My name is Chris Pierce. I'm with the Needham Research Team. Welcome to the 25th Annual Needham Growth Conference. It's my pleasure to introduce the team from Lightning eMotors. We have CEO Tim Reeser and CFO David Agatston. They're gonna give a presentation for a little bit, and then we're gonna have some fireside Q&A. Take it away, guys.
Thank you, Chris. Before I bring our CEO up here and CFO, my name is Brian Smith, and I'm the Vice President of Investor Relations, and I'm gonna give you a very quick overview of Lightning eMotors, and then I will turn it over to Tim, who will go into some more detail. Before I do that, as you may know, our statements will include forward-looking statements that include some risks, factors, and actual results may differ materially from our forward-looking statements based on those risks, which can be found in our SEC filings, and I would advise you to peruse those.
We're gonna give you an introduction to Lightning eMotors. In summary, from an investment thesis standpoint, we have a significant market opportunity that we will go into in detail that is in the midst of a strong demand inflection. Especially given the momentum from incentives and from mandates to decarbonize commercial vehicle fleets. That's what we provide at Lightning eMotors. We are shipping products today, which may not sound very special, except that that puts us ahead of most of our peers and competitors. We are partnering with world-class customers and OEM partners, and we'll go into a list of those as well.
We have a capital-light structure that has allowed us to ramp our production capacity and build out our factory, which is now done in a very capital-light model, and we'll go into that as well. We have robust in-house manufacturing and strong backlog, strong pipeline of business and an inflection in demand that gets us very excited. At a glance, Lightning makes commercial electric zero-emission powertrains and complete vehicles that are built generally on existing OEM platforms. Now, we don't play in the small Class 1 and 2 consumer car and truck space that the big OEMs play in, and we don't play in the big semi-tractor trailer space either, where also the big OEMs play.
We participate in the middle, which is some lower volume and more customization, which is why the big OEMs don't play there. We think it's a very attractive space with limited competition and high barriers to entry. We have some specific and special technology built on 13 years of R&D that allows us to address this fairly broad and customizable space with our own offerings and allows us to provide a very broad portfolio of vehicles from ambulances to shuttle buses to delivery vans to school buses. We'll go over our whole portfolio soon.
We have seen strong demand, and we have capacity today to build 3,000 vehicles a year, which may not sound like much, but in the commercial space and in the electric vehicle space, that would provide us capacity for significant revenue growth that could get us to gross margin and then EBITDA and ultimately cash flow positive. To introduce this, McKinsey just last month came out with a report talking about how fleets might decarbonize, and those are our customers. We sell products to commercial fleets, and those fleet owners are faced with a variety of issues and challenges as they attempt to decarbonize and go zero-emission on their fleets, and the fact is most of them have committed to doing that, and yet it presents some challenges.
The first one, according to McKinsey, is the vehicles themselves, and we provide those. The second is the infrastructure and the charging, which doesn't just mean buying charging. It means dealing with regulators and dealing with power companies and utilities and incentives, and it's a huge ecosystem that most of these fleet managers do not understand, but we do. The third is the economics of sustainability because these guys cannot sacrifice their business model in the name of clean air and climate change, and they shouldn't be expected to, and if they work with us, they don't have to.
Fourth is fleet management because it is much more challenging in terms of routes, in terms of range, in terms of charging times and optimizing the whole fleet structure and how that works, given the fact that you can't just give a driver a gas card now and expect them to go do what they do, and then when they run out of gas, they go to a gas station. We provide all of these things, and you will see this graphic at the end of our presentation as we show that we have checked the box on all these and provide a full solution to fleet managers. To describe in more detail how we do that, I will turn the mic over to our CEO, Tim Reeser.
Thank you, Brian. Brian does a great job of talking much slower, so now I get to talk fast, with our remaining time and then introduce David. Who also talks fast. Who also talks fast. We'll keep you entertained for a bit here. As you think about a portfolio, as Brian pointed out what McKinsey said we have to do to solve the fleet challenge, we look at that across five areas. One of them is we have to provide the vehicle. Brian went over that quickly and just said we do that. I think it's important to note this is one of the hardest parts and the reason why to date, commercial vehicles don't have more electric vehicle traction, because as it turns out, it's a very, very disjointed market with a lot of complexity.
You see two pictures here, a school bus and an ambulance. Those are two examples of two very different vehicles that have different requirements. It may not be obvious, but you compare it to a passenger vehicle where maybe you have a two-door or four-door or an SUV. In this world, if the difference between a school bus and an ambulance is dramatic, both under the vehicle, around the vehicle, in the vehicle, and under the hood, ranging from. For example, the ambulance has a gurney lift out back, and it has different kinds of doors, and it has a water tank underneath it, and it has high voltage power requirements, and it has many. Even a gasoline ambulance has to stay plugged in to run all the electric vehicle equipment and all the medical equipment.
That turns out to be a real complex challenge in electrification. It's already solved, long solved in a gasoline vehicle. It's a new challenge in electrification. Yet a totally different challenge than a school bus, where we have, again, a lot of extracurricular equipment on board, both under it and around it that make adding batteries and dealing with wire harness and high voltage and the computer system on board highly complex. That's what Lightning does, and that's where we built the business. In addition to building complete vehicles, we build powertrains. People like Winnebago buy powertrains from us today. Blue Bird, they buy powertrains from us today and install it at their factory. In choice number one, we often install those at our factory. We build the powertrain and install it.
In choice number two, they buy just a powertrain from us. They install it at their factory. Many of these factories of commercial vehicles are multi-stage manufacturing. They buy a chassis, they buy a powertrain. Historically, they might buy a diesel from Cummins or a gasoline from General Motors. They put it on their custom chassis. They put a body on top. We feed right into that ecosystem that's already there as a powertrain provider. Third, we also provide repowering. This is important when you think about the market. You'll see in a moment there's about 250,000 new commercial vehicles sold in North America today every year. You look back and say, "What about the vehicles that are on the road?" I'll give you one application. School buses alone.
School buses alone, there's half a million of them on the roads today, every day, driving students back and forth to school. Half a million of them on the road today. In addition to the well, 40,000 sold a year, there's half a million already on the road today. Our ability to not only put a new powertrain in a new Blue Bird but also provide a Blue Bird customer with a repowered powertrain so that when their diesel wears out, they can make it electric, is highly compelling and a big opportunity in the space.
Another one that everybody talks about a lot I've seen recently, people say, "Hey, we're gonna run out of electricity," or, "Hey, there's no charging." It's important to note that fleet charging is different than residential or commercial than public charging or residential charging. It's also different than semi-truck charging, over-the-road charging. These are depots. Think about people like DHL here in town. We got a chance. We were walking to an appointment in Manhattan yesterday, saw one of the DHL vehicles we've built live, so that was very satisfying to see something that came out of our factory running around the streets here. That vehicle at DHL drives 12 miles a day. They have 100 of them here in Manhattan. They drive 12 miles a day.
It's a very unique use case, but these kind of unique cases exist all over commercial vehicles. Again, our specialty is really catering to this kind of customer. DHL buys this small battery unit for Manhattan, so it only needs to go 12 miles. They buy a 120-mile unit battery system, so three more battery modules to put at Palo Alto, California. That's our business. No one else provides that level of customization. That level of customization, just the difference in price between those two identically packaged vehicles, just different batteries, is an additional $50,000. DHL wants to be efficient and wants to choose the right battery, and we allow them to do that. The other part of that is charging it. They charge here at their Manhattan facility, all on Level 2 chargers.
They have plenty of time at night. It's a very easy charging situation. We've got customers with motor coaches, though, that need to charge that coach in an hour, and they have a very large 640 kilowatt-hour battery. Again, we provide a full solution for that customer to buy charging in vehicles and have them interact and interface from us. As we like to say, one throat to choke. If anything doesn't work, they're calling us, and that's what a fleet wants. A little bit about what else we do in terms of our portfolio.
Again, I like pictures because this isn't as common as, say, a passenger vehicle ranging from a Class 3, which is Those of you see if you see a van that's got 4 wheels on the back and 2 on each side, a dually set, then that's a Class 3 van. You'll see vans and trucks like that all the way up to a Class 78 motor coach. We electrify all the products in this picture today. It's not speculative. It's not a future product portfolio. These vehicles are on the road today. An interesting point you'll see that's kind of new to everybody, the Inflation Reduction Act came out and said there's a $7,500 rebate and a $40,000 rebate. On this picture, you get kind of where it is. The $7,500 rebate is Class 3.
The $40,000 rebate is everything bigger than that, Class 4, 5, 6, and 7. The majority of our portfolio picks up the $40,000 rebate. It's also important to note, people ask us all the time, "What about Ford? What about Stellantis? What about GM? Everything they build. What about Rivian? Everything they build is on the left side of this picture. It doesn't exist on this picture. Rivian's product is a Class 2. Ford's E-Transit product is a Class 1, 2. BrightDrop product is a Class 1, 2. They're way off the side of the picture. We don't compete with them. They don't compete with us. Also, they're a long ways from getting the $40,000 rebate that we get playing in the bigger vehicles that we're playing in here. A few of the customers, again, we're already on the road.
I talked about DHL. Spin, for example, is a Ford spin-out that does scooters. You have a variety of everything from Amazon and Fluid Trucks to people like RideCo in Los Angeles and others. Very nice set of customers. On the OEM partners, these are people we sell a powertrain to. ABC is the number one coach builder. If you've seen Google's campus in Northern California, they run 500 motor coaches for employee transportation. That's an ABC customer. We're working with them on electrifying those motor coaches. They look like the picture you see under Class 7, 8 here. Other OEM partners, GM, that we've been very public about, Winnebago.
REV Group does both Collins school buses and Leader Ambulance with us, Forest River does white school buses and Blue Bird, of course, that we've talked about, or I'm sorry, white shuttle buses. We're not done today with the product portfolio. Again, back to the McKinsey report, a customer's not buying the product if you don't have the product for them, and this is important in commercial vehicles, different again than passenger vehicle. A passenger vehicle customer might be willing to buy an SUV instead of a passenger vehicle or a crossover instead of an SUV. They might be flexible, and they might have one of both. If a customer needs a electric refrigerated delivery truck, they're not gonna buy a school bus. Not gonna happen. They aren't the same, the powertrains aren't the same, the product's not the same.
You need the various products we have, and the more products we build, frankly, the more revenue we have. In many of these spaces, you'll see in a moment there's a lot of white space. We have very few to no competitors. For example, where you see there a Class 3 passenger van, we have no competitors today. There's nobody in the United States other than us building a Class 3 electric, 15-passenger passenger wagon today that is Altoona-tested and ready to go into transit agencies. We're excited about our product portfolio. We're in many cases, a significant amount of white space and a lot of grant and subsidy space that we've purposely chosen as we've made the investments in our portfolio. A few accomplishments, brief to date here. One of them is we've been doing this a long time.
Started the company in 2008. I co-founded the company then. We've been in commercial vehicles since then. It was hybrids at the beginning. It's electric vehicles since 2017 and on. It means we have a lot of experience with customers, with go-to-market, with dealers, a lot of experience with products. Many of our products are on generation 2, 3, 4. We're not just coming out with a new product that's gotta go through a tough time. We even have our second generation of our mobile battery vehicle charger, a product that again is enabling to people who may not be able to get charging right away and use a trailer charger to make it happen. Over 3 million I saw yesterday, I get an update on this every week, about almost 4 million customer mile, customer zero emission miles driven.
Doesn't sound like a lot, but in the commercial vehicle space, we are the leaders in that space. Our second generation of leading telematics. When you walk into our network operations center, we collect every second on every vehicle in the field, 250 data points. We see what's going on in the field. We're able to call our customer and say, "Hey, we noticed your water pump has lower voltage. We believe you have a leak. Please ground the vehicle tonight, and we'll send a rep over." Very significant opportunity we have that you can't historically, hasn't historically been done with gasoline or diesel vehicles. Finally, a mature product around Lightning Energy, where we're providing integrated charging. Our chargers know what the vehicle's doing. Our vehicles know what the charging doing.
When that school bus comes off route, we know when it shows up at the charger how many miles it needs to charge for tomorrow. A very unique opportunity that again doesn't exist with our customers and didn't exist previously with gasoline or diesel vehicles. Kind of to that point, gasoline vehicles versus electric vehicles, there's a whole new set of complexity with electric vehicles that doesn't exist with gasoline vehicles. We specialize in that. It's our business. One of the key questions I get all the time is, "Why doesn't Ford just do it?" Part of it is they don't want this complexity. Ford wants to build 1 million F-150s a year, no customization, crank them out, high volume, low customization, make it happen. That's what they do.
They spent $2.5 billion to build their little van, their E-Transit van. $2.5 billion to get ready to build it. When you get into our space, that school bus has a total market of 10,000 units a year. They aren't gonna go spend $2.5 billion to take on a 10,000 unit per year product. It's not their model. It is our model. Same thing with an ambulance. An ambulance is 5,000 units per year. Not gonna be a Ford product, not gonna be a GM product. This is our space and our world to take on.
One of the things you'll see, Ford's come out and said, the CEO came out and said 3 months ago they were laying off 3,500 people because they didn't have the software skills and they had to start over. They've said over and over they don't have the software skills. Volkswagen came out and said, "We underestimated the software skills required." That's again what Lightning does. We build software for these vehicles, over 100 software engineers on the team. Some of the companies we're working with today, we have more software engineers than the major, than the in these vehicles, the major OEMs working on these vehicles. Software is about how do you control the powertrain and the regen and the feel and look and feel of that product? How do you integrate it to specific chassis and applications?
Thirdly, our own proprietary analytics telematics software that goes with it. A lot of people then say, "Okay, you've got a factory," and this is real pictures of our factory, not speculative, not what it's gonna look like, not vaporware. This is our factory building real powertrains on the left side there and real vehicles on the right side. People ask me what it is we build, and we'll talk about this a bit. We build powertrain and powertrain components. We test them. We integrate them into a vehicle, and we design, build, and own all the software that makes all of this work. Again, to dig a little bit deeper, I won't dig into specific ones of these, but the things on the left are things we buy, things on the right, things we build. We do both. We buy and build.
Some of the stuff you can imagine that we buy, we buy in a custom way or we customize it after we get it. We have both the software side, a great barrier to entry to this. It is complicated. It's not as easy. I get people saying all the time, "It's just a battery and motor. How hard can it be?" There's over 1,500 components in each powertrain, proprietary components in each powertrain. The supply chain lift, the complexity is there. It's a great barrier to entry, but it's also taken us a while to get past it. We've made the excuse, supply chain's hard. It's absolutely hampered our progress in the last year as we've built it, but we've gotten better, and we're continuing to get better. Our supply chain team before we went public was 3 people.
It's a little over 12 people and growing. We've added people, we've added process, NetSuite, DemandCaster, all the process it takes to be good at supply chain. We've leveraged the capital we got from going public to build. We are the largest Proterra battery customer. We're the second largest CATL customer, one of the largest motor customers. We've leveraged our capital and the fact that we have vehicles on the road to build a much better supply chain with more optionality and more robustness. We still have a bit to go, but we've made real progress in this area. I like to talk a bit because dealerships and the go-to-market is very different with commercial vehicles. Commercial vehicles, unlike when you know, I'm a Tesla owner, so I like to use it because many of us think about that.
Tesla's early adopters, many of them bought a vehicle sight unseen, certainly never even took a test drive. They just bought a vehicle. I'm one of those. I bought a vehicle a Tesla vehicle, never driven it. That doesn't happen in commercial vehicles. These customers not only wanna drive it, many of our commercial vehicles wanna drive it a year before they decide to buy one or buy more. Many will rent a vehicle from us for 6 months before they decide to buy more or buy additional ones. It's a long sales cycle, but the great part is once you're through that sales cycle, you start getting repeat orders, and those happen faster. I'm proud to say, happy to say we're starting to get those repeat orders after this long sales cycle.
That's why we have such an optimism around the future and a very significant growth curve because we've already done this step. We've already gone through the long sales cycle, and now we're on the flip side where things can really accelerate and take off. I'm not gonna go through everything on this slide, but I think what you see in the middle there on the right side, 50% of fleets plan to be fully carbon-free by 2027. This isn't a long time. In an industry where many of these vehicles. UPS, by the way, keeps their trucks 25 years. The transit agencies have a. They have to commit when they get funding from the Federal Transit Administration to keep the bus for 12 years.
When you think about these people are gonna be totally carbon-free by 2027, they're making these decisions now. This isn't something we gotta wait for. It's happening now, and this is another reason we're very excited about it. Obviously, many of the other things that we'll go through, one of them is look at the incentives. I hear a lot of people say, "Oh, when Congress changes and whenever the incentives are going away," they aren't. These incentives are tied up in a lot of other jobs bills and a lot of what's happening. It's Infrastructure Bill, it's Inflation Reduction Act. These are done. The Inflation Reduction Act is a 10-year bill. The Infrastructure Act is already 1 year in, already $1 billion of EPA and $1 billion of FTA going in the street now and just beginning to hit.
It actually stalled us in the last couple quarters because customers wanted to wait for these to be available before they place their next orders. If you can get a free vehicle or a largely free vehicle, you're gonna wait to place your order. It's been a stall for us and many of us in the industry for the last year, but now we're really seeing it, this take off. The neat part is you look at these check marks, they are additive. If you can get, when you look across that sheet and you see a Class 4 school bus, and you see that it can get Inflation Reduction Act money of $40,000, EPA money of 85% funding, and state province money that fills in the rest, they are getting a free school bus.
This has never been there in the history. This is a huge inflection point that is new and fresh and happening. You kinda see it laid across the screen. Old incentives, not much there. You basically had California, and largely that was it that was being deployed. You look in the middle of the screen, a lot of new money, and you see there's a little over $20 billion in the last, really, that are just hitting the street now. This is fresh money, exciting money. Even beyond the incentives, as Brian pointed out, there's an awful lot of people, Amazon, UPS, IKEA, FedEx, BP, saying they will be carbon-free. They are gonna do this.
All the momentum is here, and it's an exciting place to be, from the corporate sustainability commitments, the mandates in California and other states, and of course, what we call the carrots, which is all the stuff. I like to point out our business is not entirely dependent on that. If you said all these subsidies are gone, there's no subsidies. You said there's no mandates, Tim, is anybody gonna buy an electric commercial vehicle? The answer is hell yes. Here's why. It's extremely compelling from a dollar today. This wasn't true 2 or 3 years ago, so this is another thing driving inflection. Gasoline prices have gone up. Electric prices have stabilized. The prices of our vehicles have come down.
Now you see even without a grant, so if you look at the far right line there, no grants. You leave out grants and subsidies there, it's still $846 per month cheaper for this vehicle, for an electric vehicle than the equivalent gasoline vehicle all in. Very compelling, even without grants and subsidies. This is something I'm passionate about. You can see the majority of that savings comes in fuel savings. The reason why is this vehicle right here is a gasoline vehicle, gets 13 miles per gallon. As an electric vehicle, the equivalent energy use, 66 miles per gallon, nearly 5 times more efficient. That's true across our entire product line. 5 times more efficient, and that's why this works. It's not about where did the energy come from or how much was the energy.
Five times more efficient. When you start there, you've got a real opportunity to make a difference. Brian mentioned it, very limited competition in the middle of this chart, medium-duty space. Yes, I talked about earlier Ford, GM, Rivian, Lordstown, Tesla, all on the left side. Arrival, Chrysler, all of that, left side, not our war. On the right side, you have not our war. It's PACCAR, it's Mercedes, it's Daimler, it's Tesla again announced their products. Volkswagen, Hyliion, not our war. In the middle is our war, and we're winning that war, and we are the leader in that space. Why are we the leader in the space? Over 3 million miles on the road. No one else has 3 million miles of medium duty. Limited competition in most of those spaces. No one else has the products.
We're much further along in generation and product, much better software. It does ultimately come down to better product. The customers like the product. Finally, you get to kind of the bottom where we talk about a CapEx-light model and the other things that really make this go. What does it lead to? This is one of my favorite customer, Richard Tree. I was there when his city council in California decided to make this decision to buy our vehicles. The city he's in, one of our competing, one of our competitors in the city, they chose us over the competitors in his own town. He said for these reasons: competitive pricing, ability to configure the vehicle to meet our needs, and their superior maintenance and support.
He's checking all four of these boxes as you see that Brian brought up. The vehicles met his needs. Supporting infrastructure's there. We've made those investments. Economic stability and sustainability, big part to him, and he knows we've got the fleet management. With that, turn it over to David.
Thanks, Tim. Tough act to follow, as always. I'll finish up pretty quickly so we leave some time for Q&A at the end. As Tim and Brian highlighted, we're really excited about the opportunity in this market. We think it's a great space. We've carved out some blue ocean there to go after this medium-duty Class 3 to Class 7 vehicles. What's it gonna take for us to grow? Well, there's a few things, right? We think the path is really clear. We got to we gotta scale. We gotta scale both organically and inorganically, potentially. We need to continue to build out a resilient supply chain, right? Including eventually building and sourcing our own proprietary eChassis.
We need to streamline production to help lower our costs, and then we need to make the purchase process easier for our customers. Today, there's, you know, we've talked about some of the barriers we've got, you know, charging, you know, route management. How do they navigate all these incentive programs? How do they get financing? You know, we're putting in place all of the infrastructure to help make it an easier buying process for customers, 'cause it is not an easy decision today. Just like many of you may not have gone to an electric vehicle yet, I have not, for the same reason you have to figure out what are the things you need to navigate. You know, how do I drive? Where am I gonna charge?
If I go to the, you know, to the mountains or if I go out to the Hamptons from New York City, am I gonna be able to make it? Fleet managers have those same issues, and so we've got to put the infrastructure in place to make it an easier buying decision for them. We also, as I think Tim and Brian alluded to, you know, we really believe we're at an inflection point in the business, right? There's a bunch of things that are tailwinds moving in our favor, right? We've got the incentives that Tim alluded to, and I think they've been out there for two years. People, you know, we heard about the Inflation Reduction Act starting in the middle of last year.
There's been some lack of clarity about what that means, how are customers gonna go get those incentives. That's starting to firm up and become clearer for people. We know that the cost premium for electric vehicles is pretty steep, especially, you know, in passenger vehicles. There's also a an increase for electric vehicles. The incentives help reduce that. That reduction also helps improve the total cost of ownership equation for vehicle, you know, fleet managers. We have the charging infrastructure, right? That's starting to improve. It's not perfect. There's still work to be done. We're trying to help with that in our business, but that's still one of the impediments.
Again, it's, it, you know, we think this is the year where that really starts to take off and makes it easier for customers to make that decision. The supply chain's maturing. We all know what 2021 and 2022 were like with COVID. We're seeing that get improved. It doesn't mean it's perfect. There's still, we still run into issues. Tim likes to talk about the golden screw. There's, you know, we can have every part that we need to make the vehicle except for the one golden screw. If you don't have that, you can't finish the vehicle. You know, every now and then, we still run into those issues, but we do believe it's starting to ease.
We think costs are starting to, especially around batteries, are starting to level out and even go down a little bit. We know it's really important to get to gross margin positive. We said on our Q3 call that we expect to be there in the second half of this year. We showed in Q3 the impact of volume on our gross margin. Our gross margin improved several points between Q2 and Q3, and a lot of that was selling volume. We have the factory Tim talked about. There's overhead there. We need to get volume through that factory, which gets back to the path to our success, which is about scaling. As we scale, we'll see our gross margin improve. As we reduce costs, our gross margins improve.
We have a little more pricing flexibility with our customers now that they have these incentives, especially if they can get the $40,000 Inflation Reduction Act incentive. We, you know, we feel really strongly that we'll be able to achieve it in the second half of the year, as long as we continue to see the volumes and we can close these deals. That's all a lot of positive stuff. You know, the elephant in the room is 2022 has been a tough year for many, including us. The EV space has been pummeled. Our stock has been hit hard. We recognize that. We acknowledge that. We, you know, we don't like where we are right now, and we know it's important to turn that around for our investors.
We also know that, and we've said, you know, publicly, that you know, in order to continue to grow, we need to raise capital, and we're planning to do that, you know, by the end of this quarter or early second quarter, 'cause we need the cash to get us to allow us to the runway to get to EBITDA positive and cash positive. We're planning to go after that and aggressively. We know it's a tough market. We know it won't be easy. We know it's gonna be expensive, but we have no choice, and we're committed to doing it.
You know, reiterating it, look, we're really, we're really pumped about the opportunity. There's a significant market opportunity. You know, we make products today. Many of our competitors, it's vaporware, you know, it's a CAD diagram. If you came out to Loveland to see our facility, there's, you know, 40 or 50 vehicles in some stage of manufacturing, a bunch of powertrains. We are shipping these vehicles. Our customers are driving it.
Tim Reeser you know, told you about how we ran into one of our DHL vehicles yesterday. They're out there on the road. We have no doubt that we can succeed here, and we will succeed, and we're really excited and look forward to any additional questions.
I have a question. I don't know if you guys acknowledge The Shyft Group as a competitor. I know they're in Class 3, and they're, you know, historically doing internal combustion or engines, you know, or trucks that compete with A Class. They use the same chassis provider, Proterra battery supplier, same thing. At the end of the day, if you're all getting the same components, what's gonna differentiate your product from theirs?
Software.
Imagine that.
Yeah.
Lay it on me. As someone who
The other one is sofon metware. There's also some other differentiation. The Shyft Group, that, you know, their entire business is delivery vehicles, last-mile delivery vehicles. They do have some. In terms of their electrification, they aren't building any electric fire trucks. The Shyft Group does not build passenger vans, never has, doesn't have that currently. They don't. The dealerships, by the way, that go to market for e-school buses, totally different. They don't build school buses. The go-to-market, the product, the software, totally different. The go-to-market product software on white shuttle buses, totally different than what The Shyft Group does. We only overlap with them slightly. We don't mention them as a competitor. We only overlap. They don't make a product today, which is part of the reason they aren't our competitors. They're vaporware. They will. I think they'll have a good product.
I like The Shyft Group. They've been a partner with us. They've built bodies for us for a long time for our products. They build a step van product, is primarily what they're building, and it's a good step van product. They'll have a good product. Primarily a Class 3 product is their first one. We've chosen not to build a Class 3 step van. We aren't overlapping with them in product. It gets both of them. They're different. We're different, and in the sense that when a customer says, "I need, you know, a Class 3 step van," we don't make one. They do. When a customer says, "I need a school bus," they don't make one. We do. There's no real. We don't compete in a bid system or pricing or anything else.
They've talked to us, quite frankly, about our help building powertrains and parts for them. We've used them to build to install our powertrain in Class 6 trucks for Isuzu. We've used them, that's their a different group within The Shyft Group, but same parent company. We've used them to build bodies for some bigger step vans we've built and for our Blue Bird chassis step van. It's kinda an interesting place in commercial vehicles that there's some cooperation, some competitors. By and large, you don't see them up here, one, because today they don't yet have a product, and two, when they do, it doesn't overlap from a product. As a software, it also, you know. If, if we were building the same product, that's where a customer would see the difference is software.
You do get to a case a bit like, you know, do you buy a BMW or Mercedes? The software is different and, you know, the name is different. Yeah, it becomes much, a much smaller delta. Today it's a big delta 'cause one of them has an SUV and the other one has a passenger car, so to speak. You just have a different vehicle.
Two is, can you talk about last night's press release, the, partnership with Romeo Power ?
Yes.
... pack of battery packs that
We took our lumps last night for those of you who read it. We announced we've gotten in the habit now of releasing production numbers because we're excited to point out that we every quarter we're scaling significantly. We pointed out that we're what? 24%, 25%. 23%. Brian's got the numbers. 23% quarter-over-quarter growth in how many vehicles and powertrains we made. Again, as David Agatston talked about getting the gross margin positive, that's important to us. We wanna scale manufacturing and scale it fast. We were excited about that.
In putting that out, we felt we needed to point out that we had run into a revenue recognition challenge in meeting our revenue guidance because one of our key suppliers, although we had plenty of batteries, which we've said for a while, supply chain's getting better, we got batteries. It turns out the batteries we had were defective, and the company, in this case Romeo, that was purchased by Nikola, sent us a letter at the end of December. It was software fixes. It was doable. We really thought it'd get fixed by the end of December. They sent us a letter late December saying, you know, We're not gonna be able to fix these. We don't plan to fix them. So we're in further discussions with them now. Unfortunately, we had to put that, you know, tough news out last night.
taking our lumps, but, still very excited about, you know, the scale and where we're going this year.
Does that mean you have these vehicles, customers have ordered these vehicles, you just need a new battery supplier? Or, and then these vehicles are out the door?
In some cases. Yeah. I'll go into a bit more complexity. We have 3 battery suppliers today. Romeo is what we call a legacy supplier. We designed them out about 1 year ago, the products we designed them in still needed to finish getting those out before the new products with Proterra batteries and CATL batteries came out. We were hoping to get another 1 month of production out of these Romeo batteries before we had phased them out entirely, that's why we ended up here. It's also why we knew this was a risk. We thought we'd mitigated it, we hadn't replaced them yet because we only had 1 more month of production with this product before we switched products.
Today we've switched products entirely to Proterra and CATL batteries. Going forward, we don't have the issue with Romeo. We just didn't quite squeeze out past the end of the product cycle.
In terms of the capital, I was just looking at consensus estimates. It looks like your revenues are projected to more than triple next year. The EBITDA loss is roughly the same. I guess the first question is where is the leverage in the model then? Secondly, how much capital do you need to raise to kind of fill that gap?
I'll let David answer the question, but I'm gonna repeat the question 'cause I think we're webcast. I think the question is how much capital do we need? How does this scale? And when we look at next year's consensus, how does the profitability scale and cash scale?
Yeah. I'm not, I'm not sure exactly what consensus you're looking at there, I mean, I know of the consensus. For us, we think we need $75 million-$100 million, depending on how quickly we get the volume, and that's really what drives so much of it. As we can, you know, spread those costs and amortize them across more vehicles, the gross margin improves dramatically. We think, you know, to get to gross margin positive, we've said we need to build and sell about 100 vehicles a month. To get to EBITDA positive is, you know, order of magnitude above that. We feel like with all of the tailwinds we talked about today, that's very feasible. I mean, Tim talked about the market size.
If you, if, you know, it's about 250,000 vehicles in North America, maybe a little more with Canada, a year that are ICE vehicles in the classes where we compete. McKinsey & Company report suggests, you know, 50% of those will be electrified on an annual basis by 2027. That's 125,000 vehicles. If we got 10% of that gets us to, you know, a really nice business, including, you know, cash generation. And, you know, and, and it's, you know, that's only 10% market share. There's not 9 other players in this market, so we feel really good about how we're positioned.
What's the constraint on production? Is it demand at this point in time, or is it due to changes need to be made to the factory?
Probably the biggest constraint we've advertised has been supply chain, but I, I personally find that frustrating to say. The reason why is it's, you know, it's been an excuse for a long time, let me elaborate a little bit on it. The challenge in our standpoint, and for many others, has been, when you look at supply, lining up everything is synchronizing it all. What I mean by that is if demand is sitting in a school bus and we have inventory to build a van, then even though I've got big backlog and I've got a factory that can do it, I don't have the right spare part product. I don't have the product in place to build what I have demand for.
We have plenty of demand, but sometimes, quite often, the challenge we've had is demand doesn't line up with the product we have in inventory or the product we've managed to buy or the. That's been, I call it the synchronization fact that has been the challenge, and it does make it hard to explain it because people think you're just making excuses if you just categorize it all as supply chain or categorize it all. Otherwise, we don't see a demand problem. What we see is synchronizing the demand we have with the supply we have. From a factory standpoint, we can build anything. We built a very flexible factory and open invitation to anybody here who would like to come to Colorado and see it.
It's, it is truly, I'll speak, you know, I'm very proud of our factory, and I find it very stunning. Everybody who comes just is shocked by. It's very, very beautiful, but it's also, you know, well put together and clearly something that can scale. Don't have a factory scale, but we have a synchronization. We see 2023 as our year to synchronize all that. Many of the components that have been constrained are coming available. Many. What the customers are wanting to order because of the way the grants have all lined up and what the customers need have lined up, that's beginning to synchronize. As we get through 2023, we believe we'll solve the synchronization problem of demand and what supply we have and really be able to, you know, hit our stride.
Also aligning it with incentives and charging infrastructure.
Right. Yeah, that's been the other one is customers. DHL will say, "We aren't buying more vehicles in California until we have chargers." We've had to get through that, help them get chargers, help them get chargers installed, help them go through that process as well. There is an alignment of charging and infrastructure with vehicles. I think we're out of time. Excellent. Thank you, everyone.