Shares of Canoo (NASDAQ:GOEV) popped Wednesday after The Verge reported that Apple (NASDAQ:AAPL) held potential investment and acquisition talks with the EV startup last year. As of this writing, GOEV stock is up more than 15% on the news.
Judging by the GOEV stock price reaction, the market clearly saw this news as a pleasant surprise for Canoo. But it comes as no surprise to me.
That’s because I’ve long held the belief that Canoo — with its modular skateboard platform that is ready to reimagine the future design of cars in the self-driving era and its novel subscription model that will forever change the way we buy cars — is the most innovative EV startup in the world. Apple knows the value of innovation.
It’s the fuel for long-term growth.
To that extent, although Apple-Canoo discussions fell apart, they broadly underscore that GOEV stock is one of the best stocks to buy to play the EV Revolution.
Here’s a deeper look:
Canoo: The Self-Driving Car of the Future
Canoo’s innovation can be segmented into two parts: hardware innovation and software innovation.
On the hardware side, Canoo is entirely reimagining the design of traditional automobiles, and creating a new auto design that is purpose-built for the self-driving era.
Long story short, Canoo has engineered a proprietary, modular skateboard platform that is uniquely designed to optimize the space of the vehicle. It has low floors, a wide base and also features the market’s first steer-to-wheel platform — which essentially removes all the motors from the hood of the car and allows Canoo to push the front two passenger seats right to the front.
The result? A car that ostensibly looks like a beetle (without a hood or trunk), but which is basically a loft on wheels. It’s spacious (188 cubic feet of passenger volume, versus 112 for a Tesla Model X). It’s comfortable (it sits like a semicircle booth at a restaurant with tons of leg space). And it looks more like a small room than the interior of a legacy car.
This car design may seem odd today. But it represents the future design of cars in the self-driving era.
Today’s cars suck for self-driving, because they are designed to be driven. They aren’t comfortable. Relaxing in them is tough to do. You can’t really work, or watch movies and TV shows. The Canoo – as a room on wheels – isn’t designed to be driven; it’s designed to be rode. It’s designed to be relaxed in. It’s ultra comfortable and exceptionally spacious. You can pull out your laptop and comfortably work. Or you can kick back and throw on a movie and relax.
It’s a car that is purpose-built for the era of self driving.
Thus, as semi- to fully-autonomous cars become more commonplace over the next 10 to 20 years, you are going to see a seismic shift in auto design toward Canoo-looking cars. A large portion of these cars will be built by Canoo, because they own all the patents behind the proprietary skateboard architecture that creates these ultra spacious vehicles.
Big picture: Canoo has created the innovative technology architecture that will inspire a new generation of self-driving vehicles that are designed to be rode, not driven. Of course, that has bullish long-term implications for GOEV stock.
The Subscription Car Rental Model of the Future
On the software innovation side, Canoo is pioneering a new way to buy cars that is specifically designed for tomorrow’s car buyers.
Traditionally, consumers either owned or leased a vehicle. Canoo is disrupting this status quo with a pure subscription model. It’s basically a direct-to-consumer leasing model, without a down payment and with a minimum term of just one month.
Say you want a Canoo vehicle. You download the Canoo app. You apply to be a member. Once approved, you pick your Canoo vehicle and a select a time frame for usage. You go and pick-up your Canoo, pay to use it every month, and return it at the end of the subscription. Minimum term: Just one month.
This new “Transportation-as-a-Service” business model is genius for two reasons.
One, it’s significantly higher margin. Because Canoo essentially “re-sells” the same vehicle multiple times throughout its life, the company generates significantly more revenue per vehicle than a legacy OEM, on the same cost basis, leading to 4X the margins on each vehicle.
Two, it aligns with today’s consumer interests. Everything is a subscription these days. Your shopping with Amazon (NASDAQ:AMZN). Your movies with Netflix (NASDAQ:NFLX). Your music with Spotify (NYSE:SPOT). Your workouts with Peloton (NASDAQ:PTON). Your kids’ education with Chegg (NASDAQ:CHGG).
Why not your car?
Indeed, that’s the direction we are headed – and Canoo is leading the way. That, of course, is a bullish development for GOEV stock.
Bottom Line on GOEV Stock
Apple held potential investment and acquisition talks with Canoo in 2020 because Apple wants to build an EV, Canoo is the most innovative EV startup in the world, and Apple knows the value of innovation in creating new products. See: The iPhone.
Those talks fell apart. But the reason they happened remains true. That is, with its modular skateboard platform and subscription car-rental model, Canoo is still the most innovative EV startup in the world.
Innovation is the fuel for long-term growth. Thus, so long as Canoo remains the most innovative player in the promising EV Revolution, the future for GOEV stock will remain bright.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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