Arrival

Hello, everyone, and welcome to Arrival's fourth quarter and full year 2021 earnings webinar. My name is Megan, and I will be your operator today. Before I hand the call 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. Thank you for your attendance today. I will now turn the call over to Mitesh Soni, Investor Relations, for Arrival.

Thank you all for joining us today to discuss the Rivals' fourth quarter and full year 2021 financial results. My name is Mithir Chakroni, VP of Investor Relations, and with me today is Dennis Redloff, CEO, Abhinav Ragubur, President, Mike Abelson, CEO of Automotive, and John Wozniak, CFO. 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. Descriptions of these factors and other risks that cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC and our fourth quarter 2021 Preliminary Earnings Release issued today on the 2nd of March. 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 investitsourarrival.com. With that in mind, I'll turn it over to Dennis.

Thank you, Mitesh, and thanks to everyone for joining us today. We at Arrival are on the mission to make the air clean by replacing all vehicles with electric. Before we get into the details of our earning call, I would like to show you an important achievement in our progress with our van skateboard structure being assembled in the Microfactory using in-house developed robotics hardware and software. This milestone proves our new method to design and assemble vehicles is working. With that, I want to remind everyone why Aravel is unique. We address large and expanding total addressable markets All vehicles will be replaced with electrics. Demand is huge. The total automotive market for all vehicle classes will be approximately 100 million vehicles per year. We target to have more than 100 microfactors over time equivalent to 1 million vehicles per year. Our initial focus is commercial vehicles but we believe this method can produce all vehicle types. Arrival aims to create vehicles with best-in-class attributes and user experience. Our target is to be number one in TCO which is the number one first criteria for fleet customers and number one in vehicle uptime. We believe our microfactories are a superior method, enabled by hardware, software, materials, and next-gen robotics. Our breakable components, software and data, significantly increases the life of vehicle and revenue potential. Plot work we have developed helps to accelerate time for market for new models and variants. 2021 was a transformative year, and we accomplished a lot, including remarkable progress in development, of our enabling technologies, micro factories, vehicle platforms, new materials, components, software, and new-gen robotics. Becoming a public company, started proving ground testing and validation for bus and van, advanced relationship with global companies such as UPS, LeasePlan, Microsoft, and others, and set up service network in the US, Europe, and United Kingdom. Looking ahead, our priority for the year is self-production of bus and van, and delivering the highest quality vehicles possible. With that over you, let me now hand over to Avinash, President of Riley.

Thanks, Bennett. In Q4, we successfully completed our first capital raise and our full attention has been on working towards our key milestones on bus and van. The market continues to support a rapid shift to EVs, including the signing of the bipartisan infrastructure bill that includes $4 billion to zero-emission transit buses, and President Biden's executive order permitting the US to net zero by 2050, with 100% of new vehicle purchases to be EV by 2035, and the UK's Bus Back Better, which includes £3 billion of funding. This shift is happening all around the world and creates favorable markets for Arrival to drive growth in the years to come across multiple vehicle segments. This momentum and our products, which we have been showcasing in the US and EU, continues to translate into strong demand with our non-binding orders and LOIs more than doubling to serve our 134,000 vehicles. The van continues to be the volume player for Arrival and we are on track to start production in Q3. On our bus program, First Bus, one of the largest UK operators, has worked together with local authorities in England to submit Zero Emission Bus Regional Areas, or ZEBRA, funding applications, which will potentially see up to 193 of Arrival's new electric bus models introduced across First Bus, subject to running successful trials, agreeing to a contract, and the outcome of the full ZEBRA process. You can see here the feedback from Jeanette Bell describing a strong relationship between First Bus and Arrival. We will be certifying the bus and starting our public road trials with FIRST as planned. And I want to remind everyone that the sales cycle for the bus starts with trials for one or two quarters. We have seen increased demand in the UK through next year and ongoing into the future, which enables us to begin production locally. As part of our commitment to support FIRST Bus' goal of a fully zero-emission bus fleet by 2035 and the increased demand from other operators, the decision has been made to produce vehicles in the UK in the second half of 2022. Rockfield will continue at a later date. Mike will go into further details on this, but we believe this simplified approach reduces cost and logistical complexity and is aligned with our customer push for local government funding and our ability to bring production to demand. I truly believe only a company like Arrival with its agile approach is able to quickly respond to strategic decisions in this fashion. Today, I want to take you deeper into the Arrival software ecosystem, the significant data we generate, and how this is expected to act as a multiplier for per vehicle revenue for Arrival. Arrival's unique quality is that we're vertically integrated. This means we design and build not just our vehicles, but all of the core systems, software and sensors within them. As most OEMs use a mixture of primarily third-party components, they are limited in their ability to collect such a holistic and complete data set, thereby limiting the insights they can generate and the improvements they can offer to customers. All the Arrival systems are designed in a way that they share structured data about the health, performance, and efficiency. It is also possible to send raw data about any signal or parameter which is available in any system. Our hardware is shared across all vehicles regardless of form factor. The bus, van, and car all use the same components, allowing us to capture combined data of all vehicles, use cases, and seats. With Arrival connected device platform, we can collect data from our vehicles at all phases, from early development through aftermarket till end of life. In case of accidents and faults, we can automatically generate, pack, and publish the dataset, which gives clear sequence and the root cause, and when coupled with machine learning intelligence, means we can continuously identify patterns and generate deep insights and build new features, such as predictive maintenance, advanced driver monitoring, and many, many others. thereby constantly improving the uptime of vehicles and reducing the TCO for our customers. Our in-house software ecosystem has four key objectives in mind. One, deliver best-in-class digital services and data to our customers. Two, continuous vehicle improvement through hardware plug-and-play architectures and software updates. Three, tools to rapidly bring new products to market. And four, to optimize our production processes to generate efficiency gains. Some examples of our digital services include the Move app, which will power self-service vehicles and trials and contactless delivery, giving users control over their vehicle and reducing the need for dealerships. Our 16-inch touchscreen inside the vehicle, which is integrated with mobile apps and back-end systems to manage the fleet, vehicle jobs, and assist drivers. And our Fleet Studio app, which allows fleet owners large and small to manage their fleet at all times. The extensive telemetry data that comes off each vehicle is also made available directly in the cloud in a way that our customers can seamlessly integrate into their existing tools or use ours. It is important to note that we believe this is a large competitive advantage. Commercial vehicles are high-utilization vehicles running considerably more miles than passenger vehicles, and we believe we will be able to collect more data per vehicle than anyone in the industry. And we have the control of the hardware and software that enables us to improve the vehicle considerably. And every dollar we save on the TCO makes our vehicle the most competitive product on the market. We consider these data and software packages a significant multiplier for Rival's revenue. We have only touched the surface here on what a Rival software ecosystem is capable of. With that, I will end. Thanks, Avinash. Today, I will go through the significant progress we're making in our microfactories, the development of our enabling technologies, and the status of vehicle testing and certification for both the bus and the van. At our Bistro Microfactory, installation has continued at pace, with six of the seven technology cells already installed. Most importantly, as Dennis highlighted, we've recently completed our first robotic assembly of the van's skateboard structure using the microfactory technology cells. Although only the skateboard structure of the van was assembled, it demonstrates the production capability of the cell. Each subsequent step of assembly in the technology cell will use the same fundamental technologies, so we expect to progress rapidly from this first result. This is a significant achievement and a critical step forward towards microfactory production. The skateboard structure assembly also used the other key element of our microfactory method, our autonomous mobile robots, or AMR. Our AMRs are used to move vehicles and parts to the factory and are a more flexible replacement for the traditional assembly line. The AMR's path is controlled dynamically. They don't follow a preset path, so they offer us great flexibility in the operation of the microfactories. AMRs are designed to operate either singly or in groups, and each van microfactory is expected to utilize approximately 140 AMRs. We continue to expand our U.S. operations in advance of van-centered production in our Charlotte microfactories. We've produced our first composite panels on production equipment in the U.S., and we've also announced a battery module manufacturing facility in Charlotte that's anticipated to bring an additional 150 jobs to the area. This battery module manufacturing facility is envisioned to eventually support production at both Charlotte and Rock Hill. As we progress towards starter production, we continue to monitor our supply chain and associated logistics. Unfortunately, we've started to see some delays in parts and equipment delivery. While these delays have not yet affected our start of production timing, we will watch these areas closely in the coming months. Turning to our two milestones, we achieved our first two bus milestones in Q4 2021, with trial bus production and proving ground trials, both starting in December. We intended to deliver vehicles for UK-based public road trials with first bus in Q1 2022. We've completed the build of the first trial bus, and the second one is currently being assembled. These trials are expected to last between three to six months, and we will continue to build further buses for trials in the second half of the year. Our intent originally had been to build both right-hand drive and left-hand drive buses in the Rock Hill Microfactory. However, because we've seen significant potential near-term customer demand for our buses in the UK, we've decided to shift our focus to producing buses in the UK. To be clear, we are still expecting to build buses at Rock Hill at a future date. As far as development milestones, we've begun building the final prototype versions of both our bus and van. These vehicles are the final step in the vehicle development process and are the vehicles used for trials, testing, and certification prior to production. Currently, we have three buses in testing, with two at Idiata's testing facility in Spain and one in the UK. We have a further six being built in Van Buren. We recently completed bus primary structure certification as well as steering and braking-based calibrations. we continue to target completing bus certification yet in Q1 of 2022. You can see in these videos examples of the testing our buses are undergoing, including abuse and fatigue testing of suspensions, closures, exterior and interior panels. For van, we've already built 20 prototypes for use in our initial testing and demonstrations to customers. We recently completed the first prototype van for European certification testing, with brake and steering calibration, stability control, and cold environment tests already completed in Sweden. We have a further 11 vans under construction that will be used for further testing in the UK, Europe, and the US. These vans will be a combination of both right-hand drive and left-hand drive vehicles, and we intend to achieve full product certification in Q2 of 2022. As a result of all these developments, we've updated our target milestones for this year, taking advantage of our ability deploy our capital and manufacturing capacity to those regions and those products where we see the strongest customer demand. Finally, to reiterate, we believe the Vans skateboard structure build using AMRs is a key step forward for proving our unique manufacturing method. It's truly exciting to see our enabling technologies come together on the factory floor. And with that thought, I'll pass it over to John. Thanks, Mike. First, I'd like to cover our preliminary Q4 and full year 2021 results. All amounts referenced in my comments are in U.S. dollars using average exchange rates over the relevant period for conversion. For the fourth quarter of 2021, the expected loss for the period was between $42 and $52 million compared to a loss for the period of $40 million in the fourth quarter of 2020. The expected adjusted EBITDA loss was between $56 and $66 million, compared to a loss of $44 million in the fourth quarter of 2020. As of the end of the year, the company had 637 million shares outstanding. The weighted average shares outstanding in Q4 were 612 million. Capital expenditures in Q4 were approximately 90%. to $100 million compared to $56 million in the fourth quarter of 2020. During the quarter, the company raised a combined $648 million through a $338 million secondary offering of the company's shares and the issuance of $310 million in convertible green bonds. The company ended Q4 with approximately $900 million of cash and cash equivalent. For the full year 2021, the expected loss for the period was approximately $1.3 billion, compared to a loss of $95 million in 2020. The full year 2021 loss included a one-time non-cash charge of $1.2 billion associated with the merger of Arrival and CIIG. The expected adjusted fee for the loss was between $178 million and $188 million, compared to a loss of $93 million in 2020. Capital expenditures for the year are expected to be between $315 and $325 million, compared to $122 million in 2020. These results are preliminary, and we expect to release full financial statements on April 8th when we file our 20F with the SEC. Turning to our outlook for 2022, we expect an adjusted EBITDA loss of between $185 million and $225 million and CapEx of between $380 million and $420 million. And we expect to end the year with between $150 million and $250 million of cash and cash equivalents. We continue to expect van production to begin in Bicester in Q3 of 2022 and in Charlotte of Q4 of 2022. And we expect to produce and sell between 400 and 600 vans this year as we ramp production in these two microfactories. For bus, we will be building saleable buses in the UK and expect the majority of these will be used in trials in 2022. The priority for this year is completing vehicle certification, starting production with our unique method, and ensuring the highest possible quality from our production methods. As we look beyond 2022, I want to reiterate why we believe the unit of economics on our microfactories differentiates arrival and is expected to yield attractive margins over the long term. Our long-term production and non-production capex target remains $50 million per microfactory. Van microfactories are expected to produce 10,000 vehicles per year on two shifts, and we continue to expect to generate $100 million of margin per year at full capacity. We expect to achieve these capex and margin targets over the next few years as we optimize the bill of material on our vehicles and improve efficiency in the microfactories. We believe this to be an important and achievable target, so much so that 50% of the long-term compensation of the senior leadership team is tied to meeting both the microfactory production and margin targets. Finally, I'd like to remind you why we think Arrival has an attractive business. We see a large growing demand as we start production this year and will deliver our first vehicles to our customers. We have significant upside from data and digital services, and we have attractive unit of economics and a CapEx advantage from our microfactory approach that allows us to scale rapidly to hundreds of microfactories with the flexibility to produce many vehicle types. In summary, we are well positioned for accelerated growth as we ramp production and scale our microfactories over the next several years. I'll now hand the call back to Avinash to wrap up. In conclusion, we have a very large addressable market supported by accelerated industry tailwinds and have seen our backlog continue to grow at an impressive rate. as more customers experience our products to approximately 134,000 vehicles. We have deepened our relationship with one of the largest UK bus operators, and hence have flexibly moved initial production to the UK to support this potential demand. Van will start production in Q3 in Vista and Charlotte in Q4. On the microfactories, we have crossed a major development milestone with the VanScape all-build you have seen today. Our software ecosystem is pervasive through everything we do and is expected to be a significant revenue multiplier as we continue to lower TCO and provide customer-facing software packages. The entire rival organization is all hands on deck focused on achieving certifications, with our vehicles already commencing testing and validation. We are looking forward to seeing the very first vehicles produced on the Microfactory and vehicles in the hands of our customers by the end of the year. Thank you. And with that, we open the Q&A.

At this time, I would like to turn the floor over to Dennis Verglas for opening remarks, and then we'll hold a Q&A session. Dennis?

Yes, hello, but can you allow me to turn on the video? Of course, I cannot do it. Hello, everyone.

I will read my statement because I'm quite emotional about it, but I need to address it. So, I would like to... I want to address any concerns related to my nationality. You all know that I'm Russian. nationality, and I'm strongly against war or discrimination of any kind. I was born in Georgia and worked in Russia. My wife, three kids, and I left Russia in 2013 before the Crimea event, and I was shocked at that time. And after two years in France, we moved to London in 2015, where I founded Derival. I have no connections to the Russian government in any form, I have only one desire to have a chance to create a meaningful impact globally. I founded this company in UK with an important mission to make our clean everywhere replaceable vehicles with electric. Arrival is a multinational company built on values. We operate in multiple countries and our duty is to support our team members in any way they need. Currently, we do not see the current situation has a material impact on our business operations. We have no parts sourced in Russia, and our people can work from anywhere as we must if we're not working during pandemic. We are monitoring and still provide updates should there be any material changes. And we now can move to Q&A. Thank you.

Thank you, Denis. I would like to remind everyone to ask a question. Please use the raise hand function located at the bottom of your screen. All right, it looks like our first question is from Brian Johnson with Barclays. Brian, your line is open.

Hold on. Is that unmuted? Can you hear me?

Yes, we can hear you. Okay, thanks. You know, two questions. You know, first, and thank you, Dennis, for sharing your comments. The first question is around the skateboard assembly milestone. Can you drill down on that a bit and kind of give us a sense of a few things. What went into that? Is that a more critical gating factor than actually assembling the rest of the chassis and the body of that? And I think third, kind of related to that, when I think of skateboards, I think of metal frames, traditional welding, kind of plucking battery modules and assembling them, which sounds, you know, and I'm not a manufacturing expert, different from the challenge of assembling the plastic bodies. So, you know, just maybe kind of talk a bit more on that. And my second question is a little bit different. It's just around the competitive dynamics within the bus market.

Absolutely. Okay. So, on the first side of the stage we finish, and why this is so much important for us, is that this stage includes all of what we call micro-technologies. So, there is a process where you need to pick up the parts using, like, ROGs and reapers and bring it to the station. There is a process how they lift it, like, in a special position. Then there's a process how the robot's picking up them and applying glue. then when it's placed inside the structure, and then other operations like a DS, and both and so on. So, what is important with this stage is that we actually did our full set of this micro technology within the cell. And all of them work the way we had planned. So, for that reason, it's our very important milestone. And actually, another very important thing that actually achievements we've got right now, it is according to our plans. So, we are not late with that and this is very very important so that it's actually developing with the way how we were planning and this is very very important for us so we expect that a lot of patients within the vehicle and actually we already we were recording this before and after that we already did the others stages of assembly as well. So actually putting the hoops on the structure and putting composite panels like on top of that utilizing the exactly same micro technologies. So for that reason we're expecting that we're actually going to go through those stages quicker than we were doing this in the first one. But the first one was, as I was saying, like the election of all micro technologies coming together. Another important thing is that actually, robotically, we were developing this technology already for quite a long time, but we were waiting for the parts to arrive, and so we assembled already the product. So the parts arrived, and we did the full cycle of doing this with the real parts from our vehicle. And for that reason, we are extremely excited about it, because this actually proves that our method works. So, our first testing, which we're doing right now, tells us that our methods of design work, so that our different types of interfaces actually work really well. But, from other side, the assembly process also works as well. So, both kind of things have been put on the stage. What I'm saying is, with all the tests we did so far, we're quite happy with what we see. But, obviously, we're still going through the certification process, probably we can get some other surprises there, but we don't expect that they will become surprises. That's probably my answer.

Just a follow-up there. When's the milestone of creating, using the micro factory process to create the full body and make the skateboard into the vehicle?

We are, you know, we are starting to start the production. It's starting in Q3. and this is the date we were talking about for a long time, and we are not moving this date, so it's still valid, and that's our internal target for the company. So, if you ask me when we will see the full sellable product is assembled, it's going to be Q3 for demand in 2022. But obviously, we will see earlier results of that, and we will update you with the progress when we will report Q1 and Q2, obviously.

Okay. And second question I get from investors is, you know, the original back in 2017 when I first met you, you know, it was all about LCVs coming in there. We know the kind of landscape there. You know, the bus is also, you know, increasingly a key part of it as you emphasize that's going to be the initial focus in the UK. You know, that being said, you've got a number of competitors in the bus space. And You know, can you give us a sense of why you think, you know, you'll have a competitive advantage in the bus space?

Yeah, absolutely. First of all, we believe that we have better products. I mean, so if you just hear on the attributes of the product we have, and the user experience we've made in our product, and the software features and smart features we have within the product, which is absolutely unique for the market, and the So we still see that our product's value proposition is so much stronger than like any other company already announced their product. So this is number one. And you know what is important? I think I need to emphasize here is that we are using a lot of technologies we are bringing from like our home products, from Japan, for example, Basque. a lot of components reused from design, including, for example, steering wheel, which has never been done in industry before. Normally bus has huge steering wheel, ours is exactly the same as the van has. And so, why it is important? Because we are 2,700 people company, and we have more than thousands of engineers working in our company making the software. You don't see any other bus company in the world which has this potential in terms of people and the going to the product. And for that reason, we are getting much better products. But the second part, as I said, because we were using components from then, we see that the cost of our bus is lower as well. Because normally, if you are even a super successful bus company and you're producing, let's say, 15,000 buses a year, you come to the market and you say, like, I want to buy a motor, 15,000 motors is so small volume that normally you pay a huge part for that. In our case, of course, we are building a bus using, for example, our bus has four motors from them, exactly the same motors, where we are using unit economics of demand inside the bus, which, again, is something which has never been done before. And for this reason, we are getting benefits, like cost benefits, which are not possible to get with the direct, just normal way of doing bus. And for that reason, we feel very, very confident, like, and strong in our position.

Okay, thank you.

Your next question comes from Steven Fisher with UBS. Steven, your line is open. Please make sure you're unmuted.

Thanks. Good morning. Good afternoon. Can you hear me okay? Yes, Steven. Great. Thanks. So, you mentioned some delays on parts and deliveries that you're starting to see. Can you talk about how broad that is and what's the risk that that might shift out any of your timelines? Yeah, I'd say right now we're seeing, you know, constraints in two areas that probably won't surprise you. They're generally industry-wide. Obviously, battery cells are an issue, although on that we've mitigated our constraint for this year. We secured production capacity on two lines with LG, which is the equivalent of about 82 million cells per line. and allows us to assemble battery packs for between 18,000 and 20,000 vehicles or vans per line. So we feel pretty good about that. We're also seeing constraints in chipsets and in, you know, semiconductors. We have been able to stockpile those, and we think we've got enough lined up for starter production this year and the volumes that we've guided to. But, you know, just in general with, A lot of the economic uncertainty that's out there, we continue to see issues with the supply, you know, just with logistics. We continue to see issues with inflation. And obviously, you know, we have a conflict now that's going on, and we need to continue to monitor the situation. But where we sit right now, at least we feel very confident about our ability to secure all the necessary parts. for production this year and even as we ramp up production into next year, but it's something that we need to monitor on a daily basis. And obviously there is uncertainty there and we could see constraints that we don't anticipate right now.

If I may, I just want to actually answer this question from two sides. The majority of what John said is more about long-term projects, right? Because batteries is a long-term project, we've been doing it already for a long time, and we've secured our position. Chips, for example, some of the chips have a 60-week lead time, and we've placed the orders for those chips a long time ago, so we've stockpiled them, so we don't see the issues here. But obviously, every day we can have sometimes one week or two weeks for some of the parts which are coming. But because of our flexible nature, we're almost planning every day. So we have our operational team planning in the morning, like, okay, guys, we have those parts arrived, these demons, what do we do? And based on that, they can aggressively change the plan. So for that reason, we just say that Of course, in fact, it's the same as any other company with just instability with its supply chain, but it doesn't make much real impact right now on our operations because our flexible methods, like agile methods of doing things, allow us to address that and compensate that internally. But look, I mean, of course, we see like aluminum pricing is growing high right now because local we supply from Russia, and nobody knows if it's going to be available in the market or not, and so on. So, of course, it will make an impact on, like, everything. I mean, not only us as a company, but any others. But what we're happy with is that our method allows us to be flexible, and that's where we can compensate a lot. So, actually, our microfactories approach and our kind of method of which we apply to supply chain become our very strong competitive management.

Thanks for that. And then nice to see the ramp up in the LOIs. I'm wondering if you could just give us a sense of how many binding orders you have and how you see those non-binding LOIs ramping into actual binding orders. Thank you. In terms of the sales conversion, I think what's important is right now we're going through the process of showing the vehicles to customers. And I think You're seeing the impact of that in the doubling of the ROI. We expect that to start converting this year. And if I just remind everyone that the van sales cycle is different to the bus sales cycle. So bus will typically require the trials. They last one or two quarters. We're commencing those initially with our partner in first bus. But we do need to run those trials before they'll convert into binding orders. When it comes to the van, it's really once we hit that certification point, and that is being planned for Q2, and that's where we really see a conversion across the buying orders. And those industry tailwinds are really big. We mentioned some of them, but the commercial vehicle segment in particular, their requirements also drive in a fast transition. So when you see the growing backlog, I think that you know, towards the – our sales team is really focused on that right now, and that's going to just progress through the year. Thank you.

Your final question comes from Michael Filatov with Berenberg. Michael, your line is open. Please remember to unmute.

All right. Can you guys hear me? Thank you, Mike. Great. Thanks for taking my question. So the first one, you know, it seems like you mentioned the delay or I guess maybe the push out of the production at the Rock Hill facility. It seems like potentially that is because you see stronger demand in the U.K. with U.K. customers, if I'm understanding that correctly. But I know previously you said demand is not really an issue for you guys, right? It's more so just getting to production. So just maybe if you could provide a bit more detail around the decision to push out the start of production at Rock Hill.

That would be great. Yeah, okay. I'm happy to give you A little bit more background on that, Stephen. First, I would make the point.

Yeah, please, Mike. If you don't mind, I will do a very short kind of thing. It's a very simple answer here. We have very strong supply in the UK. They're having more than 5,000 buses. And obviously, with all the push from government, it's a lot of pressure on the local operators to switch to electric. So we have a local customer who wants to buy local products. And for us, it's a business decision. So originally we wanted to build those vehicles in Rockville because we wanted to develop our US presence and our operations there. But this customer, and for this customer, it makes a lot of business sense to make it here in the UK. And for that reason, like, we're doing this. And again, like, we see it as an advantage of our organization. Because here we are, like, it's an organization. You're building the factory, you're doing this, you're putting the content there, and then, like, your plan is changing. So you can hold it there, like, should we continue? Should we not? We're already invested. In our case, because of our, that we can reuse equipment, and we're using great chief leasing, like a big building we're using, extended air house, which is quite cheap compared to the production size. It's not specially built. It allows us to give the, to do it from, so that we can react on the demand from customers. So it's purely business decision. It makes much more sense for us as an organization to do this. And for Rockfield, we are not canceling this project. We are just saying that we are going to do it a bit later, when we will create like a right, There are two aspects of that. So we need to have a US-based product, we need to have the US buses certified in the United States. And like our customers in the United States, it aligns very good with our plan as well. So the point here is that the fact that we are moving from Rock Hill, it doesn't make an impact in terms of our business. And this is very, very important. So we support our company here and they're planning to do the first things next year anyway. And we do like a preparation of all the bus operations happening here. So we are quite pleased with the development of this.

Let me just add, we still see significant opportunity in the U.S. market, obviously with the passage of the infrastructure law. There's significant funding there for EV buses. As we've said, we will be building U.S. buses in the future. As Dennis explained, we have a near-term customer demand. We have trials that will be starting here very shortly. And, of course, the government and the customers are interested in having the buses built locally. The cycle, as I said, it's the two quarters, quarter to two quarters of trials first. And so because we're already going to be commencing those locally, it just makes sense that we'll lean on production from there. We're just going to, you know, Charlotte still starts production for BAM in Q4 this year.

Yeah, what is important about all our messages today in terms of dates, we're conforming to almost all dates, right? So the only date which is is that top of production in Rockfield, but it's not a delay, it's a business decision to move it to UK. And another important thing is that in terms of our trial, like we started like as we planned in terms of pace.

And like we, like, so actually, like, we got in very well in that regard.

Thank you, everyone. I will now pass the call over to Avinash for closing remarks.

Thanks, everyone. So, thanks for tuning in. I think, you know, just to sum up, you know, we do see a rapid transition in demand. We've shown our backlog is growing and more than doubling as products get out to everybody. And our method of better integration, which we've seen to be The skateboard is being assembled, which is a major milestone, and that very integration allows us to scale rapidly. So thank you, everyone, for joining. We're really excited about this year.

This concludes today's call. You may now disconnect.