things which relate mostly to R&D projects budgets we also controlling that very well and our method is supporting producing many models and variants at the same time so because we have like our method of design makes in the way that we have like radically less people involved in developing of the particular programs compared to what the industry does today. So broadly, you're right with the way to see our finance. Yeah. Gotcha.

Okay. Thank you.

Our next question will come from Brian Johnson with Barclays.

Thank you. Excuse me. You know, given so much that could be unique about Arrival is around the microfactory, as the last questioner pointed out, can you give us some anecdotes or metrics from the last quarter that gives us a sense that the microfactory composite production approach is still on track?

So, Brian, absolutely. I referenced in the script we're actually installing right now an updated composite manufacturing line in Bistar. But even on the line that we've had, we've produced over 1,400 composite panels to date. So the composite is absolutely delivering what we knew it would as far as both the product attributes that it brings as well as the manufacturing process. Again, one of the advantages of it being a rival IP is our ability to continue to improve it. And we're going to continue to work on the process to make it more efficient with higher throughput.

Yeah, and just to give you a bit of color here is that we just finished developing development of our new forming stations. And on the new line, which Mike was referring to, we're already putting this new generation, which has much better attributes than we had before. And because this process is so modular, so we have this flexibility even on the same composite factory to have like a previous one as a one line and the new one as a new line. and then updating the previous one, like not stopping the production. So that's also an advantage of our method as well.

Anything else, Brian?

Just as a follow-up, so the composite panels are produced. How about the process of actually joining them at scale into a van? How do we get some insight into that? Because your competitors would point out that panels are panels, and complete vehicles are complete vehicles. So just want to get a sense of how that production is going.

So Brian, when we talk about this composite manufacturing line, the last station or the last cell in that line is a bonding cell. We use that to assemble say an inner panel to an outer panel or any other sort of panel assembly. It's a very flexible cell. You know, it's done in the arrival way, so it's very highly automated. And then, you know, the panels get assembled to the vehicle in the tech cells in the actual microfactory assembly area. Again, you know, with very high automation and a lot of work on making sure the process executes to the throughput and the quality that we need. So yes, panels are only panels, but we are already assembling them into vehicles. I mean, we're using these processes already to assemble our prototype vehicles. So we're already getting a lot of practice with it.

But Brian, I would say that I expect others to say that because it's the old method, right? So in their mind, it's just, okay, you're replacing X with Y, but fundamentally that's just not true at Arrival. We've designed the composite panel to work with the systems that we've developed with the chassis and then you've got the components and you've got, you know, it's all design in-house technologies that all work together. So you can't take an existing vehicle, replace all of the body panels with our composite and expect it to work that way. It's fundamentally different. It's a total step change in how you think about a vehicle and how it's engineered. I want to make that point. Denis, I know you want to say something there.

Yeah, absolutely. Because what I wanted to say is that I want to refer the car which is behind you. is that it's quite amazing in the way that it was designed, in the way that we put interiors inside the car robotically, so which have never been done before in industry. And again, like our composite panels and the way how we do the bodies allows us to do that. And with unibody or with the current manufacturing, you get like traditional companies, it's impossible. With this type of design, we do, it's possible. Hey, thanks.

And with that, everyone, that does conclude today's webinar. We thank you all for your participation. You may now disconnect.

Thank you very much for your time. Thanks, everyone.