Shares of American electric vehicle startup Canoo are soaring after its Oklahoma City facility received approval as a Foreign Trade Zone (FTZ). This approval is expected to enhance Canoo’s profitability as it expands its production capacity.
Earlier this month, Canoo undertook a reverse stock split to maintain its listing on the NASDAQ, and now, with the approval of its OKC EV facility as an FTZ, its stock is experiencing a significant surge.
Canoo announced on Monday that the US Department of Commerce has approved the plant as an FTZ, leading to a surge in its stock price. This approval is set to accelerate Canoo’s “Made in America” EV strategy, improve unit profitability, and enable a quicker path to breakeven.
Currently employing around 100 workers, the plant is expected to support up to 1,100 employees at full capacity. With the FTZ designation, Canoo eliminates all customs duties on vehicles sold overseas and defers customs duties on imported parts for EVs sold in the US.
Canoo sources over 90% of its parts from the US and free trade partners, with approximately 70% coming from North America. The FTZ approval is expected to significantly enhance profitability by reducing vehicle costs by up to 5% on parts imported from other parts of the globe.
According to Canoo, the cost reductions will apply to EVs manufactured in the US and exported overseas, with specific announcements on this front expected “in the near future.” For vehicles sold in the US, the FTZ approval will improve working capital by avoiding customs duties and tariffs on imports, resulting in savings amounting to millions.
Canoo anticipates additional cost savings through a simplified customs process and a streamlined supply chain. The company is awaiting approval for FTZ status at its other manufacturing plants. If approved, Canoo’s FTZs will be among the largest in Oklahoma.
Following this news, Canoo’s stock has surged over 50% (+1.06 per share). Despite bouncing back from an all-time low earlier this month, Canoo shares remain down nearly 80% over the past year.