Q4 2023 Lion Electric Co Earnings Call

Participants

Isabelle Adjahi; Vice President - Investor Relations, Sustainable Development; Lion Electric Co

Marc Bedard; Chief Executive Officer, Founder, Director; Lion Electric Co

Nicolas Brunet; President; Lion Electric Co

Richard Coulombe; CFO; Lion Electric Co

Presentation

Operator

Good morning, everyone. Welcome to Lion Electric's fourth-quarter and fiscal 2023 results conference call. (Operator Instructions) As a reminder, this conference call is being recorded.
I would now like to turn the call over to Isabelle Adjahi, Vice President, Investor Relations and Sustainable Development. Please go ahead, Miss Adjahi.

Isabelle Adjahi

Good morning, everyone. Welcome to Lion's fourth-quarter and fiscal 2023 results conference call. And we have a consultant for niche synergy cash-in of surgical instruments at the legacy brands. And that's why the deal today. I'm here with Marc Bedard, our CEO-Founder; Nicolas Brunet, our President; and Richard Coulombe, our Chief Financial Officer.
Please note that our discussion may include estimates and other forward-looking information and that our actual results could differ materially from those implied in any such statements. We invite you to review the cautionary language in this morning's press release and in our MD&A, which contains important information regarding various factors, assumptions and risks that could impact our actual results.
With that, let me turn it over to Marc to begin Yes.

Marc Bedard

Thank you, Isabel. Good morning, everyone. We will be discussing our Q4 results in a moment, but I first wanted to address our 2023 performance and highlight some of our achievements 2023 and without a doubt, been a challenging year for the whole industry, including for Lion. But it has also been a year of significant progress for our company. First, we saw a significant increase in deliveries resulting in revenue growth of 81% for the year. In addition to achieving positive adjusted gross margins, we also completed the construction of our vehicle production facility in Joliet and our battery plant in Morocco and started production at both facilities. We now have the infrastructure in place, including the production line and equipment to achieve a production capacity of up to 5,000 vehicles per year and battery production capacity of 1.7 gigawatt hour enough to power 5,000 of our vehicles with this significant manufacturing infrastructure in place, we do not plan to make any significant investments in growth CapEx for the foreseeable future. We also obtained certification for our MDP battery packs which powers our Line five trucks today and will be integrated shortly on our lines fiscal buses. This represents a significant milestone in the execution of our vertical integration strategy and last but not least, we started the commercial production of the alliance, the school bus and the Line five truck. And we are planning to start the commercial production of the Lyon, a tractor this summer. With our vehicle lineup nearly completed and with significant production infrastructure in place, we are well positioned to capture market share in the medium and heavy-duty EV space.
Let me now comment on our Q4 results. During the quarter, we delivered 188 vehicles, leading to 29% revenue growth over Q4 2020, despite maintaining a positive adjusted gross margin during the quarter. The 100 Adient vehicles we delivered are below our expectations. This is mainly explained by two reasons. First, we incurred delays in the initial deliveries of the Lyon D school buses and the Line five trucks as we wanted to ensure optimal quality of these vehicles, which were the first ones to go into customers and as a result, initial deliveries were pushed out to Q1 and Q2 of this year. And second, our Q4 deliveries and the pacing of new orders were significantly impacted by the substantial delays in carried by the Canadian government with its zero-emission transit funding program. ZTS. since several Canadian school bus operators are still waiting for an official approval to start receiving our electric buses. The continued uncertainty and delays around the ZTF. program had a major impact on momentum of electric school bus deliveries in Canada as the Canadian federal government and our clients currently work to evaluate and process sizable applications for school buses deployment that were filed several months ago. As a result of these delays and its impact on our liquidity. We are taking immediate action by importantly, laying off approximately 100 employees, mostly impacting our night shift production workforce in St. Jerome. We will reassess our production needs on a regular basis in the upcoming months, mainly depending on the pace, if there's any ETF projects, approval and deployment.
Before turning it over to Nicolas and Richard to provide more detailed insights into our commercial operations and financial performance. Let me reiterate that with our 18 hundreds, 50 vehicles on the road that have driven 22 million miles in real operating conditions and considering everything we have achieved over the past 15 years, we believe we are in an exceptional position for continued success. Our main objectives are in effective liquidity management and achieving profitability by remaining agile and actively focused on cost control. Further, we will continue to proactively improve the quality of our vehicles and increase our field technician service coverage to maximize customer experience and uptime with our vehicles.
Nicolas?

Nicolas Brunet

Thank you, Marc. I will start by addressing Q4 and fiscal 2023 delivery, then discuss the order book and conclude with an update on certain subsidy programs starting with deliveries. We delivered 188 vehicles in Q4, consisting of 178 school buses and 10 trucks, 107 vehicles were delivered in Canada and 81 in the US. Our school bus deliveries in Canada were impacted by the inability to deliver under the Canadian debt ETF program for which a number of our clients are in discussions with the government to obtain satisfactory approval under the program. Furthermore, as previously explained, we experienced some delays in the first deliveries of the line five trucks and the line, the school buses, which further impacted risk. For fiscal 2023, we delivered 852 vehicles compared to 519 in 2022, a 64% increase on a year over year.
Now shifting our focus to purchase orders. The order book currently stands at 2,076 vehicles consisting of 1,791 school buses and 285 trucks, representing approximately 500 million. In addition to the challenging economic environment, the decline in the order book is in part attributable to the timing of certain subsidy programs, which are beneficial in the long term, but can cause some volatility on a quarter to quarter basis. For example, EPA awarded in January close to $1 billion of grant funding for purchase of clean school buses, but purchase orders cannot yet be placed under the program parameters and hence are not reflected in the order. As previously announced, LINE was awarded a grant for 97 school buses and related charging infrastructure in this round, representing a total of 38 million for which we are working with the school district obtain formal purchase orders. Once allowed by the EPA, we see significant potential for additional opportunities for Lyon in connection with this ramp as we estimate that 70% of units were awarded directly to school districts, financial entities and third party contract, we are in dialogue with a number of these parties towards the potential deployment of LINE's cobots. We are also very encouraged by customer engagement towards applications for the most recent rebate round of YK. program, which closed on February fourth, EPA expects to award at least $500 million under this round with results to be announced in April. Now that the application for the EPA's latest rebate round I close, we are hopeful to see more momentum in a number of state-level programs, including in California, Colorado and New York, among others.
On the truck side, we are particularly excited by two trucking programs from the EPA. First EPA's clean ports program, which was launched yesterday as expected, to allocate up to $2.6 billion towards zero-emission port equipment and infrastructure, including drayage trucks. The application deadline for this program is set for May 20th.
Second, the EPA's clean heavy duty vehicles program, which is expected to allocate $1 billion towards the deployment of Class six and Class seven Clean Trucks is expected to start in early spring of 2020 with the Line five and Line six in commercial production today and with the start of commercial production of the line eight tractor trucks scheduled for mid 2024. We believe we are very well positioned for our customers to benefit from such funds.
In summary, the Grant's environment, combined with customers' strong appetite for electric vehicles is very promising for the long term, despite causing some volatility in the short term, which we expect to persist for at least the next year.
I will now turn it over to Lisa to discuss our financial performance.
Jean?

Richard Coulombe

Thank you, Nicola. I will start by commenting on Q4 results and then comment on fiscal 2023. I will then discuss our liquidity position and provide color for 2024.
Starting with Q4 performance, revenue amounted to $60.4 million, representing a 29% increase year over year. Despite lower than expected sales volume, we posted adjusted gross margin of 1.3%, which excludes the $9.8 million inventory write-down related to the line eight and nine m. vehicles as compared to an adjusted gross margin that was negative 10.2% for the corresponding quarter in 2022, our SG&A expenses, which amounted to 16 million, decreased from 33% of revenue in Q4 2022 to 27% of revenue. This year, reflecting our disciplined approach to cost management. Our Q4 results included an impairment of intangible assets and property, plant and equipment of 36 million related to our decision to indefinitely delay the start of our commercial production of the line eight and nine m. vehicles. We had a significant improvement in adjusted EBITDA, which was negative EUR6.3 million for the quarter as compared to negative EUR13.9 million in Q4 2022, resulting from improved adjusted gross profits and decreasing Q4. Capex amounted to 13.7 million a significant decrease as compared to 39.1 million in Q4 22, marking the end of our growth CapEx.
On the development front, we continue to see a reduction in spend as we bring new platforms in production. Additions to net intangible assets, mostly related to vehicle and battery related development amounted to 17.8 million, down EUR2.5 million as compared to EUR21.3 million in Q4 2022.
Now turning to fiscal 2023 performance for fiscal 2023 revenue, which amounted to 253.5 million, increased by 81% as compared to EUR139.9 million in 2022. Worth mentioning revenue generated in the US more than tripled as compared to 2022 and accounted for over a third of our revenue for the year. We achieved positive adjusted gross margins for the year with adjusted gross profit of $4.3 million or 1.7% of revenue as compared to an adjusted gross loss of $12.9 million or negative 9.3% of revenue in 2020. Adjusted EBITDA amounted to negative 34.3 million for the year as compared to negative EUR54.8 million in 2022. This is a result of our revenue growth, an effort in optimizing our cost structure.
Turning to our liquidity position. We ended the year with 93 million of available liquidity, consisting of 30 million in cash and $63 million of immediate borrowing capacity on our revolver. It is important to note that inventory investments made over the last two years to achieve production ramp-up has been a significant driver of cash outflow with the bulk of our ramp-up occurring during the supply chain crisis. We have built significant inventory of raw material on the balance sheet with supply chain now easing such a large inventory position is no longer required further, we have a number of finished vehicles on hand, which could be deployed rapidly, particularly in the event that certain customer, I think satisfactory approval from the ZTF. We therefore, anticipate that inventory reduction will positively contribute to liquidity. In 2024, we had a targeted inventory reduction of 50 to 75 million.
Looking ahead to 2024, our focus remains on driving growth in orders and deliveries while diligently controlling costs. As previously mentioned, the ramp-up of the LINDLIN. five and the Lion batteries as well as the upcoming launch of The Lion, a tractor will put short-term pressure on our gross margin, particularly in the first half of the year. We anticipate that CapEx will be lower than 10 million, consisting largely of maintenance CapEx. Similarly, vehicle and battery development spending will be reduced by approximately 30% as compared to 2023 and amount to approximately 45 million as the development of new product nears completion and vehicles are brought to market. We remain committed to tight cost management and a concerted effort to reduce working capital, particularly focusing on reducing inventory levels last, we will continue to monitor our liquidity requirements, including a significant reduction in our inventory and will stay appraised of potential opportunities to strengthen our balance sheet to ensure financial resilience in the face of evolving market conditions.
In summary, while we have made significant strides in our financial performance, we remain vigilant in navigating the challenges and opportunities that lies ahead. Guided by our commitment to sustainable growth and financial consciousness.
Back to you, Matt.

Marc Bedard

Thank you, Richard. Before we open the line for questions, let me conclude by reiterating that while we expect the current environment to continue to result in volatile order flow and deliveries for at least the next few months. We remain very enthusiastic about our future and totally committed to leveraging all investments made over the last 15 years to reach our ultimate objective of becoming profitable and free cash flow positive. Until then, we remain fully committed to taking appropriate measures to safeguard our liquidity.
Thank you for your attention this morning, and let's now open the lines for questions.
Operator, we'll now open the line for questions.
I just want to ask you to limit to the number of questions aggregate to allow other participants to ask their questions. You can, of course, go back into the queue if you have any follow-up questions.

Question and Answer Session

Operator

Yes, thank you.
If you would like to ask a question, please press star one on your telephone keypad. Now if you would like to withdraw your question, please press star two. Our first question comes from Rupert Merer from National Bank. Please go ahead.

Marc Bedard

Hi, good morning, everyone. At some point here over the phone, if I can start with the ZETF. funding.

Isabelle Adjahi

I'm wondering, do you have any visibility from the government on the timing for when they could? It relates some of that and so ETF funding?

Yes, Rupert, this is this is Mark. Let me start by saying that the Kenyan government has been a great partner over the years, and we all know that they are supporting electrification in Canada and one example is that their target is to get 35% of the total medium and heavy duty vehicle sales, but by 2030 to be at the 35% also. So that's a that's a lot and it's exactly aligned with what the DTF is supposed to be doing. So there has been a lot of delays. I understand right now there is now a lot of ongoing dialogue with the union with the potential customers. And we are also in dialogue with the ZPF. at the same time. And as you know, it's a major part of our purchase order book as well. So I think everybody on is on the same page, and there has been a lot of volume there and this is what I'm getting and there are terms negotiation as we speak, but we're very enthusiastic about the outcome of that. We feel this is obvious that this is going to go through at some point and we're looking we're really looking forward to add to that.

Isabelle Adjahi

So we're thinking we're a good partner, and we feel that we're well listened as well, you believe that when they when they finish this process that they come up with a framework that allows for all of the funding to move forward in fairly short order or is it going to be more of an approval of a grants on a rate case by case basis?

And while we all hope the same thing that you know, the grant will be in such a form that it will be very easy for the or the operators to apply and get their funding. And maybe, you know, that was part of the issue. So I cannot talk about the future, but I know that, you know, $2.75 billion is a lot of money to invest for them understanding as well that, you know, transit buses are included in there. But in all the discussions we've had in the past, I mean it was very clear that a lot of that money will go into the school buses as well, and we have yet to it. You see that.

Marc Bedard

So we're looking forward to it. I think it.

Isabelle Adjahi

Secondly, if we can talk about inventory. It's so encouraging to hear that we could bring that down 50 to 75 million, what's an appropriate amount of inventory for the Company in the long run? And what are the opportunities to further bring that down and maybe to more of a just-in-time model or if you can discuss what sort of inventory level you think you need to hold in the future? Are there any critical components that And absolutely, you can't move to more of a just-in-time model?

Marc Bedard

It's Richard here.

I think I'll take that one at Rupert and obviously, you know, we build, as I said earlier, our inventory in a very challenging and all supply chain environment. And right now, as I mentioned earlier, we don't need to have or carry a buffer that we've been carrying in the last couple of years. So right now, we are very focused on reducing inventory levels to healthier levels, hard to say at all what is the timing and optimal inventory in the current content that's appropriate with March of this drive towards our goal is to really add No, really monitor our order book make sure we have the appropriate level of inventory and inventory to deliver on our customer needs.

Richard Coulombe

So that's what we're focusing on.

Like I said, right now, we are really focused on reducing our inventory. We mentioned 50 to 75 million this device, the raw material itself of finished goods that we could deliver quite quickly at some of these, I guess application, in particular, our approval call. So that's the short-term view that 50 to 75, and we'll get them there afterwards.

Isabelle Adjahi

Just a quick follow-up to that. So you're now producing your own battery packs, and I know you do have some batteries and battery packs and inventory with that. Do you anticipate that you'll be running your own battery production at a reasonable level in the coming quarters?

Or is there or do you hold back on your own battery pack production while you work off the inventory and now we will, we are starting to integrate our own battery packs on our vehicles are reported. So with you, you're going to see some light in five deliveries and they are equipped with our lithium battery and the pack. So those are the first vehicles with our battery packs.
That being said, though, I mean, obviously up take using the 1,000 BMW battery pack that we have in stock right now.

Marc Bedard

He's also top of mind, and this is part of what Richard has been talking production as well.

So it's mainly a mix of taking down this inventory up the manufacturing in Amerigo.

Okay.

Marc Bedard

Very good.

Richard Coulombe

I'll leave it there.

Marc Bedard

Thank you.
Thank you.
Thank you, Robert.

Operator

Your next question comes from Kevin Chang from CIBC. Please go ahead.

Hey, good morning, everybody. Thanks for.
Thanks for taking my question. A little ask about, I guess, how you think about your sales strategy as you look to build out your the vehicle book. I appreciate that you guys are generally more conservative in how you how you framed your backlog and your order book size versus maybe some some of the other companies out there have no, but it is down I think three quarters in a row. We have I know a significant amount of excess capacity. It seems like. So it makes sense to find a way to kind of ramp up sales here to leverage better fixed cost absorption that seems like that that could that could work. And then maybe as a follow onto that if you need a freight recession, silicon come more of those wind turbines, some of the non-core best vehicles you have in the market. Just wondering how a freight recession might have impacted your dialogue on the past year, just given where the freight economy was in 2023?

Kevin, Nick here. I'll let me start by addressing. I had trouble understanding the second part of your question, but let me start with the first part on the the the but the order book side, you know, obviously the order book at this point in time. And it's not reflective necessarily of really the ongoing client dialogue and what I alluded to this in.
Finally, on the bus side, there's significant volatility caused by the timing of the subsidy program only when you look at it, there are unprecedented amounts being deployed towards electric school buses, specifically the EPA. I mean, that's a great example allocated close to 1 billion, an amount that was double from the initial plan and the grant round of this second phase, if you will, of the $5 billion program that was allocated in January. And as we announced, there's about $30 million of units that was directly allocated to our applications for our clients, of course. And there's a number of dialogues as well as 70% of that balance because the 2000 vehicles are allocated to free agents. But the program does not yet allow anyone to place purchase orders and that won't be available. I won't be allowed until we expect April. And so this is a great amount of money that are coming in that space. All with the firm, do the uptick of buyers of electric school buses, but they can't show in them the order book just yet. At the same time, the EPA just closed on 1015 applications for again, $500 million of back to the Valtera around this time. And this is another situation where we see a lot of client enthusiasm toward applying under the program and ultimately looking to purchase with EPA subsidy electric school buses, but not yet reflected in the order books saying you look at the ETF, right, there's clearly a lot of enthusiasm in the program, half of the order book for us tied in there. There's a big number of applications that we know of that are the clients are making on their own and they're awaiting the outcome of that. And so at least subsidy programs, when you pick up the, let's say, medium term time timeframe, they're very exciting. They will drive very significant volume, we believe, but in the short term. They cause the volatility that we're discussing this morning. And so things are going in the right direction without a doubt, but there is volatility in the short term caused by really the specificity of those subsidy programs?

Marc Bedard

I'm sure you don't mind, Kevin.
Yes.

Just a comment.

Marc Bedard

So it partly reflects the development for Syneron for sure.

So if I look at some of the products that you've launched, like the Line five line, because those seem to be a little bit more maybe tied to the freight economy, people using those vehicles to deliver goods in the last year and parts of 2022?
No, we did go through and are going through a freight recession.
Just wondering how much that might have impacted customer dialogue, right. Looking at the shipper is facing that are 10, 15% decline in volume. Are they actually are they at the table also talking about transitioning the fleet to electric? Or is that a competition that might have got gotten pushed out until the freight economy looks a little bit better?

Yes, that's a good question. It's without a doubt, we're operating in a more challenging economic environment for the purchasers of trucks for shippers. As we said at the same time, there's the we see that clients are increasingly realizing they will lead the transition to zero-emission at the dialogue. It's really a split, I would say, between some of the smaller operators looking to do a few just a handful of units that have trialed the product. They will benefit, of course, from some of the subsidies, particularly here in Canada. And we also have dialogue with much larger players that are looking to figure out the solution at scale. That's what I mean when I say they realized we will need to do this transition. And certainly during the the most active use of a shipping itself, active dialogue with a little pushed aside because of the need to focus on current operations, maximize profitability. And so we've seen a return of that dialogue. It's not, you know, isn't tomorrow demand, but it's the big demand that will drive the market.
When you think about the trucks, the electric truck market is still at its total infancy. There's less than 1,500 all-electric trucks registered in North America as of December 2023. And we're one of the few players that has critical scale were part of this dialogue with the large and the small operators. And actually we're the fourth largest player when you look at the registration. But we're encouraged by the dialogue. Subsidies will help. We don't think they're as needed in the truck as they are in school bus space, but they will help. And as I mentioned this morning, the EPA is stepping things up quite big with a $2.6 billion funding program support that open yesterday and for which applications are due by the for 1 billion coming in the early spring with EPA. This time from the Class six and seven, obviously the parts for our Class A. tractor. So all in all, there's certainly good movement there.

Okay. And then just if I can just slip.
A quick question on the inventory comment. The 50 to 75 million, was that a kind of a net number? So if accounting for what inventory, I suspect we would be a headwind to inventory as you ramp up production or that some of that on gross comment that today is sitting at 50 to $75 million. You could take that out but cannot be offset potentially the offset to that is as you ramp up production, I would say that would obviously go on working capital headwind as it is no longer originating at a net reduction in our 50 50, depending upon considering the growth like that's all factored in like we finished the year with 250 million of inventory.

Like I said earlier, we have some finished goods there that were no longer going to move in a short period of time. And we're very focused on, again, discipline on raw material and the current context right now. And so we're really trying to bring a partner in and more of a just-in-time approach. So that's going to be the focus and the 50 to 70 of them being that commitment.

But.

Perfect. That's very helpful. Thank you very much and best of luck in 2024.

Marc Bedard

Thank you, Kevin and Kim.

Operator

Next question comes from Mike Shlisky from D.A. Davidson. Please go ahead.

Marc Bedard

Hi, good morning. Thanks for taking my questions on. I think you asked this every quarter, so I'll ask it again here on deals, do you feel like 2024 will be a year of growth for deliveries overall from when you submit the processing?
I challenge your question months here, but do you think and net-net you'll be growing that well, that might hit the decks. You're speaking.

There's a lot of moving pieces in that in 2024, but the short of it is yes, we are aiming for a year of growth and delivery. And when I say the moving pieces, obviously the half the order book is tied to that EPS application. And so that's having a big driver of our deliveries for the upcoming year. As we mentioned in the prepared remarks, we see some volatility in the next few months. Again, driven by the subsidy program. But without that, we're aiming for 2024 to be a growth year of growth in Ireland.

Marc Bedard

Great. And I also wanted to ask about about market share, especially in school buses. There's been a large supplier of batteries go bankrupt recently. They supply at least one of the bus makers on the EV side. I'm curious if you thus far, I've seen some some expansion in your share expect more in 2024. I'm wondering you have expected, given that the full perhaps is at least one company not delivering right now. Just curious whether there's not a lot of ground switching out there in your opinion.

Yes, there were on the market share front. We're looking to capture all the market share that we can. We just like I alluded to in trucks when we think market share, we like to stick to the facts and we look at registrations and by the fact that we see we are the number one player in all electric school buses in North America. And I'm talking specifically the fact Type C and D combined and we of course, we saw that bankruptcy as well. Are we seeing a shift in applications?

Richard Coulombe

Not yet.

But at the same time, one of the things that I think will distinguish us is the extent to which we are delivering on the program. I suppose specifically with EK. program for close to 80% delivered on our allocations of the first run and we think as the program moves forward, the OEM's ability to deliver rapidly will be an important fact.

Marc Bedard

Okay. I'll pass along. Thank you.

Thank you, Mike.

Operator

Our next question is from George January cash from Canaccord Genuity. Please go ahead.

Marc Bedard

Good morning and thank you for taking my my questions.

I'd like to know it's a volatile environment. You mentioned some issues with allocations of orders. But I was wondering if you you mentioned liquidity you could give us sort of in broad strokes, what you're expecting 2024 to look like from a from an EBITDA perspective and maybe a gross margin perspective, just so we can kind of compartmentalize what what your cash needs will be throughout the year.

Thank you.

Marc Bedard

Yes, and hydrogen to enriching lives.

And you know, right now, we don't we don't provide any new guidance.
I can maybe comment on the liquidity front. We like I said earlier, we closed the year with 93 million, 30 million in cash and $62 million on our revolving facility. Now we believe we have sufficient run rate for the year as key drivers and offer us in terms of the liquidity. Obviously, we're coming towards the end of our investment cycle, right? We we this year, we're looking at the CapEx that's going to be lower than 10 million. We talked about the inventory reduction plan of between 50 and 75 million. We continue to be very focused on overall cost control, cost reduction, SG&A we expect this trend to continue with the percentage of sales of Nissan improvement year over year, and that's going to continue. We have a lot of initiatives on product cost savings also that are another focus area for us and R&D, same thing as we introduce a new product in the market. We see the R&D spend went down. We're looking at a 30% reduction this year. So both those elements makes us feel really comfortable with our cash position.

George, maybe one additional comment as well. Obviously, you know, the growth CapEx being behind us is a big, big thing, right? And you don't see that very often in the DVD space. So I think it's great. And also, you know what we did this morning like letting go 100 people, obviously, and this is not the kind of thing that we wanted to, but we're taking the action to make sure that we're protecting our liquidity without a doubt.
Thank you.

And maybe as a follow-up, you had a previous question was about market share, etc. One of the larger competitors in this space has talked about expecting to order about 30 to win excuse me, about 30% of orders related to the lease round two of the EPA Clean school bus program, maybe again in broad strokes what would be satisfactory for you in terms of just market share and when rate for those two programs?

Marc Bedard

Thank you.

Yes, hey, look, we for us, George expectations of winning in a program that's lottery driven, right? Because that's what it is is more speculative than them we're going to be here. And so I'm not going to comment about a specific number I will say, you know, we are number one player in the space by registration today by market share. Our market share has been more weighted in Canada relative to the US and we expect to we're hoping to see continued improvement in the proportion of our wins under the EPA program. And the dialogue with the customers is very constructive, but ultimately will want to talk with with purchase orders and not with the app with these types of forward-looking estimates.

Appreciate.

Marc Bedard

Thank you.
Thank you.

Operator

Next question comes from Dan Levy from Barclays.

Marc Bedard

Please go ahead promoting.

We'll probably go on for the day and thanks for taking the question. So looking at looking at the order book, I can appreciate that the timing of the awards under the Tornier major flood programs are significantly impacted by the timing, but the I guess, the government subsidy programs. But well, look, I guess we're looking for sort of inflection in the order book. I was just curious if you could I know you can't guide to it, but could you quantify like what we could expect as these programs as you know the timing aligns with this, Jonathan, the order books be larger than some of the larger sequential jump 16 in the past.

And could they I guess they could download it from the pharma. If you look at it, essentially, again, there was a $1 billion allocated in the ground, right, that run second down the TA program. And as I mentioned 7% of that is allocated to what we call free agents, meaning that line is that other OEMs?
It's not their dealers that have it was close to 2000 units that are, we believe a progress by by everyone, including us, and we're working hard at it. And then there's a of CAD500 million in the rebate program that is that just closed in them and in 2014, right? And so and that will be allocated in April. So when you look at it starting in April in the next few months, there will be a lot of funding that can result in purchase orders for the next few months. And so yes, the jump could potentially be bigger than we've seen in the past also mentioned that, you know, when these programs come out, it really is the OEMs like us. And certainly we do make the promotion of these programs and make sure that the clients are aware, we filed a lot of applications on behalf of clients, but more and more that program gained maturity and the school districts and operators are aware of the program and file on their own and then pick an OEM. So there will be a lot of dollars out there dedicated the bus purchases that are up for grabs. So technically speaking?
Absolutely.

Marc Bedard

Yes.

The jumps in the future could could be higher in the order book when obviously it starts and potentially in April and then in the subsequent months, that's very helpful.

Thank you. Then as a follow-up, we've seen news reports coming out about the finalized EPA EPA targets for light vehicles. Specifically, it sounds like the emissions targets might get softened a little bit, at least to 2030. And I was just curious if there was any meaningful read here for your end markets?
You know, I appreciate that light vehicles is a different world, but is there any reason to think that the sentiment might translate over into a 20-year realm as well for EPA rules specifically, are you from our standpoint we've seen no change of the forecast.

Actually, when you look in the school bus, I don't I think we're past the point of convincing customers and general society around the benefits of electric school buses relative to diesel for a school bus application on top of EPA targets, really Derek of state level, provincial level regulation that's coming into place. And so I know what's happening in the light vehicle sector hasn't impacted us. And in the truck sales, we've said it in the past, the truck space of medium heavy duty here is a few years behind the school bus reform and a much bigger market. As I mentioned earlier, it really is going to be a discussion topic that has been more active with the large operators that really have these targets out there. There's regulation, there's targets as well right then. And with these large companies that essentially need to figure out the solution going forward, and so in short, that no impact as it relates to the light duty.

And then also with time with respect to the greenhouse gas emissions are if you want to lower them one of the best ways to attack the medium and heavy-duty trucks and buses, you know, for every bus that you're doing, it's like you are taking up basically at least in oh five to buy cars from the from the street. So that's really the best way to get to your goals of bringing that down. You know, the greenhouse gas emissions and when we're looking in Canada, unlike you know, the 35% of target that they have for 2030 and 2030 is tomorrow. So we do not see our you know, this could decrease, and we really see that that will be the best way to achieve their goals. And that's exactly what we are echo on the on the US side and in Europe as well.

That's really helpful. I appreciate it.

Marc Bedard

Yes.

Operator

Our next question comes from Chris alpha from B. Riley. Please go ahead.

Isabelle Adjahi

Hey, guys, good morning, and thanks for taking my questions here on, would you be able to quantify the impact on the delays for the initial line, the line five vehicles in the fourth quarter in areas like versus how much you were expecting versus kind of the push out there, I think would be helpful.

Yes, Chris. I mean, obviously, no, we did not provide the exact that exact figure, but you know, that was that that was significant right now. Some of it is explaining the, you know, the difference between, you know, the what the Street was. I was looking at the final number that we got at one 88, which was clearly below our expectations. So that was a mix of that and the DCF. But you know, for us. I mean, quality is always is always number one and not easy to bring any new product to market. We see that. I mean, there's very few new EV products coming to market. And when you do that, you need to take your time. So our goal was really to start delivering that by the end of the year. But I mean, we've had a few challenges like in terms of, you know, software updates and those kind of things where we sell that Keynote since those will be the first deliveries to the customers you know, the sort of the best and so we will catch up.

Marc Bedard

I mean what we lost at the end of Q4 is going to take us two quarters to catch up, but we feel good about the quality of the product we're bringing to market.

And you probably saw some feedback also on some of the customers that started to receive the line the end, it's very, very positive.

Marc Bedard

Okay.

Isabelle Adjahi

Maybe just you know, if we take out the GTF snow and kind of look at the backlog on how many of the 10 remaining scope of all electric school buses are learning daily.
And can you give us any sense around the breakdown of expected timing, excluding that kind of Canadian program that there is obviously out of your control. I just wanted to get a sense if we could get a better feel for on no other timing delays beyond that one that we're that we're seeing here. I think you called out a little bit with the EPA now for April for this past grant one, but kind of a broader peek at the order book. I think would be helpful for folks.

Yes. So the point that the majority more than half of the order book, right, is in the US at EPF and conditional for that, the rest of it. It is still the majority of that is in the Type C markets. We have a good amount of demand for the Type B in the order book, especially for our product that we haven't delivered yet, but the but the bulk of it is in the Type C. Nonetheless, we generate the most demand with the vehicle. When you put it on the street, which is what we're doing now. And so we expect production of the Type B to ramp up and demand the ramp-up curve.

Yes.

Marc Bedard

Okay.

Isabelle Adjahi

Thanks. I'll hop back in the queue here. Thank you.

Operator

Yes, next question is from SEN. Lower Shell from Deutsche Bank. Please go ahead.

Richard Coulombe

Any Good morning and thank you for taking my question. My first question is on the headcount that you announced this quarter. I'm just curious if you could provide more color on how much in OpEx savings which could translate to another, if you will insurance charges for this in the upcoming quarters?

Yes.

Marc Bedard

Yes.

So it's in the morning the yes, the account number is the 100 people that we are. We've we've locked down and most of them are on the night shift. So basically at this point, worth importantly, eliminating the the night shifts up and done, a lot of them are manufacturing people, but some of them are overhead as well. So basically, we're reducing the overhead at the same at the same time.

Marc Bedard

So was that your question?

I mean, part of your the second part of your question.

Yes.

Richard Coulombe

So I was just curious if you could provide more color on how much in OpEx savings could that translate to an MR to ensure that you would incur any charges in the coming quarters we'll get to them.
And then one 50 you previously announced back in December?

Marc Bedard

Yes.

Well, the one 50 were all already obviously no benefiting from this discount. I mean there are some, you know, with them in addition to the to the savings, obviously we're making on a temporary basis because the goal is to is to is to for those employees to go back to work as soon as we get, you know, approvals from that ETF for the delivery of our vehicles. So we still hope that this will be the case, if not the annual saving that we're looking at with this is around, you know, 8 million US. So that's the kind of saving we're looking at when you're including the payroll and obviously the other expenses related to the night shift. But the real goal is to get great news from visibility up and bring back our people.

Got it.

Richard Coulombe

Thank you for the color and just a follow up with supply chain issues and shipping costs easing over the last couple of months. I'm just curious if you've seen a reduction of your bill of material costs.

And while we saw some reduction a lot because of all the initiatives we have that Richard was alluding to in the past. And he was I know saying that we're working a lot on the bill of materials.

Marc Bedard

I mean savings.

So there is some of that, obviously, you know, the with the amount of inventory that we have, it could take a little while as well to start, you know, seeing the benefit it does cost savings because we have 250 million of inventory. And the real goal is obviously to use that inventory as soon as possible to get the benefit of a 50 to $75 million in inventory reduction that Richard was talking about, but this is top of mind for us to keep reducing the cost of the bill of material. And we have people working full-time on that without any compromise on the on on quality.

Marc Bedard

Got it.

Richard Coulombe

Thank you for taking my questions. I'll pass the line.

Marc Bedard

Thank you.

Operator

If there are any further questions, please press star one on your telephone keypad.

Isabelle Adjahi

Now we have no further questions on the call at this time.

Operator

So I'll hand the floor back to you.

Yes.

Isabelle Adjahi

First, thank you, everyone, for joining the call today. We are really look forward to continuing the discussion and the feel free to contact me for any follow-up question you may have.

Richard Coulombe

Have a nice day.

Operator

Thank you.
This concludes today's conference call. You may now disconnect your lines.

Isabelle Adjahi

No, no, no.