Canoo Might Be Too Revolutionary

Given the futuristic minivan look of Canoo’s (NASDAQ:GOEV) first electric vehicle, the company is clearly seeking to be revolutionary. In a past column about GOEV stock, I noted that I thought consumers would view the vehicle’s very spacious interior favorably.

GOEV stock an electric vehicle charging. image represents electric vehicle overvalued stocks
Source: nrqemi / Shutterstock.com

Two other revolutionary features of Canoo’s upcoming “lifestyle” EV (that’s what the company calls its minivan), however, may turn off many, if not most, EV buyers. Change, after all, is not always a good thing.

“Drive by Wire” Steering

According to the website Electrek, Canoo’s minivan will incorporate “‘drive-by-wire steering,’ meaning there is no traditional steering column, just connectors.”

Wire steering (as I’ll call it) has a number of advantages. First, as Electrek notes, it allows the steering mechanism to be placed anywhere in a vehicle. And Wired says the system provides a “quicker and more precise steering response, keeps vibrations from the road from annoying the driver, and improves the car’s active lane control system.”

Moreover, at some point in the future, wire steering will also “offer weight savings, reduce maintenance costs, and make designing autonomous cars a lot easier.”

But there are also downsides. In general, wired systems are more vulnerable to hacking, the extra parts can “add new complications,” and there can be a ” delay between input and action,” warned Autoweek. Further, wire steering specifically prevents drivers from feeling some changes in the road, meaningfully diminishing the driving experience for some.

Interestingly, Infiniti, the first auto brand to implement wire steering, retained the old-fashioned steering mechanism in its vehicles, along with the new system. So it sounds like drivers can use either the traditional system or the old one.

I think that the latter decision by Infiniti was quite wise. After years or decades of using the same type of steering system, many drivers may not feel comfortable switching to a new mechanism. (After driving for over two decades, I know I would not feel great about learning how to drive with a new steering system).

Despite intensively researching the issue, it was difficult for me to determine the exact specs of Canoo’s wire steering system. Canoo did, however, clarify that it intends to have some sort of steering wheel somewhere within its minivan.

Still, Canoo makes clear that the wheel may be located anyplace within the vehicle. As a result, drivers of the company’s minivan may have to adjust to a new steering wheel location. Further, after reviewing a short video by South Korean company Mando, which made Canoo’s steering system, I think that a portion of the steering wheel will activate “comfort mode” and another portion will activate “sports mode.” So, it does appear that there will be a learning curve when it comes to steering for buyers of Canoo’s minivan.

Further, I have a hunch that the wire steering system, which sounds way more complex than the traditional steering wheel, is far more susceptible to breakdowns. Indeed, Autoweek hinted at that weakness when it stated that wire steering may “add new complications.”

No Touchscreens

Unlike the vast majority of new vehicles over the past decade, Canoo’s minivans will not have touchscreens. Instead, drivers of the EV will be expected to use their smartphones or tablets to interact with its infotainment system.

That will represent another big adjustment for the EV’s owners. Moreover, I believe that many drivers will find either often glancing down at their devices or placing their devices in the vehicle’s holder (which comes with the EV) before every trip inconvenient and annoying. More importantly, glancing down at devices could be, of course, quite dangerous for drivers.

The Bottom Line on GOEV Stock

With Canoo at a large market capitalization of over $3 billion, a huge number of sales of the company’s minivan is already baked into the shares.

Yet I believe that the company’s revolutionary steering and infotainment systems may turn off many if not most consumers. As a result, the company could very well have difficulty generating enough sales to justify the current elevated level of GOEV stock.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Larry has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.


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