We have a lot of initiatives on product cost savings, so that’s another focus area for us. And R&D, same thing, as we introduce new products in the market, we see the R&D spend going down. We’re looking at a 30% reduction this year. So those elements make us feel really comfortable with our cash position.
Nicolas Brunet: Hey, George. Maybe one additional comment as well. Obviously, the growth CapEx being behind us is a big, big thing. You don’t see that very often in the EV space. So I think it’s great. Also, what we did this morning, letting go 100 people. Obviously, this is not the kind of thing that we wanted to, but we’re taking the action to make sure that we’re protecting our liquidity without a doubt.
George Gianarikas: Thank you. And maybe as a follow-up, the previous question was about market share. One of the larger competitors in the space has talked about expecting the order about 30 — to win, excuse me, about 30% of orders related to at least round two of the EPA Clean School Bus program. Maybe, again, in broad strokes, what would be satisfactory for you in terms of just a market share win rate for those two programs? Thank you.
Marc Bedard: Yeah. Hey. Look, we — for us, George, expectations of winning in a program that’s lottery-driven, because that’s what it is, is more speculative than we’re going to be here. I’m not going to comment about specific numbers. I will say we are number one player in the space by registration today, by market share. Our market share has been more weighted in Canada relative to the U.S. and we expect to — we’re hoping to see continued improvements in the proportion of our wins under the EPA program. The dialogue with the customers is very constructive, but ultimately, we’ll want to talk with purchase orders and not with these types of forward-looking estimates.
George Gianarikas: I appreciate it. Thank you.
Marc Bedard: Thank you.
Operator: Next question comes from Dan Levy from Barclays. Please go ahead.
Trevor Young: Good morning. Trevor Young on for Dan Levy. Thanks for taking the question. So looking at the order book, I can appreciate that the timing of the awards under the — under your major bus programs are significantly impacted by the timing of, I guess, the government subsidy programs, but we are looking — I guess we’re looking for a sort of inflection in the order book. I was just curious if you could, I know you can’t guide to it, but could you quantify, like, what we could expect as these programs, the timing aligns and would these jumps in order books be larger than some of the larger sequential jumps you’ve seen in the past?
Nicolas Brunet: Look, could they — I guess they could, Dan. If I am — if you look at it, essentially, again, there’s a $1 billion allocated in the grant round, right, the grant — second round of the EPA program, and as I mentioned, 70% of that is allocated to what we call free agents, meaning it’s not Lion, it’s not other OEMs, it’s not their dealers. That’s — so it’s close to 2,000 units that are, we believe, up for grabs by everyone, including us and we’re working hard at it. And then there’s a $500 million in the rebates program that just closed on Feb 14 and that will be allocated in April. So when you look at it, starting in April and the next few months, there will be a lot of funding that can result in purchase orders for the next few months.
And so, yes, the jump could potentially be bigger than we’ve seen in the past. I also mentioned that, when these programs come out, it really is OEMs like us, or certainly, we do make the promotion of these programs and make sure that the clients are aware. We file a lot of applications on behalf of clients, but more and more, that program gains maturity and the school districts and operators are aware of the program and file on their own and then pick an OEM. So there will be a lot of dollars out there dedicated to bus purchases that are up for grabs. So technically speaking, absolutely, yes, the jumps in the future could be higher in the order book when, obviously, it starts potentially in April and then in the subsequent months.
Trevor Young: That’s very helpful. Thank you. Then there’s a follow-up. We’ve seen these reports coming out about the finalized EPA targets for light vehicles specifically. It sounds like the emissions targets might get softened a little bit, at least through 2030 and I was just curious if there was any meaningful reads here for year-end markets. I appreciate that light vehicle is a different world, but is there any reason to think that this sentiment might translate over into your realm as well for EPA rules.
Nicolas Brunet: From our standpoint, we’ve seen no change. First of all, especially when you look in the school bus space, I don’t — I think we’re past the point of convincing customers, and in general, society around the benefits of electric school buses relative to diesel for a school bus application. On top of EPA targets, really, their state level, provincial level regulation that’s coming into place, and so no, what’s happening in the light vehicle sector hasn’t impacted us. And in the truck space, we’ve said it in the past, the truck space, medium-heavy duty here, is a few years behind the school bus for sure, but it’s a much bigger market. As I mentioned earlier, there really is, it’s a discussion topic that has been more active with the large operators that really have these targets out there.
There’s regulation, there’s targets as well and with these large companies that essentially need to figure out the solution going forward. And so, in short, Dan, no impact as it relates to the light-duty.
Richard Coulombe: And Dan. also, with respect to the greenhouse gas emissions, if you want to lower them, one of the best ways to attack the medium- and heavy-duty trucks and buses, for every bus that you’re doing, it’s like taking off basically at least five cars from the street. So that’s really the best way to get to your goals of bringing down the greenhouse gas emissions. When you’re looking in Canada, like, you know, the 35% target that they have for 2030, 2030 is tomorrow. So we do not see how this could decrease and we really see that that will be the best way to achieve their goals and that’s exactly what we echo on the U.S. side and in Europe as well.
Trevor Young: That’s really helpful. Appreciate it.
Operator: Our next question comes from Chris Souther from B. Riley. Please go ahead.
Chris Souther: Hey, guys. Good morning and thanks for taking my questions here. Would you be able to quantify the impact on the delays for the initial LionD, Lion5 vehicles in the fourth quarter there, like, versus how much you were expecting versus the push out there, I think would be helpful?
Nicolas Brunet: Yeah. Chris, I mean, obviously, we cannot provide the exact figure, but that was significant, right? Some of it is explaining the difference between what the street was looking at and the final number that we got at 188, which was clearly below our expectations. That was a mix of that. The ZETF, but for us, quality is always number one and not easy to bring any new product to market. We see that. There’s very few new EV products coming to market and when you do that, you need to take your time. So our goal was really to start delivering them by the end of the year, but I mean, we’ve had a few challenges like in terms of software updates and those kind of things where we felt that since those will be the first deliveries, the customers deserve the best.
And so we will catch up, what we lost at the end of Q4 is going to take us two quarters to catch up, but we feel good about the quality of the product we’re bringing to market. You probably saw some feedback also on some of the customers that started to receive the LionD and it’s very, very positive.
Chris Souther: Okay. Maybe just if we take out the ZETF and kind of look at the backlog, how many of the remaining school — all-electric school buses are LionD and can you give us any sense around a breakdown of expected timing, excluding that kind of Canadian program that is obviously out of your control? I just wanted to get if we could get a better feel for other timing delays beyond that one that we’re seeing here. I think you called out a little bit with the EPA for April for this past grant one, but kind of a broader peek at the order book I think would be helpful for folks?
Nicolas Brunet: Yeah. So the majority, more than half of the order book is in the — with the ZETF and conditional to that. The rest, Chris is, I’d say, still the majority of that is in the Type C market. We have a good amount of demand for the Type B in the order book, especially for a product that we hadn’t delivered yet, but the bulk of it is in the Type C. Nonetheless, you generate the most demand with the vehicle when you put it on the street, which is what we’re doing now and so we expect production of the Type D to ramp up and demand to ramp up concurrently.
Chris Souther: Okay. Thanks. I’ll hop in the queue here.
Nicolas Brunet: Thank you.
Operator: The next question is from Étienne Larochelle from Desjardins. Please go ahead.
Étienne Larochelle: Hey. Good morning and thank you for taking my question. My first question is on the headcount that you announced this quarter. I’m just curious if you could provide more color on how much an OpEx savings this could translate to and if you will incur any charges for this in the upcoming quarters?
Nicolas Brunet: Yeah. So, Étienne, good morning. The — yeah. The headcount number is 100 people that we’ve let go and most of them are on the night shift. So basically, at this point, we’re temporarily eliminating the night shift and a lot of them are manufacturing people, but some of them are overhead as well. So basically we’re reducing the overhead at the same time. Was that your question, I missed part of your — the second part of your question.
Étienne Larochelle: Yes. I was just curious if you could provide more color on how much an OpEx savings this could translate to and if you will incur any charges in the upcoming quarters. We’ll get to that. The $150 million you previously announced back in December.
Nicolas Brunet: Yeah. Well, the $150 million, we’re already benefiting from this cap. I mean, there is some with — in addition to the savings, obviously, we’re making on a temporary basis, because the goal for those employees is to go back to work as soon as we get approvals from ZETF for the delivery of our vehicles. So we still hope that this will be the case. If not, the annual saving that we’re looking at with this is around US$8 million. That’s the kind of saving we’re looking at when you’re including the payroll and obviously the other expenses related to the night shift, but the real goal is to get great news from the ZETF and bring back our people.
Étienne Larochelle: Got it. Thank you for the color. Maybe as a follow-up, with supply chain issues and shipping costs easing over the last couple of months, I’m just curious if you’ve seen a reduction in your bill of material costs.
Nicolas Brunet: Well, we saw some reduction a lot because of all the initiatives we have that Richard was alluding to in the past. He was saying that we’re working a lot on the bill of material and in savings. So there is some of that. Obviously, with the amount of inventory that we have, it could take a little while as well to start seeing the benefit of those cost savings, because we have $250 million of inventory and the real goal is obviously to use that inventory as soon as possible to get the benefit of the $50 million to $75 million inventory reduction that Richard was talking about. But this is top of mind for us to keep reducing the cost of the bill of material and we have people working full-time on that without any compromise on quality.
Étienne Larochelle: Got it. Thank you for taking my questions. I will pass the line.
Nicolas Brunet: Thank you.
Operator: [Operator Instructions] We have no further questions on the call at this time, so I’ll hand the floor back to you.
Isabelle Adjahi: Thank you everyone for joining the call today. We really look forward to continuing the discussion and feel free to contact me for any further questions you may have. Have a nice day.
Operator: Thank you. This concludes today’s conference call. You may now all disconnect your lines.
