Once considered a significant addition to tech startups in Northwest Arkansas, electric van maker Canoo now faces probable bankruptcy.
In late 2021, Canoo announced ambitious plans to establish its corporate headquarters in Bentonville, alongside a research and technology center in Fayetteville. This move, designed to capitalize on Arkansas' burgeoning tech sector, promised to create at least 545 high-paying jobs.
The company secured a 10-year, $17.1 million lease for a 270,000-square-foot warehouse in Bentonville, intending to launch its initial domestic EV manufacturing operations from the state.
However, these plans began to unravel by early 2024. The Bentonville facility remained unoccupied, and a "Warehouse For Sublease" sign was displayed prominently outside. Company officials cited difficulties in securing a suitable nearby site for headquarters operations, leading to a reprioritization of resources toward manufacturing in Oklahoma. This shift left Arkansas with unfulfilled promises and local economic stakeholders questioning Canoo's commitment.
The abrupt pullout from Arkansas marked a significant setback for the state, which had hoped to position itself as a hub for EV innovation.
Local officials expressed frustration over the lack of transparency in Canoo's decision-making process, as the company failed to communicate its shifting priorities effectively.
Walmart’s Stake
As Canoo’s largest customer, Walmart has a vested interest in the startup’s success. The retail giant’s commitment to integrating EVs into its delivery operations aligns with its broader sustainability initiatives, which include achieving zero emissions across its global operations by 2040.
Canoo’s LDVs were expected to play a pivotal role in Walmart’s last-mile delivery strategy, particularly for grocery and e-commerce orders. However, delays in production and delivery have forced Walmart to explore alternative options, including partnerships with other EV manufacturers.
While Walmart has not publicly indicated plans to sever ties with Canoo, the retailer’s patience appears to be wearing thin.
Strategic Partnerships and Contracts
Canoo's partnerships with high-profile entities, including Walmart, the U.S. Army, and NASA, initially signaled confidence in the company's technology and market potential.
In July 2022, Walmart announced a deal to purchase at least 4,500 of Canoo’s Lifestyle Delivery Vehicles (LDVs), with an option to increase the order to 10,000 units. This agreement aimed to integrate Canoo’s vehicles into Walmart’s last-mile delivery operations, aligning with the retail giant’s sustainability goals.
Locally, it signalled a step forward in bringing Canoo operations closer to their biggest client.
Additionally, Canoo secured contracts with the U.S. Army for testing its vehicles under extreme conditions and with NASA to provide crew transportation vehicles for the Artemis lunar missions. These deals underscored Canoo's potential to cater to specialized markets beyond traditional consumer vehicles.
However, Canoo’s financial instability jeopardized its ability to meet these commitments. Production delays and workforce reductions raised questions about whether the company could deliver vehicles on time.
Walmart, a cornerstone customer for Canoo, expressed concerns over the startup’s reliability, potentially jeopardizing the long-term partnership.
Financial Instability: Persistent Challenge
Despite its strategic partnerships, Canoo’s financial health remained precarious. The company reported a net loss of $302.6 million for the full year of 2023, with its cash reserves dwindling to $6.4 million by year-end, down from $36.6 million the previous year. These alarming figures prompted warnings about the company’s ability to continue as a going concern.
In an effort to stabilize its finances, Canoo sought additional capital through investments and loans. In early 2024, the company secured a $45 million investment from a foreign institutional investor and a $12 million revolving credit line.
However, these measures were viewed as short-term solutions, insufficient to address Canoo’s long-term financial needs.
Oklahoma: A Pivot
Following its departure from Arkansas, Canoo shifted its focus to Oklahoma, where it planned to establish substantial manufacturing operations. The company’s vision included a 400-acre factory in Pryor and a 500,000-square-foot facility in Oklahoma City.
These ambitious plans were underpinned by incentive agreements with the state of Oklahoma and the Cherokee Nation, offering up to $113 million over ten years in exchange for job creation and investment milestones.
Despite these incentives, Canoo faced significant challenges in Oklahoma. By late 2024, financial struggles led to workforce furloughs and legal disputes. The company furloughed 30 workers—23% of its Oklahoma factory workforce—for 12 weeks, citing a "realignment of North American operations."
These furloughs followed multiple lawsuits from vendors alleging unpaid bills. The operational instability raised concerns about Canoo's ability to fulfill its commitments.
Oklahoma’s officials, initially optimistic about Canoo’s potential to boost local manufacturing, began reassessing the viability of their partnership. Critics pointed to the state's substantial financial incentives as a risky gamble on a company with a precarious financial position.
For Arkansas and Oklahoma, Walmart’s potential withdrawal from Canoo contracts could have ripple effects. Both states had hoped to benefit indirectly from Canoo’s success, leveraging the startup’s growth to attract additional investments in the EV sector.
Canoo’s challenges have broader implications for the economic landscapes of Arkansas and Oklahoma. In Arkansas, the abandonment of planned facilities has left a void in the state’s burgeoning tech ecosystem. Local officials are now grappling with how to attract other EV manufacturers to fill the gap left by Canoo.
In Oklahoma, the situation is more complex. While Canoo’s ongoing operations provide some economic benefits, the company’s financial instability casts a shadow over its long-term viability. State officials face mounting pressure to ensure that their investment in Canoo yields tangible returns, even as the company struggles to meet its commitments.
Future Prospects for Canoo
Canoo’s future hinges on its ability to overcome financial and operational hurdles while regaining the confidence of its stakeholders. The company has signaled plans to refocus on core markets and streamline its operations, but these efforts may be too little, too late.
For Arkansas and Oklahoma, the lessons from Canoo’s trajectory underscore the risks and rewards of investing in emerging industries. While the EV sector holds significant promise, the challenges faced by startups like Canoo highlight the need for cautious optimism and diversified economic strategies.
As Canoo navigates its precarious position, the stakes are high not only for the company but also for the states and partners that have bet on its success.
Whether Canoo can deliver on its promises or becomes another cautionary tale in the EV industry remains to be seen.
