REE Automotive Ltd. Q2 FY2024 Earnings Call

Good day, and thank you for standing by. Welcome to the REE Automotive Q2 2024 Financial Results. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Karen Shemesh, REE's Chief Marketing Officer. Please go ahead.

I would like to remind you that today's call may include forward-looking statements. Any statements describing our beliefs, goals, plans, strategies, expectations, projections, forecasts, and assumptions are forward-looking statements. Please note that the company's actual results may be different from those anticipated by such forward-looking statements for a variety of reasons, many of which are beyond our control, such as the ongoing military conflict in Israel. Please refer to the company's Form 20-F filed on March 27, 2024, with the Securities and Exchange Commission which identifies the principal risks and uncertainties that could affect our business, prospects, and future results. We assume no obligation to publicly update any of these forward-looking statements, except as required by law. In addition, we will be discussing or providing certain non-GAAP financial measures today, including non-GAAP net loss and non-GAAP operating expenses. Please see our financial results press release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. Listeners and those on our webcast are invited to follow along with our presentation today, which is available on the Investor Relations portion of our website. Today's call is hosted by Daniel Barel, REE's CEO and Co-Founder. Who we will be joined by Josh Tech, our Chief Operational Officer; Tali Miller, our Chief Business Officer; and Yaron Zaltsman, our Chief Financial Officer. I will now turn the call over to Daniel Barel.

Good day, everyone, and thank you for joining us today. For those of you who have been following our story and for those who recently joined, the past few months have been the most significant in REE's history. We have achieved milestones that we pursued for years. Today I can tell you that we have what we believe is by far the best product offering in our heavily underserved addressable market. I can also tell you that we have secured sufficient production capital and our funding position is strong. Thanks to our recently announced strategic supply chain management agreement with Motherson Group. We de-risked our ability to ramp up to mass production. We have already kicked off U.S. production with Roush as a U.S.-based contract manufacturer for our P7 product line and we continue to see growing demand for our products both from fleets and OEMs. The strategic agreement with Motherson Group is transformational. It will allow us to grow faster while lowering production challenges that other EV companies often face as they ramp. With Motherson driving manufacturing, customers and shareholders could be confident on this front. Today we are joined by two great gentlemen from Motherson, Mr. Rajesh Goel, President, Head of Special Projects and Mr. Aviral Khandelwal, Head of Group Strategy and M&A, who will share more on the rationale behind Motherson's decision to partner with REE. But before we jump to discuss these strong milestones in more detail, let's first cover the second quarter of 2024 financials. Second quarter net loss narrowed by 57% quarter-over-quarter and by 59% year-over-year. Free cash flow burn continued to narrow with a 19% reduction quarter-over-quarter. Liquidity was $60.5 million comprised of cash, cash equivalent, and short-term investments inclusive of a $15 million credit facility. I believe that our strategic agreement with Motherson will allow for faster and more stable production scale-up and significant working capital benefits. Motherson is a very strong global engineering and manufacturing company and one of the world's leading automotive suppliers. For fiscal year 2024, Motherson achieved gross revenue of $17.2 billion and they operate 400 facilities across 44 countries with 190,000 employees. Motherson has a strong, lasting relationship with some of the leading automotive brands. Combining Motherson's manufacturing expertise and supply chain management with REE's market-leading software-defined EV product lineup promises to create a dominant new force in the electrified commercial vehicle market globally, allowing us to service customers at scale and address the significant order growth anticipated for our products. As part of the strategic agreement, Motherson will manage sourcing and supply chain management of all production parts and support the assembly of the REEcorner and the REE P7 electric trucks. They will drive operational manufacturing improvements to REE’s production line, which we believe would significantly improve unit costs. Faster revenue growth and improved unit costs are expected to accelerate the road to meaningful free cash flow generation. Demand-wise, we continue to see strong interest in our technology from potential customers, including OEMs. Let me repeat that last point. We are currently in discussions with three OEMs seeking to utilize REE’s software-defined technology in their future product lines, offering the potential to meaningfully expand our current offering from full vehicles or platforms to software licensing of our full X by-wire technology, allowing OEMs to take our software to EVs in all classes and segments. Our order book continues to grow, reflecting strong demand, even amidst broader challenges in the EV market. We remain committed to offering excellent products that provide improved operational efficiencies and a low total cost of ownership. With the additional confidence, customers gain from our collaboration with Motherson. We anticipate strong order flow to continue. To put numbers on it, our order book is up 15% quarter-over-quarter as we continue to expand our dealer and service network to 78 locations across North America. We now have one of the largest service networks of its kind in North America. On the demand front, it is important to know that the commercial vehicle fleet globally is not electrifying as quickly as fleet owners would like. The reason is simple. The available electrified vehicle options are simply not good enough. I think it's fair to say that major fleet owners today are desperate for a fit-to-purpose electric product that they can order at scale. At the risk of repeating myself, we believe that REE has the best-in-class technology-led product. Not only do we have the best product, but now, thanks to Motherson, REE also has the manufacturing scale, experience, and expertise to scale production to meet the demand of large and global fleet owners. The annual market for medium-duty vehicles in the U.S. alone is 240,000 units with more than double that in Europe and Asia. Currently, only a small part of that is electrified and those units that do sell are essentially retrofitted internal combustion engine products. With the right product and production availability, the industry could easily be ordering tens of thousands of EV units per year in the U.S. alone, especially in Classes 3 to 5. With the right product, the required manufacturing backing, and the required service network, we are ready to meet the growing demand. As you may have seen, last week we announced a $45.35 million capital raise. As you know, we went public via a SPAC transaction, and at the time of the transaction, we underwent approximately $153 million in redemptions, causing us to commence our life as a public company with less cash than we expected. However, since that time we continue to adapt and today we feel that we are finally in a very, very strong cash position. We are proud that we have made it to the mass production point with the best-in-class, full FMVSS-certified X by-wire product that has been custom designed for the target customers. Thanks to the continued support of our patient long-term investors, this additional capital allows us to move forward confidently into the mass production phase from a financial standpoint. Motherson contributed to the capital raise, as you have seen, fully aligning their interests with ours. With that, let me hand it over to Josh to tell you more about our plans to meet the growing demand we see.

Thank you, Daniel. We believe that our supply chain management agreement with Motherson is a game changer and bolsters our commitment to deliver our amazing powered by REE technology reliably, with quality, and at scale to all our customers. It allows us to grow our production capacity responsibly with the demand while leveraging Motherson's purchasing power, global footprint, and experience. This translates into a more efficient and stable production ramp alongside improvements to working capital. For those that are new to the story, Motherson Group is a major supplier to the automotive industry with longstanding relationships with global OEMs. And I would like to hand it over to Aviral for Motherson to tell you more about them and why in their eyes they did partner with us.

Thanks, Josh. We at Motherson have been highly impressed by REE’s path-breaking corner module-based architecture and the value proposition it represents for both truck makers as well as end-users. Our goal is to support REE's growth and technological progress by expertly managing its supply chain and leveraging our top-tier engineering and manufacturing capabilities to drive commercialization and industrialization through a mutually beneficial commercial framework. Additionally, we aim to enhance REE’s integration into the automotive ecosystem by providing exceptional customer support across the value chain. Our participation in the financing round further underscores our commitment to support this exciting technology. We believe the strategic partnership will contribute to Motherson’s diversification and strategy of increasing content per vehicle. Over to you.

Thank you, Aviral. We believe that we have the most compelling product on the market, well positioned to meet the growing consumer demands within the segment. Now with Motherson’s vast network of supply chain professionals, we can better support our customers through the startup production and ramp-up phases as they build their electric commercial fleets. We know how important the ability to produce at scale and provide nationwide support is to our customers. Motherson will be looking to drive efficiencies throughout the supply chain, especially in areas where they have production expertise. With this manufacturing backbone, REE will be able to grow sustainably while maintaining our DNA as an innovative technology company. We are freeing up resources for future technological development and product enhancements while reducing production risks, becoming more efficient, and improving on unit economics. We kicked off U.S. production of our P7 lineup with Roush as our contract manufacturer for full vehicle assembly. Roush is a leading global product development supplier operating across more than 30 countries. We signed an agreement with Roush during the second quarter and have been preparing to start production over the past few months. This effort will be supported by a joint Motherson and REE team responsible for quality assurance, logistics, and testing. REE will continue to manufacture our proprietary REEcorner technology in our Coventry Integration Center. Now that we have secured the capital required for production, the execution of the strategic agreement with Motherson and the production kick-off at Roush, we are updating our production plan to start deliveries in 2025. In order to utilize our renewed capabilities while addressing the strong customer pull we see and to capitalize on the significant savings and efficiencies our collaboration with Motherson is expected to enable. As a result of the very recent signing of our agreement with Motherson, we expect it will take some time to develop a production plan which includes Motherson's important input. Following the finalization of the revised production plan, we believe the revised production and revenue plan will benefit our ability to address larger follow-on orders from fleets and OEMs, and coupled with the expected improved unit cost will accelerate the road to meaningful free cash flow generation. With that, let me hand it over to Tali to tell you more about our business and product achievements. Tali?

Thank you, Josh. The demand and interest in REE’s software-defined electric vehicles continues to grow. We see strong demand from both fleets and OEMs. Our order book increased by 15% quarter-over-quarter and is valued today at approximately $60 million. REE’s Authorized Dealer Network, one of North America’s largest of pure commercial EVs, continues to expand now covering 78 sales and service points. This is a key strength for our fleet-customers who seek nationwide service and support. We continue to receive strong positive customer feedback from our demo program as we continue to deliver more P7-C demo trucks to our dealers across the U.S. The REEcorner business line continues to show strong potential with two new OEMs joining our OEM program. We continue to see growing interest in our software-defined technology by traditional and new OEMs interested in adopting our REEcorner and thus gaining access to software-defined EV technology. We believe that, although this is a long-cycle business, it has the potential to bring our technology across vehicle categories and classes, making it the Intel Inside for automotive. As Josh mentioned, we are updating our production plan, and as such, we are working with our current and new customers to secure production slots for their deliveries. Naturally, our production slots are limited and we prioritize according to several factors, one of which is significant follow-on orders commitment. During the quarter, we delivered the first Powered by REE demo trucks to Penske and U-Haul, among others, and have expanded our collaborations with upfitters such as Wabash, who upfitted the Penske EV with a 16-foot Wabash DuraPlate body. These trucks received great feedback from potential customers, and Penske began offering Powered by REE electric vehicles for demos and orders across North America. In addition, U-Haul received the first P7-S platform, completed it with a full body and is now evaluating it as the first solution to support the electrification of its fleet. The feedback from U-Haul is very positive and we believe that the P7-S strip chassis is an excellent solution for a significant portion of the U-Haul fleet. The newly unveiled P7-S, a software-defined electric truck, was designed in collaboration with the leading parcel delivery fleet. The P7-S is designed to enable a fully flat platform with low step-in height, modular configuration, high payload, and revolutionary all-wheel steer, allowing for flexibility in dimensions and ultimate design freedom for fleet and bodybuilders to develop their own purpose-built electric vehicles, such as step vans, box trucks, and vocational-specific vehicles. On the autonomy front, we are very excited about the progress in our joint program with Airbus. Airbus has fitted Powered by REE with basic A350 airliner controls to demonstrate the first-ever autonomous drive on runways in France as part of the Airbus’ three-year Optimate project. According to Airbus, they expect to see this technology tested in a full flight within one year on the A350 with more platforms to come. This project further improves the future of aviation, airport ground traffic management and safety, and REE’s technology is at its core. As of July 2024, over 50,000 government and education entities were granted access to purchase REE software-defined electric trucks through Sourcewell contract. Subsequent to the quarter end, REE announced that its P7-C will be available to government and education entities in all 50 states in the U.S. through a four-year contract awarded to National Auto Fleet Group. By Sourcewell, a government agency dedicated to streamlining the procurement process by fulfilling the billing requirements on behalf of their members. As you can see, we've made strong progress on the demand side. We continue to see high interest from both fleets and OEMs for our very differentiated products as customers appreciate the value our technology brings to their needs. I believe the market has been waiting for electric trucks to be better, safer, and more efficient than internal combustion engine trucks. The Powered by REE electric trucks are made to serve this exact need, and customers recognize that. We are working with our fleet customers to secure production slots to ensure they have the best possible pathway to build meaningful electric fleets. I'm very encouraged by the level of interest our software-defined technology receives from leading auto manufacturers. With that, I would like to hand over to Yaron to talk about financials. Yaron?

Thank you, Tali. I'm very happy to share that we have secured the necessary funding to kick off U.S. production. This will allow us to start delivering vehicles to our customers in North America in 2025 and to grow it to scale. I believe our collaboration with Motherson will allow us to start reducing our production costs and to accelerate growth as we concentrate on our core, which is our technology and product offering. I am very proud of our teams across the world for driving results while cutting costs. With that, let us dive into our second quarter financials. As Daniel stated earlier, our working capital position is strong. We ended the quarter with $60.5 million in cash and short-term investments, inclusive of a $15 million credit facility. Our cash burn narrowed in the second quarter, as did our net loss. Free cash flow burn continued to decrease, with a 19% reduction quarter-over-quarter and a 17% reduction year-over-year. Net loss narrowed as well to $10.8 million, a 50% decrease quarter-over-quarter and a 59% decrease year-over-year. Non-GAAP net loss in the second quarter decreased by 41% quarter-over-quarter to $12.4 million, a 43% decrease year-over-year. A reconciliation of GAAP to non-GAAP measurement has been provided in the financial statement tables included in our earning press release. Last week, we completed a $45 million registered direct offering for the purchase of about 11 million ordinary shares or pre-funded warrants. M&G Investments, our long-term supportive shareholder, led the investment with $20 million and they now hold approximately 16% of REE shares outstanding. Motherson invested $15 million and now holds 11% on a fully diluted basis. We believe our funding position is strong and that with the recent financing round we have the capital we need to kick off production without the need for further funding. We always said that we would kick off our production plan only when we know we are not taking any major financing risk. And now we are finally ready. There is a lot going on for REE. We have our work cut out for us as we merge our operational activities with Motherson and we will be providing new guidance soon. Once we are deeper into the plan with Motherson, we will be able to share the updated number which we expect to include positive margins on our production and a faster path to positive cash flow than previously announced. I will now turn the call back over to Daniel.

Thank you, Yaron. As you can probably tell from the tone of this call, the recent announcement of REE's strategic collaboration with Motherson represents an absolutely transformational development. It's very big news for REE's future prospects and our ability to realistically scale into what we know is a massive market opportunity where customers have limited alternative options. We have also strengthened our financial position with new capital from stable long-term investors, including Motherson itself. In combination, this marks a major positive inflection point for the business. The combination of core competencies from REE and Motherson will significantly benefit our customers, be they fleet owners or OEMs. They've been in need of a mature and capable electrified product lineup that can be produced and serviced at scale. In fact, we've already started discussions with key customers to secure production slots, and we are currently updating our production plan. We will update you on this as things progress. Looking ahead, we anticipate three different ways that REE technology will be sold and integrated into the market: REEcorner, the REE platform, and full vehicles such as the P7. We will work with Motherson to build a reliable, stable, and long-term production plan across all three avenues. We will leverage Motherson's production capabilities and expertise to lower our costs and improve our cash flows as we ramp production and delivery quantities. Before opening to Q&A, I should also mention that I am encouraged by a recent capital raise which secures our working capital needs to start U.S. production, and I am grateful to Motherson, to M&G investment, and the rest of our other long-term investors for their continued support, trust, and patience. I also look forward to Motherson's additional contribution to our Board of Directors. Lastly, as always, I would like to thank the entire team at REE for their devotion and dedication, as this very talented group of professionals are the true factor behind our success. I would also like to thank Aviral and Rajesh from Motherson for joining us on this call today.

Thank you. We are now going to proceed with our first question. And the questions come from the line of Craig Irwin from ROTH Capital Partners. Please ask your question.

Good morning, and congratulations on the strategic investment. It was big news and a big deal actually for the EV trucking industry considering the vote of confidence there from Motherson. So, I wanted to ask if we could maybe talk a little bit about the Roush contract manufacturing agreement. You did mention in the release you kicked off U.S. production. Does that mean that there are trucks that have started the build process or that you're preparing for the build process? Can you maybe frame out for us your interaction with Roush and how you would qualify the vehicles with them and then certify those for U.S. customer delivery and maybe the capacity or the number of vehicles a day that you would hope to get to over the next number of months?

Sure, Craig. Good morning. This is Daniel. Thank you for the question. Maybe, Josh, do you want to start?

Yes, I can take that. Hi, Craig. How are you doing?

I'm great. How are you?

So, Roush, as we noted, we started working with them back way earlier in the year and we kicked off the actual contract back in Q2 and we've been preparing for this moment with them for actually quite a while now. Now is the right time to bring it to fruition and announce it. But basically, our collaboration with Roush is really centered around contract manufacturing for the full vehicle assembly of our Powered by REE vehicle. Roush will play a crucial role in helping us scale production in North America and through joint operations with the REE team. Roush will manufacture the vehicle for us, which is an exact replica of the vehicle we have already certified. As a contract manufacturer, they will build to our specifications, so the certification process is straightforward. They are essentially replicating what we have already accomplished. We will begin production in Q4 and plan to deliver the first vehicles in 2025.

Understood, understood. So my second question is about the cash burn, right? So you guys have done a fantastic job bringing expenses down. I know some of the belt tightening there is sometimes a little bit painful, but you've got the company to a much leaner overall structure. As we look at the progress to customers' deliveries in 2025, is there much in the way of incremental expenses that might need to be added back or can this be part of the conversation you started in your prepared comments about getting profitability faster with the Motherson agreement and obviously manufacturing at Roush?

Sure. I think this is a very good question. Yaron, why don't you take…

Hi. Good morning, Craig. So the cash burn was getting down, and it's not going to go up. Actually, it's going to get more down in the following quarters, because the R&D, as we always said, is more or less done. And R&D was the major expense in our cash burn. And R&D now is going to go more down in the future. And of course, the SG&A should go slightly up because we need to increase our position in the U.S. But in total, there is not going to be an increase in the cash burn.

Thank you, Yaron. I want to add that we are currently re-evaluating many expenses we initially thought necessary for expansion, but we may not need to incur those costs thanks to our collaboration with both Motherson and Roush as we progress. This is why this collaboration with Motherson and Roush as a contract manufacturer is so transformational for us, because not only does it get us to scale, it helps us to significantly lower costs that we already thought we were going to be spending but not necessarily will be spending in the future, hence the revised production plan. And I think this is what we believe will drive faster profitability and free cash flow as we move forward.

Excellent. My last question, I guess, is probably interesting for both Wall Street and your customer base, right? So I've talked to a lot of customers that are enthusiastic to take delivery of units from REE. And I was hoping you might be able to talk a little bit about how you select the customers that are likely to be front of the line for deliveries in 2025?

Of course. First of all, I tend to agree. We see a lot of demand and a growing demand for Powered by REE vehicles out there for multiple customers. And to your point, we have a very clear decision matrix, upon which we prioritize orders. Among other indexes that we look at, you can find order size, price, even the fleet electrification readiness, and of course, the future potential. And we weigh them all together in order to score that in the end. And according to that score, we prioritize the production slot. I think maybe Tali can shed a little bit more light on customers actually visiting a few now in the U.S. Tali?

Yes, sure. Thank you. Good morning here. Yes, definitely. We see demand, we see growing demand. The way we prioritize is, first of all, we have, again, a clear framework to allocate that, now that we have a clear production plan for 2025. Working with the fleet and working with the dealers that we have in place. And prioritization goes by size, potential, price, and also the fit to their needs.

Understood. Well, congratulations on the progress. I'll go ahead and hop back in the queue. It's great to see you guys strong out of the gates.

Thank you so much.

Thank you. We are now going to proceed with our next question. And the questions come from the line of Amit Dayal from HC Wainwright. Please ask your question.

Thank you. Good morning, everyone. Congrats on all these important strategic milestones that you recently accomplished. With respect to the three OEMs, Daniel, can you give a little bit more color on what kind of customers these potentially are? I know you mentioned Penske and U-Haul in the last earnings call. Are these the same customers? Are these different customers versus what you highlighted previously?

Yes, thanks. And of course, good morning. So no, these are not the same customers. When we talked about OEMs, remember, what we always said is that REE completes, it does not compete. So we have the ability to work with other OEMs such as us to allow them access to our software-defined technology, giving them by-wire software-defined vehicles. And we see a lot of demand and growing demand from other leading car and automotive manufacturers interested in our technology. And when I say interested in our technology for other OEMs, they are not interested in us building trucks for them. They are more than capable of building and sort of finding their own trucks. They're more interested in the software. And why is it important? It's important because, one, we are the leading technology company. And second, it allows us to open up an opportunity for software licensing revenue, which is very significant in general and also for us, especially margin-wise and scale-wise. Why is that? It's because it opens up the opportunity for our software to be implemented in vehicles that are not necessarily only commercial and are not necessarily only in the current Class 3 to 5. And I think if you look at the market in general, most of the car manufacturers and auto manufacturers out there have been talking about trying to get access to softer-defined vehicles.

Understood. So my follow-up question on that is. These OEMs or other types of customers who are looking into your software, they don't have to buy the REEcorners?

They can buy the REEcorners, and we'd be more than happy to supply them and of course leverage Motherson's production capabilities at scale, which is also just to make sure we understand is super important for those OEMs. But at the end of the day, production of mechanical parts can be done by several fronts. We believe that the best way to do it is for REE itself to concentrate on software and together with Motherson we will be able to produce the REEcorners as a full set with better scale, better economics, and better efficiencies. And then the OEMs will basically, the way we see it, put it on their own chassis, their own bodies, and be able to drive it. When we look at different vehicle classes, naturally it's going to be different REEcorners.

Okay. Understood. Thank you for that. Are the regulatory incentives you were expecting for customers who purchase the REE vehicles still available? Any changes regarding that?

Could you please repeat the question? I couldn't hear it well. Sorry.

So, the regulatory incentives for purchasing these electric trucks. Are those still in place? Any changes to that? Just to see if customers can still enjoy those incentives when they purchase these offerings.

Yes. I think Tali can answer that, but before she does, I can say that we haven't seen a change in incentives. In fact, during the quarter, we added another state that provides incentives. Tali, can you share some more on that?

Yes. Sure, sure. So on the incentive side, we don't see a major difference. There continue to be incentives on both state and federal levels. We're talking about the U.S. now, especially Massachusetts. But of course, there are also other states, and we see this definitely as interesting too.

Understood. Thank you. Just one last one from me. The $60 million in your order book, this is all for the full vehicles, right? These are not just orders for the corners, but these are orders for full vehicle delivery, right?

Yes, that's a very good question. We have three different product lines: full vehicles, chassis, and corners. The approximate $60 million order book value is for full vehicles and chassis.

Okay, thank you. I'll take my other questions offline. Thank you guys. Appreciate it.

Thank you.

Thank you. We are now going to proceed with our next question. And the questions come from the line of Jeff Osborne from TD Cowen. Please ask your question.

Thank you. Daniel, I have a couple of quick questions regarding the process flow. Will you be manufacturing the corners in Coventry? Will you also be producing chassis there, or is Roush handling the full vehicles and the skateboard production while you focus solely on corners in Coventry? I'm unclear about Roush's actual role.

Yes, corners are in Coventry in the UK, all the rest is with Roush, but Josh, do you want to maybe dive a little bit deeper?

Yes. Hi, Jeff, how are you? It's great to see you again. As for Coventry, we want to keep our core intellectual property. We're going to manufacture the corners there; that part is ours. What we're going to do then is we locally source everything else, right? So again, the truck, the compelling REE vehicle is our design, everything is our IP. We will source that like our normal models. We're not going to invest in heavy equipment to make chassis. So we have current chassis manufacturers that will manufacture the chassis for us. Cabin parts will be made locally by local suppliers in the U.S. Again, we want to localize the supply chain. Again, Motherson will have a huge impact on that as well. And then Roush will do the final assembly for us, right? So again, that's with us and Motherson together, we'll localize the supply chain, we'll bring down the costs. A lot of that has to do with logistics, of course, quality management, able to be with the suppliers to work hand in hand, and we'll bring the entire vehicle together at Roush. Then again, what's key is, us with Motherson as well will be at Roush. Roush is putting the vehicle together to our specifications. We then take the vehicle back over, we'll do the shakedown, quality qualification, and then handle the distribution within the U.S.

And just to add on that, Jeff, I think it's important to mention that you're touching a very important point in my view, is that, for a company like us to be able to manufacture in multiple locations around the world and manage that, everything from supply chain to logistics is a big challenge. And I think this is one of the key strengths that we're now enabled through this partnership with Motherson.

Okay. Thanks, Daniel. Thank you for the question. So as was mentioned during the announcement and by Daniel and Josh, the partnership is to bring in Motherson’s global expertise, which obviously includes sourcing and managing the entire supply chain. The value that it brings is that we do a lot of manufacturing of multiple components by ourselves globally, including harnesses, mirrors, plastic parts, lighting, etc. The components that Motherson can provide definitely enhance the competitiveness of REE. Additionally, due to our substantial sourcing organization and expertise, we can source many of the other components that we do not manufacture ourselves, as REE focuses on module manufacturing for products like the IP module and other modules. Our ability to source components is very strong. This will help us free up management resources for REE, reduce their workload, and create efficiencies both in terms of cost and process. This is what Motherson will contribute to the partnership.

Thank you. That's helpful. Two other quick questions. Josh, I think you mentioned that Roush was in production currently. I assume those are for demo units and you wouldn't have revenue attributed to those in Q1. But can you just give us any type of comments as to when you expect to deliver vehicles for revenue? Is that being Q2 or second half of next year?

Yes. So, like I said, we plan to start Q4. We didn't say it, so we've been pairing for production and obviously getting infrastructure and things together with them. Start before the end of the year and then we will start production next year. So as far as the production plan, again, as we've noticed throughout this call, we signed with Motherson just a little bit ago, and we're in the process of updating that production plan now, so again, we expect to start in Q4, deliveries in 2025, and then following the final edges of the revised plan, we believe this revised production and revenue plan will benefit our ability to address the larger fall in orders from fleets and OEMs.

Got it. And then can you share what the maximum capacity is of the Michigan facility from Roush if it were fully utilized hypothetically?

So the way we've done the production plan over the next couple of years is, we can scale on a single plant up to 5,000 vehicles on two shifts, but again, we'll be putting that plan together for what 2025, 2026, 2027 etc. is with them over the next couple of weeks.

Got it. Last question, do you think by the next call you could update us on what the production plan is, potential cost savings, and then what the new gross margin and EBITDA breakeven levels are based on the volume that you've shared in the past?

Yes, we are working extremely hard to finalize the plan and we are very excited about it. It may take us a little longer as we recently announced a partnership and it will require some additional time. Once we have everything in place, we will make sure to keep you and our customers informed. As Tali said, we already started to work with our customers to secure their production slots for the new plan and build that new plan. And I believe it's going to be very beneficial for REE.

Perfect. Thanks. That’s all I had.

Thank you.

Thank you. We have no further questions at this time. I will now hand back to Daniel Barel for closing remarks.

Thank you, operator, and thank you everyone for joining our call today and for being part of this journey. I also want to express my gratitude to everyone at REE for their hard work and dedication this quarter and every day, which has shaped who we are. Thank you all, and have a great day.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.