Good day. Welcome to Electric Last Mile Solutions third quarter 2021 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, today's conference is being recorded. I would now like to turn the conference over to Sam Lee, Director of Investor Relations and Finance. Please go ahead.
Good afternoon, and thank you for joining us for Electric Last Mile Solutions third quarter 2021 earnings call. Before we begin, we'd like to remind you that remarks made on today's call may include forward-looking statements. These are based on our predictions and expectations as of today. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. For more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and for our most recent SEC filing. Joining me on the call today are James Taylor, CEO of ELMS, Jason Luo, Executive Chairman, Rob Song, CFO and Treasurer, and Jonathan Ballon, Chief Strategy and Digital Officer. Management will deliver prepared remarks, and then we will open the line for your questions. Now I'll turn the call over to James.
Thank you, Sam, and thanks, everyone, for joining us today. I'm so proud of the team we've assembled at ELMS. Despite all the challenges in the auto industry this year, we delivered on our commitments. We posted a historic third quarter in which we began production at our Mishawaka, Indiana plant and posted revenue as we shipped our Class 1 Urban Delivery vehicles. We intend to continue delivering on our commitments by maintaining discipline in our goal setting, our follow-through, and our transparency going forward. Today, I'll provide a business update with detail about our Urban Delivery launch, plans for the addition of our Class 3 Urban Utility vehicle, our recently announced battery agreement, and plans to explore localization of battery assembly in the U.S., and additional insights into our digital strategy development.
Lastly, I'll turn it over to our CFO, Rob Song, to discuss our third quarter financials and outlook. Rob joined the company in April and has worked closely with the company's former Chief Financial Officer, Albert Li, as part of an intended succession plan. Rob brings nearly 20 years of diverse finance and capital markets experience, including extensive work with Morgan Stanley, Alphabet, and CorePoint Lodging. We're pleased to welcome him officially to the call in his new role within the company. Albert was essential to ELMS becoming a publicly traded company and expanding its financial operations. We thank him for his important service and look forward to working with him as he transitions into a senior advisor role with the company. Okay, let's get started.
As the first publicly listed electric vehicle company initially focused on the Class 1 to Class 3 commercial segments, we're redefining productivity for commercial vehicle customers in what the industry calls the last mile of delivery. We founded ELMS because we saw an opportunity to rapidly deliver sustainable and intelligent mobility solutions to businesses engaged in moving goods and services to their final destinations. We developed commercial solutions that are profit drivers, not cost centers. We identified an unmet business need, the Class 1 to Class 3 commercial EV segments, where we expect to benefit from several major tailwinds.
These tailwinds, by the way, seem to be blowing harder and harder these days, including, first, enormous demand for commercial vehicle solutions driven by the rapid increase in e-commerce, companies seeking to meet a very aggressive ESG targets, governments at all levels that are driving, and in some cases mandating, the adoption of environmentally sustainable solutions. U.S. policy movement toward enhanced electric vehicle tax credits, including the recently passed U.S. infrastructure bill and the pending Build Back Better bill that includes an expansion of EV tax credits. Within the last two weeks, the new global sustainability commitments coming out of the UN COP26 meetings in Glasgow. This is the perfect storm of positive demand catalysts blowing all in our favor. To date, there are few EV options on the market to meet the sudden increase in demand.
Our Urban Delivery van is the first in the Class 1 commercial vehicle segment. The response to its launch has been tremendous. Demand is strong for both the Urban Delivery vehicle already in production, as well as our planned Urban Utility vehicle. The response has not only been strong here in the U.S. market but also in Canada. We've added a regional headquarters in Montreal that materially increases ELMS' total addressable market. We see great sales opportunity in Canada, where federal and provincial governments have taken progressive actions to support electric vehicle adoption, including offering government incentives that total up to CAD 8,000 for the purchase or lease of an EV. Canada has mandated that 100% of car and light truck sales be zero-emission vehicles by 2035 and has experienced an e-commerce boom similar to that in the U.S.
Our opportunity here is to move quickly to be the first mover and take advantage of all these tailwinds. That addresses demand, and now let me turn to supply. We don't see any other Class 1 commercial EV manufacturers getting an EV foothold as quickly as we will. While many new entrants and existing players have announced plans for commercial EV products, for most of them, they remain plans. Based on competitor manufacturers' announcements, we expect to be the only company selling commercial EVs in the Class 1 space for 2-3 years. We also expect to be one of the first EV movers in the Class 3 space with a launch of the Urban Utility next year.
The traditional automakers in the Class 1 market have not made any announcements to electrify, and new EV entrants will launch first in other segments before entering the Class 1 segment. In addition, they will face regulatory approval hurdles and startup challenges before they reach the market. ELMS' key differentiator and enabler continues to be our unique business model. Our business model is built on capital efficiency and a customer focus. We're already achieving capital efficiency by leveraging our existing U.S. EV manufacturing plant and market-proven components. This allows us to deliver reliable products at an exceptional speed and at a fraction of the cost compared with the traditional automotive business model. We're also differentiated from other manufacturers by our singular focus on commercial customers' needs.
This allows us to provide what we believe will be one of the lowest total costs of ownership, up to 35% less than internal combustion engine vehicles. As a solutions provider, we're not just delivering the hardware, but also the customization and digital solutions that enable our customers to increase the productivity of their fleets. Our ELMS AIR data and connectivity solutions will help our customers optimize their fleet's efficiency, resulting in reduced emissions, best use of EV charging infrastructures, lower vehicle maintenance costs, and lessen unscheduled downtime. The result is significant differentiation and a competitive advantage for ELMS, and we intend to build on it. One example where we're building on our competitive edge is the launch of our EV Campus program. We're engaging with colleges and universities to address their sustainability goals and on-campus clean transportation needs.
We launched the EV Campus program in October to help U.S. universities forge an achievable pathway to a zero-emissions future. We're introducing our EV solutions to a large and untapped market that is very supportive of a transition to a clean and sustainable transportation fleet. Already tested by a half dozen colleges and universities, the EV Campus program allows schools to test, free of charge, an urban delivery van and experience trial installations of ELMS telematics devices in their existing fleets of also internal combustion engine vehicles. We see universities using the vans for on-campus transportation, landscaping, maintenance, moving, and more. They're seeing opportunity to use our vehicles and data to achieve more sustainability and also their financial goals. We're seeing opportunity to expand our outreach to other potential clients, such as airports, corporate office complexes, and industrial facilities, as well as the future on-road needs of those organizations.
That's why we're really excited about this program. We estimate all of these campuses together could comprise a 500,000-unit market segment. It's an excellent opportunity to demonstrate how transitioning fleets, large and small, to ELMS vehicles and data solutions can help organizations achieve their sustainability goals and lower fleet costs. It's also an excellent opportunity for ELMS to test our production systems and capabilities on smaller orders, refining our processes and protocols before we ramp up to full production capacity while allowing us to recoup these early-stage costs. We see our EV Campus program affecting positive change on university campuses and producing direct sales for our currently available on-campus fleet vehicles. We also see it highlighting a variety of ways our vehicles can be put to use to radically improve business and environmental results.
As we've said previously, we expect to meet our commitment to launch our fully homologated urban delivery vehicles in December, certified for on-road use in the U.S. market, and begin delivering against the 6,000-vehicle firm order commitment we have signed. Engagement with our customers continues at a rapid pace, with customer demos targeting such end customers as FedEx and Amazon delivery service partners and on-demand cargo van rental companies. We expect to convert many of these product tests into future sales. In addition to engaging customers directly, we also continue to work with numerous fleet management companies as an important go-to-market channel in the commercial vehicle industry. Unlike the relatively simple distribution model of retail sales, commercial fleets engage very differently. Relationships with large distributors and FMCs, as they're called, are what are required to be a player in the commercial vehicle business.
The top ten U.S. FMCs manage fleets of more than 1.9 million vehicles. Another essential requirement for success in the commercial vehicle market is establishing critical relationships with upfitting partners. We've executed more than 20 non-disclosure agreements and are working with them to develop specific upfits for our vehicles, covering a broad range of market use cases. We'll continue to provide updates on upfitting as we finalize arrangements with our partners. Demand for our vehicles and solutions remains high, and production has so far launched very smoothly. We want to recognize at the same time that we had planned a slow, controlled startup to manage normal issues that come up with any new model introduction. Our experienced team has hundreds of vehicle launches under its belt. Our slow ramp-up is intentional. When issues come up, our team is able to address them and solve them.
However, as is happening globally throughout the industry, and as we have discussed on our last call, our suppliers are experiencing challenges sourcing raw materials and managing COVID-19 disruptions, and we are facing rising transportation and logistics costs. We ordered more than enough materials for our initial production targets this year and through actually early 2022. The global shipping container shortage has significantly increased the cost of moving components to our manufacturing facility. Our spot rate shipping costs are running as high as $25,000 per container, which is over five times higher than the traditional pre-COVID rates. These elevated shipping and logistics costs have cut our margins per vehicle from double digits to low single digits.
In light of these unprecedented global supply chain challenges, we made the decision to lower our production to 300-500 vehicles for the year, down from originally 1,000. We're confident our team of experienced and skilled professionals are well equipped to manage this short-term cost challenge. After all, this is a team of top supply chain and logistics managers, engineering and manufacturing professionals, sales and dealer network experts that worked with our global supply base to bring our Urban Delivery to fruition in a short amount of time at far lower cost than any competitor has achieved. This same team has the necessary skill to manage the current market issues with our short-term and long-term financial goals and to continually adjust and adapt to changing macroeconomic environment.
We also are working closely with our suppliers to ensure timely delivery of parts and subsystems and to firm up our production estimate for 2022. More details will be provided on our next earnings call. Still, I can share that one, we're finalizing long-term shipping and logistics contracts for 2022 to avoid paying the current spot rates. We expect to significantly lower our current shipping costs. Rob will expand on this later, and we aim to provide an update on this in early 2022. In addition, based on historical trends, shipping spot rates should soften after the holidays.
Despite the macro headwinds, we're positive there's an end to these challenges in sight for ELMS as we begin to capture market share in both the Class 1 and Class 3 commercial EV segments next year, something no competitor can yet claim. We expect our vehicles to generate meaningful gross profit by the second half of 2022. Now back to product. In response to strong customer demand, our board has formally approved production of our next vehicle, the Urban Utility vehicle. The board has also directed us to explore opportunities to advance the Urban Utility's time to market. Our current timing is to launch the vehicle in the second half of next year. Like our Urban Delivery van, the Urban Utility vehicle will be assembled in Mishawaka, Indiana, and is highly customizable.
We anticipate working with partners to upfit it with customized dry boxes and special use flatbeds in many cases, and we expect to be a first mover, if not the first mover in this category. Now let me switch gears and talk about the battery agreement we signed and potential localization. In October, we announced a deal with CATL that secures the battery supply for the Urban Delivery through 2025. CATL is the leading and largest supplier of battery systems globally. Securing our battery cell and pack supply is an important milestone and a tremendous achievement for our company in an extremely challenging supply environment. ELMS battery is a lithium iron phosphate or LFP chemistry.
This type of battery is rapidly gaining popularity because it's less costly than the other alternatives, is viewed as a more stable power source than the other chemistries, and it doesn't use the scarce and price volatile raw materials, nickel and cobalt. Given these attractive qualities and growing demand for LFP batteries from competitors, we feel especially fortunate to have locked in our supply from a large and well-established battery maker. We're also collaborating with several potential partners to localize production of our battery packs in the U.S. We can envision several paths to success, including building the battery packs on a manufacturing line in our plant in Mishawaka. In the future, we are planning for the localization of about half of our vehicle content, starting with a battery, which alone comprises 30% of the production costs. We expect localization to significantly reduce our costs over time.
In other important milestones, we opened an Asia-Pacific operations center or APOC in Shanghai and an urban mobility lab in San Francisco. Our APOC further expands ELMS's global footprint and will serve as a hub for engineering operations, project management, and supply chain management. As you know, the EV industry in Asia has a several-year head start on the U.S. industry. We will tap into that expertise in the OEMs, the suppliers and talent pool. Team in Shanghai will be fully integrated with the company's global headquarters and work to improve supplier engagement, increase our speed to market, and efficiently execute our unique business plans. We expect APOC to exceed 100 employees by the end of the year. We anticipate the urban mobility lab in San Francisco to benefit from the large pool of talented hardware and software engineers, as well as application developers in the Bay Area.
The lab will serve as our tech hub for exploring and developing innovative electric vehicle solutions that improve fleet productivity and lower total cost of ownership. The lab is building out our data services and working with technology partnerships that are crucial to expanding in-vehicle technology, data-intensive applications, and machine learning capabilities. To that end, we are taking a portfolio approach to building a charging ecosystem that serves ELMS's customers' needs. One example is our partnership with EVgo. We're working with EVgo to develop a bundled turnkey fleet charging program for ELMS's customers. We anticipate that our growing charging ecosystem will include additional partners to ease customers' transition to our EVs and speed their time to realizing improved productivity and lowered fleet costs. ELMS intends to continue to discover and develop applications, data analytics, and telematics that speed our customers' achievement of sustainability and financial goals.
Currently, ELMS's vehicles launch with unit tracking, EV charging station locators, and telematic capabilities. As we build out our ELMS AIR telematic solutions, we anticipate adding fleet utilization, predictive maintenance, delivery management, and advanced driver safety applications to our vehicles. In summary, we're very proud to see our unique business model come to fruition. Our EV ready plant and the market-tested components enabled us to get far ahead of a crowded space full of new entrants, while a need for Class 1 and Class 3 commercial EVs is at its greatest. As a result, we delivered our first Urban Delivery vans and are engaging potential customers in pilot programs all across the country. We expect fully certified Urban Delivery vehicles will be shipped in December.
We've secured our battery supply for Urban Delivery through 2025 and are pursuing U.S. localization, and we reported revenue in the third quarter as promised. I just wanna repeat that. We are now a revenue-generating company, not a pre-revenue company, and we will continue to generate revenue. In response to strong customer demand, our board firmly approved production of our second vehicle, Class 3 Urban Utility, and encouraging advancing the time to market. I look forward to continuing the conversation and updating you on our progress. Now I'll turn it over to Rob to go through our financials. Rob?
Thank you, James. Having been part of the team over the last six months, I can tell you what we are doing at Electric Last Mile is special. It is a once in a lifetime opportunity to redefine the commercial vehicle market. I'm very excited to be working with this talented team. To date, we have delivered on our commitments and are confident we will continue to execute against our business plan. Moving forward to the third quarter results. As of September 30, the company reported its first revenue of approximately $136 thousand on delivery of 5 Urban Delivery vehicles. We had a total cash balance, including restricted cash of $170.9 million. For the quarter, we reported a net loss of $17.8 million or a loss of $0.15 per share.
Operating expenses were $22.3 million, consisting of $5.6 million of research and development expenses in development services, testing, and prototype expenses, and $16.7 million of general and administrative expenses for personnel, consulting services, and marketing expenses. We are on track to beat our initial CapEx guidance for 2021, as well as our initial operating expenses guidance. This is primarily due to the close and efficient relationship we have with our key suppliers that enables us to reduce our engineering, design, and testing expenditure as we remain on track to deliver the fully certified Urban Delivery vehicle on time and below budget. For the full year 2021, we are revising our projected total operating expense to be in the range of $60 million-$70 million.
We estimate total CapEx for the full year 2021 to be in the range of $20 million-$25 million. We have a unique business model that allows us to hold our investment level lower than other EV companies by leveraging our EV-ready production plant and proven components. Finally, we are pleased to deliver on our promise of revenue in the quarter. 2022 is gonna be a very exciting year, and we look forward to delivering the next major revenue milestone for the company. We'll be providing production guidance on our next earnings call. This concludes our prepared remarks. We'll now open the line for questions. Operator.
Thank you. If you'd like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a 3-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3. If you are using a speakerphone, please lift your handset before entering your request. Once again, that's 1 4 to register for a question. We do have a question from the line of Dan Ives with Wedbush Securities. Please go ahead. Your line's open.
Yeah, thanks, Jim and team. In terms of, you know, obviously I understand why you're cutting production, you know, from a cost perspective, but there's been no changes in terms of, like, the factory build out, like, just getting everything assembled. I just wonder, like, that continues to be exactly on track, right?
That's correct. Yeah, there's no restriction in, let's say, our production capabilities. Plant staffed up, people have been hired, CapEx is finished, installations, lines running. You're exactly right, Dan. The issue is getting parts to the back door, but no issue in the plant.
Yeah. Okay. Let's just walk through, like, a customer, you know, that has pre-ordered, expecting to get it, you know, later this year, and obviously you cut production. Like, how you think about this for, like, next year? Like, is it more or less just pent up as we go into 2022 in terms of just filling orders, production?
Yeah, I think if I got your question right, it's kinda call it a slide where, you know, the customers that we're looking at them for late this quarter we're gonna just, you know, slide those orders and honor them in the first quarter. I think you're well aware that, you know, the backdrop of this is a lot of customers that have been expecting their other commercial vehicles, you know, from the traditional manufacturers have all been put at, you know, in a spot where they've had to delay their orders, not receive their orders, and push those back also well into next year, some of them into the summer. You know, from a customer standpoint, you know, this is consistent with what's going on in the industry. Our particular case, we've just slid them into the first quarter.
Okay, just final, like, follow on. Just when we think about like, quote-unquote, pipeline or just, you know, what you're seeing in terms of backlog and more and more orders, like, can you just compare for, you know, qualitatively today versus, let's say, three months ago, now that you've gotten through different safety production, you know, you're much more advanced than where you were, especially three to six months ago?
Well, I think I'll start anecdotally to you know, Dan, that you know, by now, from three or four months ago, we've had so many more pilot drives, test drives, demo drives, you know, face to face with customers at the plant, in their locations, in various different use cases, as you know. Some of those, both, also the Urban Delivery as well as the Urban Utility, so they're seeing our portfolio come at them as well. You know, we decided to just cut off, let's say, the pre-orders when we're sitting at that 45,000 number and focus on moving our pre-orders to final orders, going through the bottom of the funnel and execution of these drives and demos and pilots. I'd say anecdotally that demand is you know, overwhelming.
I was just at Randy Marion this week with Ron, our head of sales, and, you know, their quotes are all in a category of, "Look, just I'm gonna sell everything you give me. Hurry up." Demand is as good as I'd say or better than we saw six months ago. From an order standpoint, with the Marion Group already committing to 6,000 of our first 8,000 and then a firm purchase order of the first 1,000, you know, we got our head down to just fulfill those and do conversions, let's say, from interest into full POs. We're not taking any new orders unless they're actual orders and POs.
Great. Thanks.
Our next question is from Michael Shlisky with D.A. Davidson. Please go ahead.
Hey, good afternoon, guys.
Hey, Mike.
Can you give us, like, an overview of the types of customers that your dealer partners have marked down as the first takers of your vehicles? I mean, you don't have to actually name any names, but what kinds of folks are they? Large fleets, small fleets, delivery, vocational? How confident are you that those 1,000 will turn into the next 5,000 by the end of February?
Yeah, I think the actual customers, as I said, without putting in names, we can lead you to fill in the blanks pretty easily, but the most and biggest and obvious is the delivery companies, the package delivery companies. I think as you're aware, Mike, a lot of that is in these private owners that have small fleets and are the individual service providers for the big package carrying companies. There's rental companies that you can again fill in the blank of the names that rent these box trucks and small vans at locations. We're seeing really strong interest from the service industries, say telephone companies, service companies that come to your house to do installations and repairs, and that kind of category.
Of course, this is obvious, but to state it for the other listeners is where the range and the vehicle is, less than sort of this, you know, 40-50 miles that we've talked about. We're seeing that reinforced that our range of 110 is more than adequate for their usages. There's medical delivery companies who large medical supply companies that have, you know, headquarters in a zone like the Southeast and deliver products, whether it's, drugs or their individual supplies to large hospital groups. We already mentioned, of course, with our campus program, these university complexes where it isn't just one campus, you know, can be part of, 20 or 30 campuses inside their overall umbrella.
Cities, just to throw out City of Miami that want very aggressive goals, airport complexes that are trying to accommodate the transformation into the mobility world. It's all of those are different, you know, industries that are taking this on. Just to reinforce it, I think the overall efforts that they're seeing out of Washington, the industry picking up volumes, of course, Tesla's success, all these things are contributing to the mindset of these fleet owners being more and more used to the idea that this is happening. It's only a matter of when, and that, you know, they gotta get on with the program and get moving quickly and adopt these.
On the other hand, there's a lot of education, you know, to be done with these owners as we go to the fleets and do our demos for many of them, of course, this is the first time they've been in an electric vehicle. Bringing them to the charging solutions, bringing them the telematics solutions and bringing them our vehicles is all part of the final conversion to a sale.
Got it. Kind of moving on, a quick question about your operating costs, your operating expenses, the R&D and SG&A. Is the run rate that we saw this quarter a relatively solid run rate going forward or were there any unusual, especially in the R&D side, one time testing costs and things, get things finalized here?
Hey, Mike, this is Rob here. The run rate that we should expect going forward is going to be lower than what you saw this quarter. That's because as you know, we are going through the development process of homologating and certifying the vehicle for on-road use. Going forward, a lot of the testing costs, engineering costs and prototype costs will not be in our financial statements.
Okay. Maybe one last one for me on the supply chain challenges that you're seeing. Can you just give us a little more detail on that? Is it that you could get the chassis or the components from China, but don't wanna pay the freight? It just doesn't make sense from a dollars and cents standpoint, or is it just challenging to find those or any other components that are sent to Indiana? Like what are some of the details behind why you're seeing these challenges here?
I think it's to put that more in the category of the one that you mentioned is more availability of containers and getting the parts here rather than the costs. You know, even with the elevated costs, we're down to single-digit margins, so we're not losing money or a negative cash flow. We're not paying money to produce those vehicles. But in reality, it's just the difficulty of them securing containers, us securing boats, and then getting them across to our plants. This is just, you know, one supplier. If you take that across our entire supply base and see that we have to solve that equation not just once or twice, but through all of that supply community, you know, that's the challenge we've run into.
Okay. I'll leave it there. Thanks so much guys.
Thanks, Mike.
Our next question is from Greg Lewis with BTIG. Please go ahead, your line's open.
Yeah. Hey, thank you and good afternoon, good evening, everybody. Yeah, you know, hey, congratulations. I mean, it's been impressive what you guys have been able to do in a short term, short time. You know, I did wanna talk a little bit more about, you know, how we should be thinking about your ASPs going forward. I mean, you know, you guys have done a lot over the last few quarters, but a lot has changed in the market over the last few quarters, right? Inflation is becoming a household name. You touched on supply chain, steel prices. Is there any way to think about maybe like a melt up in your ASPs in 2022 and into 2023?
Yeah. Well, it's, I guess a few moving parts. You know, at the high level, Greg, you could say, look, we've got nobody, no other competition in the segment and what appears to be demand way in excess of supply. Then if you switch over to the other traditional suppliers, they're very short. Just to throw more gas on the fire, we've got Nissan backing out of the market leaving a big void. All that traditional logic could say that there's plenty of upside pricing opportunity. As we're finalizing the contracts with the current conversations of these early customers, on one hand we don't wanna be too greedy.
We would still wanna stick to our principles of making it for the fleets, you know, total cost of ownership savings 35%, but also landing, you know, kind of on the traditional ICE vehicles after incentives. You know, assuming that these bills go through and some of those incentives get increased, that's certainly gonna give us upside pricing opportunity to still land at par with a gas vehicle. Also, just from pure supply and demand, we've been testing that water. We've put a couple thousand more on our first shipments of these first 1,000 vehicles so far had no pushback. Yeah, we are testing the waters.
We just don't wanna again get too crazy here and push for too much upside and push ourselves out where when the fleet owners do the math that we're out of whack on the TCO.
Understood. That's good to hear. I mean, clearly, you know, it looks like you guys really, you know, hit a sweet spot here with the Class 1 delivery van. You know, as we think about, you know, the utility vehicle the company is planning to roll out, I guess, you know, late next year, early 2023, is the company kind of expecting a similar dynamic or is that space maybe a little bit more crowded? Kinda curious on your thoughts about that.
Just make a minor correction. We're not putting out an exact date yet, but we had said second half of 2022. As I said in my comments right now, based on these early exposures we've had when we announced the vehicle and then have gone around with the early test drives, we have a lot of pressure from the customers and large fleets to move that Urban Utility as early as possible because they'd like to get their hands also on that. It will definitely be in 2022, not 2023, as you mentioned. As regards to that vehicle, if you see the configuration, Greg, if you go online and look at it's a kind of a unique configuration, so-called low cab forward.
That there is no other announcements, again, just like the Class 1 of vehicles coming similar to that. You've got Ford and GM coming out with BrightDrop and E-Transit that are talking about moving kinda up into that space as they do today with their cab chassis, but with, you know, significantly large engines and then, you know, dual wheels and axles and things like that to try to get into the Class 3 and 4 space. Right now, again, I didn't say we will be the only one, you know, to be that definitive, but from what we can see so far, there's no like to like products that are coming in in that segment. We've got potentially Arrival and Canoo coming down from that Class 3 space.
Most of what we've seen are more the vans and walk-in vans as opposed to, say, box trucks like you'd see with U-Haul or Ryder or Penske and these kinds of users. Again, I'm not gonna go as far as saying there's nobody, but in the specific application we're looking at, I think we're still going to be one of the few, if not the only one in that segment.
Okay, thank you all very much for the time.
Good. Thanks, Greg.
Our next question is from Jeff Osborne with Cowen and Company. Please go ahead. Your line's open.
Yeah, good evening. I have a couple questions. I was wondering if we could walk through what's left on the homologation process to hit that for December. What have you done so far, and what's still needs to be banged out?
Yeah. Thanks, Jeff. Well, as you can tell, you know, it's November and December's not that far away, so we got a pretty good line of sight. As we've gone through before, this is you know a series of engineering tests that we go through, of course, to verify that we're meeting the FMVSS standards. Some of those are done, you know, virtually in the math tools. Some of them, a lot of them have already been completed in off of prototype tools. The last step we have is what we really call verification testing. We've seen them already pass the tests. Those have already happened. Now we just have to make sure that those are, call it, repeated or verified or confirmed off production tools, production parts in the same configuration.
We're highly confident these are gonna pass 'cause we've already seen them pass once. They just have to pass off this last generation of parts that are coming from our assembly line. Those are the tests that we have lined up in the first couple weeks of December. As those progressively pass, then we'll be in a fully certified situation to ship in December.
Got it. That's great to hear. Just maybe for yourself or Rob, as it relates to the 300-500 deliveries for the quarter, will those all, I assume, be the unhomologated? Should we think about the average price that you had this quarter being, you know, $27,000 or so being consistent in Q4 and then, you know, back to more normalized levels for 2022?
Hi, Jeff. This is Rob here. The 300-500 production vehicles that we've indicated for 2021, it's actually gonna be a mix of EV Campus vehicles as well as the fully homologated on-road vehicles. The price assumption should be a blend of $27,000 and the $34,500 that we have for the on-road vehicles.
Got it. My last question is just, I think you folks had a social media post on the fifth of November that had an aerial shot of your lot that had quite a few vans out there. Can you just give us any sense of what you've seen in October and November in terms of, like, weekly build rates? There wasn't a lot on the call as it relates to sort of the staffing and throughput levels. There was a lot of, you know, issues around, inputs and costs and whatnot, but anything as to the staff and the job that they're doing would be helpful to understand.
Yeah. I think it's probably easier just to come into the current tense, Jeff, say that our build rate next week will be about 40. That aerial shot you had, it was a large piece of around a 100 that we got in play or on the way out the door. Right now we've got the sufficient team. It's about 45, 50 people that are in place to be able to build our current rate of about 40 a week. Going into the end of the year, we'll ramp that workforce up to just a little bit less than a 100 by the time we hit Christmas, New Year's. 100 people.
It's great to hear. Thanks much.
Okay. Thanks, Jeff.
We have a question from Chirag Patel with Jefferies. Please go ahead. Your line's open.
Thanks. If we could just go back to the Urban Utility vehicle. I just kind of wanted to get a sense for some of the milestones that we should be on the lookout for, whether it be testing phases, supply agreements, things of that nature as we look into next year.
Sure. Well, just to set the stage, the requirements, let's say milestones, as you called it, are quite a bit different than they were for the Urban Delivery, given that it's a Class 3 vehicle. The safety requirements FMVSS, all of that is much less than it is for the Class 1s and 2s. We have you know, less cost, less timing and less complexity for us to go through the different hurdles and milestones to hit start of production. We still have to do some of the retooling, some similarities, for instance, just one example would be the headlamps where you have to have headlamps that are compliant with the U.S. regulations.
That has nothing to do with crash, but as far as airbags, seat belts and things like that, it's a very different approval process. We have similar gates, you know, locking up our battery supply with incremental volume. We have the early tooling changes that make us U.S. compliant on some things that we've all kicked off. You know, this has started months ago. It'd really just be the plant, the trials that all plants go through and then final certification. A pretty, I'd say, generic or normal process. The highlight is much shorter and much lower cost than it was for the Urban Delivery.
All right. I appreciate that. The only other thing I had to look at was just the idea of the freight and logistics costs. Just trying to get one more handle on that for a second, the idea of locking in some of that for 2022. What should we kinda be projecting as far as thoughts on how that's gonna impact the margins from what we had talked about, you know, as we went through the process of the original launch, the idea of double-digit margins? It's gonna be a longer term playbook.
Is that something that we're thinking of, high single digits in the near term, and then eventually, as we kinda progress into a more normalized area to achieve those, double digits or is it maybe even sooner than that?
Yeah, it's Rob here. Regarding freight costs, if you think about what the current spot rate is, about 25,000, and what contract prices typically are, which is about 60% of spot rate. Assuming we can achieve that type of a discount, going forward in 2022, that will equate to about $10,000 per container, lower than what we're currently paying. That equates to if we are only able to put two vehicles in a container, that's about a $5,000 savings per vehicle. If you apply that to the 34,000 MSRP, you're probably generating 15%, up to 15% gross margin on our products.
We expect to be able to get within that range by the second half of 2022, assuming we are able to lock in contracts at that rate.
Very helpful. Thank you so much.
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