Volcon Inc. on Thursday announced a “comprehensive program and manufacturing transition aimed at efforts to improve profitability and cash flow.” No word yet on the location of the new manufacturing facility, but it will no longer be the company’s headquarters in Round Rock, Texas.
Here’s the word from Round Rock…
To improve cash flow and profitability over the immediate and near term, Volcon will close its manufacturing operations in Round Rock, Texas, merging its logistics and storage operations into a single location, reducing storage and fulfillment costs.
To improve product margins, the Company has entered into a contract manufacturing agreement with GLV Ventures (GLV), an established automotive supplier and manufacturer. GLV Ventures and its partner companies have been providing sound automotive solutions, superior product development and advanced manufacturing in a timely, cost-effective manner for over 25 years. GLV will produce the Volcon Grunt in both current and future models, as well as the Volcon Stag, the class-leading, all-electric UTV launched by Volcon in July 2022.
The Company expects these actions will improve overall gross margin on a product-by-product level by reducing materials, labor and overhead costs, reduce operating expenses due to lower headcount and facilities cost, all of which are expected to improve cash retention. The Company is also seeking to reduce its reliance on parts and components sourced from China, and will look to consolidate its supply chain to countries friendly to US manufacturers, especially those located in North America.
“The manufacturing, supply chain, and logistics environment in which small and emerging companies are participating is changing at a rapid pace. Socio-economic and geo-political landscapes are much different now than they were two to three years ago,” said Jordan Davis, Chief Executive Officer of Volcon. “For the past few quarters, our leadership team has been re-evaluating our costs across the entire organization to ensure we are appropriately structured to achieve profitability in order to set ourselves up for long-term success. While we’ve been able to successfully navigate supply chain and logistical issues to date, we believe the best course of action for our profitability and cash retention is to leverage the scale of third-party manufacturers. We believe that eliminating our reliance on Chinese components to the greatest extent possible, will improve our payment terms and cash outlay for parts and components that can be sourced closer to home. While we understand this transition will take time to execute, and that some products will require sourcing from southeast Asia for the time being, we believe that this cost-reduction plan stands as the best course of action to reach profitability as quickly as possible for our business and for our shareholders. As part of this program, we’ve made the difficult decision to reduce the size of the Volcon team. This was a very difficult decision as we recognize that we are losing quality teammates. We thank them for their dedication to building a great product as we could not have brought the Grunt to market without them.”
To improve competitiveness and profitability in the immediate and near term, Volcon plans to look at additional opportunities to utilize third party manufacturers that have robust infrastructure, established supply bases that enable a lower cost structure, high utilization of overhead, and greater purchasing power. The Company believes these types of relationships will enable it to launch products at an accelerated pace that the Company believes will improve profitability in the near term.