American electric automaker Canoo enjoyed a notable increase in its shares after the US government approved its Oklahoma City manufacturing facility as a Foreign Trade Zone (FTZ).
Canoo’s factory secures FTZ status
According to the press release, Canoo successfully secured the US Department of Commerce’s approval to make its OKC EV factory a Foreign Trade Zone (FTZ) on Monday.
“We are proud to announce that we have achieved another important building block in our strategy by creating one of the largest Foreign Trade Zones in the State of Oklahoma. This FTZ will generate economic growth, American jobs, and have a long-term permanent financial benefit to working capital and cost of materials.”
Canoo
The American EV maker expects this approval to help improve profitability as it bolsters electric vehicle production in the US.
For context, the OKC EV factory currently has approximately 100 workers, with the potential to reach up to 1,100 when fully operational.
The FTZ status enables Canoo to axe all customs duties on its electric vehicles it sells overseas. Likewise, it allows the company to waive customs duties on imported components necessary for its locally sold EVs.
Canoo secures more than 90% of its parts in the US and other free trade partners. Of that total, North America accounts for approximately 70% of the parts.
Benefits: Increases profitability
Canoo is highly optimistic that the approval will boost its “Made in America EV” strategy, increase unit profitability, and “enable a faster path to breakeven.”
As per the press release, the FTZ status will substantially improve the company’s profitability for international sales by reducing the EV cost by a maximum of 5% on components imported from the rest of the world.
“This cost reduction will occur when these Made-in-America vehicles are exported to international markets, which we plan to announce in the near future.”
Canoo
In addition, the FTZ status increases Canoo’s working capital by millions of dollars. As mentioned, it eliminates customs, duties, and tariffs on imported components that it uses to produce its offerings in the local market.
Moreover, the American electric automaker also expects to enjoy extra cost savings and advantages through a streamlined customer process, supply chain and site security improvement.
Direct impact: Canoo stock surges
Canoo (GOEV) shares were trading higher by 56% to $3.03 on Monday’s session following the US Department of Commerce’s approval of its OKC EV facility as an FTZ, Benzinga reports.
The stock surge is indeed remarkable, given how the company hit an all-time low earlier this month. However, its stock still indicates an almost 80% decline from the prior year.
Canoo is waiting to receive approval for its other manufacturing plans, which could potentially make Canoo FTZs one of the largest in OKC.
