Plucky L.A. Startup Xos Plots A Multibillion-Dollar Future In Unsexy Electric Work Trucks

Xos Trucks, a Los Angeles-based electric truck startup that’s going public in a few weeks, is convinced that shifting delivery trucks, armored cars, forklifts and other heavy work vehicles to battery power isn’t a glamorous business but one that will generate billions of dollars of future revenue–and get some of the dirtiest exhaust and carbon emitters off the road. 

“If we all woke up tomorrow and bought an electric passenger car for ourselves, we’re only going to make so much of a dent in greenhouse gas emissions,” cofounder and COO Gio Sordoni tells Forbes. “It’s the last-mile delivery vehicles that are driving through our cities and past our schools and places of work and pulling up to our house 12 times a day that tend to be larger, dirtier diesel vehicles. That’s really the area we want to focus on.”

The five-year-old company looked like a longshot when it started showing off an electric big-rig with a distinctive sculpted exterior around the same time Elon Musk unveiled his futuristic Tesla Semi in late 2017. Sordoni and fellow cofounder and CEO Dakota Semler were passionate twenty-somethings (and Forbes 30 Under 30 alums) but lacked the billions of dollars to invest in a new commercial vehicle business that Musk commanded. But they won a contract from UPS to make customized medium-duty delivery trucks, followed by a surprising deal to electrify armored cars for Loomis–eliminating vast amounts of diesel exhaust produced by vehicles that constantly idle and are never switched off as they make their rounds. This month the company launched a new powertrain unit to help companies like Wiggins Lift make electric heavy-duty forklifts and other specialty vehicles. 

A $20 million funding round last year helped it start to scale up but Xos’ recently announced plans to merge with blank check company NextGen Acquisition Corp. and trade on Nasdaq as “XOS” will generate $515 million in net proceeds to help the lean young truckmaker set up flexible production lines in factory spaced leased from contract truck builders Fitzgerald in Tennessee and partner Metalsa in Mexico. It plans to build about 2,000 heavy-duty electric trucks at the two plants next year, up from 116 in 2021. By 2025 it intends to be shipping out more than 30,000 trucks and generating annual revenue of more than $5 billion.

The push to electrify cars and trucks is accelerating as the Biden Administration pushes policies that would create federal incentives for domestic production of advanced batteries and key electronic components, as well as the vehicles themselves. Every major automaker is announcing plans for new battery-powered models and companies including Ford, General Motors and Daimler’s Mercedes-Benz are beefing up their electric offerings in the light-duty commercial space, with a particular focus on delivery vans. 

To avoid going head-to-head with more powerful competitors, Xos is targeting the somewhat overlooked medium-duty market, which includes larger, heavier delivery trucks as well as a range of service vehicles used by utilities, at ports and moving shipments between warehouses and distribution centers. 

“Given the explosive growth in e-commerce if you’re a last-mile delivery company, you’re seeing more dense routes and larger parcel volumes,” says Sordoni. “You’re having these larger, bulkier, goods in the back of these vans. So you will tend to need a larger format vehicle, and that’s why we’re focused on that larger van space.”

Unlike rival EV startup Arrival, for example, which is also preparing to make electric delivery vehicles for UPS as well as transit buses, Xos is staying away from smaller commercial vehicles. “That’s a more competitive space. A lot of people are going after that class of van. That’s where the big guys go first. Ford and Mercedes will have electric versions of those products before they turn to larger volumes of any other commercial vehicles.”

Xos recently shifted headquarters from North Hollywood to a new location on the border of Los Angeles and Glendale, rehabbing a former movie poster factory. In addition to offices, the 80,000-square-foot space also houses the R&D team, prototype and pilot production facilities and, for now, its battery pack production line. Over time, higher-volume production of its proprietary battery modules, made with LG Chem cells, will shift to locations nearer where its trucks are built, says Dag Reckhorn, vice president of manufacturing.

Along with upgraded facilities, Xos is now adding experienced automotive and engineering talent like German-born Reckhorn, a veteran of Tesla and Volkswagen, and CTO Ron Ferber, who also worked at Tesla in its founding period, as well as at EV pioneer AC Propulsion and Virgin Hyperloop. Kingsley Afemikhe, its Stanford University-trained CFO joined last year after stints at UBS, Deutsche Bank and Swiss oil and energy company MET Group.

Because Xos already has potential orders for about 6,000 vehicles and has made arrangements to scale up production to about 10,000 trucks through 2023 with Fitzgerald and Metalsa, it shouldn’t need to raise more cash beyond the SPAC merger in the foreseeable future, says Afemikhe.

“We wanted to make sure that we could raise enough money to get to cashflow positive, and really execute on our plan, and not have to go back out to the market in a year, two years or three years and say, ‘hey, we ran out of money, we need more money,” he says. “We’re extremely confident in our planning to be able to get there.”