AYRO, Inc. (AYRO) is a Texas-based company that designs and manufactures compact, sustainable electric vehicles (EVs) for various commercial and community applications. With a focus on providing environmentally friendly transportation solutions, AYRO has carved out a niche in the growing EV market, catering to the needs of universities, businesses, and last-mile delivery services.

Company Background

Founded in 2016 as Austin PRT Vehicle, Inc., the company has undergone several transformations, eventually becoming AYRO, Inc. in 2019 and establishing its headquarters in Round Rock, Texas. Since its inception, AYRO has been at the forefront of promoting resource sustainability through the development of its all-electric vehicle portfolio. The company changed its name to Austin EV, Inc. in March 2017 before adopting its current name in July 2019. At the same time, AYRO converted its corporate domicile to Delaware.

Product Portfolio

AYRO’s product lineup includes the AYRO 411x and the recently launched Vanish, both of which are designed to cater to the unique demands of the commercial and community sectors. The AYRO 411x, the company’s flagship model, is a four-wheeled electric vehicle geared towards campus mobility, low-speed urban transportation, and local on-demand delivery services. The Vanish, introduced in 2023, is a newer model that builds upon the success of the 411x, offering enhanced features and capabilities to better serve the evolving needs of AYRO’s customer base.

Supply Chain Developments

For several years, AYRO’s primary supplier for the AYRO 411x model was Cenntro Automotive Group, Ltd., which operates a large electric vehicle factory in China. However, due to rising shipping costs, quality issues, and persistent delays, AYRO ceased production of the AYRO 411x from Cenntro in September 2022. This decision was made to focus the company’s resources on the development and launch of a new 411.00 fleet vehicle model, the Vanish.

In July 2022, AYRO entered into a manufacturing agreement with Linamar Corporation to provide certain sub-assembly and assembly parts for the Vanish. On June 21, 2024, AYRO notified Linamar of its intention not to renew the agreement, which will terminate in July 2025.

The company continues to face supply chain challenges, including shortages of lithium-ion battery cells, integrated circuits, vehicle control chips, and displays. These shortages have caused delays in the availability of saleable vehicles.

Financial Performance

In the third quarter of 2024, AYRO reported revenue of $5.43K, a significant decrease from the $88.39K reported in the same period of the previous year. This decline was primarily due to a reduction in product sales, which fell by $0.07 million, and a decrease in shipping revenue of $0.01 million. The company’s gross loss for the quarter widened to $280.60K, compared to a gross loss of $143.44K in the prior-year period, largely due to an increase in inventory adjustments and allowances related to the 411x vehicles.

For the nine months ended September 30, 2024, product revenue was $43,200, down 87% from $327,860 in the same period of 2023. The company attributed this decrease to the ongoing transition to the new Vanish model, as well as supply chain challenges impacting component availability and production.

AYRO’s research and development (R&D) expenses decreased substantially, from $1.34 million in the third quarter of 2023 to $14.78K in the same period of 2024. This reduction was driven by the company being substantially complete with the R&D on the Vanish by the end of 2023, offset by the re-engineering work and design changes associated with the internal restructuring during the current year.

Similarly, sales and marketing expenses decreased by 45% to $216.60K in the third quarter of 2024, down from $390.68K in the same period of the previous year. This was primarily due to a reduction in salaries and related expenses, reflecting the decreased headcount resulting from the internal restructuring.

General and administrative (G&A) expenses also declined significantly, from $4.37 million in the third quarter of 2023 to $1.41 million in the same period of 2024, a decrease of 68%. This reduction was driven by lower salaries and related expenses, decreased office expenses, and a reduction in consultant services, all of which were attributed to the internal restructuring.

AYRO’s net income for the third quarter of 2024 was $550.56K, compared to a net loss of $12.59 million in the same period of the previous year. This improvement was largely due to the non-cash changes in the warrant liability and the derivative liability, which resulted in a net gain of $2.81 million.

For the most recent fiscal year ended December 31, 2023, AYRO reported revenue of $498.92K, a net loss of $34,160,455, operating cash flow of -$26,181,465, and free cash flow of -$28,365,005.

Liquidity and Capital Resources

As of September 30, 2024, AYRO had $2.73 million in cash and cash equivalents, $10.02 million in restricted cash, and $16.13 million in marketable securities, totaling $28.88 million in available liquidity. The company’s working capital decreased by $16.39 million during the nine-month period ended September 30, 2024.

AYRO has no outstanding debt as of the most recent reporting period. The company raised $22 million in a private placement of Series H-7.00 convertible preferred stock in August 2023, with $10 million of the proceeds placed into a segregated deposit account.

As of December 31, 2023, AYRO had a strong liquidity position with a current ratio of 11.35 and a quick ratio of 10.61. The company’s cash and cash equivalents stood at $33.44 million at the end of the 2023 fiscal year.

In July 2024, AYRO received a notice from Nasdaq indicating that the company did not meet the minimum bid price of $1.00 per share required for continued listing on the Nasdaq Capital Market. AYRO was granted a compliance period of 180 calendar days, or until January 14, 2025, to regain compliance.

During the nine months ended September 30, 2024, AYRO redeemed a total of 7.50K Series H-7.00 Preferred Shares for cash equal to $5.10 million and issued 2.07 million shares of common stock, elected pursuant to the terms of the Series H-7.00 Certificate of Designations, worth $1.78 million.

Management Changes and Restructuring

In January 2024, AYRO began implementing an internal restructuring to achieve greater efficiency, which included eliminating a substantial number of positions. In August 2024, the company appointed Gilbert Villarreal as President of its subsidiary, Ayro Operating Company, Inc., to lead a thorough review of the Vanish, working closely with third-party consultants to achieve the company’s objectives of lowering the bill of materials (BOM) and overall manufacturing expenses.

Challenges and Risks

AYRO’s financial performance and liquidity position have been impacted by the ongoing supply chain challenges, including shortages of lithium-ion battery cells, integrated circuits, and vehicle control chips. These supply chain disruptions have caused delays in component shipments and validation, which, in turn, have created delays in the availability of saleable vehicles.

Furthermore, the company is subject to various legal proceedings and claims, including a complaint filed by Club Car in October 2023 alleging breach of contract due to alleged defects in the vehicles sold to Club Car and the termination of warranty support. AYRO intends to vigorously contest these allegations.

Outlook and Strategic Initiatives

Despite the challenges, AYRO remains focused on executing its strategic initiatives, including the continued development and commercialization of the Vanish model, the strengthening of its supply chain, and the implementation of its internal restructuring to improve operational efficiency and profitability.

AYRO primarily sells its vehicles in the United States and does not currently have significant sales outside of the US market. The company’s management indicated that the strategic review and restructuring efforts underway are aimed at positioning AYRO for improved financial performance going forward, though near-term headwinds have resulted in lower sales volumes.

As AYRO navigates the evolving EV landscape, the company’s ability to adapt to market demands, address supply chain disruptions, and resolve legal disputes will be crucial in determining its long-term success. The focus on optimizing the Vanish’s bill of materials and manufacturing costs to improve the vehicle’s affordability and competitiveness will be key to AYRO’s future growth prospects. Investors will closely monitor AYRO’s progress as it works to solidify its position in the compact, sustainable mobility solutions market.

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