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L.A. start-up plans to offer electric vehicles by subscription

Canoo electric vehicle
Canoo, a start-up that plans to offer electric vehicles by subscription, unveiled its first model Tuesday at its L.A. headquarters.
(Canoo)

Canoo, a startup that plans to offer electric vehicles by subscription, unveiled its first model — a breadbox-shaped van — at its headquarters in Los Angeles on Tuesday evening.

With seven seats and an estimated range of 250 miles, the bus was designed to meet the needs of city dwellers who currently drive SUVs, according to Canoo co-founder Ulrich Kranz. Seats in the rear cabin are arranged in a U-shape, like a sectional sofa, rather than in rows. The battery, powertrain and suspension are all housed in a slim platform, leaving 188 cubic feet of space for passengers and cargo.

“I would call it a loft on wheels,” Kranz said. “It has the interior space of a large SUV and the footprint of a compact car.”

Canoo electric vehicle
With seven seats and an estimated range of 250 miles, the bus was designed to meet the needs of city dwellers who currently drive SUVs, according to Canoo co-founder Ulrich Kranz.
(Canoo)

Canoo says the vehicle will be available in Los Angeles and San Francisco sometime in 2021, with cities on the East Coast to follow. The company plans to market it by subscription: Customers will pay a one-time membership fee and a flat monthly rate. The fee will cover registration, taxes, insurance, maintenance and unlimited mileage, said the company, and subscribers can opt out at any time. Kranz said the fee would be “reasonable,” but he has declined to offer any specific numbers.

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Subscription services for cars have proliferated in the last five years, as automakers, rental companies and start-ups began experimenting with new retail formats for customers who do not want to own or lease. Luxury carmakers, including Cadillac and Porsche, have programs, costing thousands of dollars monthly, that provide access to a variety of models and include concierge pickup and drop-off service.

Monthly Porsche subscribers can drive as many as 20 model variants, have vehicles delivered to them, and only pay for gas after a $595 activation fee.

Hertz and Enterprise have similar programs for their rental fleets, typically costing $1,000 per month or more. Fair, a startup that says it has more than 45,000 subscribers, offers used cars for a few months at a time at more modest prices, essentially a short-term lease.

“The reality is that these business models did not take off quite the way they expected,” said Brian Collie, managing director and head of the automotive sector at Boston Consulting Group. “The economics are just tough to make work.”

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Canoo is betting that its electric offering will set it apart from existing services. Kranz, who spent more than 30 years at Bayerische Motoren Werke AG, founded the company in 2017 with Stefan Krause and Richard Kim, both fellow BMW alums. Kranz helped design the German automaker’s i3 electric hatchback and left to join EV startup Faraday Future in 2016. He, Krause and Kim all left Faraday shortly thereafter, in an acrimonious split with ownership, to found Canoo, originally known as Evelozcity.

Canoo electric vehicle
Seats in the rear cabin are arranged in a U-shape, like a sectional sofa, rather than in rows.
(Canoo)

Krause stepped down as chief executive officer earlier this year for personal reasons, leaving Kranz in charge of Canoo’s day-to-day operations. The privately held startup has about 300 employees. Kranz declines to say how much money it has raised; previous reports put the total at about $1 billion. The company has three backers, Kranz said: one from China, one from Taiwan and one from Germany.

Canoo plans to use contract manufacturers to build its cars. Kranz said he expected the cars would be built in the U.S. Canoo has been working closely with manufacturers during the design phase, he said, to ensure its cars can be built efficiently at scale. The company does not plan to use dealerships.

“This saves us quite a big chunk of money,” Kranz said. He expects the company’s cars to stay in service for 10 to 12 years, allowing for depreciation costs to be spread across a longer span than the typical car lease.

Canoo electric vehicle
Canoo hopes its electric van will set it apart from existing auto subscription services.
(Canoo)

The Canoo van will come equipped with seven cameras and five radar, as well as ultrasonic sensors that will enable advanced driver assistance systems, such as adaptive cruise control. Eventually, said Kranz, the company expects to add sensors, including lidar, and update software to increase automation until the car reaches full autonomy.

Bringing a new vehicle to market in the United States is a wildly expensive proposition — even without attempting an unproved business model — in the unprofitable electric market while embarking on the long slog to build a self-driving car.

“You could say what Canoo is attempting is almost insanely ambitious,” said Eric Noble, president of consulting firm the CarLab. But urban populations have shown an increasing appetite for on-demand transportation, subscription services, and electric vehicles — three trends that Canoo hopes to ride to success.


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