Top 3 SPAC Targets – EV Makers

After a quiet stretch in the SPAC market, we pressed pause on this column. But with deal flow picking up, targets getting more creative, and sponsors back in hunting mode, it’s the right time to bring back one of our favorites: the Top 3 SPAC Targets. Read on to see who we picked for private targets among EV manufacturers.

There has been increasing sense of alarm in recent months at the sense that major Chinese automakers may be winning the race for the top of the EV market. To dodge tariffs, BYD and Rivian have each moved to localize production in North America in recent years and major US automakers have pulled back on many of the models they had hoped would compete with these incoming Chinese builds.

With Tesla (NASDAQ:TSLA) sales also declining, there is now a gap opening for other EV makers to potentially fill before the dominance of foreign manufacturers becomes a foregone conclusion.

Despite the negative shifts by these legacy automakers, sales of EVs in the US are still growing, albeit at a slower pace than other markets. Ember’s estimates that just under 10% of cars on the roads in the US are EVs and adoption has reached as high as 27% in some markets in the Americas.

Assuming the US doesn’t lag behind its neighbors forever in this trend, there are many cars to left to be sold to bridge this gap. And, they could well come from a player currently waiting on a capital move to fuel their bid.

Slate

A big thing any new carmaker in the market is going to need in order to fight off the Chinese competition is low-cost manufacturing.

That’s a challenge for the US market, because, for American car buyers, size matters. The top selling vehicle in America has been the Ford F-150 for 44 consecutive years, but Ford’s (NYSE:F) attempts at making an EV version of this model were largely considered a failure and led to a -$19.5 billion loss.

For an EV to match the size and power of an American-style truck, it needs massive batteries with a price to match, and the electric F-150 Lightning was +30% to +40% more expensive than its internal combustion counterpart. It now has re-strategized around a model it aims to sell a for about $30,000 a pop.

Its upstart competitor Slate is looking to undercut even this, with its initial goal of an MSRP below $20,000 for its EV pickup truck. That included the $7,500 EV tax credit, which has since expired, but the company believes it will be able to make its first sales later this year at a price point in a mid-$20,000 range.

What might be most encouraging to SPAC teams is that Slate is not hurting for cash. Unlike many of the cash-hungry EV startups that went public via SPACs in 2020 and 2021, Slate has deep-pocketed backers in Amazon’s (NASDAQ:AMZN) Jeff Bezos and it has reportedly raised $1.4 billion to date.

Its last round earlier this year pulled in another $650 million that is expected to fund it through its initial production runs. That pre-existing runway could be key as it would assuage market worries left over from the last EV deal wave. At the same time, a SPAC listing could still make it attractive to retail investors that would be gaining the chance to buy in right as its vehicles make their debut on the road this year.

Longbow

Another company debuting its new electric models this year is Longbow Motors, and it is looking at a decidedly more premium range.

Longbow’s two-seat sportscars, the Roadster and Speedster, are expected to sell for £64,995 to £84,995 (about $87,365 to $114,260). The company justifies this premium through both exclusivity and a unique ultralight design, with the two models both weighing less than 2,000 lbs. That allows joyriders to go zero to 62 mph in about 3.5 seconds.

The London-based company plans to begin large-scale production of these models this year and it has already taken pre-orders. Its team has done this before as well, as both co-founders Daniel Davey and Mark Tapscott helped roll out some of Tesla’s first models.

The two are also familiar with the SPAC process as Tapscott was launching international sales with EV charging firm Wallbox (NYSE:WBX) just before it announced its combination with Kensington II and the two worked on the Lucid’s (NYSE:LCID) launch in the European market as it was merging with Churchill Capital IV.

Longbow’s smaller-scale strategy – it plans to limit sales of its premium Speedster to just 150 models – could make it more approachable to SPACs of varying sizes. And its overall lower capital needs contrasts favorably with some of the major buildouts that past SPAC EV targets attempted.

Jaguar Land Rover

If a SPAC were to want to go big, however, it would have few options with more heft to them than Jaguar Land Rover.

The two iconic brands have been a subsidiary of Indian industrial conglomerate Tata Group since 2008, but that wing of the Tata empire has been under going a restructuring lately. What had been Tata Motors, has now been split into a Tata Motors Commercial Vehicles (TMCV) and Tata Passenger Vehicles (TMPV).

The former is focused on running the company’s electric bus fleet in India as well as other enterprise fleet sales while the latter sells Tata brand consumer vehicles primarily for the Indian market.

While this provides cleaner corporate stories for each, it leaves Jaguar Land Rover as something of the odd man out. It is formally a part of TMPV, but the two operate in very different markets and clienteles.

Their stories now seem to be diverging even more. TMPV saw +20.7% revenue growth in past fiscal year and +49% in the last last quarter on the backs of its dominance in the Indian market while Jaguar Land Rover faced declines due to its global sales strategy.

Jaguar Land Rover’s headwinds saw it face a -20.9% revenue decline in the past fiscal year due the mix of trade shocks and short-term production interruption from a cyberattack. But, the company is otherwise in strong financial shape and still logged EBITDA margins of 14% last quarter with £829 million ($1.1 billion) in free cash flow.

As the company now looks to roll out new electric models, a spinoff could help it differentiate its story from that of the Tata Group in ways that would likely benefit both. It would likely take a high-profile team to reel it in, but there are several that would enjoy the opportunity to engage with a household names like this one.