The Key Metrics
Zapp has sales of USD 17,400 in FY 2024 (ending Sept 2024). This was the first year of revenue for the company.
The company reported a net loss of USD 9.0m on an IFRS accounting basis.
This cannot be compared to the net loss of USD 222m in FY 2023, which included expenses of USD 213.7m related to the business combination completed in April 2023.
Zapp’s SPAC: Zapp was founded in 2017 and raised GBP 500k through a seed round in 2018 led by Cameron Parry (Tally) and First Equity Private Clients.
After that, the company worked on developing the i300 scooter but failed to raise significant capital.
Facing difficulty in raising funds in a rapidly deteriorating private funding environment, Zapp formed a SPAC (Special Purpose Acquisition Company) with CIIG Capital Partners II and listed it on Nasdaq. The listing happened in April 2023 and valued the combined entity at over USD 500m.
However, as it has frequently happened with SPACs, the original shareholders of CIIG soon headed for exit, leading to a massive market cap erosion of ZAPP.
Zapp reported an operating loss of USD 6.2m, an improvement from an operating loss of USD 7.8m in the prior year.
The company claimed that it has available liquidity of USD 44.9m*, including a standby equity purchase agreement, utilizable as required at the company’s discretion.
Zapp anticipates beginning to generate positive cash from operating activities in 2026.
Niche Product
The i300 is a unique sports scooter built for a niche audience. The frame comprises two parts – a top aerospace-grade alloy load-bearing exoskeleton over a chrome-moly steel undertone.
The i300 rides on 14” wheels, front, and rear, on a 1397 mm wheelbase. The scooter weighs 120 kg.
Power comes from a mid-drive motor that hits a peak of 14.0 kW and has a continuous rating of 5.7 kW. There is a two-stage reduction, belt, and belt. The top speed is limited to 97 kph.
Zapp has designed the product to be ‘impractical hooligan fun,’ so the scooter has strong acceleration and sharp handling. At the same time, the battery pack size is 720 Wh only. Each pack weighs 6 kg, and the scooter takes two for a total pack size of 1.44 kWh. The claimed range is 60 km and that too comes in the Eco mode. The packs are portable.
A significant year
This year, Zapp started manufacturing in Thailand in a micro-factory at the Bangkok Free Trade Zone industrial park. The 12,000-square-foot factory can manufacture 20,000 units per year.
With manufacturing started, Zapp has started delivering units in Thailand and the UK. The application for homologation in Europe has been submitted.
The company has plans for high-volume markets like India and South America. In June 2024, Zapp announced a joint venture with India-based Bounce Infinity to manufacture and sell the i300 in the Indian market.
Takeaways
USD 17.4k may not sound much, but it indicates that Zapp has started manufacturing operations. Things should gather momentum, though that does not ease the pressure, as the i300 is a very niche product.
Zapp EV has the same problems that any passion-driven start-up in Europe has – a product that is high on tech but is priced out of the market. The i300 starts at EUR 8500, which is not great for a scooter that goes very fast but can only go 60 km, that too in the eco mode.
As much as we like the i300, it is not for everyone. There is a limited market for such machines. Europe is changing, and we see the passion element in rich teenagers dwindling. The i300 should have been the spiritual electric successor to souped-up 50cc two-stroke Aprilias, but the price kills the opportunity.
There is very little that Zapp can do to ease prices – the BoM costs on this should be very high. Apart from the frame and the twin belt drives needed, the Zapp would also require high discharge – 10C – cells, as 1.44 kWh batteries energize it while the motor hits a peak of 14kW. High-discharge cells are expensive.
In February 2024, Zapp reported that it had entered into a standby equity purchase agreement (SEPA) with an affiliate of Yorkville Advisors Global, LP, providing the scooter manufacturer with up to USD 10m.
Zapp plans to use the proceeds to start the production and commercial rollout of the i300.
The initial tranche of USD1.5m would be immediately available in two parts once Zapp meets the conditions laid down, including filing the company’s Annual Report on Form 20-F for the fiscal year ended September 30, 2023, and filing and effectiveness of an SEC registration statement registering the resale of shares issuable under the SEPA.
Post that, Zapp will have the right, but not the obligation, in its sole discretion, to issue and sell to the Investor up to a further $8.5 million worth of its ordinary shares.
