Xos
Photo by Dale Staton on Unsplash

Xos Acquires Company to Go Public, Provide Fleet-as-a-Service

Xos, a manufacturer of fully electric class 5 to 8 commercial vehicles, will go public. These classes comprise medium and hearvy duty trucks.

Xos and NextGen Acquisition Corporation recently announced the two companies have entered into a definitive business combination agreement. It will result in Xos becoming a publicly listed company. The new combined company, with a value of $2 billion, expects to trade on Nasdaq under the ticker XOS.

Xos developed its vehicles to meet the demands and extended life cycles of last-mile, on-highway, and vocational vehicles. The company thinks that it’s well-positioned to capitalize on the electrification of the $100 billion total addressable market for medium- and heavy-duty last-mile commercial electric vehicles.

“Last mile” is a term in supply chain management and transportation planning that describe the last part of a journey in the movement of goods from a transportation hub to a final destination. Amazon’s fleet of Ford Transit, Mercedes-Benz Sprinter, and Ram ProMaster vans is one example.

“In 2016, my co-founder and I set out to build a company whose mission was to decarbonize transportation through the design, engineering and development of purpose-built commercial vehicles,” Dakota Semler, co-founder and CEO of Xos said in a press release. “Our aim was to provide customers a superior alternative to traditional fossil fuel vehicles. As former fleet operators, we gained a deep appreciation for the challenges of operating and maintaining commercial fleets, particularly in light of accelerating emissions requirements. Xos developed its technology and product portfolio in close collaboration with established fleet operators who have provided invaluable ongoing feedback that has informed every aspect of our vehicle design, product engineering, commercial manufacturing and service strategy. As a result, we have developed commercial EV solutions that uniquely incorporate customer requirements.”

Image credit: Piqsels

Xos expects the demand for the last-mile commercial EV market will increase at a 35% CAGR through 2040. The primary reason is that electric vehicles continue to replace traditional fossil fuel vehicles. New emissions standards and continued growth of e-commerce have contributed to this trend. Relocation fulfillment centers to areas closer to consumersalso has contributed.

Observers say NextGen looked at more than 100 potential merger opportunities. The company conducted in-depth evaluations of several companies in the EV and automotive technology sectors. NextGen co-founder and co-chairman Gregory Summe jointly provided this report.

“Based on our work, we believe that Xos is best-positioned to capture the rapidly growing demand for commercial electrical vehicles with a compelling customer offering. We look forward to working with Xos’ leadership team. Wil will provide strategic, operating and governance experience to help Xos realize its vision of decarbonizing commercial transportation.”

“The strong secular tailwinds of climate change and e-commerce anchor our investment conviction in Xos,” said George Mattson. Morton is the co-founder and co-chairman of NextGen.

Mattson explained that climate change is one of the world’s greatest challenges. He said that commercial trucks are the emit the most per capita of greenhouse gases in the transportation industry.

Xos offers a Fleet-as-a-Service bundled package that provides vehicle ownership services to fleet operators. The company charges a fixed monthly fee.Partners such as DLL Group (financing services) and Dickinson Fleet Services (vehicle maintenance) assist in this endeavor.

The Fleet-as-a-Service package aggregates otherwise fragmented fleet service offerings and is projected to increase Xos’ lifetime revenue per vehicle.

At the same time, last-mile e-commerce delivery is growing. This trend is thanks in large part to the changes in consumer purchasing behaviors during the COVID-19 pandemic.

“The dual drivers of strong underlying industry growth and the imperative to transition traditional fossil fuel vehicles to zero emission vehicles, set the backdrop for strong underlying growth for years to come. Xos has successfully commercialized its cost competitive proprietary product offering and is now poised to scale delivery of its customer-validated vehicles with the growth capital that NextGen will provide,” Mattson said.

The deal will give Xos $575 million of gross proceeds. This sum includes a $220 million investment led by Janus Henderson Investors and a consortium of truck dealers led by Thompson Truck Centers.

The companies say the acquisition will close during Q2 2021.

Ryan Carpenter serves as Attorney and Managing Director of Carpenter Wellington. Ryan advises clients across a broad set of corporate and commercial matters.

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