Lion Electric Co

NYSE:LEV

Earnings Call Transcript 2023-Q1

[Operator]

Good morning, ladies and gentlemen, and a warm welcome to the Lion Electric First Quarter 202 Results Conference Call. [Operator Instructions].

I would now like to turn the conference call over to Isabelle Adjahi, Vice President of Investor Relations and Sustainable Development. Please go ahead, Ms. Adjahi.

[Isabelle Adjahi, VP, IR & Sustainable Development]

Good morning, everyone. Welcome to Lions First Quarter 2023 Results Conference Call. Today, I'm here with Marc Bedard, our CEO and Founder; and Nicolas Brunet, our EVP and CFO.

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. Marc?

[Marc Bedard, Founder, CEO & Director]

Thank you, Isabelle. Good morning, everyone. We are pleased to share with you today our Q1 results and to report that Lion is showing great progress, setting a strong foundation to execute our plan. There are three main items we will be talking about today. Number one, we continued our sequential growth in vehicle production and deliveries, announcing today our sixth consecutive quarter of delivery growth. Number two, manufacturing operations at both our Joliet vehicle plant and our battery factory are now underway and will gradually ramp up over the course of the year. And number three, with production ramping up in all three of our plants, we are focused on achieving profitability and are putting the right elements in place to achieve this key objective. We will now provide color on each of these items before we open the line for questions.

Let's begin with deliveries and orders. During the quarter, we delivered 220 vehicles. This is the sixth quarter in a row of sequential growth in vehicle deliveries. We delivered more vehicles in Q1 than we did in all of fiscal 2021, the year in which we became a public company. We now have more than 1,100 vehicles on the road in real-life operating conditions. Our purchase order book currently stands at 2,565 vehicles, for a total order value of $625 million. It includes orders for 2,270 electric school buses. We secured 289 orders in the EPA Clean School Bus Program, representing a total order value of approximately $105 million, and we are working to obtain additional orders from awardees who have obtained extensions from the EPA. Nicolas will provide further details regarding this program, including the upfront payments that have been made and are expected to be made by the EPA. I am also pleased to announce that the EPA recently released guidelines for the second round of the Clean School Bus Program, which I will discuss in a moment.

Our PO book also includes orders for 295 electric trucks, and our LionEnergy PO book amounts to approximately $6 million for charging infrastructure and related services. We realized that the electric truck market is still in its early stage. But the recent unveiling of our Lion5 truck, the first Lion model with our own Lion batteries and the upcoming commercialization of our Lion8 Tractor later this year should position Lion very well in the truck industry.

Coming back to the EPA program. In addition to the $920 million awarded in round 1, the EPA recently announced that it is awarding $400 million in competitive grant funding for the replacement of existing school buses with clean and zero-emission school buses. For the second round, funding is expected to be up to $395,000 per vehicle, inclusive of charging infrastructure, and all applications must be submitted by August 22 of this year.

Besides the EPA program, various levels of governments continue to implement more stringent GHG emission targets, legislation and subsidy programs to accelerate EV adoption both for Zero-Emission school buses and medium- and heavy-duty trucks. At the U.S. federal level, the EPA recently announced new GHG standards for heavy-duty vehicles. When finalized, these rules will lead to 50% of buses, including school buses and 25% of long-haul tractor trailers to be electric by 2032.

At the state level, important laws and regulations are being adopted that will continue to accelerate the shift to the electrification of the transportation sector. For example, CARB recently adopted its Advanced Clean Fleet Rule, which is expected to have an unprecedented impact on the ZEV adoption in California. Under this new rule, all trucks performing drayage operations will need to register with CARB, and starting next year, only Zero-Emission vehicles can be registered. Federal fleets and high-priority fleets will either need to purchase only ZEVs starting in 2024 or, alternatively, meet ZEV targets as a proportion of total fleet starting in 2025.

In the case of box trucks and school buses, this proportion of ZEV is set to 10% of fleet in 2025, 25% in 2028 and growing to 100% by 2035. In combination with the Advanced Clean Truck Regulation, CARB expects the ACF rule to result in over 500,000 medium- and heavy-duty Zero-Emission vehicles in California in 2035 and close to 1.7 million by 2050. As seen in the past, we expect that many other states will follow CARB's leadership and adopt similar regulation.

In addition to regulation, we continue to see great momentum in subsidies and incentive programs, with billions of dollars available across the U.S. and Canada to support fleet electrification. With our product lineup focused on urban range and our growing production capacity, we believe we are highly positioned to benefit from all these programs, and we'll continue to closely monitor them on behalf of customers, which takes me to an update on the Joliet factory and the battery plant.

During the first quarter, we focused on the ramp-up of electric school bus production in Joliet as we continue to install school bus working stations equipment, with a targeted manufacturing capacity of 2,500 buses per year by the end of the year. This allowed us to continue to manufacture our LionC units for customer deliveries. Also, we should proceed with the official grand opening of our Joliet plant during the summer.

As for our battery plant, we did the grand opening and hosted analysts for an on-site meeting a few weeks ago. We installed additional equipment as we continue to ramp up the production of Lion battery packs, with an objective of bringing our production capacity to 1.7 GWh on an annual basis by the end of the year. This will be enough to power approximately 5,000 of our vehicles in a mix of school buses and trucks. Certification of the first of our two battery pack models is expected in Q2 of this year, followed by a gradual ramp-up of production during the rest of the year. We will gradually integrate our Lion battery systems into our different vehicle models, starting with the LionC and LionD school buses the Lion5 trucks. Also, we currently have over 3,800 BMW battery packs in inventory to perform a smooth transition to our own batteries throughout the year.

Now a few words on our Saint-Jérôme plant. The operational improvements made in the prior years have allowed us to continue to increase our production cadence. No major CapEx is required to achieve our production capacity of 2,500 vehicles at scale, consisting of 1,000 school buses and 1,500 trucks.

Let me now address our focus on profitability. In parallel to ramping up operations at our three plants, we are focused on our path to achieving profitability. The unit-level economics are healthy, and the Lion model works well at scale. As we produce and sell more vehicles and expand on our vertical integration strategy, such as the Lion batteries at our own battery plant, we are confident that the Lion model should generate attractive margins. The CapEx investments to bring our total capacity to 5,000 vehicles, including batteries, will be completed by the end of this year, a very significant milestone for Lion. We have also put in place measures to contain costs at all levels of the company to minimize as much as possible the time line to profitability. Our entire organization is aligned towards achieving this goal.

Nicolas will now further discuss our financial performance for Q1. Nicolas?

[Nicolas Brunet, EVP & CFO]

Thank you, Marc. I will start with the financial highlights for the first quarter. I will then comment on Q1 CapEx and conclude with our liquidity position.

During the quarter, we delivered 220 vehicles, consisting of 207 buses and 13 trucks, which translated into revenue of $54.7 million compared to $22.6 million in Q1 2022, a 142% year-over-year growth in revenue. 215 of the vehicles delivered in Q1 were delivered in Canada and 5 in the U.S. This was our sixth consecutive quarter of sequential growth in vehicle deliveries. We posted gross margin of negative 4%, a significant improvement relative to the negative 10% margin in Q4 of 2022. If we remove the impact of noncash share-based compensation, SG&A amounted to $17.5 million in Q1 as compared to $12.6 million in the same period last year. The increase was mainly due to an increase in expenses as we expand our head office and general corporate capability and sales force in anticipation of the ramp-up of production capacity.

Adjusted EBITDA was negative $14.5 million for Q1 as compared to negative $11.3 million for the same period last year. During the quarter, CapEx amounted $23.1 million, including $6 million incurred for the Joliet plant and $14 million incurred for the Lion Campus. As previously signaled, our 2023 CapEx for the Joliet plant and the Lion Campus are expected to amount to $65 million, consisting of $45 million for the Lion Campus and $20 million from the Joliet vehicle plant. We expect CapEx to drastically decrease next year as we expect to have by year-end, a combined production capacity of 5,000 vehicles at our Canadian and U.S. vehicle plant and a production capacity of 1.7 GWh at our battery plant, enough to power approximately 5,000 vehicles in a mix of school buses and trucks. Any future investments towards further capacity expansion will only take place when justified by the order book and, importantly, our liquidity profile.

As a reminder, we expect that approximately 55% or approximately $25 million of the $45 million in capital expenditures to be incurred in 2023 for the Lion Campus will be financed through the federal and provincial loans secured for such purpose.

Addition to intangible assets, which mostly consist in R&D, amounted to approximately $16.5 million as compared to $15 million last year.

Let me now say a few words on our liquidity and capital resources. In Q1, gross proceeds for the exercise of the overallotment option for the December 2022 unit offering generated $7.5 million. We also completed a sale-leaseback transaction for the battery plant building in Mirabel, raising gross proceeds of approximately $21 million. We raised $4.6 million under our ATM program, and we used $6.3 million on our government loans remitted to the Lion Campus. As of the end of Q1, we had an immediate liquidity position of $57 million, consisting of a cash position of $36 million and $21 million availability on our ABL credit facility. We were also owed $10 million on the government loans for capital expenditures incurred up to March 31, 2023, on the Lion campus. Also, as Marc mentioned, 209 purchase orders were obtained in connection with the EPA Clean School Bus Program, most directly through vouchers filed by Lion and, to a lesser extent, through applications made by three agents, which were converted into purchase orders of Lion. These purchase orders represent a total value of $105 million.

For approximately 1/3 of these orders, clients have requested an extension to the EPA, mainly due to challenges remaining at acquiring infrastructure and related construction work. As Marc mentioned, we are also working to obtain additional orders from awardees who have obtained extensions from the EPA. Upfront payments under the EPA program have already come in, with over $10 million having been received from the EPA since the end of the quarter. As applications in respect of other orders are processed by the EPA, we expect to also be able to receive other upfront payments from the EPA.

Lastly, at the end of the quarter, capacity of approximately $90 million remains available for issuance under our ATM program.

To conclude, I will reiterate that we will continue to closely monitor market conditions and our liquidity and capital requirements and resources. We'll also continue to explore and evaluate different financing opportunities with a view to raise additional capital and strengthen our financial position in the upcoming months.

With that, I will pass it back to Marc for concluding remarks.

[Marc Bedard, Founder, CEO & Director]

Thanks, Nicolas. Before we open the line for questions, let me conclude by saying that we are pleased with our Q1 performance, and we expect this gradual growth in orders, sales and production to continue. We will keep building on this momentum and on our objective to achieve profitability. Thank you for your time this morning.

[Isabelle Adjahi, VP, IR & Sustainable Development]

Operator, we will now open the line for questions. [Operator Instructions].

[Operator]

[Operator Instructions]. Our first question comes from the line of Chris Souther of B. Riley.

[Chris Souther, B. Riley Securities]

Maybe you could just kind of quantify, how many extensions do you think are out there for the first round of the EPA that are still kind of three agents that are looking at potential solutions. And maybe just on the EPA strategy for the second, how you think the bundling of the bus and charging infrastructure to play out. Do you think pricing will become more of a factor here where customers will be looking to open up additional funds for charging infrastructure?

[Nicolas Brunet, EVP & CFO]

Chris, Nick here, I hope as well, I'll take this one. So in terms of the broader extensions as part of the EPA program, it's something we're in the process of trying to find out, if, we believe, it could be a significant number that are still out there for the agents but don't have all the facts right now. In our case, in the case of the client that we work with, we're talking about 1/3 of the orders or 1/3 of the clients that requested extension. Recall that in total, we're talking about close to 2,400 unit vouchers for electric buses that were awarded. So it's something that we're working on right now.

In terms of the second round, what I'd say is, the second round is $395,000 of total vouchers for both the vehicle and the charging infrastructure. It's this -- essentially, the same amount, but it's not as prescribed, meaning in the first round, it was $375,000 for the button and $20,000 for the charging infrastructure. Now there's a little bit more flexibility in terms of allocating the amount. I would also say that it's a completely different program. In the first round, we were talking about a rebate, right, where it was essentially a -- well, a subsidy to purchase the vehicle. It was targeting a really broad audience. There were over 400 awardees as part of the program, and they were capped at -- each applicant was capped at 25 units max.

In the second round. It's a competitive grant process. There's a pretty detailed scoring system in there, and there's both minimums and maximums for school districts, larger school districts. We're talking about minimum 15, maximum of 50 units. And for the third-party applicants that have to aggregate at least four school boards, we're talking about a minimum of 25 and a maximum of 100.

There's also a big focus on leveraging third-party funds as part of this overall -- and I should also specify that the EPA indicated that they expect to award 25 to 50 applications as part of this competitive grant process. It's a more complex application, but I'd say it's more in line with what we've done in the past in terms of bidding.

[Chris Souther, B. Riley Securities]

Got it. No, that's very helpful. And maybe on the path to profitability, we saw some progress in gross margins in the quarter with some additional volumes. Can you walk through whether we should expect the cadence of fixed costs over the next couple of quarters to come on as you ramp, Mirabel and Joliet or whether we could expect continued steady improvements there with some of the additional volumes?

[Marc Bedard, Founder, CEO & Director]

Yes, I'd say on that, look, we're -- we think the model works well at scale. It's something we've said in the past, continues certainly to be the case. There is potential improvements related to the unit mix as we deliver more units in the U.S. as we have more of a -- as we have more of those price increases that come in, in the deliveries. We think volume will help on the margin side of things. At the same time, I think you identified correctly there can be some volatility related to the timing of the cost of the Joliet facility as well as the battery plant, but we're -- as Marc mentioned, it's clearly a focus for us to continue to improve on the margin side of it.

[Operator]

Our next question comes from the line of Mike Shlisky of D.A. Davidson.

[Michael Shlisky, D.A. Davidson & Co.]

As a follow-up to his question real quick about your profitability comments there, Nick. Maybe a better way maybe the way I can ask is some more of meat on these, how far do you think you are? How many quarters where do you think you are from being breakeven on a gross margin level? Maybe you could do it if you could just like start there?

[Marc Bedard, Founder, CEO & Director]

Yes. Well, we're -- profitability is really a key objective for all of us at Lion. And the way to get there is -- well, the first step is really a positive gross margin and then a positive EBITDA. And the ultimate goal is the free cash flow, right, free cash flow-positive. So we feel that, as Nick was saying earlier, our model scales very well. And one of the reasons for that is because the models we are building are purpose-built for electric. So with respect to volume, we don't need a very significant volume to achieve this profitability.

So this would be the -- and we spoke about the material margins in the past, and they are very healthy. So let's say that this model as we have right now works very well in Saint-Jérôme. And also the way we're ramping up in Joliet, this is going very well. I think we're very focused on school buses and getting to this first phase of 2,500 school buses of manufacturing capacity we feel is very wise. And we feel that right now, the manufacturing capacity ramp-up is very well aligned with the ramping-up that we're expecting also on the purchase order side.

[Michael Shlisky, D.A. Davidson & Co.]

That's great. And perhaps my other question is also a follow-up on your comment there, Marc. I guess I'd like to know a little bit about the cadence of the ramp-up from here. It sounds like you've got increases in Q2, probably Q3, Q4 sequentially. But I'm kind of curious, is there a quarter where there's a large step change in the production volumes, either because you're opening up more at Joliet where you've got a large purchase order, at some point, this year? Just any sense as to how steep the ramp might be over the next couple of quarters would be appreciated.

[Marc Bedard, Founder, CEO & Director]

No. Thank you, Mike. We feel that it's going to be gradual. This quarter with the sixth consecutive quarter of growth, and for us, it's really growing from one quarter to the other. That's the name of the game. We have a very strong foundation, and we will keep building like that. So I don't believe in a switch that you're just turning on and off and then you can increase by thousands of units. In my mind, this is totally unrealistic. So you can expect this growth to keep going in Q2 and then Q3 and Q4 as well. This is exactly what we're expecting. And this is very well aligned also with our customer request. We need to make sure delivering electric vehicles, Mike, is something that we need to plan ahead. So you need to plan the delivery of the vehicle at the same time that you are planning the charging infrastructure installation as well. So all of this is very well aligned with the Lion ecosystem that we have.

[Operator]

Our next question comes from the line of Rupert Merer of National Bank.

[Rupert Merer, National Bank Financial]

First, just to follow up on that last question. I think you had five deliveries in the U.S. in Q1. How many of those were produced in Joliet? And given that you plan to be at a capacity of 2,500 by the end of this year, is that a number that you think you'll physically have the capability to do by the end of this year?

[Marc Bedard, Founder, CEO & Director]

Rupert, with respect to the manufacturing capacity of 2,500 units, the CapEx by the end of this year, as you know, will have been fully invested. And it's -- after that, it's the ramp-up of the labor that we need to do. So when we're saying we have a manufacturing capacity of 2,500 units, we do have the equipment to manufacture 2,500 units. And we will make sure that we align the labor with the forecasted delivery. So we're not saying that we will be at that pace before the end of the year, but we will be ready to be at that pace if the order book is there and if, obviously, the customers are requesting those buses in this period of time as well. So I think we need to be sure on -- to be aligned on this thing.

[Nicolas Brunet, EVP & CFO]

Yes. We -- Rupert, I'll just add. We're still at modest volumes in Q1 as we're ramping up. We're not providing the split -- the exact split of the units, but it's still in ramp-up phase. And as Marc mentioned, we expect it to continue to ramp up over the year.

[Rupert Merer, National Bank Financial]

Okay. Great. And can you remind us on your order book, how many sales or orders are available for sale this year in Canada and the U.S?

[Nicolas Brunet, EVP & CFO]

Yes. The order book, the composition, it goes all the way up to 2026, but what we've said in our disclosure is that it -- the bulk of -- or the quasi totality of that is delivered from now to the end of 2025. Obviously, the -- substantially all of the orders are related to some subsidy programs, some of which include the ZEVs. In fact, a big portion includes the ZEVs, and some of these applications are still pending approval. So we're working to get those approvals, but I don't have a specific breakdown to give you for this year.

[Operator]

Our next question comes from the line of Craig Irwin of ROTH MKM.

[Craig Irwin, ROTH MKM]

So I wanted to see if we could maybe dive into gross margins a little bit more from a qualitative perspective. So when we look at these big components in gross margins, materials, labor and overhead, can you comment whether or not you're still seeing cost escalation on materials, if you're getting more efficiency on your purchases, if that's something that's generally stabilized and materials content per bus is possible -- or bus and truck is possibly coming down the way one would expect with your volumes?

Then on the labor, can you comment about the number of hours per bus -- number of bus and your proportionate labor versus where you would be at the ? You obviously hired ahead to facilitate a ramp that we expect to go on for a couple of years and to really train the workforce ideally. But if you could talk maybe the manhours approximately, that would be helpful.

And then the overhead, if we look at the overhead for adjusted from facility, would it be fair to assume that those buses [indiscernible] profitably with nice margins? And do we fully -- does the P&L yet [indiscernible] overhead will be carrying for both the Mirabel and Joliet facilities in the future?

[Nicolas Brunet, EVP & CFO]

Yes. Craig, Nick here. Thanks for the question. Let me just tackle qualitatively those items. In terms of material, I'd say it's a mix in terms of cost pressure. We're still seeing some inflationary pressure. But at the same time, we're starting not only to see some of that ease, but we're starting to see the -- we have a good eyesight on the benefits of a cost-out program that we've been talking about for a while. So I'd say there's some good opportunities for us to bring the cost down, and it's something that we need to achieve, and we're working at through the quarters. But it's becoming more and more tangible. And the dialogue with suppliers whereas it was about containing cost only or containing cost increases in the past, it's become more and more about going back to previous presses and reducing the cost in some instances.

In some more sort of technical -- technological items, we're riding out a more long-term couple of years type thing, significant cost-out opportunity, but that will take some time. But I'd say overall on the material, certainly, there's been a change in the dialogue and the relationships where we see some important opportunities to bring costs down in a number of places. So there's certainly room there.

In terms of labor, what I'd say is, right now, our workforce is not where we wanted to be in terms of productivity at the hours per vehicle. One of the principal reasons for that is all the development activities that we have and the new platforms that we're launching and the new production lines that we're ramping up. And so certainly, it's not as important cost-wise as is the bill of material, but there are some opportunities there, but we expect that this will improve really once we've gradually and once we've launched the new platforms that we're bringing to market this year.

And then finally, on the overhead, look that -- it's probably the biggest issue in terms of weighing on gross margins, fixed overhead or overhead cost absorption. I would say that we have a cost base today that is reflective of much more than just our Saint-Jérôme plant, and we'll absorb that over more volume as we scale up both Saint-Jérôme and the Joliet plants. There's likely to be some increases in the overhead as we ramp up Joliet but not anywhere close to proportional to volume, meaning we already incur those costs in great proportion in Saint-Jérôme to manage the two operations or the two production plants.

[Craig Irwin, ROTH MKM]

Excellent. So my next question is really the velocity of sales into the North American market. So you've done an excellent job capturing vouchers, supporting your customers in the school districts out there to procure vouchers from the EPA programs. So can you really talk about the tempo of potential deliveries into the North American market? And should we expect a [indiscernible] back-end loaded for the vouchers to really see those deliveries closer to sort of mid-2024? Or is it possible that we see a rapid uptick on those deliveries? And is that facilitated by some of the heavy pricing we've seen from other OEMs in the market?

[Nicolas Brunet, EVP & CFO]

Look, in terms of the EPA units, which is I think what you were referring to, and correct me if it's not the case. But we're -- the deliveries can go all the way to October 2024. I want to make it very clear that our objective is to deliver those units as soon as clients are ready to take them. And we think we can deliver them well before that. And in general, clients are looking to get those units. And the first phase of the EPA was about getting purchase orders, and we're still working at that. As I mentioned, I think there's an opportunity to do more. But really, what's going to be most important is going to be the cadence of deliveries and the quality of the product that's delivered. And so it's our objective to do much sooner than 2024. At the same time, we use the word gradual quite a lot and expect that the cadence of those deliveries will be gradual. But we do -- I mean we had very few units delivered on the U.S. The purchase order book has proportionately become more U.S.-driven than it was in the past few quarters. And it's our intention for that mix to change over time over the coming quarters.

[Marc Bedard, Founder, CEO & Director]

Craig, what's your question on school buses? Or were you alluding to trucks as well?

[Craig Irwin, ROTH MKM]

It would be useful to know on trucks, but on school bus, that's what everyone is watching right now. My next question is going to be on trucks. So...

[Marc Bedard, Founder, CEO & Director]

Okay. And you talked -- Craig, I think there was another part to your question on pricing. Look, I mean, I'd say we think we could be very competitive when we need to. It will apply -- it can apply well to that second round of the EPA, which talks about leveraging sort of third-party funding. Essentially, we feel the EPA is asking for groups to do more with less, and we can do well. We've done competitively quite well in the Canadian market as well. It probably hasn't been as much of a factor in the first round, though -- yet, that we expect it to become an increasing focus, and we think we're well prepared for that.

[Craig Irwin, ROTH MKM]

And if I could ask another, the truck question that I have. So you're now [indiscernible] the Lion6 and the Lion8 are both shipping and in customers' hands. That's usually a pretty good thing for the pipeline, the potential orders, and real-world experience tends to change the quality of those customer interactions. Could you maybe give us some color around that? And then IRA, it seems that Class 4 could have outsized stimulus funding, but subsidies is a less attractive word. But Class 4 is not in your plan. You've got both Class 5 and Class 8 planned for this year. Could you talk about flexibility to address this substantial support for Class 4 out there in the market? Is it something you would consider?

[Marc Bedard, Founder, CEO & Director]

Thank you, Craig. Class 4 is not in our plan for now, Craig. We feel that Class 5, which is a medium duty and where we have many options for the customers will cover a lot of the market. For most of those operators, what really matters is that they can drive those trucks without the special drivers license, and they can do a lot with this Class 5. And it's also the payload that matters. And you can add a lot of payload with this Class 5. So we've decided to go with the Class 5 for now. Class 4, I mean, you're getting very close to the market of the lighter truck and where it's really crowded right now. And this is a market that we've decided to stay away from. And we feel that the medium duty and heavy duty is really a market where there's a lot of potential and very few OEMs that are proposing purpose-built trucks right now.

So we're one of the only OEMs out there that are proposing to our customers' purpose-built electric trucks. So huge market on Class 5. You're absolutely right. We delivered Class 6 and Class 8. And for many of those operators, they are looking at electrifying the whole fleet or most of the fleet. And it's almost, let's say, a pilot for them right now. But this is going well. I mean discussions with the truck operators, I mean, we really see an increased interest. And Craig, you probably saw as well the ACF that we were talking about earlier. We feel this is a game changer. New regulation in California. And when we're looking at the past, like with the ACT, a lot of states and a lot of Canadian provinces will follow what California is doing. And with the ACF, it's a major game changer where the starting in 2024. So it's really tomorrow. I mean it's early next year, the operators will have to start buying electric trucks in California.

We were expecting this to happen, and this is finally happening. And we feel this is a real game changer. So when you're looking at the product lineup we have, the Class 5 that we are -- we unveiled last week and the Class A tractors that we will be unveiling by the end of the year as well with the Class 6 and the Class 8 straight buddy as well. We have a full line of products for those operators. And we feel it's very promising.

[Craig Irwin, ROTH MKM]

I could just squeeze one in on the trucks. Can you remind us the approximate number of customers that are operating their Lion6 or Lion8 trucks and the total size of the fleet that's rolling right now?

[Nicolas Brunet, EVP & CFO]

Yes. We have about 125 to 150 trucks out there with clients, I mean, the bulk of clients who have purchased less than 10 units.

[Craig Irwin, ROTH MKM]

Well, congratulations on the progress here.

[Operator]

Our next question comes from the line of Tamy Chen of BMO Capital Markets.

[Tamy Chen, BMO Capital Markets]

First question I had is related to the Clean Bus Program. So you said the -- of the 298 purchase orders, about 1/3 are requesting some delays with the EPA. Do you know like what the length of delays we're talking now here? Do you know what amount they're requesting for?

[Nicolas Brunet, EVP & CFO]

Yes. When we say 1/3 of clients, I'm really referring to the number of units, Tamy, and the delays go all the way to the latest the EPA allowed is August 15. And some of the clients have -- they don't all go to August 15. And those delays were largely related to having the appropriate contracts for the installation of charging infrastructure. So it's just a matter of figuring that out. And so I'd say the extensions go anywhere from sort of end of May all the way to August, yes.

[Tamy Chen, BMO Capital Markets]

Got it. Okay. And then my last question is -- apologies if I missed this earlier, but were any of the bus deliveries in this quarter from what you've been awarded so far from the first round? And can you talk a little bit about how you expect your bus deliveries to unfold over the rest of this year as it relates, in particular, to the Clean Bus Program?

[Nicolas Brunet, EVP & CFO]

Yes. Really, just a very small number of units from the EPA program. So it hasn't kicked in materially. What you may have heard me answer before around the timing of the program, the program allows for delivery and all other requirements around the scrapping or selling a diesel bus and whatnot to be done by October of 2024. We're working with clients to time those deliveries, but our objective is to deliver faster than the deadline. I mean we -- as I mentioned in one of the prior questions, the first phase of this was about getting the purchase orders, and the second phase about timely deliveries of quality vehicles. At the same time, client has to be ready to take on the vehicle, and we want this to be a positive experience. But the bottom line is we're going to look to do these deliveries as rapidly as possible.

[Operator]

Our next question comes from the line of Dan Levy of Barclays.

[Dan Levy, Barclays Bank]

Apologies if I missed this earlier, I jumped on late. But I just wanted to ask on the CapEx side. I think recently, the Canadian government budget is allowing for some additional tax credits for clean tech manufacturing, which would be a pretty nice offset on the CapEx piece. So maybe you can just talk about if there's any further clarity here and what offsets you might have on CapEx?

[Nicolas Brunet, EVP & CFO]

Yes. Dan, the -- yes, so in the federal budget, there's discussion of the investment tax credit, I believe, was 30% for investments related to EV manufacturing, battery manufacturing. And the version that we've seen that -- it refers to investments that take place after January 1, 2024. So it's something, as you would imagine, we're very much looking into. At the very least, it could be an option for future expansion. At the same time, one thing we've made very clear this morning is that post our 2023 CapEx plan, our intention is to drastically reduce CapEx, and we don't plan to build capacity expansion until, number one, it's justified by the order book, and number two, importantly, that it's -- it works with our liquidity situation. And so it's something we're looking into right now. We would want this to apply, of course, to our current investments, but they're not -- it's not a program that we're counting on just yet given the timing restrictions I just talked about.

[Dan Levy, Barclays Bank]

Got it. And then again, apologies if you mentioned it earlier, but if you could just address within the order book, obviously, buses are up, but trucks are down. So maybe you could just talk about some of the movements within the order book on the truck side.

[Marc Bedard, Founder, CEO & Director]

Yes, it's slower than expected, to be honest. But at the same time, what we're seeing right now is very exciting. We have trucks out there. We have customers, and we do have a full lineup of purpose-built trucks. And with unveiling last week of the Lion5, we see increased interest. And we feel it's going to be exactly the same thing with the line8 tractor as well. A lot of the market is expecting the Lion8 tractor to be launched before the -- at the end of the year. So we feel the timing is finally working for us right now. And if you remember our work on the school bus side, it took about 5, 6 years to really take off. And with the supply chain crisis and the COVID and all this crisis within the last few years, we feel that this period is starting now. And we think this is exciting, and I was referring to the ACF earlier. And as I was telling Craig, I mean this is really a game changer in our opinion.

So there are some subsidies out there. There are some subsidies on the U.S. side. There's a lot of subsidies on the Canadian side. And now we're seeing this new regulation taking up as well. And this is great. And this is really going to help us. I mean, only in California, where CARB is saying that the ACF group, they are expecting to have over 500,000 ZEVs on the road just in California by 2035 and over 1.7 million ZEVs by 2050. So now the OEMs don't have any choice than offering a ZEV in California. And a ZEV is really -- it's going to be electric, or it's hydrogen. And with respect to electric with the purpose-built full lineup of trucks that we have right now, we feel we're very well positioned to capture some of this market.

[Dan Levy, Barclays Bank]

Great. And if I could just get a -- squeeze, a follow-up on that. Just to clarify, what is the typical timing of an order cycle from a fleet, meaning -- we've seen ACF pass. And just how long does it typically take for fleets to then flow in orders and for those orders to eventually convert to production?

[Marc Bedard, Founder, CEO & Director]

It's always -- Dan, it's always the first order that takes a lot of time. And especially on the truck side, I mean, the fleet operators we're talking to, a lot of them, they are very large fleets. And well, it takes a lot of planning to electrify your fleet. And it's really a team work between the operator and the OEM to make sure that while the right specs are on the vehicles but also the right charging infrastructure are being selected, and they are being installed in a timely manner as well. So it takes some time, I mean, to do a good job, and you probably remember, I mean, our way of thinking, it's really a mean for us to adapt to the operator and not the other way around.

So the first order takes always a lot longer. And that's one of the reasons you see so many repeat orders on the school bus side. And that's the reason why the order book is growing very well also. We expect the same thing to happen on the truck side. And we are working on the initial order for a lot of those truck operators as we speak right now.

[Operator]

Our next question comes from the line of Michael Kypreos of Desjardins Capital.

[Michael Kypreos, Desjardins Securities]

On the supply chain issue, your press release mentioned that you still had some continued issues. Maybe just an update versus last quarter, what sections have improved? What has gotten more difficult? And any updates on that front?

[Marc Bedard, Founder, CEO & Director]

Yes. Michael, thank you. Yes, still supply chain challenges, I mean, we're not done with those challenges at this point. It's a lot better than it was in the past. We're still expecting to have those supply chain issues for the rest of the year. You probably remember the way we've been able to deal with this. And one thing we've done, I think, very well is the redundancy of suppliers. We've been doing this because of the supply chain crisis, but we've also been doing that because of our expansion into the United States. So right now, we have a lot of suppliers on both sides of the border. And for most of the components, we have at least two suppliers and sometimes more than two suppliers as well. So we feel that this will still be a challenge for the remaining of the year, but it's becoming less and less of an issue.

[Michael Kypreos, Desjardins Securities]

Perfect. That helps a lot. And maybe just on the liquidity front, your cash did drop in the quarter. And if the timing on the upfront payments for EPA last until August and maybe some other from Canadian stimulus. What would you see would be your picking order of priorities in terms of liquidity? What would you prefer in terms of maybe issuing shares, the ATM or the other options you have available.

[Nicolas Brunet, EVP & CFO]

Yes. Look, I'd say just first on the liquidity, Michael, we finished at $57 million at the end of the quarter. That was a $36 million of cash and $21 million available on the credit facility. We were owed $10 million on the government loans for the campus as at the end of the quarter and has since collected half of that. We received $10 million in EPA payments. We've also collected $7 million as part of an R&D subsidy program. Certainly, the EPA orders are expected to help. It's $105 million in value in total. Recall that about 1/3 -- for 1/3 of those, the clients have requested extensions that can go all the way to August. We expect to continue to receive some of those payments.

You asked about specific timing. The EPA talked about -- they stated in the program as an objectives to fund 60 days after they process the order. It usually takes a little bit of time to get these programs going. So we're pretty happy that it has started already.

And then in terms of additional sources, we have, as you mentioned, the CAD 100 million of government loans, which we expect to fund about $25 million of our Lion Campus this year. And then we have about $90 million remaining on our ATM program. I said that during the prepared remarks, we will continue to monitor market conditions, our liquidity, our capital requirements, and we'll evaluate different financing opportunities with a view to raise some capital and turn the financial position in the upcoming months. That said, I can't give you a precise answer on timing and instruments. I will say we feel we have significant runway. But the -- we'll be mindful of dilution. We'll be mindful of flexibility, but I can't be more precise than that at this stage. There's going to be a lot of varying factors.

[Operator]

Thank you. As there are no additional questions waiting at this time, I'll hand the conference back over to Ms. Isabelle Adjahi for closing remarks.

[Isabelle Adjahi, VP, IR & Sustainable Development]

Well, thank you, everyone, who attended today. [indiscernible] if you may have then thats where you can [indiscernible] us. Thank you.

[Operator]

Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.