So, you could see putting all of this together, 27% increase in BOM costs and yet an improvement of gross profitability of somewhere over 10% at the same time. Now that you don’t print money, it’s going to come from somewhere. If we have to spend more to make the product and yet our gross profitability is improving, all that can tell you is that you need to combine those two things to get a true picture of what we’ve done. And it comes to well over a 30% improvement in gross profitability just over the last couple of years. Look, I don’t like having a negative gross profit. I spend every waking hour working on it, so does the whole team here, and they’ve done a brilliant job of it clearly to extract these types of improvements during such an inflationary period and without increasing our prices.
But the trend is very much with us. And everything we’re hearing from our vendors, I did — for example, we just had our battery cell vendor in here the other day from Korea, and he told me that we will see significant cost reductions in battery cells heading into the second half of this year. Battery cells are the single largest cost contributor to the product. Steel cost coming down. Transportation cost very much down from where they were just a year ago today. And also, some other opportunities for us to save money. We will become very profitable in the gross profitable — profit line and at the bottom line. If I didn’t believe that, I wouldn’t be doing this. And I’ve had plenty of experience with it. But again, the numbers support it. We are trending towards an improved profitability, even at GAAP, certainly from the unit economics, even better.
And I think the important thing to take out that call is our EV ARC product, which is the product that drives most of the revenue, broke even in the fourth quarter. GAAP broke even in the fourth quarter. We own segment, our business running outside that, we have seven or eight different products that we make between batteries and EV charging solutions. But naturally, we look at how we’re doing with each of them, and in this case, we know that we’ve grown even according to GAAP on the EV ARC product in the fourth quarter. We do not intend to move backwards from that moving forward.
Christopher Souther: Appreciate all that color. I’ll hop in the queue. Thanks.
Desmond Wheatley: Thank you, Chris.
Operator: The next question comes from Tate Sullivan with Maxim Group. Please go ahead.
Desmond Wheatley: Hi, Tate.
Tate Sullivan: Thank you. Hi. Thank you, Desmond. Hello. You mentioned growing the production of battery packs by 10 times since about March of last year is a lot. Are a lot of those battery packs go into your EV ARC unit, or can you bifurcate it a little bit?
Desmond Wheatley: No, they definitely are. I mean, the team over there has done a fantastic job. I’m so proud of them and so glad that they’re part of the Beam Global family now. They really have completely upped their game from where they were when we acquired them. And yes, they are now supplying all of our internal battery requirements. And the savings that we have received as a result of that are really very, very meaningful. I mean, it’s a huge amount of money actually. Beautiful thing about this acquisition is I’m confident that we will end up paying for the company just in gross margin recapture. Never mind all the other benefits we’re getting from it. So, yes, a huge amount of what they produced came to us last — came to us for internal use.
