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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 20-F

____________________
(Mark One)
oRegistration Statement Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
x
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal Year Ended December 31, 2021
oTransition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
oShell Company Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission file number 001-40286
____________________
ARRIVAL
(Exact Name of Registrant as Specified in Its Charter)
____________________
Grand Duchy of Luxembourg
(Jurisdiction of Incorporation or Organization)
60a, rue des Bruyeres, L-1274 Howald,
Grand Duchy of Luxembourg
(Address of Principal Executive Offices)
Daniel Chin
60a, rue des Bruyeres, L-1274 Howald,
Grand Duchy of Luxembourg
Telephone: +352 621 266 815
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading
Symbol(s)
Name of Each Exchange
on which Registered
Ordinary Shares, with aARVLThe Nasdaq Stock Market LLC
nominal value of €0.10
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
____________________
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. As of December 31, 2021, there were 657,661,077 Ordinary Shares outstanding.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    o  Yes    x No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    o  Yes    x  No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes     No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    x  Yes    o  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,or an emerging growth company. See definition of “large accelerated filer, accelerated filer, and emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filerxAccelerated filero
Non-accelerated fileroEmerging growth companyo
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
o
International Financial Reporting Standards as Issued
by the International Accounting Standards Board
x
Other
o
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    o  Item 17    o Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    o  Yes    x  No
1

Table of Contents

FREQUENTLY USED TERMS
INDUSTRY AND MARKET DATA
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
A. Directors and Senior Management
B. Advisers
C. Auditors
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
A. Offer Statistics
B. Method and Expected Timetable
ITEM 3. KEY INFORMATION
A. Reserved
B. Capitalization and Indebtedness
C. Reasons for the Offer and Use of Proceeds
D. Risk Factors
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
B. Business Overview
C. Organizational Structure
D. Property, Plant and Equipment
ITEM 4A. UNRESOLVED STAFF COMMENTS
ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. Operating Results
B. Liquidity and Capital Resources
C. Research and development, patents and licenses, etc.
D. Trend information
E. Critical Accounting
ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Executive Officers and Directors
B. Compensation of Executive Officers and Directors
C. Board Practices
D. Employees
E. Share Ownership
ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
B. Related Party Transactions
C. Interests of Experts and Counsel
ITEM 8: FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
B. Significant Changes
ITEM 9: THE OFFER AND LISTING
2

Table of Contents
ITEM 10: ADDITIONAL INFORMATION
A. Share Capital
B. Memorandum and Articles of Association
C. Material Contracts
D. Exchange Controls
E. Taxation
F. Dividends and Paying Agents
G. Statements by Experts
H. Documents on Display
I. Subsidiary Information
ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Part II
ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Item 15: Controls and Procedures
(a) Disclosure Controls and Procedures
(b) Management’s annual report on internal control over financial reporting
(c) Attestation report of the independent registered public accounting firm
(d) Changes in internal control over financial reporting
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
ITEM 16B. CODE OF ETHICS
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
ITEM 16F. CHANGE IN REGISTRANTS’ CERTIFYING ACCOUNTANT
ITEM 16G. CORPORATE GOVERNANCE
ITEM 16H. MINE SAFETY DISCLOSURE
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
ITEM 17: FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-119
ITEM 18: EXHIBITS
SIGNATURES
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FREQUENTLY USED TERMS

In this annual report:

“Adjusted EBITDA” represents EBITDA adjusted for impairments and write-offs, share option expenses, listing expense, fair value adjustments on Warrants, reversal of difference between fair value and nominal value of loans that got repaid/settled, fair value movement of embedded derivative, fair value movement on employee loans, foreign exchange gains/losses and transaction bonuses. Adjusted EBITDA is a Non-IFRS measure and provided as a supplemental measure of Arrival’s performance.

“Arrival” means (a) Arrival Luxembourg SARL with respect to the periods prior to the Closing and (b) to the Company and its subsidiaries following the Closing.

“Arrival Luxembourg SARL” means Arrival Luxembourg SARL (formerly Arrival S.à r.l.), a limited liability company (société à responsabilité limitée) governed by the laws of the Grand Duchy of Luxembourg having its registered office at 60a rue des Bruyeres, L-1274 Howald, Grand Duchy of Luxembourg, registered with the Luxembourg register of commerce and companies (Registre de Commerce et des Sociétés de Luxembourg) under number B 200789.

“Board of Directors” means the board of directors of the Company.

“Business Combination” means the transactions contemplated by the Business Combination Agreement.

“Business Combination Agreement” means the Business Combination Agreement, dated as of November 18, 2020, as amended, by and among CIIG, Arrival, the Company, and Merger Sub.

“CIIG” refers to Arrival Vault US, Inc. (formerly CIIG Merger Corp.), a Delaware corporation.

“Company” means Arrival (formerly Arrival Group S.A.), a joint stock company (société anonyme) governed by the laws of the Grand Duchy of Luxembourg having its registered office at 60a rue des Bruyeres, L-1274 Howald, Grand Duchy of Luxembourg, registered with the Luxembourg register of commerce and companies (Registre de Commerce et des Sociétés de Luxembourg) under number B248209.

"Closing" means the closing of the Business Combination.

“EBITDA” represents the net loss before interest income or expense, tax income or expense, depreciation and amortization.

“EVs” means electric vehicles.

“Exchange Act” means the Securities Exchange Act of 1934.

“GHG” means greenhouse gas.

“HKMC” means Hyundai and Kia, collectively.

“Hyundai” means Hyundai Motor Company.

“Kia” means Kia Corporation.

“Merger Sub” means ARSNL Merger Sub Inc., a Delaware corporation.

“Nasdaq” means The Nasdaq Stock Market LLC.

“OEMs” means original equipment manufacturers.

“Ordinary Shares” means the ordinary shares of Arrival.

“Registration Rights and Lock-Up Agreement” means that certain agreement entered into on March 24, 2021 by the Company and certain stockholders of CIIG and certain shareholders of Arrival.
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“SEC” means the U.S. Securities and Exchange Commission.

“Warrants” mean a right to acquire one Ordinary Share.


CURRENCY AND EXCHANGE RATE PRESENTATION

In this annual report, references to “Euro” and “€” are to the single currency adopted by participating member states of the European Union (“EU”) relating to Economic and Monetary Union and references to “$”, “US$” and “U.S. Dollars” are to the lawful currency of the United States of America.

Unless otherwise noted, all financial information for Arrival provided in this annual report is denominated in Euros.

Certain amounts described in this annual report have been expressed in U.S. Dollars for convenience and, when expressed in U.S. Dollars in the future, such amounts may be different from those set forth in this annual report due to intervening exchange rate fluctuations.
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IMPORTANT INFORMATION ABOUT IFRS FINANCIAL MEASURES

The consolidated financial statements of Arrival have been prepared in accordance with the International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board, which can differ in certain significant respects from U.S. GAAP.
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INDUSTRY AND MARKET DATA

In this annual report, Arrival presents certain industry data, information and statistics regarding the markets in which Arrival competes as well as Arrival’s analysis of statistics, data and other information provided by third parties relating to markets, market sizes, market shares, market positions and other industry data pertaining to Arrival’s business and markets (collectively, “Industry Analysis”). Such information is supplemented where necessary with Arrival’s own internal estimates and information obtained from discussions with its customers, taking into account publicly available information about other industry participants and Arrival’s management’s judgment where information is not publicly available. This information appears in “Item 4. Information on the Company,” Item 5. Operating and Financial Review and Prospects” and other sections of this annual report.

Industry publications, research, studies and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this annual report. These forecasts and forward-looking information are subject to uncertainty and risk due to a variety of factors, including those described under “Item 3.D. Risk Factors.” These and other factors could cause results to differ materially from those expressed in any forecasts or estimates.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements in this annual report constitute forward-looking statements that do not directly or exclusively relate to historical facts. You should not place undue reliance on such statements because they are subject to numerous uncertainties and factors relating to Arrival’s operations and business environment, all of which are difficult to predict and many of which are beyond Arrival’s control. The U.S. Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking information to encourage companies to provide prospective information about themselves. Arrival relies on this safe harbor in making these forward-looking statements. Forward-looking statements include information concerning Arrival’s possible or assumed future results of operations, including descriptions of its business strategy. These statements are often, but not always, made through the use of words or phrases such as “believe,” “anticipate,” “could,” “may,” “would,” “should,” “intend,” “plan,” “potential,” “predict,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” “outlook” and similar expressions. All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in the statements. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are the following:

the risk that Arrival is an early stage company and expects to incur significant expenses and continuing losses for the foreseeable future;
the risk that Arrival has a limited operating history and has not yet manufactured or sold any production vehicles to customers and may never develop or manufacture any vehicles;
the ability to raise additional capital necessary to execute its business plan, which may not be available on acceptable terms or at all;
the risk that the period of time from the receipt of orders to implementation and delivery is long and the orders are subject to risks of cancellation or postponement;
the risk that the market for commercial EVs may not develop as Arrival expects or may develop slower than Arrival expects;
the risk that Arrival's orders from UPS, LeasePlan and Anaheim Transportation network may be cancelled, modified, or delayed;
the risk that certain of Arrival’s strategic development and deployment arrangements could be terminated or may not materialize into long-term contract partnership arrangements;
Arrival’s ability to execute its microfactory production model on a large scale is unproven and still evolving and such production model may lead to increased costs, delayed and/or reduced production of its vehicles;
regulatory requirements or infrastructure limitations outside of Arrival's control that may slow market adoption of EVs;
the risk that Arrival may be impacted by overall economic conditions, particularly in the markets in which Arrival plans to operate;
the ability to maintain relationships with Arrival's existing suppliers, source suppliers for Arrival's critical components and complete building out Arrival's supply chain;
the ability to sell products to large corporations with substantial negotiating power and exacting standards;
the risk that Arrival may not be able to establish and maintain confidence in its long-term business prospects among customers and analysts and within its industry or is subject to negative publicity;
the risk that as it expands into new territories, Arrival may encounter stronger market resistance than it currently expects;
the risk that because Arrival has grown its business rapidly and expects to continue to expand its operations, it could fail to manage its growth effectively.

These and other factors are more fully discussed under “Risk Factors” and elsewhere in this annual report. These risks could cause actual results to differ materially from those implied by forward-looking statements in this annual report.

You are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. New risks and uncertainties come up from time to time, and it is impossible for Arrival to predict these events or how they may affect Arrival. Arrival does not undertake any obligation to update or revise any forward-looking statements after the date of this annual report, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks and uncertainties, you should keep in mind that any event described in a forward-looking statement made in this annual report or elsewhere might not occur.

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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS


A. Directors and Senior Management

Not applicable.

B. Advisers

Not applicable.

C. Auditors

Not applicable.
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ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

A. Offer Statistics

Not applicable.

B. Method and Expected Timetable

Not applicable.
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ITEM 3. KEY INFORMATION

A. Reserved


B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

In addition to the other information included in this annual report, the considerations listed below could have a material adverse effect on Arrival’s business, financial condition or results of operations, resulting in a decline in the trading price of the Ordinary Shares. The risks set forth below comprise all material risks currently known to Arrival. These factors should be considered carefully, together with the information and financial data set forth in this annual report.

Risk Factor Summary

The risks described below include, but are not limited to, the following:

Arrival is an early stage company with a history of losses, and expects to incur significant expenses and continuing losses for the foreseeable future.
Arrival has a limited operating history and has not yet manufactured or sold any production vehicles to customers and may never develop or manufacture any vehicles.
Arrival may need or choose to raise additional funds and these funds may not be available to it when it needs them, or may only be available on unfavorable terms. As a result, Arrival may be unable to meet its future capital requirements which could limit its ability to grow and jeopardize its ability to execute its business plan or continue its business operations.
While Arrival has received orders for vehicles, the period of time from the receipt of orders to implementation and delivery is long, potentially spanning several months, and the orders are subject to cancellation or postponement.
Arrival’s growth is dependent upon the willingness of operators of commercial vehicle fleets and small to medium sized businesses to adopt EVs and on Arrival’s ability to produce, sell and service vehicles that meet their needs. If the market for commercial EVs does not develop as Arrival expects or develops slower than Arrival expects, Arrival’s business, prospects, financial condition and operating results will be adversely affected.
The orders from UPS, LeasePlan and Anaheim Transportation Network constitute all of the current orders for Arrival vehicles. If these orders are cancelled, modified or delayed, Arrival’s prospects, results of operations, liquidity and cash flow will be materially adversely affected.
Certain of Arrival’s strategic, development and deployment arrangements could be terminated or may not materialize into long-term contract partnership arrangements and may restrict or limit Arrival from developing EVs with other strategic partners.
Arrival’s ability to execute its microfactory production model on a large scale is unproven, still evolving and dependent on Arrival’s ability to raise sufficient capital to support production. This production model may lead to increased costs and/or reduced production of its vehicles and adversely affect Arrival’s ability to operate its business.
Arrival may encounter obstacles outside of its control that slow market adoption of EVs, such as regulatory requirements or infrastructure limitations.
Demand for Arrival’s EVs is impacted by overall economic conditions, particularly in the markets in which Arrival plans to operate
Arrival’s growth depends upon Arrival’s ability to maintain relationships with Arrival’s existing suppliers, source suppliers for Arrival’s critical components, and complete building out Arrival’s supply chain, while effectively managing the risks due to such relationships.
Arrival currently targets many customers, suppliers and partners that are large corporations with substantial negotiating power, exacting product, quality and warranty standards and potentially competitive internal solutions.
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If Arrival is unable to sell its products to these customers or is unable to enter into agreements with suppliers and partners on satisfactory terms, its prospects and results of operations will be adversely affected.
If Arrival is unable to establish and maintain confidence in its long-term business prospects among customers and analysts and within its industry or is subject to negative publicity, then its financial condition, operating results, business prospects and access to capital may suffer materially.
As Arrival expands into new territories, many of which will be international territories, it may encounter stronger market resistance than it currently expects, including from incumbent competitors in those territories.
Arrival has grown its business rapidly, and expects to continue to expand its operations. Any failure to manage its growth effectively could adversely affect its business, prospects, operating results and financial condition.
Arrival may be delayed or fail to obtain the product certifications necessary for the sale of its products
Arrival's business may be adversely affected by labor and union activities
Arrival's limited operating history makes it difficult for Arrival to evaluate its future business prospects
Arrival is dependent on its suppliers, some of which are single or limited source suppliers, and the inability of these suppliers to deliver the raw materials and components of Arrival’s vehicles in a timely manner and at prices and volumes acceptable to it could have a material adverse effect on its business, prospects and operating results.
As Arrival grows rapidly and expands into multiple global markets, there is a risk that Arrival will fail to maintain an effective system of internal controls and its ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely affected. Arrival may identify material weaknesses in its internal controls over financial reporting which it may not be able to remedy in a timely manner.
Arrival has identified material weaknesses in its internal control over financial reporting. This could result in material misstatements in Arrival’s historical financial reports and, if Arrival is unable to successfully remediate the material weaknesses, the accuracy and timing of Arrival’s financial reporting may be adversely affected, investors may lose confidence in the accuracy and completeness of Arrival’s financial reports, and the market price of the Ordinary Shares may be materially and adversely affected.
There are complex software and technology systems that need to be developed in coordination with vendors and suppliers in order to reach production for Arrival’s EVs, and there can be no assurance such systems will be successfully developed.
The discovery of defects in Arrival vehicles may result in delays in new model launches, recall campaigns or increased warranty costs. Additionally, discovery of such defects may result in a decrease in the residual value of its vehicles, which may materially harm its business.
Arrival may become subject to product liability claims, which could harm its financial condition and liquidity if it is not able to successfully defend or insure against such claims.
If Arrival is sued for infringing or misappropriating intellectual property rights of third parties, litigation could be costly and time consuming and could prevent Arrival from developing or commercializing its future products.
Arrival may incur significant costs and expenses in connection with obtaining, maintaining, protecting, defending and enforcing its intellectual property rights (covering patents, trademarks, trade names, and trade secrets), including through litigation. If such intellectual property is not adequately protected, Arrival may not be able to build name recognition in its markets of interest, and its business and competitive position may be harmed. Additionally, even if Arrival is able to take measures to protect its intellectual property, third-parties may independently develop technologies that are the same or similar to Arrival, and Arrival may not be able to obtain and protect its intellectual property rights throughout the world.
Patent applications which have been submitted to the authorities may not result in granted patents or may require the applications to be modified in order for patent coverage to be obtained.
If Arrival’s trademarks and trade names are not adequately protected, Arrival may not be able to build name recognition in its markets of interest, and its competitive position may be harmed.

Details of Arrival’s Risk Factors

Risks Related to Arrival

Arrival is an early stage company with a history of losses, and expects to incur significant expenses and continuing losses for the foreseeable future.

Arrival has incurred losses in the operation of its business related to research and development activities since its inception. Arrival anticipates that its expenses will increase and that it will continue to incur losses in the future until after it begins delivery of significant volumes of its vehicles. Even if Arrival is able to successfully develop and sell or lease its vehicles, there can be no assurance that the vehicles will be commercially successful and achieve or sustain profitability. Arrival does not expect to generate a profit until at least 2024.
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Exclusive of listing expenses incurred in 2021, Arrival expects the rate at which it will incur losses to be significantly higher in future periods as it, among other things, designs, develops and manufactures its vehicles; deploys its microfactories; builds up inventories of parts and components for its vehicles; increases its sales and marketing activities, develops its distribution infrastructure; and increases its general and administrative functions to support its growing operations. Arrival may find that these efforts are more expensive than it currently anticipates or that these efforts may not result in revenues, which would further increase Arrival’s losses.

Arrival has a limited operating history and has not yet manufactured or sold any production vehicles to customers and may never develop or manufacture any vehicles.

Arrival, then Arrival Luxembourg S.à r.l. was incorporated in October 2015 and has a limited operating history in the automobile industry, which is continuously evolving. Arrival vehicles are in the development stage and Arrival does not expect its first vehicle to be produced until at least the third quarter of 2022, if at all. Arrival has no experience as an organization in high volume manufacturing of the planned EVs. Arrival cannot assure you that it will be able to develop efficient, automated, cost-efficient manufacturing capability and processes, and reliable sources of component supplies that will enable Arrival to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass market its EVs. You should consider Arrival’s business and prospects in light of the risks and significant challenges it faces as a new entrant into its industry, including, among other things, with respect to its ability to:
design and produce safe, reliable, quality vehicles on an ongoing basis;
obtain the necessary regulatory approvals in a timely manner;
build a well-recognized and respected brand;
establish and expand its customer base;
successfully market not just Arrival’s vehicles but also the other services it intends to provide;
properly price its services, including its charging solutions, financing and lease options, and successfully anticipate the take-rate and usage of such services by users;
successfully service its vehicles after sales and maintain a good flow of spare parts and customer goodwill;
improve and maintain its operational efficiency;
successfully execute its microfactory production model and maintain a reliable, secure, high-performance and scalable technology infrastructure at costs that enable it to remain competitive;
predict its future revenues and appropriately budget for its expenses;
estimate its vehicle production costs (i.e. its bill of materials (“BOM”);
obtain sufficient capital to support production needs;
attract, retain and motivate talented employees;
anticipate trends that may emerge and affect its business;
anticipate and adapt to changing market conditions, including technological developments and changes in competitive landscape; and
navigate an evolving and complex regulatory environment.

If Arrival fails to adequately address any or all of these risks, its business may be materially and adversely affected.

Arrival may need or choose to raise additional funds and these funds may not be available to it when it needs them, or may only be available on unfavorable terms. As a result, Arrival may be unable to meet its future capital requirements which could limit its ability to grow and jeopardize its ability to execute its business plan or continue its business operations.

The design, production, sale and servicing of Arrival’s EVs is capital-intensive. Arrival has sufficient funds to execute its near-term business plan, including starting production in the third quarter of 2022 for its first two vehicles, Bus and Van. But Arrival anticipates needing to raise additional capital to execute its long-term business plans, including the deployment of additional microfactories and vehicle platforms. This capital may be necessary to fund Arrival’s ongoing operations, continue research, development and design efforts and improve infrastructure. Arrival may raise additional funds through the issuance of equity, equity related or debt securities or through obtaining credit from government or financial institutions. Arrival cannot be certain that additional funds will be available to it on favorable terms when required, or at all. In addition, Arrival expects its capital expenditure and working capital requirements to increase substantially in the near future, as it begins to produce its vehicle platforms, develop its customer support and marketing infrastructure and continue its research and development efforts. If Arrival cannot raise additional funds when it needs them, its business,
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prospects, financial condition and operating results could be materially adversely affected. For example, if Arrival is unable to secure additional capital, Arrival may be required to curtail development and tooling of its microfactories and take additional measures to reduce costs in order to conserve cash, including reducing the number of vehicles and planned microfactories to start production. Such measures could impact the amount and timing of revenue and, in turn, when it expects to commence generating positive cash flow. Delays in the building of Arrival’s microfactories will, in turn, delay the production of Arrival vehicles, which is critical to the realization of Arrival’s business plan, while reductions in expenditures could negatively impact its relationships with its suppliers.

In addition, if Arrival raises funds through further issuances of equity and/or equity-linked securities, dilution to its shareholders would result. Any equity or equity-linked securities issued also may provide for rights, preferences or privileges senior to those of holders of Ordinary Shares. The terms of debt securities issued or borrowings, if available, could impose significant restrictions on Arrival’s operations and could involve additional restrictive covenants relating to Arrival’s capital raising activities, which may make it more difficult for Arrival to obtain additional capital and to pursue business opportunities.

While Arrival has received orders for vehicles, the period of time from the receipt of orders to implementation and delivery is long, potentially spanning over several months or years, and the orders are subject to cancellation or postponement.

Arrival vehicles are in the development stage and Arrival does not expect its first vehicle to be produced until at least the third quarter of 2022, if at all. Even after Arrival begins production of its vehicles, due to the nature of large commercial fleet orders, the anticipated lead time between receipt of orders for Arrival’s EVs and implementation and delivery of its EVs is long, potentially spanning over several months or years. Given this anticipated lead time, there is a heightened risk that customers that have ordered vehicles may not ultimately take delivery due to potential changes in customer preferences, competitive developments and other factors. As a result, no assurance can be made that orders will not be cancelled or postponed, or that orders will ultimately result in the purchase or lease of EVs. Any cancellations or postponements could harm Arrival’s financial condition, business, prospects and operating results. Currently no customers have paid deposits or will be required to pay any penalties for cancellations other than UPS, LeasePlan or Anaheim Transportation Network, which have made any commitments to purchase Arrival vehicles. Arrival anticipates contracting with customers on terms which require the payment of a deposit and are not cancellable for convenience; however, in certain cases, Arrival and a customer may agree to commercial terms which include (amongst other things) the ability for the customer to modify or terminate the vehicle order and the parties may agree that a deposit is not required.

In addition, Arrival’s business model is initially focused on building relationships with commercial bus, van and car fleet customers. Even if Arrival is able to obtain binding orders, customers may limit their volume of purchases initially as they assess Arrival’s vehicles and whether to make a broader transition to EVs. This may be a long process and will depend on the safety, reliability, efficiency and quality of Arrival’s vehicles, as well as the support and service that Arrival offers. It will also depend on factors outside of Arrival’s control, such as general market conditions and broader trends in fleet management and vehicle electrification, which could impact customer buying decisions. As a result, there is significant uncertainty regarding demand for Arrival’s products and the pace and levels of growth that Arrival will be able to achieve.

Arrival’s growth is dependent upon the willingness of operators of commercial vehicle fleets and small to medium sized businesses to adopt EVs and on Arrival’s ability to produce, sell and service vehicles that meet their needs. If the market for commercial EVs does not develop as Arrival expects or develops slower than Arrival expects, Arrival’s business, prospects, financial condition and operating results will be adversely affected.

Arrival’s growth is dependent upon the adoption of EVs by operators of commercial vehicle fleets and on Arrival’s ability to produce, sell and service vehicles that meet such operators’ needs. The entry of commercial EVs into the medium-duty commercial vehicle market is a relatively new development, particularly in the United States, and is characterized by rapidly changing technologies and evolving government regulation, industry standards and customer views of the merits of using EVs in their businesses. This process has been slow to date. As part of its sales efforts, Arrival must educate fleet managers as to what Arrival believes are the economical savings during the life of the vehicle and the lower “total cost of ownership” of Arrival’s vehicles. As such, Arrival believes that operators of commercial vehicle fleets will consider many factors when deciding whether to purchase Arrival’s commercial EVs (or commercial EVs generally) or vehicles powered by internal combustion engines, particularly diesel-fueled or natural gas-fueled vehicles. Arrival believes these factors include:

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the difference in the initial purchase prices of commercial EVs with comparable vehicles powered by internal combustion engines, both including and excluding the effect of government and other subsidies and incentives designed to promote the purchase of EVs;
the total cost of ownership of the vehicle over its expected life, which includes the initial purchase price, ongoing operating and maintenance costs, and the residual value of the vehicle and/or its components;
the availability and terms of financing options for purchases of vehicles and, for commercial EVs, financing options for battery systems;
the availability of tax and other governmental incentives to purchase and operate EVs and future regulations requiring increased use of non-polluting vehicles;
government regulations and economic incentives promoting fuel efficiency and alternate forms of energy;
electricity costs and fuel prices, including volatility in the cost of diesel or a prolonged period of low gasoline and natural gas costs that could decrease incentives to transition to EVs;
the cost and availability of other alternatives to diesel-fueled vehicles, such as vehicles powered by natural gas;
corporate sustainability initiatives;
commercial EV quality, performance and safety (particularly with respect to lithium-ion battery packs);
the quality and availability of service for the vehicle, including the availability of replacement parts;
the limited range over which commercial EVs may be driven on a single battery charge;
access to charging stations and related infrastructure costs, and standardization of EV charging systems;
electric grid capacity and reliability; and
macroeconomic factors.

If, in weighing these factors, operators of commercial vehicle fleets determine that there is not a compelling business justification for purchasing commercial EVs, particularly those that Arrival will produce and sell, then the market for commercial EVs may not develop as Arrival expects or may develop more slowly than Arrival expects, which would adversely affect Arrival’s business, prospects, financial condition and operating results.

In addition, any reduction, elimination or selective application of tax and other governmental incentives and subsidies because of policy changes, the reduced need for such subsidies and incentives due to the perceived success of the EV, fiscal tightening or other reasons may result in the diminished competitiveness of the EV industry generally or Arrival’s EVs in particular, which would adversely affect Arrival’s business, prospects, financial condition and operating results. Further, Arrival cannot assure that the current governmental incentives and subsidies available for purchasers of EV will remain available.

The orders from UPS, LeasePlan and Anaheim Transportation Network constitute all of the current orders for Arrival vehicles. If these orders are cancelled, modified or delayed, Arrival’s prospects, results of operations, liquidity and cash flow will be materially adversely affected.

The UPS order for 10,000 vehicles (with a UPS option to purchase up to an additional 10,000 vehicles), the LeasePlan agreement for 3,000 vehicles and the Anaheim Transportation Network agreement constitute the only agreements in place with respect to the order of Arrival vehicles. Other potential orders are either letters of intent or in late stage sales discussions. The vehicle volumes to be purchased pursuant to the UPS, LeasePlan and Anaheim Transportation Network orders may be modified or cancelled by UPS, LeasePlan or Anaheim Transportation Network, respectively. If one or more of the UPS, LeasePlan or Anaheim Transportation Network orders are cancelled or modified, or any other arrangements are terminated, and Arrival has not received additional orders from other customers, its business, prospects, financial condition and operating results will be materially adversely affected.

Certain of Arrival’s strategic, development and deployment arrangements could be terminated or may not materialize into long-term contract partnership arrangements and may restrict or limit Arrival from developing EVs with other strategic partners.

Arrival has arrangements with strategic, development and deployment partners and collaborators. Some of these arrangements are evidenced by memorandums of understanding, non-binding orders or letters of intent, early stage agreements that are used for design and development purposes but will require renegotiation at later stages of development or production or master agreements that have yet to be implemented under separately negotiated statements of work, each of which could be terminated or may not materialize into next-stage contracts or long-term contract partnership arrangements. In addition, Arrival does not currently have arrangements in place that will allow it to fully execute its business plan, including, without limitation, final supply and manufacturing agreements and fleet service and management agreements. Moreover, existing or future arrangements may contain limitations on Arrival’s ability to enter into strategic,
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development and deployment arrangements with other partners. For example, the Collaboration Agreement with HKMC (Hyundai and KIA), pursuant to which Arrival and Hyundai and KIA have agreed, among other things, to jointly develop vehicles using Arrival’s technologies, prevents Arrival from developing EVs with other traditional OEMs until November 3, 2022. If Arrival is unable to maintain such arrangements and agreements, or if such agreements or arrangements contain other restrictions from or limitations on developing EVs with other strategic partners, its business, prospects, financial condition and operating results may be materially and adversely affected.

Arrival’s ability to execute its microfactory production model on a large scale is unproven and still evolving and such production model may lead to increased costs, delayed and/or reduced production of its vehicles and adversely affect Arrival’s ability to operate its business.

Arrival’s business model depends in large part on its ability to execute its plans to manufacture, market, deploy and service its EVs at microfactories. Arrival’s reliance on this production model will be subject to risks, including that Arrival, among other things:

may find that it cannot implement its production (including robotic assembly processes and composite manufacturing), which are still being tested, or that the assumptions underpinning its production methodologies are inaccurate, which would materially adversely affect its business;
may require a larger than anticipated factory footprint, which would increase Arrival’s costs of setting up the microfactories and would significantly delay production of its vehicles;
may not be able to reach its rate of production targets within its microfactories for its primary products, which would reduce its ability to be profitable;
may not be able to locate existing buildings meeting the requirements for its microfactories with respect to size, shape, power supply, and strength of construction, which would increase its costs of setting up the microfactories and would significantly delay production of its vehicles;
may not be able to build the expected number of microfactories, which would reduce its production targets and have a material adverse impact on its results of operations and financial condition; and
may experience higher local wages and supplier, manufacturing and construction costs than expected in local regions, resulting in higher operating costs and reducing its ability to be profitable.

Arrival currently has two microfactories in active development: one in Bicester, U.K. and one in Charlotte, North Carolina, USA. These microfactories are expected to start production in the third quarter of 2022, and the fourth quarter of 2022, respectively. Due to the relatively short commissioning times required for the Arrival microfactory, the exact locations of the microfactories are yet to be determined.

If any of the foregoing issues occur, and Arrival is unable to execute on its microfactory production business model, Arrival’s business, prospects, financial condition and operating results may be materially and adversely affected.

Arrival may encounter obstacles outside of its control that slow market adoption of EVs, such as regulatory requirements or infrastructure limitations.

Arrival’s growth is highly dependent upon the adoption of EVs by the commercial and municipal fleet industry. The target demographics for Arrival’s EVs are highly competitive. If the market for EVs does not develop at the rate or in the manner or to the extent that Arrival expects, or if critical assumptions Arrival has made regarding the efficiency of its EVs are incorrect or incomplete, Arrival’s business, prospects, financial condition and operating results will be harmed. The fleet market for EVs is new and untested and is characterized by rapidly changing technologies, price competition, numerous competitors, including OEMs, evolving government regulation and industry standards and uncertain customer demands and behaviors.

Demand for Arrival’s EVs is impacted by overall economic conditions, particularly in the markets in which Arrival plans to operate

A weak or uncertain economic environment in the markets in which Arrival plans to operate could adversely impact its business and the demand for its EVs. For example, a decrease or stagnation in national gross domestic products, declining levels of confidence by consumers or businesses, increased interest rates or rising costs of raw materials could all have an indirect impact on Arrival’s business and prospects.

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Economic conditions can be impacted by a number of factors, including volatility in global financial markets, higher interest rates, inflation, unemployment rates, trade policy and conflicts, consumer confidence, lower corporate earnings, tighter credit conditions and both public and private debt levels. Furthermore, geopolitical tensions, war, terrorism, natural catastrophes, epidemics and/or pandemics, or other unforeseen events may lead to declines in demand for Arrival’s EVs and lower sales for Arrival.

The positive momentum in the global economy was significantly adversely affected by the COVID-19 pandemic from the first quarter of 2020, leaving many countries with a challenging mid-term outlook, and there is a risk of prolonged economic uncertainty or an economic downturn. Global trade conditions and consumer trends that originated during the pandemic continue to persist and may also have long-lasting adverse impact on Arrival and the EV industry independently of the progress of the pandemic. For example, pandemic-related issues have exacerbated port congestion and intermittent supplier shutdowns and delays, resulting in additional expenses to expedite delivery of critical parts. Similarly, increased demand for personal electronics has created a shortfall of semiconductors, which has caused challenges in Arrival’s supply chain and production. Economic and financial conditions in Europe have also been affected, and may continue to be adversely affected, by the United Kingdom’s exit from the EU.

On February 24, 2022, Russia launched a full-scale invasion of Ukraine. As a result of the invasion, and ongoing war in Ukraine, the EU, EU Member States, Canada, Japan, the United Kingdom and the United States, amongst others, have implemented and continue to implement coordinated sanctions and export-control measures against Russia and Belarus. The United States and the United Kingdom have also implemented bans on importing Russian oil. In response, Russia has instituted counter-sanctions, which include export bans, divestment restrictions and the nationalization of the property of foreign organizations. The uncertain nature, magnitude and duration of Russia’s war in Ukraine and actions taken by Western and other states and multinational organizations in response thereto, including, amongst other things, the potential effects of sanctions, export-control measures, travel bans and asset seizures, as well as Russian retaliatory actions, including, amongst other things, restrictions on oil and gas exports, expropriation and cyber-attacks, on the world economy and markets, have contributed to increased market volatility and uncertainty. As a result of Russia’s war in Ukraine, Arrival employees have experienced disruptions when travelling between Russia and other countries. Additionally, Arrival has redistributed certain of its human and data resources to existing operations outside of Russia. Russia's war in Ukraine and other geopolitical risks may have a material adverse impact on macroeconomic factors or Arrival directly which affect Arrival’s business, prospects, financial condition and operating results.

In addition, global economic developments are currently subject to a high degree of uncertainty with respect to the stability of the global trade and tariff framework. The introduction of new regional or international trade barriers, including tariffs such as those imposed by the United States on certain imports from a number of trading partners and a broad range of imports from China, tariffs implemented by the United States, the EU and other countries on Russia in response to its invasion of Ukraine, or any countermeasures, could have a negative impact on the economic environment and thereby result in a lower level of demand for Arrival’s EVs.

Any economic downturn in the markets in which Arrival plans to operate or into which it sells its EVs, lower than expected growth or an otherwise uncertain economic outlook, or any perception thereof by Arrival’s customers, could have a material adverse effect on demand for Arrival’s EVs, resulting in a material adverse effect on its business, prospects, financial condition and operating results.

Arrival’s growth depends upon Arrival’s ability to maintain relationships with Arrival’s existing suppliers, source suppliers for Arrival’s critical components, and complete building out Arrival’s supply chain, while effectively managing the risks due to such relationships.

Arrival’s growth will be dependent upon Arrival’s ability to enter into supplier agreements and maintain its relationships with suppliers who are critical and necessary to the output and production of Arrival’s vehicles. Arrival also relies on a small group of suppliers to provide Arrival with the components for Arrival’s vehicles. The supply agreements Arrival has or may enter into with key suppliers in the future may have provisions where such agreements can be terminated in various circumstances, including potentially without cause. If these suppliers become unable to provide or experience delays in providing components or the supply agreements Arrival has in place are terminated, it may be difficult to find replacement components. Changes in business economic or geopolitical conditions, including Russia’s invasion of, and ongoing war in, Ukraine, pandemics, world events, governmental changes, and other factors beyond Arrival’s control or that Arrival does not presently anticipate could affect Arrival’s ability to receive components from Arrival’s suppliers. See “—Increases in costs, disruption of supply or shortage of materials, in particular for lithium-ion battery cells, could harm Arrival’s business.”
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Furthermore, Arrival has not secured supply agreements for all of its components. Arrival may be at a disadvantage in negotiating supply agreements for the production of its vehicles due to its limited operating history and perceived lower volumes. Arrival may be exposed to fluctuations in components, materials and equipment prices even after Arrival has entered into long-term supply agreement as some vehicle part prices may be indexed to market prices and reviewed quarterly. Substantial increases in the prices for such components, materials and equipment would increase Arrival’s operating costs and could reduce Arrival’s margins if Arrival cannot recover the increased costs. Any attempts to increase the announced or expected prices of Arrival’s vehicles in response to increased costs could be viewed negatively by Arrival’s potential customers and could adversely affect Arrival’s business, prospects, financial condition or operating results.

Arrival currently targets many customers, suppliers and partners that are large corporations with substantial negotiating power, exacting product, quality and warranty standards and potentially competitive internal solutions. If Arrival is unable to sell its products to these customers or is unable to enter into agreements with suppliers and partners on satisfactory terms, its prospects and results of operations will be adversely affected.

Many of Arrival’s current and potential customers, suppliers and partners are large, multinational corporations with substantial negotiating power relative to Arrival and, in some instances, such customers, suppliers and partners may have internal solutions that compete with Arrival’s products. These large, multinational corporations also have significant development resources, which may allow them to acquire or develop independently, or in partnership with others, competitive technologies. Meeting the technical requirements and securing design wins with any of these companies will require a substantial investment of Arrival’s time and resources. There can be no assurance that Arrival’s products will secure design wins from these or other companies or that Arrival will generate meaningful revenue from the sales of its products to these key potential customers. If Arrival’s products are not selected by these large corporations or if these corporations develop or acquire competitive technology, it will have an adverse effect on Arrival’s business.

If Arrival is unable to establish and maintain confidence in its long-term business prospects among customers and analysts and within its industry or is subject to negative publicity, then its financial condition, operating results, business prospects and access to capital may suffer materially.

Customers may be less likely to purchase Arrival’s commercial EVs if they are not convinced that Arrival’s business will succeed or that its service, support and other operations will continue in the long term. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with Arrival if they are not convinced that its business will succeed. Accordingly, in order to build and maintain its business, Arrival must maintain confidence among customers, suppliers, analysts, ratings agencies and other parties in its EVs, long-term financial viability and business prospects. Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of Arrival’s control, such as its limited operating history, customer unfamiliarity with its EVs, any delays in scaling production, delivery and service operations to meet demand, competition and uncertainty regarding the future of EVs, including Arrival’s EVs and Arrival’s production and sales performance compared with market expectations.

As Arrival expands into new territories, many of which will be international territories, it may encounter stronger market resistance than it currently expects, including from incumbent competitors in those territories.

Arrival will face risks associated with any potential international expansion of its operations into new territories, including possible unfavorable regulatory, political, tax and labor conditions, which could harm its business. In addition, in certain of these markets, Arrival may encounter incumbent competitors with established technologies and customer bases, lower prices or costs, and greater brand recognition. Arrival anticipates having international operations and subsidiaries that are subject to the legal, political, regulatory and social requirements and economic conditions in these jurisdictions. However, Arrival has no experience to date selling or leasing and servicing its vehicles internationally, and such expansion would require Arrival to make significant expenditures, including the hiring of local employees and establishing facilities, in advance of generating any revenue. Arrival is and will be subject to a number of risks associated with international business activities that may increase its costs, impact its ability to sell its EVs and require significant management attention. These risks include:

conforming Arrival’s EVs to various international regulatory requirements where its EVs are sold which requirements may change over time;
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difficulties in obtaining or complying with various licenses, approvals, certifications and other governmental authorizations necessary to manufacture, sell or service its EVs in any of these jurisdictions;
difficulty in staffing and managing foreign operations;
difficulties attracting customers in new jurisdictions;
taxes, regulations and permit requirements;
a heightened risk of failure to comply with corporation and employment tax laws;
fluctuations in foreign currency exchange rates and interest rates, including risks related to any interest rate swap or other hedging activities Arrival may undertakes;
U.S. and foreign government trade restrictions, tariffs and price or exchange controls;
foreign labor laws, regulations and restrictions;
changes in diplomatic and trade relationships;
political instability, natural disasters, global health concerns, including health pandemics such as the COVID-19 pandemic, war, including the ongoing war in Ukraine, or events of terrorism; and
the strength of international economies.

If Arrival fails to successfully address these risks, Arrival’s business, prospects, financial condition and operating results could be materially harmed. Factors that may influence market adoption of EVs include:

perceptions about EV quality, safety, design, performance, reliability and cost, especially if adverse events or accidents occur that are linked to the quality or safety of EVs;
perceptions about vehicle safety in general, including the use of advanced technology, such as vehicle electronics, batteries and regenerative braking systems;
the decline of vehicle efficiency and/or range resulting from deterioration over time in the ability of the battery to hold a charge;
changes or improvements in the fuel economy of internal combustion engines, the vehicle and the vehicle controls or competitors’ electrified systems;
the availability of service, charging and fueling and other associated costs for EVs;
access to sufficient charging infrastructure;
the risk that government support for EVs and infrastructure may not continue;
volatility in the cost of energy, electricity, oil and gasoline could affect buying decisions;
government regulations and economic incentives promoting fuel efficiency and alternate forms of energy, including new regulations mandating zero tailpipe emissions compared to overall carbon reduction;
the availability of tax and other governmental incentives to purchase and operate EVs or future regulation requiring increased use of nonpolluting vehicles; and
macroeconomic factors.

Arrival has grown its business rapidly and expects to continue to expand its operations. Any failure to manage its growth effectively could adversely affect its business, prospects, operating results and financial condition.

Any failure to manage Arrival’s growth effectively could materially and adversely affect Arrival’s business, prospects, operating results and financial condition. Arrival intends to expand its operations and expects such future expansion to include:
expanding the management team;
hiring and training new personnel (including factory workers);
leveraging consultants to assist with company growth and development;
forecasting production and revenue;
controlling expenses and investments in anticipation of expanded operations;
establishing or expanding design, production, sales and service facilities;
implementing and enhancing administrative infrastructure, systems and processes; and
expanding into international markets.

Arrival intends to continue to hire a number of additional personnel, including software engineers, design and production personnel and service technicians for its EVs. Because Arrival’s EVs are based on a different technology platform than traditional internal combustion engines, individuals with sufficient training in EVs may not be available to hire, and as a result, Arrival will need to expend significant time and expense training any newly hired employees. Competition for individuals with experience designing, producing and servicing EVs and their software is intense, and Arrival may not be able to attract, integrate, train, motivate or retain additional highly qualified personnel. The failure to attract, integrate,
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train, motivate and retain these additional employees could seriously harm Arrival’s business, prospects, financial condition and operating results.

Arrival may be delayed or fail to obtain the product certifications necessary for the sale of its products.

Arrival’s products may require certification for their intended use. Additionally, customers may require that Arrival’s products meet certain standards which go beyond the standard legal and regulatory requirements. In the event that Arrival fails to obtain the relevant certifications in a timely manner, Arrival’s ability to sell its products may be impacted.

Arrival’s business may be adversely affected by labor and union activities.

Although none of Arrival’s employees are currently represented by a labor union, it is common throughout the automobile industry generally for many employees at automobile companies to belong to a union, which can result in higher employee costs and increased risk of work stoppages. Arrival may also directly and indirectly depend upon other companies with unionized work forces, such as parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on Arrival’s business, financial condition or operating results.

Arrival’s limited operating history makes it difficult for Arrival to evaluate its future business prospects.

Arrival is a company with an extremely limited operating history that has not generated revenue to date. As Arrival attempts to transition from research and development activities to commercial production and sales, it is difficult, if not impossible, to forecast Arrival’s future results (and such forecasts are subject to uncertainty), and Arrival has limited insight into trends that may emerge and affect Arrival’s business. The estimated costs and timelines that Arrival has developed to reach full scale commercial production are subject to inherent risks and uncertainties involved in the transition from a start-up company focused on research and development activities to the large-scale manufacture and sale of vehicles. There can be no assurance that Arrival’s estimates related to the costs and timing necessary to complete design and engineering of its EVs and to tool its microfactories will prove accurate. These are complex processes that may be subject to delays, cost overruns and other unforeseen issues. For example, the tooling required within Arrival’s microfactories may be more expensive to produce than predicted, or have a shorter lifespan, resulting in additional replacement and maintenance costs, particularly relating to composite panel tooling, which could have a material adverse impact on Arrival’s results of operations and financial condition. Similarly, Arrival may experience higher raw material waste in the composite process than it expects, resulting in higher operating costs and hampering its ability to be profitable.

In addition, Arrival has engaged in limited marketing activities to date, so even if Arrival is able to bring its EVs to market on time and on budget, there can be no assurance that fleet customers will embrace Arrival’s products in significant numbers. Market conditions, many of which are outside of Arrival’s control and subject to change, including general economic conditions, the availability and terms of financing, the impacts and ongoing uncertainties created by the COVID-19 pandemic, fuel and energy prices, regulatory requirements and incentives, competition and the pace and extent of vehicle electrification generally, will impact demand for Arrival’s EVs, and ultimately Arrival’s success.

Arrival is dependent on its suppliers, some of which are single or limited source suppliers, and the inability of these suppliers to deliver the raw materials and components of Arrival’s vehicles in a timely manner and at prices and volumes acceptable to it could have a material adverse effect on its business, prospects and operating results.

While Arrival plans to obtain raw materials and components from multiple sources whenever possible, some of the raw materials and components used in its vehicles will be purchased by Arrival from a single or limited source, such as LG Energy Solution, Ltd. (as assignee of LG Chem Ltd., “LG Chem”) which has agreed to manufacture and supply lithium-ion battery cells for Arrival’s vehicles. While Arrival believes that it may be able to establish alternate supply relationships and obtain or engineer replacement raw materials and components for its single or limited source raw materials and components, it may be unable to do so in the short term (or at all) at prices or quality levels that are acceptable to it, leaving Arrival susceptible to supply shortages, long lead times for components and cancellations and supply changes. In addition, Arrival could experience delays if its suppliers do not meet agreed upon timelines or experience capacity constraints.

Any disruption in the supply of raw materials or components, whether or not from a single or limited source supplier, could temporarily disrupt production of Arrival’s vehicles until an alternative supplier is able to supply the required raw materials or components. Changes in business conditions, unforeseen circumstances, governmental changes, world events and other factors beyond Arrival’s control or which it does not presently anticipate, could also affect its suppliers’ ability to deliver raw materials or components to Arrival on a timely basis. For example, the ongoing war in Ukraine as well as the sanctions
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imposed on Belarus and Russia and the counter-sanctions imposed by Russia on other states may disrupt global supply chains and could lead certain suppliers, particularly suppliers of nickel or aluminum, to experience disruptions in their ability to source materials or could lead to a significant price increase of key raw materials or EV components that Arrival sources. See “—Increases in costs, disruption of supply or shortage of materials, in particular for lithium-ion battery cells, could harm Arrival’s business.”

Any of the foregoing could materially and adversely affect Arrival’s results of operations, financial condition and prospects.

As Arrival grows rapidly and expands into multiple global markets, there is a risk that Arrival will fail to maintain an effective system of internal controls and its ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely affected. Arrival may identify material weaknesses in its internal controls over financial reporting which it may not be able to remedy in a timely manner.

As a public company, Arrival operates in an increasingly demanding regulatory environment, which requires it to comply with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the regulations of Nasdaq, the rules and regulations of the SEC, expanded disclosure requirements, accelerated reporting requirements and more complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for Arrival to produce reliable financial reports and are important to help prevent financial fraud.

Arrival anticipates that the ongoing process of building out its accounting and financial functions and infrastructure will require significant additional professional fees, internal costs and management efforts. Arrival expects that it will need to implement a new internal system to combine and streamline the management of its financial, accounting, human resources and other functions. However, such a system would likely require Arrival to complete many processes and procedures for the effective use of the system or to run its business using the system, which may result in substantial costs. Any disruptions or difficulties in implementing or using such a system could adversely affect Arrival’s controls and harm its business. Moreover, such disruption or difficulties could result in unanticipated costs and diversion of management’s attention. Arrival’s internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If Arrival is not able to maintain proper and effective internal controls, it may not be able to produce timely and accurate financial statements. If Arrival cannot provide reliable financial reports or prevent fraud, its business and results of operations could be harmed, investors could lose confidence in its reported financial information and Arrival could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.

Arrival has identified material weaknesses in its internal control over financial reporting. This could result in material misstatements in Arrival’s historical financial reports and, if Arrival is unable to successfully remediate the material weaknesses, the accuracy and timing of Arrival’s financial reporting may be adversely affected, investors may lose confidence in the accuracy and completeness of Arrival’s financial reports, and the market price of the Ordinary Shares may be materially and adversely affected.

In connection with the audit of Arrival’s consolidated financial statements as of and for the year ended December 31, 2021, Arrival’s management and its independent registered public accounting firm identified deficiencies that Arrival concluded represented material weaknesses in its internal control over financial reporting primarily attributable to its lack of an effective control structure and sufficient financial reporting and accounting personnel. The material weaknesses in the control framework include, without limitation, an ineffective control environment, insufficient policies and procedures that defined personnel’s internal control responsibilities, insufficient personnel, ineffective risk assessment, management’s failure to effectively design and maintain controls in response to risks of material misstatement, management’s failure to design and maintain formal accounting policies and procedures, and ineffective IT general controls have been identified and included in ITEM 15. SEC guidance defines a material weakness as a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

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Arrival is in the process of designing and implementing measures to improve its internal control over financial reporting to remediate the material weaknesses related to its financial reporting for the year ended December 31, 2021. Primarily design and implementing formal processes, policies and procedures supporting its financial review process, including review controls and hiring additional accounting personnel, to bolster technical reporting and support the appropriate implementation of segregation of duties controls over review responsibilities. In addition, designing and implementing IT general controls over areas including but not exclusive to change management, review and update of user access rights and privileges and program development approval and testing. At the time of this annual report, these material weaknesses have not been remediated.

While Arrival is designing and implementing measures to remediate the material weaknesses, it cannot predict the success of such measures or the outcome of its assessment of these measures at this time. Arrival can give no assurance that these measures will remediate either of the deficiencies in internal control or that additional material weaknesses in its internal control over financial reporting will not be identified in the future. Arrival’s failure to implement and maintain effective internal control over financial reporting could result in errors in its financial statements that may lead to a restatement of its financial statements or cause it to fail to meet its reporting obligations. The identification a material weakness and the inability of Arrival’s management to assert that its internal control over financial reporting is effective may cause investors to lose confidence in the accuracy and completeness of Arrival’s financial reports, the market price of Ordinary Shares to be adversely affected and/or Arrival to become subject to litigation or investigations by Nasdaq, the SEC, or other regulatory authorities, which could require additional financial and management resources.

There are complex software and technology systems that need to be developed in coordination with vendors and suppliers in order to reach production for Arrival’s EVs, and there can be no assurance such systems will be successfully developed.

Arrival vehicles will use a substantial amount of third-party and in-house software codes and complex hardware to operate. The development of such advanced technologies is inherently complex, and Arrival will need to coordinate with its vendors and suppliers in order to reach production for its EVs. Defects and errors may be revealed over time and Arrival’s control over the performance of third-party services and systems may be limited. Thus, Arrival’s potential inability to develop the necessary software and technology systems may harm its competitive position.

Arrival is relying on third-party suppliers to develop a number of emerging technologies for use in its products, including lithium ion battery technology. These technologies are not today, and may not ever be, commercially viable. There can be no assurances that Arrival’s suppliers will be able to meet the technological requirements, production timing, and volume requirements to support its business plan. In addition, the technology may not comply with the cost, performance useful life and warranty characteristics Arrival anticipates in its business plan. As a result, Arrival’s business plan could be significantly impacted, and Arrival may incur significant liabilities under warranty claims which could adversely affect its business, prospects, and results of operations.

The discovery of defects in Arrival vehicles may result in delays in new model launches, recall campaigns or increased warranty costs. Additionally, discovery of such defects may result in a decrease in the residual value of its vehicles, which may materially harm its business.

Arrival’s EVs may contain defects in design and production that may cause them not to perform as expected or may require repair. Arrivals’ products (including vehicles and components) have not completed testing and Arrival currently has a limited frame of reference by which to evaluate the performance of its EVs upon which its business prospects depend. There can be no assurance that Arrival will be able to detect and fix any defects in its EVs. Arrival may experience recalls in the future, which could adversely affect Arrival’s brand and could adversely affect its business, prospects, financial condition and operating results. Arrival’s EVs may not perform consistent with customers’ expectations or consistent with other vehicles which may become available. Any product defects or any other failure of Arrival’s EVs and software to perform as expected could harm Arrival’s reputation and result in a significant cost due to warranty replacement and other expenses, a loss of customer goodwill due to failing to meet maintenance targets in Arrival’s total cost of ownership calculations, adverse publicity, lost revenue, delivery delays, product recalls and product liability claims and could have a material adverse impact on Arrival’s business, prospects, financial condition and operating results. Additionally, discovery of such defects may result in a decrease in the residual value of Arrival’s vehicles, which may materially harm its business. Moreover, problems and defects experienced by other EV companies could by association have a negative impact on perception and customer demand for Arrival’s EVs.

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Arrival may become subject to product liability claims, which could harm its financial condition and liquidity if it is not able to successfully defend or insure against such claims.

Product liability claims, even those without merit or those that do not involve Arrival’s products, could harm Arrival’s business, prospects, financial condition and operating results. The automobile industry in particular experiences significant product liability claims, and Arrival faces inherent risk of exposure to claims in the event Arrival’s EVs do not perform or are claimed to not have performed as expected. As is true for other commercial vehicle suppliers, Arrival expects in the future that its EVs may be involved in crashes resulting in death or personal injury. Additionally, product liability claims that affect Arrival’s competitors may cause indirect adverse publicity for Arrival and its products.

A successful product liability claim against Arrival could require Arrival to pay a substantial monetary award. Arrival’s risks in this area are particularly pronounced given that no production EVs have been delivered to customers date and limited field experience of Arrival’s products. Moreover, a product liability claim against Arrival or its competitors could generate substantial negative publicity about Arrival’s products and business and could have a material adverse effect on Arrival’s brand, business, prospects, financial condition and operating results. In most jurisdictions, Arrival plans generally to self-insure against the risk of product liability claims for vehicle exposure, meaning that any product liability claims will likely have to be paid from company funds, not by insurance.

If Arrival is sued for infringing or misappropriating intellectual property rights of third parties, litigation could be costly and time consuming and could prevent Arrival from developing or commercializing its future products.

Companies, organizations, or individuals, including Arrival’s competitors, may hold or obtain patents, trademarks, service marks, trade names, copyrights, trade secrets or other intellectual property or proprietary rights that would prevent, limit or interfere with Arrival’s ability to make, use, develop, distribute, sell, import, export, market or otherwise exploit its vehicles or components, which could have a material adverse effect on Arrival if such claims were decided against it. From time to time, Arrival may receive communications from holders of patents, trademarks or other intellectual property regarding their proprietary rights. Companies holding patents or other intellectual property rights may bring suits alleging infringement or other violation of such rights or otherwise assert their rights and ask or urge Arrival to take licenses. Arrival’s applications and uses of trademarks relating to its design, software or technologies could be found to infringe upon existing trademark ownership and rights. In addition, if Arrival is determined to have infringed upon a third party’s intellectual property rights, it may be required to do one or more of the following:

cease selling, incorporating certain components into, or using vehicles or offering goods or services that incorporate or use the challenged intellectual property;
pay substantial damages;
seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms, or at all;
redesign its vehicles or other goods or services; or
establish and maintain alternative branding for its products and services.

In the event of a successful claim of infringement against Arrival and Arrival’s failure or inability to obtain a license to the infringed technology or other intellectual property right, Arrival’s business, prospects, operating results and financial condition could be materially and adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs, negative publicity and diversion of resources and management attention.

Arrival may incur significant costs and expenses in connection with obtaining, maintaining, protecting, defending and enforcing its intellectual property rights, including through litigation. Additionally, even if Arrival is able to take measures to protect its intellectual property, third-parties may independently develop technologies that are the same or similar to Arrival, and Arrival may not be able to obtain and protect its intellectual property rights throughout the world.

Arrival’s success depends to a significant degree on its ability to obtain, maintain, protect, defend and enforce its intellectual property and other proprietary rights. Arrival may not be able to prevent others from unauthorized use of its intellectual property, which could harm its business and competitive position, including a decline of the Arrival brand and goodwill associated therewith. Arrival relies on a combination of patents, trade secrets (including know-how and confidential information), unfair competition laws, employee and third-party nondisclosure agreements, copyrights, trademarks, trade names, service marks, domain names intellectual property licenses, and other contractual rights to establish and protect its rights in its technology. Despite Arrival’s efforts to obtain, maintain, protect, defend and enforce its proprietary rights, third parties may attempt to copy or otherwise obtain and use Arrival’s intellectual property or seek
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court declarations that they do not infringe upon or otherwise violate its intellectual property rights. For example, Arrival may fail to obtain effective intellectual property protection, or the efforts it has taken to protect its intellectual property rights may not be sufficient or effective, and any of its intellectual property rights may be challenged. Arrival applies for patent protection as it deems appropriate, based on then-current facts and circumstances. Accordingly, Arrival has applied for patents in the United States and in other foreign jurisdictions. As of the date of this annual report, Arrival had approximately 90 granted patents and over 100 pending patent applications. Arrival cannot guarantee that any of its pending patent applications or other applications for intellectual property registrations will be issued or granted or that its existing and future intellectual property rights will be sufficiently broad to protect its proprietary technology. While a presumption of validity exists with respect to patents issued to Arrival, there can be no assurance that any of its patents, patent applications, or other intellectual property rights will not be, in whole or in part, opposed, contested, challenged, invalidated, circumvented, designed around or rendered unenforceable. If Arrival fails to obtain issuance of patents or registration of other intellectual property, or its patent claims or other intellectual property rights are rendered invalid or unenforceable, or narrowed in scope, pursuant to, for example, judicial or administrative proceedings, including re-examination, post-grant review, interference, opposition or derivation proceedings, the coverage of patents and other intellectual property rights afforded to its products could be impaired. Even if Arrival is to obtain issuance of further patents or registration of other intellectual property, such intellectual property could be subjected to attacks on ownership, validity, enforceability or other legal attacks. Any such impairment or other failure to obtain sufficient intellectual property protection could impede Arrival’s ability to market its products, negatively affect its competitive position and harm its business and operating results, including by forcing Arrival to, among other things, rebrand or redesign its affected products. Moreover, Arrival’s patents and patent applications may only cover particular aspects of its products, and competitors and other third parties may be able to circumvent or design around its patents. Competitors may develop and obtain patent protection for more effective technologies, designs or methods. There can be no assurance that third parties will not create new products or methods that achieve similar or better results without infringing upon patents Arrival owns. If these developments occur, they could have an adverse effect on Arrival’s sales or market position.

Patent, trademark, copyright and trade secret laws vary significantly throughout the world. A number of foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States, and mechanisms for enforcement of intellectual property and proprietary rights may be inadequate. Therefore, Arrival’s intellectual property rights may not be as strong or as easily enforced outside of the United States. Filing, prosecuting, maintaining and defending Arrival’s intellectual property in all countries throughout the world may be prohibitively expensive, and it may choose to forgo such activities in some applicable jurisdictions. Failure to adequately protect Arrival’s intellectual property rights could result in its competitors offering similar products, potentially resulting in the loss of some of Arrival’s competitive advantage, a decline of the Arrival brand and goodwill associated therewith and a decrease in its revenue which, would adversely affect its business, prospects, financial condition and operating results.

As Arrival faces increasing competition and becomes increasingly high profile, the possibility of receiving a larger number of intellectual property claims against it grows. In addition, various “non-practicing entities,” and other intellectual property rights holders may attempt to assert intellectual property claims against Arrival or seek to monetize intellectual property rights they own to extract value through licensing or other settlements. Moreover, third parties may seek to challenge, invalidate or circumvent Arrival’s patents, trademarks, copyrights or other intellectual property and proprietary rights, including through administrative processes such as re-examination, inter partes review, interference and derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings) or litigation. The value of Arrival’s intellectual property and proprietary rights could also diminish if others assert rights therein or ownership thereof, and it may be unable to successfully resolve any such conflicts in Arrival’s favor or to Arrival’s satisfaction.

Monitoring unauthorized use of Arrival’s intellectual property is difficult and costly, and the steps Arrival has taken or will take may not prevent infringement, misappropriation or other violation of Arrival’s intellectual property. From time to time, Arrival may have to resort to litigation to enforce its intellectual property rights. Regardless of their merit, any intellectual property-related claims or litigation could:

result in substantial costs and diversion of its resources;
put Arrival’s patents or other intellectual property at risk of being invalidated or interpreted narrowly;
put Arrival’s patent applications or applications for other intellectual property registrations at risk of not issuing;
require Arrival to enter into unfavorable royalty or license agreements, which may not be available on commercially reasonable terms or at all;
require Arrival to re-design its solutions, which could be costly, time-consuming or impossible; or
require that Arrival comply with other unfavorable terms.

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Additionally, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of Arrival’s confidential information could be compromised by disclosure during this type of litigation. Furthermore, any enforcement of Arrival’s patents or other intellectual property may provoke third parties to assert counterclaims against it.

Any investment in protecting Arrival’s intellectual property through additional trademark, patent or other intellectual property filings could be expensive or time-consuming. Arrival may not be able to obtain protection for its technology and, even if successful in obtaining effective patent, trademark and copyright protection, it is expensive to maintain these rights, both in terms of application and maintenance costs, and the time and cost required to defend Arrival’s rights could be substantial.

For example, if any of Arrival’s customers are sued, Arrival may be required to defend and/or settle the litigation on their behalf. In addition, if Arrival is unable to obtain licenses or modify its products to make them non-infringing, it might have to refund a portion of subscription fees prepaid to it and terminate those agreements, which could further exhaust its resources. In addition, Arrival may pay substantial settlement amounts or royalties on future solution sales to resolve claims or litigation, whether or not legitimately or successfully asserted against it. Even if Arrival were to prevail in the actual or potential claims or litigation against it, any claim or litigation regarding its intellectual property and proprietary rights could be costly and time-consuming and divert the attention of its management and key personnel from its business operations. Such disputes, with or without merit, could also cause potential customers to refrain from purchasing Arrival’s products or otherwise cause it reputational harm.

If Arrival does not successfully defend or settle an intellectual property claim, it could be liable for significant monetary damages and could be prohibited from continuing to use certain technology, business methods, content or brands, and from making, selling or incorporating certain components or intellectual property into the products and services it offers. As a result, Arrival could be forced to redesign its products and services and/or to establish and maintain alternative branding for its products and services. To avoid litigation or being prohibited from marketing or selling the relevant products or services, Arrival could seek a license from the applicable third party, which could require Arrival to pay significant royalties, licensing fees or other payments, increasing its operating expenses. If a license is not available at all or not available on reasonable terms, Arrival may be required to develop or license a non-violating alternative, either of which could be infeasible or require significant effort and expense. If Arrival cannot license or develop a non-violating alternative, Arrival would be forced to limit or stop sales of its offerings and may be unable to effectively compete. Moreover, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of Arrival’s Ordinary Shares. Furthermore, many of Arrival’s current and potential competitors may be in a position to dedicate substantially greater resources to enforce their intellectual property and proprietary rights. Accordingly, despite Arrival’s efforts, it may not be able to prevent third parties from infringing, misappropriating or otherwise violating its intellectual property and proprietary rights. Any of the foregoing could have a material adverse effect on Arrival’s business, financial condition, results of operations and prospects.

Patent applications which have been submitted to the authorities may not result in granted patents or may require the applications to be modified in order for patent coverage to be obtained.

Arrival cannot be certain that it is the first inventor of the subject matter to which it has filed a particular patent application, or if it is the first party to file such a patent application. If another party has filed a patent application to the same subject matter as Arrival has, Arrival may not be entitled to the protection sought by the patent application. Further, the legal standards relating to the validity, enforceability and scope of protection of intellectual property and proprietary rights are uncertain and still evolving. Therefore, the scope of protection of issued patent claims is often difficult to determine. There can be no assurance that Arrival’s issued patents and any patents issued from its pending or future patent applications will provide Arrival with competitive advantages as they may be successfully challenged, invalidated, narrowed in scope or circumvented by third parties, or may not prove to be enforceable in actions brought against alleged infringers. Moreover, Arrival cannot be certain that the patent applications that it files will issue, that the authorities will not require the applications to be modified in order for patent coverage to be obtained or that its issued patents will afford protection against competitors with similar technology. In addition, Arrival’s competitors may design around its issued patents, which may adversely affect its business, prospects, financial condition or operating results.

If Arrival’s trademarks and trade names are not adequately protected, Arrival may not be able to build name recognition in its markets of interest, and its competitive position may be harmed.

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The value of Arrival’s intellectual property and other proprietary rights associated with Arrival’s brand could diminish if others assert rights in or ownership of trademarks or service marks that are similar to Arrival’s trademarks or service marks. The registered or unregistered trademarks or trade names that Arrival owns may be challenged, infringed, circumvented, declared generic, lapsed or determined to be infringing on or dilutive of other marks. During trademark registration proceedings, Arrival may receive rejections of its applications by the U.S. Patent and Trademark Office (“USPTO”), or in other foreign jurisdictions. Although Arrival is given an opportunity to respond to such rejections, it may be unable to overcome them. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against its trademarks, which may not survive such proceedings. Furthermore, owning and maintaining a trademark registration may not provide an adequate defense against a subsequent infringement claim asserted by the owner of a senior trademark. Arrival may not be able to protect its rights in these trademarks and trade names, which it needs in order to build name recognition with potential members. In addition, third parties may file for registration of trademarks similar or identical to its trademarks, thereby impeding Arrival’s ability to build brand identity and possibly leading to market confusion. If they succeed in registering or developing common-law rights in such trademarks, and if Arrival is not successful in challenging such third-party rights, Arrival may not be able to use these trademarks to develop brand recognition of its technologies, products or services. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of its registered or unregistered trademarks or trade names. Over the long term, if Arrival is unable to establish name recognition based on its trademarks and trade names, or if Arrival incurs damage to its reputation or brand, or loss of confidence in its products and solutions, this could result in decreased demand for its products and solutions and Arrival may not be able to compete effectively, which could have a material adverse effect on its business, financial condition, results of operations and prospects.

If Arrival is unable to maintain, protect and enforce the confidentiality of its trade secrets, its business and competitive position would be harmed.

Arrival relies on trade secrets and confidentiality agreements to protect its unpatented know-how, technology, and other proprietary information, and to maintain its competitive position. However, trade secrets and know-how can be difficult to protect. Arrival seeks to protect these trade secrets and other proprietary technology, in part, by entering into limited access, confidentiality and other contractual agreements with parties who have access to them, such as its suppliers, customers and collaborators. However, Arrival cannot guarantee that it has entered into such agreements with each party that has or may have had access to its proprietary information, know-how and trade secrets. Moreover, no assurance can be given that these agreements will be effective in controlling access to, distribution, use, misuse, misappropriation, or disclosure of Arrival’s proprietary information, know-how and trade secrets. Further, these agreements may not prevent Arrival’s competitors from independently developing substantially equivalent or superior technologies. These agreements may be breached, and Arrival may not have adequate remedies for any such breach. Additionally, such agreements may not effectively prevent unauthorized access to or unauthorized use, disclosure, misappropriation or reverse engineering of Arrival’s confidential information, intellectual property, or technology. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret or know-how is difficult, expensive, and time-consuming, and the outcome is unpredictable. Trade secrets and know-how can be difficult to protect, and some courts inside and outside the U.S. are less willing or unwilling to protect trade secrets and know-how. If Arrival develops any trade secrets that were to be lawfully obtained or independently developed by a competitor or other third-party, it would have no right to prevent them from using that technology or information to compete with it, and Arrival’s competitive position would be materially and adversely harmed. The loss of trade secret protection could make it easier for third parties to compete with Arrival’s products and services by copying functionality. Any of the foregoing could have a material adverse effect on Arrival’s business, financial condition, results of operations and prospects.

Arrival may not be able to obtain or agree on acceptable terms and conditions for all or a significant portion of the government grants, loans and other incentives for which it may apply. As a result, Arrival’s business and prospects may be adversely affected.

Arrival has applied, and will continue to apply, for federal, state and municipal grants, as well as loans and tax incentives under government programs designed to stimulate the economy and support the production of alternative fuel and EVs and related technologies. As of 31 December 2021, Arrival had grant agreements in place, which are subject to minimum requirements, with the counties of York and Mecklenburg in North Carolina as well as the City of Charlotte, North Carolina. Arrival anticipates that in the future there will be new opportunities for it to apply for grants, loans and other government incentives. Arrival’s ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of its applications to participate in such programs. The
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application process for these funds and other incentives will likely be highly competitive. Arrival cannot assure you that it will be successful in obtaining any of these additional grants, loans and other incentives. If it is not successful in obtaining any of these additional incentives and it is unable to find alternative sources of funding to meet its planned capital needs, Arrival’s business and prospects could be materially adversely affected.

Arrival will rely on complex robotic assembly and component manufacturing for its production, which involves a significant degree of risk and uncertainty in terms of operational performance and costs.

Arrival will rely on complex robotic assembly and component manufacturing for the production and assembly of its EVs, which will involve a significant degree of uncertainty and risk in terms of operational performance and costs. Arrival’s microfactories will contain large-scale machinery combining many components. These components may suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions of these components may significantly affect the intended operational efficiency. In addition, Arrival may encounter technical and/or validation difficulties with its components that it is unable to overcome and as a result Arrival may have to source more external components than planned and/or may not be able to achieve target prices in production components. Operational performance and costs can be difficult to predict and are often influenced by factors outside of Arrival’s control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fire, seismic activity and natural disasters. Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to production facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all of which could have a material adverse effect on Arrival’s business, prospects, financial condition or operating results.

Disruptions, capacity limitations or interference with Arrival’s use of the data centers operated by Arrival or other third-party providers that host its cloud services, including, but not limited to Amazon Web Services (“AWS” and Microsoft), could result in delays or outages of Arrival’s cloud service and harm its business.

Arrival hosts a significant portion of its cloud service from third-party data center facilities operated by AWS from several global locations, and Arrival also directly hosts portions of its cloud service. Any damage to, failure of or interference with its cloud service that is hosted by Arrival, AWS, Microsoft or by third-party providers it may utilize in the future, whether as a result of Arrival’s actions, actions by the third-party data centers, actions by other third parties, or natural disasters, could result in interruptions in such cloud service and/or the loss of Arrival’s or its customers’ data, including personal information. Arrival manages the cloud services through its site reliability engineering team, and Arrival needs to support version control, changes in cloud software parameters and the evolution of its solutions, all in a multi-OS environment. As Arrival utilizes data centers, it may move or transfer its data and its customers’ data from one region to another. Despite precautions taken during this process, any unsuccessful data transfers may impair the delivery of such services. Impairment of, or interruptions in, Arrival’s cloud services may reduce its revenue, subject it to claims and litigation, cause its customers to terminate their subscriptions and adversely affect its ability to attract new customers. Arrival’s business may also be harmed if its customers and potential customers believe its services are unreliable. Additionally, any limitation of the capacity of Arrival’s data centers could impede its ability to scale, onboard new customers or expand the usage of existing customers, which could adversely affect its business, financial condition and results of operations.

Arrival does not control, or in some cases has limited control over, the operation of the data center facilities it uses, which increases its vulnerability to problems with the services they provide. Such data center facilities are vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and similar events. It may also be subject to cyberattacks, computer viruses, ransomware attacks, disabling devices, break-ins, sabotage, intentional criminal acts, acts of vandalism, similar misconduct and to adverse events caused by operator error, negligence or malfeasance. Despite precautions taken at these facilities, the occurrence of a natural disaster, an act of terrorism, war or other act of malfeasance, a decision to close the facilities without adequate notice, or other unanticipated problems or security incidents at these facilities could result in lengthy interruptions in service and the loss of customer data and business. Arrival may also incur significant costs for using alternative equipment or facilities or taking other actions in preparation for, or in reaction to, any such events.

While Arrival has some disaster recovery arrangements in place, its preparations may not be adequate to account for disasters or similar events that may occur in the future and may not effectively permit it to continue operating in the event of any problems with respect to its technology systems or those of its third-party data centers or any other third-party
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facilities. Arrival’s disaster recovery and data redundancy measures may be inadequate, and its business interruption insurance may not be sufficient to compensate it for the losses that could occur.

In the event that any of Arrival’s agreements with its third-party service providers are terminated, there is a lapse or elimination of any services or features that it utilizes or there is an interruption of connectivity or damage to facilities, whether due to actions outside of its control or otherwise, Arrival could experience interruptions or delays in customer access to its platform and incur significant expense in developing, identifying, obtaining and/or integrating replacement services, which may not be available on commercially reasonable terms or at all, and which would adversely affect its business, financial condition and results of operations. Arrival could experience additional expense in arranging for new facilities, technology, services and support. In addition, the failure of such third-party data centers or any other third-party provider to meet Arrival’s capacity requirements could result in interruption in the availability or functionality of its website and mobile applications.

Arrival relies on third-party software and intellectual property licenses. If Arrival fails to comply with its obligations under license or technology agreements with third parties, it may be required to pay damages, and Arrival could lose license rights that are critical to its business.

In the course of Arrival’s business, it utilizes software, content and other intellectual property and proprietary rights licensed from third parties. It may be necessary in the future to seek or renew licenses relating to various aspects of Arrival’s business. However, there can be no assurance that the necessary licenses would be available on commercially reasonable terms, if at all.

Furthermore, the licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third-party intellectual property rights that Arrival may consider attractive or necessary. These established companies may have a competitive advantage over Arrival due to their size, capital resources and greater development or commercialization capabilities. In addition, companies that perceive Arrival to be a competitor may be unwilling to assign or license rights to it. Even if such licenses are available, Arrival may be required to pay the licensor substantial royalties based on sales of its products and services. Such royalties are a component of the cost of its products or services and may affect the margins on its products and services. Additionally, certain of Arrival’s license agreements allow the applicable counterparty to terminate the agreement for cause by providing Arrival with prior written notice. If Arrival is unable to enter into the necessary licenses on acceptable terms or at all, if any necessary licenses are subsequently terminated, if its licensors fail to abide by the terms of the licenses, if its licensors fail to prevent infringement by third parties, or if the licensed intellectual property rights are found to be invalid or unenforceable, its business, financial condition, and results of operations could be materially and adversely affected. Defense of any lawsuit or failure to obtain any of these licenses on favorable terms could prevent Arrival from commercializing products, which could have a material adverse effect on its competitive position, business, financial condition and results of operations.

Arrival’s inability to obtain certain licenses or other rights or to obtain such licenses or rights on favorable terms could have a material adverse effect on its business, operating results and financial conditions. In any such case, Arrival may be required to either seek licenses to other software, services intellectual property or proprietary rights from other parties and re-design its products to function with such technology, or develop replacement technology ourselves, which could result in increased costs and solution delays. Arrival may also be forced to limit the features available in its current or future products. Any delays and feature limitations could adversely affect its business, financial condition and results of operations. Moreover, in the future, Arrival may in-license certain content and other intellectual property from third parties on a non-exclusive basis. As a result, such content and other intellectual property may also be licensed to others, including Arrival’s competitors. Incorporating content, intellectual property or proprietary rights licensed from third parties on a nonexclusive basis in our solutions, including Arrival’s software could also limit Arrival’s ability to protect its intellectual property and proprietary rights in its products and its ability to restrict third parties from developing similar or competitive technology using the same third-party content intellectual property or proprietary rights.

Additionally, Arrival’s licenses may be subject to certain rights of third parties, and, as a result, its current and future licenses may not provide it with exclusive rights to use the licensed intellectual property, content and technology. If Arrival fails to comply with any of the obligations under such license agreements, Arrival may be required to pay damages and the licensor may have the right to terminate the license. Termination by the licensor may cause Arrival to lose valuable rights, and could prevent it from selling its products and services, or inhibit its ability to commercialize future products and services. Arrival’s business may suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to enforce licensed patents against infringing third parties, if the licensed intellectual
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property rights are found to be invalid or unenforceable, or if Arrival is unable to enter into necessary licenses on acceptable terms. In addition, Arrival’s rights to certain technologies are licensed to it on a non-exclusive basis. The owners of these non-exclusively licensed technologies are therefore free to license them to third parties, including Arrival’s competitors, on terms that may be superior to those offered to Arrival, which could place Arrival at a competitive disadvantage. Moreover, Arrival’s licensors may own or control intellectual property that has not been licensed to it and, as a result, Arrival may be subject to claims, regardless of their merit, that it is infringing, misappropriating or otherwise violating the licensor’s rights. In addition, the agreements under which Arrival licenses intellectual property or technology from third parties are generally complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what Arrival believes to be the scope of its rights to the relevant intellectual property or technology, or increase what it believes to be its financial or other obligations under the relevant agreement. Any of the foregoing could have a material adverse effect on Arrival’s competitive position, business, financial condition and results of operations.

Arrival may not succeed in establishing, maintaining and strengthening the Arrival brand, which would materially and adversely affect customer acceptance of its vehicles and components and its business, revenues and prospects.

Arrival’s business and prospects heavily depend on its ability to develop, maintain and strengthen the Arrival brand. If Arrival is not able to establish, maintain and strengthen its brand, it may lose the opportunity to build a critical mass of customers. Arrival’s ability to develop, maintain and strengthen the Arrival brand will depend heavily on the success of its marketing efforts. The automobile industry is intensely competitive, and Arrival may not be successful in building, maintaining and strengthening its brand. Arrival’s current and potential competitors, particularly automobile manufacturers headquartered in the United States, Japan, the European Union (the “EU”) and China, have greater name recognition, broader customer relationships and substantially greater marketing resources than Arrival does. If Arrival does not develop and maintain a strong brand, its business, prospects, financial condition and operating results will be materially and adversely impacted.

The efficiency of a battery’s use over time when driving EVs will decline over time, which may negatively influence potential customers’ decisions whether to purchase Arrival’s EVs.

The cells used in the Arrival battery modules degrade over time, influenced primarily by the age of the cells and the total energy throughput over the life of the EV. This cell degradation results in a corresponding reduction in the vehicle’s range. Although common to all EVs, cell degradation, and the related decrease in range, may negatively influence potential customer’s EV purchase decisions.

Arrival is likely to face competition from a number of sources, which may impair its revenues, increase its costs to acquire new customers, and hinder its ability to acquire new customers.

The vehicle electrification market has expanded significantly since Arrival was founded in 2015. The commercial vehicle electrification market in which Arrival operates features direct competition which includes traditional OEMs producing EVs, including but not limited to Daimler AG, Volkswagen, Fiat, Ford and General Motors and electrification solution providers such as Rivian, Hyliion, Workhorse Group Inc., Nikola, Proterra and Evobus, OEMs that have traditionally focused on the consumer market may expand into the commercial markets. If these companies or other OEMs or providers of electrification solutions expand into the commercial markets, Arrival will face increased direct competition, which may impair Arrival’s revenues, increase its costs to acquire new customers, hinder its ability to acquire new customers, have a material adverse effect on Arrival’s product prices, market share, revenue and profitability.

Arrival may not be able to accurately estimate the supply and demand for its vehicles, which could result in a variety of inefficiencies in its business and hinder its ability to generate revenue. If Arrival fails to accurately predict its manufacturing requirements, it could incur additional costs or experience delays.

It is difficult to predict Arrival’s future revenues and appropriately budget for its expenses, and Arrival may have limited insight into trends that may emerge and affect its business. Arrival will be required to provide forecasts of its demand to its suppliers several months prior to the scheduled delivery of products to its prospective customers. Currently, there is no historical basis for making judgments on the demand for Arrival’s vehicles or its ability to develop, manufacture, and deliver vehicles, or Arrival’s profitability in the future. If Arrival overestimates its requirements, its suppliers may have excess inventory, which indirectly would increase Arrival’s costs. If Arrival underestimates its requirements, its suppliers may have inadequate inventory, which could interrupt manufacturing of its products and result in delays in shipments and revenues. In addition, lead times for materials and components that Arrival’s suppliers order may vary significantly and
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depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If Arrival fails to order sufficient quantities of product components in a timely manner, the delivery of vehicles to its customers could be delayed, which would harm Arrival’s business, financial condition and operating results.

The markets in which Arrival operates are highly competitive, and it may not be successful in competing in these industries. Arrival currently faces competition from new and established domestic and international competitors and expects to face competition from others in the future, including competition from companies with new technologies.

Both the automobile industry generally, and the EV segment in particular, are highly competitive, and Arrival will be competing for sales with both internal combustion engine vehicles and other EVs. Many of Arrival’s current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources than Arrival does and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products, including their EVs. Arrival expects competition for EVs to intensify due to increased demand and a regulatory push for alternative fuel vehicles, continuing globalization, and consolidation in the worldwide automotive industry. Factors affecting competition include product quality and features, innovation and development time, pricing, reliability, safety, fuel economy, customer service, and financing terms. Continued or increased price competition in the automotive industry generally, and in “green” vehicles in particular, may harm Arrival’s business. Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in downward price pressure and adversely affect Arrival’s business, financial condition, operating results, and prospects.

The automotive industry and its technology are rapidly evolving and may be subject to unforeseen changes. Developments in alternative technologies, including but not limited to hydrogen, may adversely affect the demand for Arrival’s EVs.

Arrival may be unable to keep up with changes in EV technology or alternatives to electricity as a fuel source and, as a result, its competitiveness may suffer. Developments in alternative technologies, such as advanced diesel, ethanol, fuel cells, or compressed natural gas, or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect Arrival’s business and prospects in ways Arrival does not currently anticipate. Existing and other battery cell technologies, fuels or sources of energy may emerge as customers’ preferred alternative to the technologies in Arrival’s EVs. Any failure by Arrival to develop new or enhanced technologies or processes, or to successfully react to changes in existing technologies could delay its development and introduction of new and enhanced EVs, which could result in the loss of competitiveness of its vehicles, decreased revenue and a loss of market share to competitors.

Arrival’s EVs will compete for market share with vehicles powered by other vehicle technologies that may prove to be more attractive than Arrival’s vehicle technologies.

Arrival’s target market currently is serviced by manufacturers with existing customers and suppliers using proven and widely accepted fuel technologies. Additionally, Arrival’s competitors are working on developing technologies that may be introduced in Arrival’s target market. Similarly, improvement in competitor performance or technology may result in the infrastructure required to operate Arrival vehicles, such as for charging, becoming comparatively expensive and reducing the economic attractiveness of Arrival’s vehicles. If any of these alternative technology vehicles can provide lower fuel costs, greater efficiencies, greater reliability or otherwise benefit from other factors resulting in an overall lower total cost of ownership, this may negatively affect the commercial success of Arrival’s vehicles or make Arrival’s vehicles uncompetitive or obsolete and its research and development efforts may not be sufficient to adapt to changes in alternative fuel and EV technology.

If any of Arrival’s suppliers become economically distressed or go bankrupt, Arrival may be required to provide substantial financial support or take other measures to ensure supplies of components or materials, which could increase its costs, affect its liquidity or cause production disruptions.

Arrival expects to purchase various types of equipment, raw materials and manufactured component parts from its suppliers. If these suppliers experience substantial financial difficulties, cease operations, or otherwise face business disruptions, Arrival may be required to provide substantial financial support to ensure supply continuity or would have to take other measures to ensure components and materials remain available. Any disruption could affect Arrival’s ability to deliver vehicles and could increase Arrival’s costs and negatively affect its liquidity and financial performance.



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Increases in costs, disruption of supply or shortage of materials, in particular for lithium-ion battery cells, could harm Arrival’s business.

Arrival and its suppliers may experience increases in the cost of or a sustained interruption in the supply or shortage of materials. Any such increase, supply interruption or shortage could materially and negatively impact Arrival’s business, prospects, financial condition and operating results. Arrival and its suppliers use various materials in their businesses and products, including for example lithium-ion battery cells, semiconductors and steel, lithium, nickel, copper, cobalt, neodymium, terbium, praseodymium and manganese, and the prices for these materials fluctuate. The available supply of these materials may be unstable, depending on market conditions, global demand and world events, including as a result of increased production of EVs by Arrival’s competitors, and could adversely affect Arrival’s business and operating results. For example, Russia’s invasion of, and ongoing war in, Ukraine, the sanctions imposed on Belarus and Russia in response to the invasion and the counter-sanctions imposed by Russia on other states have disrupted and may continue to disrupt global supply chains, including those on which Arrival relies. While Arrival does not source any raw materials or EV components directly from Belarus or Russia, certain of Arrival’s suppliers do source raw materials from Russia. If such suppliers are unable to obtain raw materials from their Russian sources, this could lead to delays, price increases and/or the inability to supply raw materials or components. Disruptions in the supply of raw materials and components could temporarily impair Arrival’s ability to manufacture its vehicles or require it to pay higher prices to obtain these raw materials or components from other sources, which could have a material adverse effect on its business, prospects, financial condition or operating results.

Arrival is exposed to multiple risks relating to lithium-ion battery cells. These risks include:

the inability or unwillingness of current battery manufacturers to build or operate battery cell manufacturing plants to supply the numbers of lithium-ion cells required to support the growth of the EV industry as demand for such cells increases;
an increase in the cost, or decrease in the available supply, of materials used in the cells, particularly due to the ongoing war in Ukraine;
disruption in the supply of cells due to quality issues or recalls by battery cell manufacturers; and
fluctuations in the value of any foreign currencies in which battery cell and related raw material purchases are or may be denominated against the purchasing entity’s operating currency.

Arrival’s business is dependent on the continued supply of battery cells for the battery packs used in Arrival’s EVs. While Arrival has entered into an agreement with LG Chem to provide it with lithium-ion battery cells, Arrival may have limited flexibility in changing its supplier in the event of any disruption in the supply of battery cells which could disrupt production of Arrival’s EVs. A global semiconductor supply shortage is having wide-ranging effects across multiple industries and the automotive industry in particular, and it has impacted many automotive suppliers and manufacturers, including Arrival, that incorporate semiconductors into the parts they supply or manufacture. Arrival has experienced and may continue to experience an impact on its operations as a result of the semiconductor supply shortage, and such shortage could in the future have a material impact on Arrival or its suppliers, which could delay the start of production of planned future vehicles, impair its ability to continue production once started or force Arrival or its suppliers to pay exorbitant rates for continued access to semiconductors, and of which could have a material adverse effect on its business, prospects and results of operations. In addition, prices and transportation expenses for these materials fluctuate depending on many factors beyond Arrival’s control, including fluctuations in supply and demand, currency fluctuations, inflation, tariffs and taxes, fluctuations and shortages in petroleum supply, freight charges and other economic and political factors. As a result of Russia’s invasion of Ukraine, global commodity prices were driven to their highest levels in the last 10 years. In particular for Arrival, the price of nickel, which is used in lithium-ion battery cells, has significantly increased. The ongoing war in Ukraine continues to cause volatility in the price of nickel and other metals, making price forecasting and quotation difficult. Substantial increases in the prices for Arrival’s materials or prices charged to it, such as those charged by battery cell suppliers, would increase Arrival’s operating costs and BOM, and could reduce its margins if the increased costs cannot be recouped through increased commercial vehicle sales prices. Any attempts to increase product prices in response to increased material costs could result in cancellations of orders and therefore materially and adversely affect Arrival’s brand, image, business, prospects and operating results.




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Arrival is subject to cybersecurity risks to its various systems and software and any material failure, weakness, interruption, cyber event, incident, undetected defects, errors or bugs, or breach of security could prevent Arrival from effectively operating its business.

Arrival is at risk for undetected errors, failures, bugs, vulnerabilities, defects, interruptions, outages and breaches of: (a) operational systems, including business, financial, accounting, product development, data processing or production processes, owned by Arrival or its third-party vendors or suppliers; (b) facility security systems, owned by Arrival or its third-party vendors or suppliers; (c) transmission control modules or other in-product technology, owned by Arrival or its third-party vendors or suppliers; (d) the integrated software in Arrival’s EVs; or (e) customer or driver data that Arrival processes or its third-party vendors or suppliers process on its behalf.

Despite testing by Arrival, real or perceived errors, failures, bugs, vulnerabilities or defects may not be found until its customers use Arrival’s products, which could result in negative publicity, loss of or delay in market acceptance of its products, harm to its brand and competitive position, increased regulatory scrutiny, fines or penalties, loss of revenue or liability for damages, and access or other performance issues. In such an event, Arrival may be required, or may independently choose, to expend significant additional resources in order to analyze, correct, eliminate, or work around errors, bugs or defects or to address, analyze, correct, and eliminate software platform vulnerabilities. Such vulnerabilities could also be exploited by malicious actors and result in exposure of user data, or otherwise result in a security breach or other security incident. Any real or perceived errors, failures, bugs, vulnerabilities or defects in its products could also impair Arrival’s ability to attract new customers and partners, retain existing customers and partners, and/or expand their use of its products. Moreover, such failures, defects, errors or bugs may be present in the software Arrival licenses from third parties, including open source software.

Additionally, if customers fail to adequately deploy protection measures or update Arrival’s products, customers and the public may erroneously believe that its products are especially susceptible to cyber-attacks. Real or perceived security breaches against Arrival’s products could cause disruption or damage to its customers’ networks or other negative consequences and could result in negative publicity, damage to its reputation, lead to other customer relations issues and adversely affect its revenue and results of operations. Arrival may also be subject to liability claims for damages related to real or perceived errors, failures, bugs, vulnerabilities or defects in its products. A material liability claim or other occurrence that harms Arrival’s reputation or decreases market acceptance of its products may harm its business and results of operations. In addition, any errors, failures, bugs, vulnerabilities, defects, disruptions in service, or other performance problems with Arrival’s products may damage its customers’ business and could hurt its reputation.

Moreover, such vulnerabilities could: materially disrupt operational systems; result in loss of intellectual property, trade secrets or other confidential, proprietary or competitively sensitive information; compromise certain information of customers, employees, suppliers, drivers or others; jeopardize the security of Arrival’s microfactories; or affect the performance of transmission control modules or other in-product technology and the integrated software in Arrival’s EVs. A cyber incident could be caused by disasters, insiders (through inadvertence or with malicious intent) or malicious third parties (including nation-states or nation-state supported actors) using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, fraud, trickery or other forms of deception. The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time. Although Arrival maintains information technology measures designed to protect itself against intellectual property theft, data breaches and other cyber incidents, such measures will require updates and improvements, and Arrival cannot guarantee that such measures will be adequate to detect, prevent or mitigate cyber incidents. The implementation, maintenance, segregation and improvement of these systems requires significant management time, support and cost. Moreover, there are inherent risks associated with developing, improving, expanding and updating current systems, including the disruption of Arrival’s data management, procurement, production execution, finance, supply chain and sales and service processes. These risks may affect Arrival’s ability to manage its data and inventory, procure parts or supplies or produce, sell, deliver and service its electric powertrain solutions, adequately protect its intellectual property or achieve and maintain compliance with, or realize available benefits under, applicable laws, regulations and contracts. Arrival cannot be sure that these systems upon which it relies, including those of its third-party vendors or suppliers, will be effectively implemented, maintained or expanded as planned. If Arrival does not successfully implement, maintain or expand these systems as planned, its operations may be disrupted, its ability to accurately and timely report its financial results could be impaired, and deficiencies may arise in its internal control over financial reporting, which may impact Arrival’s ability to certify its financial results. Moreover, Arrival’s proprietary information or intellectual property could be compromised or misappropriated and its reputation may be adversely affected. If these systems do not operate as Arrival expects them to,
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Arrival may be required to expend significant resources to make corrections or find alternative sources for performing these functions.

A significant cyber incident could impact production capability, harm Arrival’s reputation, cause Arrival to breach its contracts with other parties or subject Arrival to regulatory actions or litigation, any of which could materially affect Arrival’s business, prospects, financial condition and operating results. In addition, [while Arrival is in the process of obtaining insurance coverage for cyberattacks], such coverage may not be sufficient to cover all the costs, expenses and losses it may experience as a result of a cyber incident. Any incidents may result in loss of, or increased costs of, Arrival’s cybersecurity insurance. Arrival also cannot ensure that its insurance coverage will be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims related to a security incident or breach, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against Arrival that exceeds available insurance coverage, or the occurrence of changes in Arrival’s insurance policies, including premium increases or the imposition of large deductible or coinsurance requirements, could adversely affect its reputation and business, financial condition and/or results of operations.

Arrival also collects, stores, transmits and otherwise processes customer, driver and employee and others’ data as part of its business and operations, which may include personal data or confidential or proprietary information. Arrival also works with partners and third-party service providers or vendors that collect, store and process such data on its behalf and in connection with its products and services. Arrival’s and its third-party service providers’ or vendors’ data centers could be subject to break-ins, sabotage and intentional acts of vandalism causing potential disruptions. Some of Arrival’s systems will not be fully redundant, and its disaster recovery planning cannot account for all eventualities. Any problems at Arrival’s or its third-party service providers’ or vendors’ data centers could result in lengthy interruptions in its service. There can be no assurance that any security or other potential measures that Arrival or its third-party service providers or vendors have implemented will be effective against current or future security threats. While Arrival has developed systems and processes designed to protect the availability, integrity, confidentiality and security of its and its customers’, drivers’, employees’ and others’ data, Arrival’s security measures or those of its third-party service providers or vendors could fail and result in unauthorized access to or disclosure, acquisition, encryption, modification, misuse, loss, destruction or other compromise of such data. If a compromise of such data were to occur, Arrival may become liable under its contracts with other parties and under applicable law for damages and incur penalties and other costs to respond to, investigate and remedy such an incident. Moreover, there are federal, state, and local laws regarding privacy and the storage, sharing, use, disclosure and protection of personally identifiable information and user data with which Arrival must comply, and new legislation may be enacted or existing legislation may be amended that could increase costs or require Arrival to revise its policies. For example, laws in all 50 states, as well as many international jurisdictions, require Arrival to provide notice to customers, regulators, credit reporting agencies and/or others when certain personal information has been compromised as a result of a security breach. Such laws are inconsistent and compliance in the event of a widespread data breach could be costly. Depending on the facts and circumstances of such an incident, these damages, penalties, fines and costs could be significant. Such an event could harm Arrival’s reputation and result in litigation against Arrival. Any of these results could materially adversely affect Arrival’s business, prospects, financial condition and operating results.

Arrival is subject to governmental export and import control laws and regulations. Arrival’s failure to comply with these laws and regulations could have an adverse effect on its business, prospects, financial condition and operating results.

Arrival’s products and solutions are subject to export control and import laws and regulations, including U.K. Control Laws and Regulations (e.g. Export Control Order 2008), E.U. Control Laws and Regulations (i.e. EU Regulation (EC)) and U.S. Control Laws and Regulations (e.g. International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR). U.K., E.U. and U.S. sanction controls are also applicable.

Certain of these export control laws and regulations and economic sanctions prohibit the shipment of certain products and services to embargoed or sanctioned countries, governments and persons, including those sanctioned in response to Russia’s invasion of, and ongoing war in, Ukraine. In response to the war, the United States, EU, United Kingdom and other countries have imposed significant sanctions on Russia and Belarus, as well as persons and entities associated with Russia and Belarus. This has prompted Russia to issue counter-sanctions, which include export bans, divestment restrictions and the nationalization of the property of foreign organizations. The situation is rapidly changing, and it is not possible to predict future actions that could be taken, but the sanctions could have a significant effect on global trade. Additionally, Arrival operates a research and development center in Russia, and these sanctions could disrupt technology transfers in and out of Russia, which could have a material impact Arrival’s business.

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Exports of Arrival’s products and technology must be made in compliance with the laws and regulations to which it is subject. For example, Arrival may require one or more licenses to import or export certain vehicles, components or technologies to its research and development teams in various countries and may experience delays in obtaining the requisite licenses to do so. Audits in connection with the application for licenses may identify areas of noncompliance that could result in delays or additional costs. If Arrival fails to comply with these laws and regulations, Arrival and certain of its employees could be subject to additional audits, substantial civil or criminal penalties, including the possible loss of export or import privileges, fines, which may be imposed on Arrival and responsible employees or managers and, in extreme cases, the incarceration of responsible employees or managers. In addition, complying with export control laws, regulations and sanctions for a particular sale may be time-consuming and result in the delay or loss of sales opportunities.

As Arrival expands its microfactories globally, it may encounter additional or unforeseen import/export charges, which could increase its costs and hamper its profitability. In addition, changes in Arrival’s products or solutions or changes in applicable export or import laws and regulations may create delays in the introduction and sale of Arrival’s products and solutions in international markets, increase costs due to changes in import and export duties and taxes, prevent Arrival’s customers from deploying Arrival’s products and solutions or, in some cases, prevent the export or import of Arrival’s products and solutions to certain countries, governments or persons altogether. Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations, could also result in decreased use of Arrival’s products and solutions or in Arrival’s decreased ability to export or sell its products and solutions to customers. For example, following the United Kingdom’s departure from the EU, import duties are imposed on vehicles imported to the EU from the United Kingdom. Such import duties are subject to change, particularly in the event of a breakdown in the trade agreement between the United Kingdom and the EU. Arrival does not yet have a microfactory within the EU, so would be subject to such import duties. Any decreased use of Arrival’s products and solutions or limitation on its ability to export or sell its products and solutions would likely adversely affect Arrival’s business, prospects, financial condition and operating results.

Arrival is subject to risks related to health epidemics and pandemics, including the ongoing COVID-19 pandemic, which could adversely affect Arrival’s business and operating results.

Arrival faces various risks related to public health issues, including epidemics, pandemics, and other outbreaks, including the ongoing COVID-19 pandemic. The effects and potential effects of COVID-19 and its variants, including, but not limited to, its impact on general economic conditions, trade and financing markets, changes in customer behavior and continuity in business operations creates uncertainty. The spread of COVID-19 disrupted the manufacturing, delivery and overall supply chain of vehicle manufacturers and suppliers, and has led to a global decrease in vehicle sales in markets around the world.

The pandemic has resulted in government authorities implementing many measures to contain the spread of COVID-19, including travel bans and restrictions, quarantines, shelter-in-place and stay-at-home orders, and business shutdowns. In July and December 2021, new cases of COVID-19 in Arrival’s markets began to rise substantially, connected to the spread of the Delta and Omicron variants, respectively, leading to new government measures and restrictions in certain of Arrival’s markets. If cases rise again in the future, mask mandates, social-distancing, travel restrictions and stay-at-home orders could be reinstated, which could adversely affect Arrival’s start-up and manufacturing plans. Any new restrictions may necessitate suspended operations, closures or other measures to comply with federal and state law or to ensure the safety of Arrival’s employees. If, as a result of these measures, Arrival has to limit the number of employees, consultants and contractors at any microfactory at a given time, it could cause a delay in tooling efforts or in the production schedule of its EVs. Further, Arrival’s sales and marketing activities may be adversely affected due to the cancellation or reduction of in-person sales activities, meetings, events and conferences and increase in remote working. If Arrival’s workforce is unable to work effectively, including due to illness, quarantines, government actions or other restrictions in connection with COVID-19, Arrival’s operations will be adversely affected. In addition, the increase in remote working may also result in consumer privacy, IT security and fraud vulnerabilities, which, if exploited, could result in significant recovery costs and harm to its reputation.

The extent to which the COVID-19 pandemic may continue to affect Arrival’s business will depend on continued developments, which are uncertain and cannot be predicted, including the emergence of new variants, the long-term efficacy, global availability and acceptance of the vaccines, as well as the effects of governmental actions taken in response to the COVID-19 pandemic. Even after the COVID-19 pandemic has subsided, Arrival may continue to suffer an adverse effect to Arrival’s business due to its global economic effect, including any economic recession. If the immediate or prolonged effects of the COVID-19 pandemic have a significant adverse impact on government finances, it would create
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uncertainty as to the continuing availability of incentives related to EV purchases and other governmental support programs.

Arrival is highly dependent on the services of its senior management team (including Denis Sverdlov, its Founder and Chief Executive Officer) and key personnel, and if Arrival is unable to attract or retain senior management or key personnel, its ability to compete could be harmed.

Arrival is highly dependent on the services of its senior management team (including Denis Sverdlov, its Founder and Chief Executive Officer). If members of the senior management team were to discontinue their service to Arrival due to death, disability or any other reason, Arrival would be significantly disadvantaged in the event it was unable to appoint suitable replacements in a timely manner. The unexpected loss of or failure to retain one or more of Arrival’s key employees could adversely affect Arrival’s business. Arrival will evaluate whether to obtain key man life insurance policies.

Arrival’s ability to successfully operate the business is similarly dependent upon the efforts of highly qualified personnel. Competition for individuals with experience designing, producing and servicing EVs and their software is intense. Furthermore, individuals with sufficient training in EVs may not be available to hire, and as a result, Arrival will need to expend significant time and expense training any newly hired employees. Arrival’s success depends, in part, on its continuing ability to identify, hire, attract, train, develop and retain highly qualified personnel. It is possible that Arrival will lose some key personnel, the loss of which could negatively impact the operations and profitability of Arrival. Arrival may not be able to attract, assimilate, develop or retain qualified personnel in the future, and its failure to do so could adversely affect Arrival’s business, including the execution of its global business strategy, prospects, financial condition and operating results.

Arrival may be subject to damages resulting from claims that it or its employees, consultants, contractors or service provides have wrongfully used or disclosed alleged trade secrets of its employees’ former employers.

Many of Arrival’s employees, consultants, contractors or service providers were previously employed by other automotive companies or by suppliers to automotive companies. Although Arrival tries to ensure that its employees, consultants, contractors and service providers do not use the proprietary information or know-how of others in their work for Arrival, Arrival may be subject to claims that it or these employees, consultants, contractors and service providers have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If Arrival fails in defending such claims, in addition to paying monetary damages, it may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent Arrival’s ability to commercialize its products, which could severely harm its business. Even if Arrival is successful in defending against these claims, litigation could result in substantial costs and demand on management resources.

In addition, while it is Arrival’s policy to require its employees, consultants and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to Arrival, Arrival may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that Arrival regards as its own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and Arrival may be forced to bring claims against third parties or defend claims that they may bring against Arrival to determine the ownership of what it regards as its intellectual property. Any of the foregoing could have a material adverse effect on its business, financial condition, results of operations and prospects.

Arrival is subject to stringent and changing laws, rules, regulations and standards, information security policies and contractual obligations related to data privacy and security. Arrival’s actual or perceived failure to comply with such obligations could result in proceedings, actions or penalties and harm its business.

Arrival has legal and contractual obligations regarding the protection of confidentiality and appropriate use of personal information. Arrival is subject to a variety of federal, state, local and international laws, rules, directives and regulations relating to the collection, use, retention, security, disclosure, transfer and other processing of personal information. The regulatory framework for privacy and security issues worldwide is rapidly evolving and, as a result, implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. Arrival publicly posts documentation regarding its practices concerning the collection, processing, use and disclosure of data. For example, the definition of “personal information” or “personal data” under newer privacy laws is much broader than the definition of
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“personally identifiable information” that appears in older privacy laws, and many jurisdictions have or will soon enact new privacy laws.

Although Arrival endeavors to comply with its published policies and documentation, it may at times fail to do so or be alleged to have failed to do so. The publication of its privacy policy and other documentation that provide promises and assurances about privacy and security can subject Arrival to potential state and federal action if they are found to be deceptive, unfair or misrepresentative of its actual practices. Any failure by Arrival, its suppliers or other parties with whom it does business to comply with this documentation or with federal, state, local or international regulations could result in proceedings against Arrival by governmental entities or others, increased costs to its business or restrictions on Arrival’s ability to provide certain products and services that involve sharing information with third parties. In many jurisdictions, enforcement actions and consequences for noncompliance are rising. In the United States, these include enforcement actions in response to rules and regulations promulgated under the authority of federal agencies and state attorneys general and legislatures and consumer protection agencies. In addition, privacy advocates and industry groups have regularly proposed, and may propose in the future, self-regulatory standards with which Arrival must legally comply or that contractually apply to it. If Arrival fails to follow these security standards even if no customer information or other personal information is compromised, it may incur significant fines or experience a significant increase in costs.

Internationally, virtually every jurisdiction in which Arrival operates or intends to operate has established its own data security and privacy legal framework with which it or its customers must comply, including, but not limited to, the EU. The EU’s data protection landscape is currently unstable, resulting in possible significant operational costs for internal compliance and risk to its business. The EU has adopted the General Data Protection Regulation, or the GDPR, which went into effect on May 25, 2018 and contains numerous requirements and changes from previously existing EU law, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies. For example, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States. In addition, the GDPR introduced numerous privacy-related changes for companies operating in the EU, including greater control for data subjects (e.g., the “right to be forgotten”), increased data portability for EU consumers, data breach notification requirements and increased fines. Complying with the GDPR may cause Arrival to incur substantial operational costs or require it to change its business practices. Despite Arrival’s efforts to bring practices into compliance with the GDPR, it may not be successful either due to internal or external factors such as resource allocation limitations or a lack of vendor cooperation. Non-compliance could result in proceedings against Arrival by governmental entities, customers, data subjects or others. Arrival may also experience difficulty retaining or obtaining new European or multi-national customers due to the compliance cost, potential risk exposure and uncertainty for these entities, and it may experience significantly increased liability with respect to these customers pursuant to the terms set forth in its engagements with them. Additionally, the EU-U.S. Privacy Shield Framework, under which Arrival was transferring personal data from the EU to the U.S., was invalidated by the Court of Justice of the EU on July 16, 2020. While other transfer mechanisms are still technically valid, the European Data Protection Board recently issued draft guidance requiring additional measures be implemented to protect EU personal data from foreign law enforcement, including in the U.S. As supervisory authorities continue to issue further guidance on personal data export mechanisms, Arrival could suffer additional costs, complaints, and/or regulatory investigations or fines. Moreover, if Arrival is otherwise unable to transfer personal data between and among countries and regions in which it operates, it could affect the manner in which Arrival provides its services and Arrival may find it necessary to establish systems in the EU to maintain personal data originating from the EU, which may involve substantial expense and distraction from other aspects of its business. In the meantime, there could be uncertainty as to how to comply with EU privacy law.

The GDPR also introduced numerous privacy-related changes for companies operating in the EU, including greater control for data subjects (including, for example, the “right to be forgotten”), increased data portability for EU consumers, data breach notification requirements and increased fines. In particular, under the GDPR, fines of up to 20 million Euros or up to 4% of the annual global revenue of the noncompliant company, whichever is greater, could be imposed for violations of certain of the GDPR’s requirements. Such penalties are in addition to any civil litigation claims by customers and data subjects. The GDPR requirements apply not only to third-party transactions, but also to transfers of information between Arrival and its subsidiaries, including employee information.

In addition to the GDPR, the European Commission has another draft regulation in the approval process that focuses on a person’s right to conduct a private life (in contrast to the GDPR, which focuses on protection of personal data). The proposed legislation, known as the Regulation on Privacy and Electronic Communications, or ePrivacy Regulation, would replace the current ePrivacy Directive. While the new legislation contains protections for those using communications services (for example, protections against online tracking technologies), the timing of its proposed enactment following the
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GDPR means that additional time and effort may need to be spent addressing differences between the ePrivacy Regulation and the GDPR. New rules related to the ePrivacy Regulation are likely to include enhanced consent requirements in order to use communications content and communications metadata, which may negatively impact Arrival’s products and its relationships with its customers.

Complying with the GDPR and the new ePrivacy Regulation, when it becomes effective, may cause Arrival to incur substantial operational costs or require it to change its business practices. Despite its efforts to bring practices into compliance before the effective date of the ePrivacy Regulation, Arrival may not be successful in its efforts to achieve compliance either due to internal or external factors, such as resource allocation limitations or a lack of vendor cooperation. Non-compliance could result in proceedings against it by governmental entities, customers, data subjects or others. Arrival may also experience difficulty retaining or obtaining new European or multi-national customers due to the legal requirements, compliance cost, potential risk exposure and uncertainty for these entities, and it may experience significantly increased liability with respect to these customers pursuant to the terms set forth in its engagements with them.

Further, the United Kingdom’s vote in favor of exiting the EU, often referred to as Brexit, and ongoing developments in the United Kingdom have created uncertainty with regard to data protection regulation in the United Kingdom. As of January 1, 2021, following the expiry of transitional arrangements agreed to between the United Kingdom and EU, data processing in the United Kingdom is governed by a United Kingdom version of the GDPR (combining the GDPR and the United Kingdom’s Data Protection Act 2018), exposing Arrival to two parallel regimes, each of which authorizes similar fines and other potentially divergent enforcement actions for certain violations. With respect to transfers of personal data from the European Economic Area, on June 28, 2021, the European Commission issued an adequacy decision in respect of the United Kingdom’s data protection framework, enabling data transfers from EU member states to the United Kingdom to continue without requiring organizations to put in place contractual or other measures in order to lawfully transfer personal data between the territories. While it is intended to last for at least four years, the European Commission may unilaterally revoke the adequacy decision at any point, and if this occurs it could lead to additional costs and increase Arrival’s overall risk exposure. Other countries have also passed or are considering passing laws requiring local data residency or restricting the international transfer of data.

U.S. laws in this area are also complex and developing rapidly. Many state legislatures have adopted legislation that regulates how businesses operate online, including measures relating to privacy, data security and data breaches. Laws in all 50 states require businesses to provide notice to customers whose sensitive personally identifiable information has been disclosed as a result of a data breach (e.g., information which, if exposed, could give rise to a risk of identity theft or fraud). The laws are not consistent, and compliance in the event of a widespread data breach is costly. States are also amending existing laws, requiring attention to frequently changing regulatory requirements, including requirements concerning documentation of information security policies, procedures and practices.

Certain states in which Arrival operates or may operate in the future have enacted or may soon enact comprehensive privacy laws that may be more stringent or broader in scope, or offer greater individual rights, with respect to personal information than current federal, international or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts. For example, the California Consumer Privacy Act (“CCPA”), which went into effect on January 1, 2020, imposes new and enhanced data privacy obligations and creates new privacy rights for California residents, including the right to access and delete their personal information and to opt-out of certain sharing and sales of their personal information. The CCPA allows for significant civil penalties and statutory damages for violations and contains a private right of action for certain data breach incidents.

In November 2020, California also passed the California Privacy Rights Act (“CPRA”). The CPRA broadly amends the CCPA and imposes additional obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required. Comprehensive privacy legislation has also been enacted in Colorado, Utah and Virginia, with the Virginia Consumer Data Protection Act, the Colorado Privacy Act, and the Utah Consumer Privacy Act set to take effect on January 1, 2023, July 1, 2023 and December 31, 2023, respectively. The effect of the aforementioned legislation and other similar state or federal laws, rules and regulations, and other future changes in laws, rules or regulations relating to privacy, data protection and information security, particularly any new or modified laws or regulations that require enhanced protection of certain types of data or new obligations with regard to data retention, transfer or disclosure, are significant, may require Arrival to modify its data
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processing practices and policies, and could greatly increase the cost of providing its products, require significant changes to its operations, prevent it from providing certain offerings in jurisdictions in which it currently operates, or cause it to incur potential liability in an effort to comply with such legislation.

In addition, laws have been enacted at the city, state, and federal level in the U.S. regarding specific privacy concerns that arise in connection with certain technology, such as state and city laws regulating the collection and use of biometric information and state and federal laws regulating the use and security of “Internet of Things” technology. To the extent Arrival incorporates features into its EVs that utilize biometric scanning technology, Internet of Things capabilities, or other regulated uses of information and/or technology, Arrival’s compliance costs would increase. There is also the possibility that Congress could strengthen federal privacy laws and/or enact a new comprehensive federal privacy law that would apply to Arrival, which may add additional complexity, variation in requirements, restrictions and potential legal risks, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs or changes in business practices and policies.

Because the interpretation and application of many privacy and data protection laws along with contractually imposed industry standards are uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with Arrival’s existing data management practices or the features of its products and product capabilities. If so, in addition to the possibility of fines, lawsuits, regulatory investigations, imprisonment of company officials and public censure, other claims and penalties, significant costs for remediation and damage to its reputation, Arrival could be required to fundamentally change its business activities and practices or modify its products and product capabilities, any of which could have an adverse effect on its business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, regulations and policies, could result in additional cost and liability to it, damage its reputation, inhibit sales and adversely affect its business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and policies that are applicable to the businesses of Arrival’s customers may limit the use and adoption of, and reduce the overall demand for, its products. Privacy and data security concerns, whether valid or not valid, may inhibit market adoption of its products, particularly in certain industries and foreign countries. If Arrival is not able to adjust to changing laws, regulations and standards related to the internet, its business may be harmed.

Arrival, its partners and its suppliers are or may be subject to substantial regulation and unfavorable changes to, or failure by Arrival, its partners or its suppliers to comply with, these regulations could substantially harm Arrival’s business and operating results.

Arrival’s EVs, and the sale of motor vehicles in general, its partners and its suppliers are or may be subject to substantial regulation under international, federal, state and local laws. Specifically, Arrival has been subject to investigation and remediation obligations under New Jersey’s Industrial Site Recovery Act (“ISRA”), and ISRA obligations may or may not remain outstanding. Arrival continues to evaluate requirements for licenses, approvals, certificates and governmental authorizations necessary to manufacture, sell or service its EVs in the jurisdictions in which it plans to operate and intends to take such actions necessary to comply. Arrival may experience difficulties in obtaining or complying with various licenses, approvals, certifications and other governmental authorizations necessary to manufacture, sell, transport or service their EVs in any of these jurisdictions. If Arrival, its partners or its suppliers are unable to obtain or comply with any of the licenses, approvals, certifications or other governmental authorizations necessary to carry out its operations in the jurisdictions in which they currently operate, or those jurisdictions in which they plan to operate in the future, Arrival’s business, prospects, financial condition and operating results could be materially adversely affected. Arrival expects to incur significant costs in complying with these regulations. For example, if the battery packs installed in Arrival’s EVs are deemed to be transported, they will need to comply with the mandatory regulations governing the transport of “dangerous goods,” and any deficiency in compliance may result in Arrival being prohibited from selling its EVs until compliant batteries are installed. Any such required changes to Arrival’s battery packs will require additional expenditures and may delay the shipment of vehicles.

In addition, regulations related to the electric and alternative energy vehicle industry are evolving and Arrival faces risks associated with changes to these regulations, including but not limited to:

increased subsidies for corn and ethanol production, which could reduce the operating cost of vehicles that use ethanol or a combination of ethanol and gasoline;
increased support for other alternative fuel systems, which could have an impact on the acceptance of Arrival’s electric powertrain system; and
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increased sensitivity by regulators to the needs of established automobile manufacturers with large employment bases, high fixed costs and business models based on the internal combustion engine, which could lead them to pass regulations that could reduce the compliance costs of such established manufacturers or mitigate the effects of government efforts to promote alternative fuel vehicles.

To the extent the laws change, Arrival’s EVs and its suppliers’ products may not comply with applicable international, federal, state or local laws, which would have an adverse effect on Arrival’s business. Compliance with changing regulations could be burdensome, time consuming and expensive. To the extent compliance with new regulations is cost prohibitive, Arrival’s business, prospects, financial condition and operating results would be adversely affected.

Increased safety, emissions, fuel economy, or other regulations may result in higher costs, cash expenditures, and/or sales restrictions.

The motorized vehicle industry is governed by a substantial amount of government regulation, which often differs by state and region. Government regulation has arisen, and proposals for additional regulation are advanced, primarily out of concern for the environment, vehicle safety, and energy independence. In addition, many governments regulate local product content and/or impose import requirements as a means of creating jobs, protecting domestic producers, and influencing the balance of payments. The cost to comply with existing government regulations is substantial, and future, additional regulations could have a substantial adverse impact on Arrival’s financial condition. For example, Arrival is, and will be, subject to extensive vehicle safety and testing and environmental regulations in the EU, the United Kingdom, the United States and other jurisdictions in which it manufactures or sells its vehicles. The proper functioning of Arrival’s software and technology systems is essential to Arrival’s business.

Some of Arrival’s products contain open source software, which may pose particular risks to its proprietary software, products and services in a manner that could harm its business.

Arrival uses open source software in its products and anticipates using open source software in the future. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement, misappropriation or other violation claims or the quality of the code. Some open source software licenses require those who distribute open source software as part of their own software product to publicly disclose all or part of the source code to such software product or to make available any derivative works of the open source code on unfavorable terms or at no cost, and Arrival may be subject to such terms. The terms of many open source licenses have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on Arrival’s ability to provide or distribute Arrival’s products or services. More specifically, if Arrival fails to comply, or are alleged to have failed to comply, with the terms and conditions of its open source licenses, it could be (i) required to incur significant legal expenses defending such allegations, (ii) subject to significant damages, (iii) required to seek licenses from third parties in order to continue offering its products, (iv) required to re-engineer its products or discontinue the sale of its products in the event re-engineering cannot be accomplished on a timely basis, (v) enjoined from the sale of its proprietary solutions, or (vi) required to comply with onerous conditions or restrictions on its proprietary solutions, any of which could be disruptive to it business.

Arrival could face claims from third-parties claiming ownership of, or demanding release of, the open source software or derivative works that Arrival developed using such software, which could include Arrival’s proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require Arrival to make its software source code freely available, purchase a costly license or cease offering the implicated products or services unless and until Arrival can re-engineer them to avoid infringement, which may be a costly and time-consuming process, and Arrival may not be able to complete the re-engineering process successfully. This could allow Arrival’s competitors to create similar solutions with lower development effort and time and ultimately could result in a loss of sales. Arrival cannot ensure that it has not incorporated open source software in its software in a manner that is inconsistent with the terms of the applicable license or its current policies, and Arrival may inadvertently use open source in a manner that it does not intend or that could expose it to claims for breach of contract or intellectual property infringement, misappropriation or other violation.

Additionally, the use of certain open source software can lead to greater risks than use of third party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software. There is typically no support available for open source software, and Arrival cannot ensure that the authors of such open source software will implement or push updates to address security risks or will not abandon further development and maintenance. Many of the
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risks associated with the use of open source software, such as the lack of warranties or assurances of title or performance, cannot be eliminated, and could, if not properly addressed, could have an adverse effect on Arrival’s business and results.

While Arrival monitors its use of open source software and tries to ensure that none is used in a manner that would require Arrival to disclose its proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous. Additionally, Arrival cannot be sure that all of its use of open source software is in a manner that is consistent with its current policies and procedures, or will not subject Arrival to liability. Any of these risks could be difficult to eliminate or manage and, if not addressed, could have an adverse effect on Arrival’s business, financial condition and results of operations.

Any unauthorized control or manipulation of the information technology systems in Arrival’s EVs could result in loss of confidence in Arrival and its EVs and harm Arrival’s business.

Arrival’s EVs contain complex information technology systems and built-in data connectivity to accept and install periodic remote updates to improve or update functionality. Arrival has designed, implemented and tested security measures intended to prevent unauthorized access to its information technology networks, its EVs and related systems. However, hackers may attempt to gain unauthorized access to modify, alter and use such networks and systems to gain control of or to change Arrival’s EVs’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by the vehicles. Future vulnerabilities could be identified and Arrival’s efforts to remediate such vulnerabilities may not be successful. In addition to costs associated with investigating and fully disclosing a data breach, any unauthorized access to or control of Arrival’s EVs, or any loss of customer data, could result in legal claims or proceedings. Remediation of such problems could result in significant, unplanned capital expenditures. In addition, regardless of their veracity, reports of unauthorized access to Arrival’s EVs or data, as well as other factors that may result in the perception that Arrival’s EVs or data are capable of being “hacked,” could negatively affect Arrival’s brand and harm its business, prospects, financial condition and operating results.

Changes in tax laws may materially adversely affect Arrival’s business, prospects, financial condition and operating results.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect Arrival’s business, prospects, financial condition and operating results (for example, proposed U.S. federal legislation, informally titled the Build Back Better Act, contains significant proposed changes to the U.S. tax laws). Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to Arrival.

Arrival is controlled by Kinetik S.à r.l., whose interests may conflict with the interests of other shareholders.

Kinetik S.à r.l., which was founded by Denis Sverdlov, who is the Chief Executive Officer of Arrival, directly or indirectly owns 72.54% of the outstanding Ordinary Shares. In addition, pursuant to the Registration Rights and Lock-Up Agreement, until at least December 31, 2022, Kinetik S.à.r.l., must maintain beneficial ownership of at least 50% of the outstanding voting securities of Arrival. As long as Kinetik S.à r.l. owns at least 50% of the outstanding Ordinary Shares, Kinetik S.à r.l. will have the ability to determine all corporate actions requiring shareholder approval, including the election and removal of directors and the size of the Board of Directors, any amendments to Arrival’s articles of association, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of Arrival’s assets. In addition, as long as Kinetik S.à r.l. or its affiliates beneficially own at least 30% in the aggregate of the outstanding shares of Arrival, pursuant to the Nomination Agreement between Arrival and Kinetik S.à r.l. dated March 24, 2021, Kinetik S.à r.l. has the right to propose for appointment a majority of the board of directors, at least one-half of whom must be independent under Nasdaq rules, and the right to appoint a director to each of the audit, compensation and nominating committees of the Board of Directors. This could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of Arrival, which could cause the market price of Ordinary Shares to decline or prevent shareholders from realizing a premium over the market price for Ordinary Shares. Kinetik S.à r.l.’s interests may conflict with Arrival’s interests as a company or the interests of Arrival’s other shareholders.

A market for Arrival’s securities may not continue, which would adversely affect the liquidity and price of its securities.

The price of Arrival’s securities may fluctuate significantly due to the general market and economic conditions. An active trading market for Arrival’s securities may not be sustained. In addition, the price of Arrival’s securities can vary due to
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general economic conditions and forecasts, its general business condition and the release of its financial reports. Additionally, if its securities become delisted from, Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of its securities may be more limited than if it were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

If securities or industry analysts do not publish or cease publishing research or reports about Arrival, its business, or its market, or if they change their recommendations regarding Ordinary Shares adversely, then the price and trading volume of Ordinary Shares could decline.

The trading market for Ordinary Shares will be influenced by the research and reports that industry or securities analysts may publish about Arrival, its business, its market, or its competitors. If any of the analysts who may cover Arrival change their recommendation regarding Ordinary Shares adversely, cease to provide coverage or provide more favorable relative recommendations about Arrival’s competitors, the price of Ordinary Shares would likely decline. If any analyst were to cease coverage of Arrival or fail to regularly publish reports on it, Arrival could lose visibility in the financial markets, which could cause Ordinary Share price or trading volume to decline.

The conditional conversion feature of Arrival’s Convertible Notes, if triggered, may adversely affect its financial condition and operating results.

In the event the conditional conversion feature of Arrival’s Convertible Notes is triggered, holders of its Convertible Notes will be entitled to convert its Convertible Notes at any time during specified periods at their option. If one or more holders of its Convertible Notes elect to convert their Convertible Notes, unless Arrival elects to satisfy its conversion obligation by delivering solely Ordinary Shares (other than paying cash in lieu of delivering any fractional share), Arrival would be required to settle a portion or all of its conversion obligation through the payment of cash, which could adversely affect its liquidity. In addition, even if holders of its Convertible Notes do not elect to convert their Convertible Notes, Arrival could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of its Convertible Notes as a current rather than long-term liability, which would result in a material reduction of its net working capital.

Further, the conversion of some or all of Arrival’s Convertible Notes may dilute the ownership interests of its stockholders. Any sales in the public market of its common stock issuable upon such conversion could adversely affect prevailing market prices of its common stock. In addition, the existence of Arrival’s Convertible Notes may encourage short selling by market participants because the conversion of its Convertible Notes could be used to satisfy short positions, or anticipated conversion of its Convertible Notes into shares of its common stock could depress the price of its common stock. In addition, the market price of Arrival’s Ordinary Shares could also be affected by possible sales of its Ordinary Shares by investors who view its Convertible Notes as a more attractive means of equity participation in Arrival and by hedging or arbitrage trading activity that Arrival expects to develop involving its Ordinary Shares with respect to its Convertible Notes.

Arrival may not have the ability to raise the funds necessary to settle conversions of its Convertible Notes in cash or to repurchase its Convertible Notes upon a fundamental change, and its future debt may contain limitations on its ability to pay cash upon conversion or repurchase of its Convertible Notes.

Holders of Arrival’s Convertible Notes will have the right to require it to repurchase their notes upon the occurrence of a fundamental change (as defined in the indenture pursuant to which Arrival’s Convertible Notes were issued) at a fundamental change repurchase price equal to 100% of the principal amount of its Convertible Notes to be repurchased, plus accrued and unpaid interest, if any. In addition, upon conversion of Arrival’s Convertible Notes, unless Arrival elects to deliver solely Ordinary Shares to settle such conversion (other than paying cash in lieu of delivering any fractional share), Arrival will be required to make cash payments in respect of its Convertible Notes being converted as set forth in the indenture pursuant to which its Convertible Notes will be issued. However, Arrival may not have enough available cash or be able to obtain financing at the time it is required to make repurchases of Convertible Notes surrendered therefor or pay cash for its Convertible Notes being converted. In addition, Arrival’s ability to repurchase its Convertible Notes or to pay cash upon conversions of its Convertible Notes may be limited by law, by regulatory authority or by agreements governing its future indebtedness. Arrival’s failure to repurchase Convertible Notes at a time when the repurchase is required by the indenture governing its Convertible Notes or to pay any cash payable on future conversions of its Convertible Notes as required by the indenture would constitute a default under the indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing Arrival’s future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace
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periods, Arrival may not have sufficient funds to repay the indebtedness and repurchase its Convertible Notes or make cash payments upon conversions thereof.

Risks Related to Investment in a Luxembourg Company and Arrival’s Status as a Foreign Private Issuer

As a foreign private issuer, Arrival will be exempt from a number of U.S. securities laws and rules promulgated thereunder and will be permitted to publicly disclose less information than U.S. public companies must. This may limit the information available to holders of the Ordinary Shares.

Arrival qualifies as a “foreign private issuer,” as defined in the SEC’s rules and regulations, and, consequently, Arrival is not subject to all of the disclosure requirements applicable to public companies organized within the United States. For example, Arrival is exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, Arrival’s officers and directors are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of Arrival’s securities. For example, some of Arrival’s key executives may sell a significant amount of Ordinary Shares and such sales will not be required to be disclosed as promptly as public companies organized within the United States would have to disclose. Accordingly, once such sales are eventually disclosed, the price of Ordinary Shares may decline significantly. Moreover, Arrival is not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies. Arrival also is not subject to Regulation FD under the Exchange Act, which would prohibit Arrival from selectively disclosing material nonpublic information to certain persons without concurrently making a widespread public disclosure of such information. Accordingly, there may be less publicly available information concerning Arrival than there is for U.S. public companies.

As a foreign private issuer, Arrival files annual reports on Form 20-F within four months of the close of each fiscal year ended December 31 and furnishes reports on Form 6-K relating to certain material events promptly after Arrival publicly announces these events. However, because of the above exemptions for foreign private issuers, which Arrival intends to rely on, Arrival’s shareholders will not be afforded the same information generally available to investors holding shares in public companies that are not foreign private issuers.

Arrival may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses. This would subject Arrival to U.S. GAAP reporting requirements with which it may be difficult for Arrival to comply.

As a “foreign private issuer,” Arrival is not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and related rules and regulations. Under those rules, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to Arrival on June 30, 2022.

In the future, Arrival could lose its foreign private issuer status if a majority of its Ordinary Shares are held by residents in the United States and it fails to meet any one of the additional “business contacts” requirements. Although Arrival intends to follow certain practices that are consistent with U.S. regulatory provisions applicable to U.S. companies, Arrival’s loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to Arrival under U.S. securities laws if it is deemed a U.S. domestic issuer may be significantly higher. If Arrival is not a foreign private issuer, Arrival will be required to file periodic reports and prospectuses on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. For example, Arrival would become subject to the Regulation FD, aimed at preventing issuers from making selective disclosures of material information. Arrival also may be required to modify certain of its policies to comply with good governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, Arrival may lose its ability to rely upon exemptions from certain corporate governance requirements of Nasdaq that are available to foreign private issuers. For example, Nasdaq corporate governance rules require listed companies to have, among other things, a majority of independent board members and independent director oversight of executive compensation, nomination of directors, and corporate governance matters. Nasdaq rules also require shareholder approval of certain share issuances, including approval of equity compensation plans. As a foreign private issuer, Arrival would be permitted to follow home country practice in lieu of the above requirements and intends to do so. Arrival intends to follow Luxembourg practice with respect to quorum requirements for shareholder meetings in lieu of the requirement under Nasdaq Listing Rules that the quorum be not less than 33 1/3% of the outstanding voting shares. Under Arrival’s articles of association, at an ordinary general meeting, there is no quorum requirement and resolutions are adopted by a simple majority of validly
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cast votes. In addition, under Arrival’s articles of association, for any resolutions to be considered at an extraordinary general meeting of shareholders, the quorum shall be at least one half of Arrival’s issued share capital unless otherwise mandatorily required by law. As long as Arrival relies on the foreign private issuer exemption to certain of Nasdaq’s corporate governance standards, a majority of the directors on the Board of Directors are not required to be independent directors, its remuneration committee is not required to be comprised entirely of independent directors, it will not be required to have a nominating and corporate governance committee and it is not required to obtain shareholder approval of the EIP. Also, Arrival would be required to change its basis of accounting from IFRS as issued by the IASB to U.S. GAAP, which may be difficult and costly for it to comply with. If Arrival loses its foreign private issuer status and fails to comply with U.S. securities laws applicable to U.S. domestic issuers, Arrival may have to de-list from Nasdaq and could be subject to investigation by the SEC, Nasdaq and other regulators, among other materially adverse consequences.

If Arrival no longer qualifies as a foreign private issuer, it may be eligible to take advantage of exemptions from Nasdaq’s corporate governance standards if it continues to qualify as a “controlled company.” Kinetik S.à r.l. owns 72.75% of the outstanding Ordinary Shares. As a result, Arrival will be a “controlled company” within the meaning of Nasdaq rules. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, a group, or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

the requirement that a majority of the Board of Directors consist of independent directors;
the requirement that compensation of its executive officers be determined by a majority of the independent directors of the Board of Directors or a compensation committee comprised solely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
the requirement that director nominees be selected, or recommended for the Board of Directors’ selection, either by a majority of the independent directors of the Board of Directors or a nominating committee comprised solely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

If Arrival elects to take advantage of these exemptions, shareholders would not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance standards.

Arrival is organized under the laws of the Grand Duchy of Luxembourg and a substantial amount of its assets are not located in the United States. It may be difficult for you to obtain or enforce judgments or bring original actions against Arrival or the members of the Board of Directors in the United States.

Arrival is organized under the laws of the Grand Duchy of Luxembourg. In addition, a substantial amount of its assets are located outside the United States. Furthermore, some of the members of the Board of Directors and officers reside outside the United States. Investors may not be able to effect service of process within the United States upon Arrival or these persons or enforce judgments obtained against Arrival or these persons in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the U.S. federal securities laws. Likewise, it also may be difficult for an investor to enforce in U.S. courts judgments obtained against Arrival or these persons in courts located in jurisdictions outside the United States, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws. Awards of punitive damages in actions brought in the United States or elsewhere are generally not enforceable in the Grand Duchy of Luxembourg.

As there is no treaty in force on the reciprocal recognition and enforcement of judgments in civil and commercial matters between the United States and the Grand Duchy of Luxembourg, courts in the Grand Duchy of Luxembourg will not automatically recognize and enforce a final judgment rendered by a U.S. court. A valid judgment obtained from a court of competent jurisdiction in the United States may be entered and enforced through a court of competent jurisdiction in the Grand Duchy of Luxembourg, subject to compliance with the enforcement procedures (exequatur). The enforceability in the Grand Duchy of Luxembourg courts of judgments rendered by U.S. courts will be subject, prior to any enforcement in the Grand Duchy of Luxembourg, to the procedure and the conditions set forth in the Luxembourg procedural code (nouveau code de procédure civile), which conditions may include the following as of the date of this annual report (which may change):

the judgment of the U.S. court is final and enforceable (exécutoire) in the United States;
the U.S. court had jurisdiction over the subject matter leading to the judgment (that is, its jurisdiction was in compliance both with Luxembourg private international law rules and with the applicable domestic U.S. federal or state jurisdictional rules);
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the U.S. court applied to the dispute the substantive law that would have been applied by Luxembourg courts (based on recent case law and legal doctrine, it is not certain that this condition would still be required for an exequatur to be granted by a Luxembourg court);
the judgment was granted following proceedings where the counterparty had the opportunity to appear and, if it appeared, to present a defense, and the decision of the foreign court must not have been obtained by fraud, but in compliance with the rights of the defendant;
the U.S. court acted in accordance with its own procedural laws; and
the decisions and the considerations of the U.S. court must not be contrary to Luxembourg international public policy rules or have been given in proceedings of a tax or criminal nature or rendered subsequent to an evasion of Luxembourg law (fraude à la loi). Awards of damages made under civil liabilities provisions of the U.S. federal securities laws, or other laws, which are classified by Luxembourg courts as being of a penal or punitive nature (for example, fines or punitive damages), might not be recognized by Luxembourg courts. Ordinarily, an award of monetary damages would not be considered as a penalty, but if the monetary damages include punitive damages, such punitive damages may be considered a penalty.

In addition, actions brought in a Luxembourg court against Arrival, the members of the Board of Directors, its officers, or the experts named herein to enforce liabilities based on U.S. federal securities laws may be subject to certain restrictions. In particular, Luxembourg courts generally do not award punitive damages. Litigation in Luxembourg also is subject to rules of procedure that differ from the U.S. rules, including, with respect to the taking and admissibility of evidence, the conduct of the proceedings and the allocation of costs. Proceedings in Luxembourg would have to be conducted in the French or German language, and all documents submitted to the court would, in principle, have to be translated into French or German. For these reasons, it may be difficult for a U.S. investor to bring an original action in a Luxembourg court predicated upon the civil liability provisions of the U.S. federal securities laws against Arrival, the members of the Board of Directors, its officers, or the experts named herein. In addition, even if a judgment against Arrival, the non-U.S. members of the Board of Directors, its officers, or the experts named in this annual report based on the civil liability provisions of the U.S. federal securities laws is obtained, a U.S. investor may not be able to enforce it in U.S. or Luxembourg courts.

The directors and officers of Arrival have entered into, or will enter into, indemnification agreements with Arrival. Under such agreements, the directors and officers will be entitled to indemnification from Arrival to the fullest extent permitted by Luxemburg law against liability and expenses reasonably incurred or paid by him or her in connection with any claim, action, suit, or proceeding in which he or she would be involved by virtue of his or her being or having been a director or officer and against amounts paid or incurred by him or her in the settlement thereof. Luxembourg law permits Arrival to keep directors indemnified against any expenses, judgments, fines and amounts paid in connection with liability of a director towards Arrival or a third party for management errors i.e., for wrongful acts committed during the execution of the mandate (mandat) granted to the director by Arrival, except in connection with criminal offenses, gross negligence or fraud. The rights to and obligations of indemnification among or between Arrival and any of its current or former directors and officers are generally governed by the laws of Luxembourg and subject to the jurisdiction of the Luxembourg courts, unless such rights or obligations do not relate to or arise out of such persons’ capacities listed above. Although there is doubt as to whether U.S. courts would enforce this indemnification provision in an action brought in the United States under U.S. federal or state securities laws, this provision could make it more difficult to obtain judgments outside Luxembourg or from non-Luxembourg jurisdictions that would apply Luxembourg law against Arrival’s assets in Luxembourg.

Luxembourg and European insolvency and bankruptcy laws are substantially different from U.S. insolvency and bankruptcy laws and may offer Arrival’s shareholders less protection than they would have under U.S. insolvency and bankruptcy laws.

As a company organized under the laws of the Grand Duchy of Luxembourg and with its registered office in Luxembourg, Arrival is subject to Luxembourg insolvency and bankruptcy laws in the event any insolvency proceedings are initiated against it including, among other things, Council and European Parliament Regulation (EU) 2015/848 of 20 May 2015 on insolvency proceedings (recast). Should courts in another European country determine that the insolvency and bankruptcy laws of that country apply to Arrival in accordance with and subject to such EU regulations, the courts in that country could have jurisdiction over the insolvency proceedings initiated against Arrival. Insolvency and bankruptcy laws in Luxembourg or the relevant other European country, if any, may offer Arrival’s shareholders less protection than they would have under U.S. insolvency and bankruptcy laws and make it more difficult for them to recover the amount they could expect to recover in a liquidation under U.S. insolvency and bankruptcy laws.

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The rights of Arrival’s shareholders may differ from the rights they would have as shareholders of a United States corporation, which could adversely impact trading in Ordinary Shares and its ability to conduct equity financings.

Arrival’s corporate affairs are governed by Arrival’s articles of association and the laws of the Grand Duchy of Luxembourg, including the Luxembourg Company Law (loi du 10 août 1915 concernant les sociétés commerciales, telle que modifiée) (the “1915” Law). The rights of Arrival’s shareholders and the responsibilities of its directors and officers under Luxembourg law are different from those applicable to a corporation incorporated in the United States. For example, under Delaware law, the board of directors of a Delaware corporation bears the ultimate responsibility for managing the business and affairs of a corporation. In discharging this function, directors of a Delaware corporation owe fiduciary duties of care and loyalty to the corporation and its shareholders. Luxembourg law imposes a duty on directors of a Luxembourg company to: (i) act in good faith with a view to the best interests of the company they manage; and (ii) exercise the care, diligence, and skill that a reasonably prudent person would exercise in a similar position and under comparable circumstances. Additionally, under Delaware law, a shareholder may bring a derivative action on behalf of a company to enforce a company’s rights. Under Luxembourg law, the board of directors has sole authority to decide whether to initiate legal action to enforce a company’s rights (other than, in certain circumstances, an action against members of the Board of Directors, which may be initiated by the general meeting of the shareholders, or, subject to certain conditions, by minority shareholders holding together at least 10% of the voting rights in the company). Further, under Luxembourg law, there may be less publicly available information about Arrival than is regularly published by or about U.S. issuers. In addition, Luxembourg laws governing the securities of Luxembourg companies may not be as extensive as those in effect in the United States, and Luxembourg laws and regulations in respect of corporate governance matters might not be as protective of minority shareholders as are state corporation laws in the United States. Therefore, Arrival’s shareholders may have more difficulty in protecting their interests in connection with actions taken by Arrival’s directors, officers or principal shareholders than they would as shareholders of a corporation incorporated in the United States. As a result of these differences, Arrival’s shareholders may have more difficulty protecting their interests than they would as shareholders of a U.S. issuer.

U.S. Tax Risk Factors

Arrival might not be able to utilize a significant portion of its U.S. NOL carryforwards.

As of December 31, 2021, Arrival had U.S. federal and state net operating loss (“NOL”) carryforwards. There can be no assurance that Arrival will generate revenue from sales of products in the foreseeable future, if ever, and Arrival may never achieve profitability. These NOL carryforwards could expire unused and be unavailable to offset future income tax liabilities. Under the Tax Cuts and Jobs Act, unused federal NOLs generated in taxable years beginning after December 31, 2017, will not expire and may be carried forward indefinitely, and generally may not be carried back to prior taxable years, except that, under the Coronavirus Aid, Relief, and Economic Security Act the Coronavirus Aid, Relief, and Economic Security Act a 5-year carryback of NOLs arising in taxable years beginning after December 31, 2017, and before January 1, 2021, is permitted. Additionally, for taxable years beginning after December 31, 2020, the deductibility of such U.S. federal NOLs is limited to 80% of its taxable income in any future taxable year. In addition, under Section 382 of the Code, the amount of benefits from its NOL carryforwards may be impaired or limited if Arrival incurs a cumulative ownership change of more than 50% over a three-year period. Arrival may have experienced ownership changes in the past, including as a result of the Business Combination, and may experience ownership changes in the future as a result of subsequent shifts in its stock ownership, some of which are outside its control. Arrival has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to significant complexity with such a study. As a result, its use of U.S. federal NOL carryforwards could be limited. State NOL carryforwards may be similarly limited. Any such disallowances may result in greater tax liabilities than Arrival would incur in the absence of such a limitation and any increased liabilities could adversely affect its business, results of operations, financial position and cash flows.][1]

If Arrival is a passive foreign investment company for United States federal income tax purposes for any taxable year, U.S. holders of Ordinary Shares could be subject to adverse United States federal income tax consequences.

If Arrival is or becomes a “passive foreign investment company,” or a “PFIC”, within the meaning of Section 1297 of the Code for any taxable year during which a U.S. holder (as defined in “Material U.S. Federal Income Tax Considerations – U.S. Holders”) holds Ordinary Shares, certain adverse U.S. federal income tax consequences may apply to such U.S. holder. PFIC status depends on the composition of a company’s income and assets and the fair market value of its assets from time to time, as well as on the application of complex statutory and regulatory rules that are subject to potentially varying or changing interpretations. Based on the projected composition of Arrival’s income and assets, including
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goodwill, and the fact that Arrival is not yet producing revenue from its active operations, Arrival may be classified as a PFIC in the current taxable year or in the foreseeable future. There can be no assurance that Arrival will not be treated as a PFIC for any taxable year.

If Arrival were treated as a PFIC, a U.S. holder of Ordinary Shares may be subject to adverse U.S. federal income tax consequences, such as taxation at the highest marginal ordinary income tax rates on capital gains and on certain actual or deemed distributions, interest charges on certain taxes treated as deferred, and additional reporting requirements. Certain elections (including a qualified electing fund (“QEF”) or a mark-to-market election) may be available to U.S. holders of Ordinary Shares to mitigate some of the adverse tax consequences resulting from PFIC treatment. See “Material U.S. Federal Income Tax Considerations Passive Foreign Investment Company Rules.”

If a United States person is treated as owning at least 10% of Arrival’s shares, such person may be subject to adverse U.S. federal income tax consequences.

If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of Ordinary Shares, such person may be treated as a “United States shareholder” with respect to each of Arrival and its direct and indirect subsidiaries (“Company Group”) that is a “controlled foreign corporation.” If the Company Group includes one or more U.S. subsidiaries, under recently-enacted rules, certain of Arrival’s non-U.S. subsidiaries could be treated as controlled foreign corporations regardless of whether Arrival is treated as a controlled foreign corporation (although there are currently proposed Treasury Regulations that may significantly limit the application of these rules). The Company Group includes a U.S. subsidiary.

A United States shareholder of a controlled foreign corporation may be required to report annually and include in its U.S. taxable income its pro rata share of the controlled foreign corporation’s “Subpart F income” and (in computing its “global intangible low-taxed income”) “tested income” and a pro rata share of the amount of U.S. property (including certain stock in U.S. corporations and certain tangible assets located in the United States) held by the controlled foreign corporation regardless of whether such controlled foreign corporation makes any distributions. Failure to comply with these reporting obligations (or related tax payment obligations) may subject such United States shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such United States shareholder’s U.S. federal income tax return for the year for which reporting (or payment of tax) was due from starting. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. Arrival cannot provide any assurances that it will assist holders in determining whether any of its non-U.S. subsidiaries are treated as a controlled foreign corporation or whether any holder is treated as a United States shareholder with respect to any of such controlled foreign corporations or furnish to any holder information that may be necessary to comply with reporting and tax paying obligations.



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ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

Arrival was incorporated under the laws of the Grand Duchy of Luxembourg on October 27, 2020 as a joint stock company (société anonyme) solely for the purpose of effectuating the Business Combination, which was consummated on March 24, 2021. Arrival owned no material assets other than its interests in Arrival Luxembourg SARL acquired in the Business Combination and did not operate any business. Arrival Luxembourg SARL is a limited liability company (société à responsabilité limitée) governed by the laws of the Grand Duchy of Luxembourg. See “Item 5. Operating and Financial Review and Prospects” for a discussion of Arrival’s principal capital expenditures and divestitures for the years ended December 31, 2021, 2020 and 2019. There are no other material capital expenditures or divestitures currently in progress as of the date of this annual report. See also “Item 4.B. Business Overview”.

The mailing address of Arrival’s principal executive office is 60A, rue des Bruyères, L-1275 Howald, Grand Duchy of Luxembourg and its telephone number is +352 621 266 815. Arrival’s principal website address is www.arrival.com. The information contained on, or accessible through, Arrival’s website, does not form part of, and is not incorporated by reference into, this annual report. The SEC also maintains a website at http://www.sec.gov that contains reports and other information that Arrival files with or furnishes electronically to the SEC.

The Business Combination and Other Developments in 2021

Business Combination

On March 24, 2021, the Business Combination was consummated. As part of the Business Combination:

the existing ordinary and preferred shareholders of Arrival Luxembourg SARL contributed their respective equity interests in Arrival Luxembourg SARL to the Company in exchange for Ordinary Shares (the “Exchanges”);
following the Exchanges, CIIG merged with and into Merger Sub and all shares of CIIG common stock were exchanged for Ordinary Shares, and, in connection therewith, CIIG’s corporate name changed to Arrival Vault US, Inc.;
each outstanding warrant to purchase shares of CIIG’s common stock was converted into a Warrant to purchase Ordinary Shares;
each Arrival Luxembourg SARL option, whether vested or unvested, was assumed by the Company and now represents an option award exercisable for Ordinary Shares;
the Arrival Luxembourg SARL restricted shares were exchanged for restricted Ordinary Shares; and
Arrival Luxembourg SARL and CIIG became direct, wholly-owned subsidiaries of the Company.

Immediately prior to the closing date of the Business Combination, certain investors purchased an aggregate of 40,000,000 shares of CIIG Class A common stock, par value $0.0001 per share, for a purchase price of $10.00 per share and an aggregate purchase price of $400,000,000, which were automatically exchanged with the Company for Ordinary Shares.

On the closing date of the Business Combination, the Company, certain persons and entities holding CIIG’s Class B common stock and all shareholders of Arrival Luxembourg SARL other than the Arrival Luxembourg SARL employees holding ordinary shares granted under the Arrival Restricted Share Plan 2020 entered into a Registration Rights and Lock-Up Agreement which provides customary demand and piggyback registration rights and which restricts the transfer of the Ordinary Shares during the applicable lock-up periods, which (i) in the case of New Holders (as defined in the Registration Rights and Lock-Up Agreement), expired on September 20, 2021; (ii) in the case of CIIG Management LLC and the persons and entities holding CIIG’s Class B common stock, expired on March 24, 2022; and (iii) in the case of Kinetik
S.à r.l, is expected to expire on December 31, 2022.

Warrant Redemption

During 2021, Arrival redeemed 12,937,493 in Public Warrants for total proceeds of $140,591,390. In addition, 4,783,334 private warrants were exercised on a cashless basis resulting in the issuance of 2,048,117 Ordinary Shares.


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The Follow-on Offering and the Convertible Notes Offering

On November 23, 2021, Arrival closed its underwritten public follow-on offering (the “Follow-on Offering”) and its concurrent private offering of the Convertible Notes (the “Convertible Notes Offering”).

In the Follow-on Offering, Arrival sold an aggregate of 37,229,736 Ordinary Shares, inclusive of the underwriters’ full exercise of their option to purchase an additional 4,856,052 Ordinary Shares, at a public offering price of $9.50 per share. The aggregate net proceeds to Arrival from the Follow-on Offering were approximately $337.8 million.

In the Convertible Notes Offering, Arrival sold an aggregate $320 million aggregate principal amount of Convertible Notes, inclusive of the initial purchasers’ full exercise of their option to purchase an additional $45 million of Convertible Notes. The aggregate net proceeds to us from the Convertible Notes Offering were $309.6 million.

Operational Milestones

Arrival’s priorities for 2022 are the Arrival Bus and Arrival Van programs and starting production at its first two microfactories. Arrival expects regulatory authorities to certify the Arrival Bus and Arrival Van during the first half of 2022.

At its microfactory in Bicester, U.K., Arrival continued installation during the year, with 6 of 7 technology cells installed as of the date of this annual report. Arrival expects to complete equipment installation at the Bicester microfactory in the second quarter of 2022. During the first quarter of 2022, Arrival also carried out the first robotic assembly of an Arrival Van skateboard structure using a microfactory technology cell and proprietary AMR’s.

At the micofactory in Rock Hill, South Carolina, USA, Arrival has paused installation temporarily and moved low level production of Arrival Buses to the UK expected to begin in the second half of 2022. Rock Hill will recommence installation at a later date for future production of Arrival Buses for the US market post successful trials.

Other Business Developments in 2021

Arrival continues to experience strong demand for its vehicles as the industry shifts to EVs. Arrival estimates that its non-binding orders and letters of intent have increased to approximately 134,000 vehicles as of March 2, 2022, including 10,000 vehicles for UPS and a further 10,000 vehicle option from UPS (described elsewhere herein). Approximately ninety-two percent of Arrival’s letters of intent relate to the Arrival Van, six percent to Arrival Bus and the remainder relate to the Arrival Car. Approximately sixty-four percent of the letters of intent originate from the Americas whereas the remainder originate from Europe and Rest of World.

Capital Expenditure and Divestments

See “Item 5. Operating and Financial Review and Prospects” for a discussion of Arrival’s principal capital expenditures and divestitures for the years ended December 31, 2021, 2020 and 2019. There are no other material capital expenditures or divestitures currently in progress as of the date of this annual report. See also “Item 4.B. Business Overview”.

B. Business Overview

Prior to the Business Combination, Arrival did not conduct any material activities other than those incidental to its formation and the matters contemplated by the Business Combination Agreement, such as the making of certain required securities law filings and the establishment of certain subsidiaries. Following the closing of the Business Combination, the Company became the direct parent of, and conducts its business through, Arrival Luxembourg SARL.

Arrival was founded with a mission to transform the design, assembly and distribution of commercial EVs and accelerate the mass adoption of EVs globally. The initial focus for Arrival is the production of commercial EV vans, buses and cars. Arrival believes this segment of the automotive market is currently underserved by other EV manufacturers and is a global market with significant scale opportunities. Arrival also believes the commercial vehicle segment will move quickly to EVs, and that this migration will be supported worldwide by local, state, and national government policies that either encourage EV usage via subsidies or enact usage taxes on fleet operators who continue to operate internal combustion engine vehicles. Arrival also believes that commercial fleet operators will be attracted to Arrival’s vehicles in particular, because of their attractive total cost of ownership (“TCO”). Commercial fleet operators have well understood range
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requirements, and the vehicles typically return to a central depot every evening where the vehicles can be charged overnight. For these reasons, Arrival expects the commercial vehicle fleets to migrate to EVs even more quickly than automotive retail segments.

Arrival has focused over 2,600 employees, as of the date hereof, on the research and development of an owned and controlled ecosystem, with each functional area integrated and working together to best position Arrival to deliver lower cost EVs with user benefits. To date, Arrival has developed an extensive portfolio of intellectual property that currently comprises more than 275 claimed innovations from 87 patent families that span across EV designs, battery-related innovations, composite material configurations, microfactory production procedures, modular hardware and software applications, and robotic assembly protocols.

Arrival finalized a €100 million investment and signed a collaboration agreement with HKMC, one of the largest global OEMs, in the fourth quarter of 2019. In 2020, Arrival finalized an investment and signed a vehicle sales agreement with UPS, which included an initial order of 10,000 electric vans with an option to purchase an additional 10,000 electric vans, subject to modifications or cancellation at any time. Arrival has a longstanding relationship with UPS and has been working with them since 2016. In October 2020, Arrival secured €150.5 million in additional funding from private investors led by funds and accounts managed by BlackRock. Arrival announced in May 2021 that it is partnering with Uber pursuant to a non-binding memorandum of understanding to develop the Arrival Car, an affordable, purpose-built EV for ride-hailing drivers. The Arrival Car will join Arrival’s previously announced commercial products, the Arrival Bus and Arrival Van, to provide cities with a multi-modal zero-emission transportation ecosystem that they require in order to meet their sustainability goals over the coming years. In July 2021, Arrival and LeasePlan, one of the world’s leading “car-as-a-service” companies, entered into an agreement pursuant to which LeasePlan will be the preferred operational leasing partner for Arrival Vans. Additionally, Arrival and LeasePlan entered into a vehicle sales agreement in September 2021, pursuant to which Arrival agreed to provide LeasePlan with priority to purchase an initial amount of 3,000 vans and LeasePlan agreed on a best efforts basis to purchase such vans. In July 2021, Arrival partnered with Anaheim Transportation Network (“ATN”) to produce Arrival Buses in connection with a $2.0 million grant ATN received from the Federal Transit Administration (“FTA”).

Arrival has announced five vehicle programs: Arrival Bus, Bus for emerging markets, Arrival Van, Large Van and Arrival Car. The estimated start of production for the Arrival Bus is in the second half of 2022 and for the Arrival Van is in the third quarter of 2022.

Arrival’s Competitive Positioning

Arrival has developed core technologies that enable the production of EVs through its proprietary microfactories. Arrival believes these technologies will enable it to produce EVs at a competitive cost and to more rapidly adapt its vehicles to the needs of local markets.

Microfactories differ from traditional automotive assembly plants in that they are not organized around an assembly line. The traditional assembly line is a linear process, where each vehicle is sequentially moved through the stations on the line and each station along the assembly line is optimized for a specific operation. Typically, assembly lines operate at fixed speeds, and altering the speed of the line is a complicated and laborious process. In a microfactory, the stations of the assembly line are replaced by technology cells. Each technology cell is capable of a number of different operations, and the technology cells are linked together by Autonomous Mobile Robots ("AMRs") that carry the vehicle and the required parts to each technology cell. Because the AMRs don’t follow a predestined path, the order in which the technology cells are used is under software control and can be changed from vehicle to vehicle. The microfactory approach is therefore expected to give Arrival considerable flexibility in the manufacture of its vehicles. The microfactory control software, as well as the AMRs are proprietary and developed by Arrival. Arrival believes its new method of design and assembly is new not only among its peers in the EV industry, but also among those in the traditional OEM industry.

Lower capital investment and greater profitability

Numerous factors contribute to Arrival’s expectation that it will achieve lower capital investment requirements across its owned and controlled ecosystem while positioning it to achieve greater profitability relative to other OEMs. At comparable annual production volumes, the capital investment for Arrival’s microfactories is estimated to be less than a traditional OEM production facility over the long-term once its facilities are fully optimized. A primary driver of these cost savings is the use of Arrival’s proprietary composite materials that do not require capital intensive metal stamping plants, welding facilities or paint shops. Arrival’s expectation is that the lower operating expenditures associated with its microfactories,
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lower procurement costs associated with its in-house plug-and-play components, its grid-based architecture and proprietary composite materials as well as the utilization of its in-house developed software architecture will allow it to achieve double-digit margins on a per vehicle basis when it is fully at scale.

Scalability

A key attribute to the implementation of microfactories is Arrival’s ability to scale globally. Arrival estimates its microfactories can be fully operational within six months of a warehouse being ready for equipment installation. Arrival’s microfactories are designed to fit into an estimated footprint of 30,000 square meters (or approximately 320,000 square feet), which is significantly smaller than a traditional automotive assembly plant. Arrival believes there is an abundance of warehouse space globally suitable for microfactories. The availability of warehouses and low levels of capital expenditure per microfactory also allow Arrival to deploy microfactories in response to demand for their products. Arrival believes the deployment of its microfactories into local communities will be well-accepted by governments and municipalities based on its ability to offer local jobs and to pay local taxes. Arrival believes that every city with over one million inhabitants could benefit from at least one microfactory. Globally, Arrival estimates there are more than 500 cities with a population of more than one million. Arrival currently has two microfactories in active development, one in Bicester, U.K., and one in Charlotte, North Carolina USA, for start of production in the third and fourth quarters of 2022 respectively. The flexibility of the microfactory approach allows Arrival to determine future roll out plans at a later date.

Compelling Total Cost of Ownership

Arrival believes its vans and buses have a compelling TCO driven by the low acquisition and operating costs of its vehicles.

The low costs for both Arrival's vans and buses come as a result of the significant benefits it can achieve from its design, using its microfactories, in-house plug-and-play components, proprietary composite materials, and its in-house software applications.

Arrival’s lower operating costs reflect its vehicles’ battery infrastructure and energy efficiency as well as the lower maintenance costs associated with EVs. Arrival’s battery cell configuration is scalable and provides for multiple power configurations. Arrival’s vehicles can be purpose built to include flexible battery pack configurations. Lower ongoing operating costs can be achieved using its modular plug-and-play components that have been designed for easy replacement and upgrades.

Software and Data Ecosystem

Arrival has considerable software expertise and believes the sophistication and depth of its software and data capability can help to position it as a leading EV company. Arrival has designed most of the control modules used in the vehicle, and therefore has access to vehicle data at multiple levels. Because the Arrival fleet is composed of commercial vehicles, Arrival expects that the data available per vehicle will be higher than with retail vehicles since commercial vehicles are typically operating for more hours per day. Arrival has also written the vehicle software to enable broad vehicle data connectivity. Finally, through the microfactory control software. Arrival will have access to extensive data around the “as produced” state of the vehicle. By combining the data available through all these sources, Arrival expects to be able to optimize vehicle manufacture and usage, leading a lower TCO for Arrival’s customers.

Market Opportunity

Arrival believes the commercial vehicle segment is an attractive market for its business strategy. Arrival is initially targeting two primary categories within this segment: commercial vans and commercial buses. As the industry shifts towards zero emission vehicles, Arrival believes its advanced stage EV development, cost effective production, improved user experience, and global presence strategically position it to capture a more than sufficient market share to achieve its business plan assumptions.

Arrival defines its total addressable market based on its ability to compete on price and quality within the geographic regions in which it plans to compete. Based on the attributes of Arrival’s electric Vans and Buses, it not only considers the addressable electric commercial vehicle market, but also the existing internal combustion engine commercial vehicle market. Based on industry sources, Arrival believes its total addressable market for vans and buses is approximately $280 billion and $154 billion, respectively. This excludes the Arrival Car and additional opportunities to be captured from
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Arrival’s digital capabilities and component replacement. Arrival’s initial geographic target markets include North America, the United Kingdom and Europe. Arrival believes its existing employee and microfactory presence in these markets will best position it to accelerate its market penetration rates.

Arrival believes there are several drivers to the ongoing and underlying growth of its total addressable market. One such driver is the continued growth in e-commerce. According to a Statista Digital Market Outlook 2020 report, the e-commerce market is estimated to grow by approximately 37% from 2020 through 2024. Arrival believes this growth will increase the demand for EVs from its target customers.

Key Agreements, Partnerships and Suppliers

Arrival is working closely with potential customers and collaboration partners to develop and commercialize its vehicles. Arrival’s business model includes establishing strategic partnerships and supplier relationships. Arrival believes these partnerships will help reduce execution risk, accelerate its design and development efforts, and improve its commercialization timeline, resulting in a long-term competitive advantage.

The following is a description of Arrival’s most significant partnerships:

City of Anaheim (“Anaheim”)

In partnership with the City of Anaheim, ATN has been awarded a $2,000,000 grant from the FTA. In July 2021, ATN chose to partner with Arrival as the vehicle producer for this grant and will use grant funds to replace Liquefied Natural Gas (“LNG”) buses with Arrival Buses. Under the agreement, Arrival will manufacture five Arrival Buses for ATN by 2024 and will provide training for bus operators and maintenance staff for the Arrival Buses.

Hyundai Motor Company and Kia Corporation

On November 4, 2019, Arrival entered into a Collaboration Framework Agreement with HKMC to jointly develop vehicles using Arrival’s technologies. Through this agreement, Arrival has access to HKMC’s engineering expertise and supply chain. This partnership aims to leverage the use of Arrival’s microfactories and software innovation. Arrival believes it can also benefit from HKMC’s global footprint and economies of scale with the aim to reduce the cost of components. The Collaboration Framework Agreement with HKMC prevents Arrival from developing EVs with other traditional OEMs until November 3, 2022.

In addition to its collaboration agreement with HKMC, Arrival received a €100 million equity investment from Hyundai and Kia in December 2019.

LeasePlan

In July 2021, Arrival and LeasePlan, one of the world’s leading “car-as-a-service” companies, entered into an agreement pursuant to which LeasePlan will be the preferred operational leasing partner for Arrival Vans. Additionally, Arrival and LeasePlan entered into a vehicle sales agreement in September 2021, pursuant to which Arrival agreed to provide LeasePlan with priority to initially purchase 3,000 Arrival Vans and LeasePlan agreed on a best efforts basis to purchase such vans. This vehicle sales agreement contains customary termination provisions.

Uber

Arrival announced in May 2021 that it is partnering with Uber pursuant to a non-binding memorandum of understanding to develop the Arrival Car, an affordable, purpose-built EV for ride-hailing drivers. The Arrival Car will join Arrival’s previously announced commercial products, the Arrival Bus and Arrival Van, with the potential to provide cities with a multi-modal zero-emission transportation ecosystem that they require in order to meet their sustainability goals over the coming years.

UPS

UPS, a leading global logistic operator that makes over 5 billion deliveries per year and has a fleet of over 120,000 vehicles, has agreed to purchase 10,000 vans during the period of 2022 to 2025 with an option to purchase an additional 10,000 vans representing up to $1.2 billion (€1.0 billion) in revenue (including the option), subject to modification or
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cancellation at any time. The UPS order covers four different van configurations and the following geographic regions: North America, Europe and the U.K. At the start of each calendar year, Arrival has agreed to issue UPS an invoice for a deposit of 25% of the projected vehicle volume designated for that calendar year. In connection with the UPS order, in October 2020, Arrival Luxembourg SARL entered into an agreement with UPS whereby Arrival Luxembourg SARL agreed that Arrival Group S.A. would enter into an agreement with UPS to issue warrants to UPS upon certain conditions being met. The terms of the UPS agreement are unique to UPS and orders with other customers will be negotiated independently.

UPS has been a long-term partner of Arrival’s, including making an investment in Arrival in January 2020. Arrival has worked closely with UPS since 2016 to develop specifications for delivery vans that meet UPS’ unique fleet needs across four different configurations. Key attributes for the UPS vans include increased cargo efficiency, improved driver ergonomics and a direct link to UPS’ existing back-end system through Arrival’s vehicle software. UPS has agreed to evaluate prototype vans and provide ongoing feedback to Arrival before the van enters production. Prototypes are scheduled to be delivered as early as the second quarter of 2022.

LG Chem

On February 20, 2020, Arrival entered into a long-term product manufacture and supply agreement with LG Chem. Headquartered in Seoul, South Korea, LG Chem is one of the largest chemical companies in the world. Under the terms of the agreement, LG Chem will supply battery cells for use in Arrival battery modules. Under the terms of this agreement, management believes that Arrival has secured high quality cells from a dependable supplier.

Other Partners

As Arrival moves toward production of its vans and buses, it has partnered with several key suppliers in order to reduce validation and production risk. These include several Tier 1 suppliers for safety-related systems, including, but not limited to, steering, braking, airbag and seat belt systems. In addition, Arrival has worked closely with Comau (a subsidiary of Fiat Chrysler Automotive), an experienced automotive factory automation system provider, in the development of the initial process layout of its microfactories. Arrival is also evaluating partnerships to provide vehicle financing alternatives for its customers.

Arrival Van

arvl-20211231_g1.jpg

The images above are of the Arrival Van
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The Arrival Van will be available in multiple roof heights, lengths and door configurations. The L500 variant will be the first into production and will be followed by the other variants.

The Arrival Van has been designed from the ground up to serve the delivery sector and Arrival believes the van has superior attributes to its competitors’ EVs and internal combustion engine vehicles. Many EVs in this sector are produced by taking existing internal combustion engine vehicle architectures and converting them into EVs. Due to the differences in energy density and volume requirements between battery packs and liquid fuel tanks, this approach is typically not as efficient as a vehicle designed from the outset to be an EV, as Arrival vehicles have been. Additionally, Arrival is focused on delivering an improved driver experience with the Arrival Van having a very competitive 12.9 meter turning circle (curb to curb), and a lower floor height (step in height) than competitive vehicles. Finally, the driver interaction with the vehicle controls can be optimized through the in-house developed Arrival HMI (“Human Machine Interface”) software.

All Arrival Vans are connected vehicles allowing the operator to better optimize and manage their fleet through analysis of operational data collected from the vans. Arrival Vans also feature a large windscreen for improved visibility. The driver door of the Arrival Van slides into the body to protect pedestrians from swinging doors and reduce the potential damage from curbside objects. Arrival Vans also have a flexible battery pack configuration which can be sized according to the range requirement of the customer. Rather than paying for a battery pack with full range regardless of whether the vehicles in a customer’s fleet require that capacity, each Arrival Van’s battery pack can be sized for the customer’s needs, thus saving on the upfront purchase cost.

Arrival Bus

arvl-20211231_g2.gif

The images above are of the Arrival Bus

The Arrival Bus targets private and public transit operators with a product at competitive pricing, and a compelling TCO. For bus operators, regulatory requirements are driving the shift to electric buses and upfront price and TCO are significant purchasing considerations. As an example, the California Innovative Clean Transit rule requires that 25% of transit buses purchased by large transit agencies in 2023 must be electric. This requirement increases to 50% in 2026 and by 2029, agencies will no longer be allowed to buy a bus that isn’t electric. Other green requirements are being instituted around the world.

The Arrival Bus utilizes many of the same components as the Arrival Van generating cost saving efficiencies across the two products. Similar to the Arrival Van, the battery capacity of the Arrival Bus can be customized to suit the operator’s
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needs resulting in further cost savings for operators. The modular nature of the Arrival Bus enables configurations for 35 feet, 40 feet, and 45 feet.

The Arrival Bus has also been designed with the passenger in mind. Large windows and glass roof panels generate the feeling of spaciousness, safety, and security. The vehicle features large internal and external screens to facilitate passenger information and provide potential for operators to generate incremental revenue through a digital advertising platform. Cashless payments and adjustable seats that can be easily reconfigured to change layouts help operators to maintain distancing and cleanliness in a COVID environment. The Arrival Bus features ramps and a fully flat floor for better accessibility. Additionally, similar to the Arrival Van, the Arrival Bus is a connected vehicle providing users with location-based information and operators with tools to optimize the fleet and better manage vehicle health and performance.

Arrival believes these key features of the Arrival Bus, when combined with the lower manufacturing costs associated with Arrival’s microfactories, competitively position the Arrival Bus when compared to competitor buses.

Development Timelines

Arrival has announced five vehicle programs: Arrival Bus, Bus for emerging markets, Arrival Van, Large Van and Arrival Car. Arrival expects to commence production of its Arrival Bus in the second half of 2022 in the United Kingdom. The Arrival Van is scheduled to start production in the third quarter of 2022. Arrival has made significant progress in the design of its EVs and components parts, as well as in the development of its manufacturing and assembly processes and vehicle and manufacturing technology platform:

Prototype Arrival Vans have been built and are being tested.
Arrival Buses for public road trials are currently being built.
Certification testing for both Arrival Bus and Arrival Van is underway. Bus primary structure certification testing is complete.
Arrival has installed and is running production equipment to manufacture the battery modules used on both the Arrival Bus and Arrival Van.
Arrival has installed and is running production equipment to manufacture composite panels at its Bicester, U.K. microfactory.
Arrival has used production equipment to robotically assemble the Arrival Van skateboard structure; a significant step in proving the capability of the technology cells.

Arrival’s team of over 2,600 employees, including engineers, scientists, technicians and staff, is committed to achieving the milestones to meet its current production and commercialization timelines enabling the Company to achieve its expected production dates. These milestones are critical to Arrival’s development timelines, though may be subject to unanticipated delays outside of the company’s control such as the ability to obtain sufficient capital to support production.

Arrival’s Ecosystem

Arrival has developed an EV ecosystem, which it believes differentiates its business model from others in the EV industry, and in certain cases, the traditional OEM industry. An integral component of Arrival’s ecosystem is its employees. Arrival currently employs more than 2,600 employees globally. Arrival is a technology-first company with approximately 70% of its employees being engineers (including software engineers), most of whom have been focused on the research and development of enabling leading-edge technologies to produce Arrival’s EVs, which can be assembled in its low capital expenditure microfactories. Arrival’s ecosystem is technology focused and has been designed as one system with each functional area integrated and working together to reduce the cost of Arrival’s products. The following are the key strategies to Arrival’s ecosystem:

Vehicle assembly in Arrival’s highly flexible, local microfactories that can be set up quickly with lower capital expenditures;
Development of Arrival’s high and low voltage “plug & play” components that Arrival has targeted for production at lower cost, are upgradeable and are optimized for microfactory assembly into Arrival’s EVs;
Use a modular skateboard platform designed for microfactory assembly that is highly flexible for use across multiple vehicle variants and can be designed for multiple vehicle segments;
Use of proprietary composite material instead of steel which results in lower weight and lower tooling costs. Arrival’s proprietary composite material eliminates the need for large, costly and complicated stamping plants and paint shops; and
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Use of Arrival’s in-house developed software to provide cost and service optimization for vehicle and fleet solutions.

Microfactories

Arrival has developed an industry-changing approach to manufacturing with its proprietary microfactory concept. Microfactories change the way vehicles are produced in numerous ways. Instead of using the traditional linear assembly line that operates at one speed with stations in a specific order, Arrival has designed its microfactories using technology cells. The order in which a vehicle moves through the technology cells is determined by microfactory software and the order the technology cells are used can be changed dynamically from one vehicle to the next.

Each technology cell performs one or more specific tasks in assembling Arrival’s EVs. These tasks may include, for example, adhesive application, positioning of panels or assembly of mechanical fasteners. Linking the technology cells are AMRs, which are controlled by software designed and developed in-house by Arrival. Parts delivery and vehicle movement between the technology cells is accomplished with these AMRs. Arrival has worked in partnership with Comau for the design and simulation of the microfactories. Arrival’s EVs have been designed for its microfactory production and utilize Arrival’s in-house plug-and-play components, its grid-based architecture and proprietary composite materials. Arrival focuses on designing or owning components that have either a high level of software integration with its vehicles or can be produced more cheaply than sourcing from a traditional automotive supplier.

arvl-20211231_g3.gif

The images above are of the Arrival Microfactory technology cell and Autonomous Mobile Robots (AMR)

Each microfactory is designed to provide several competitive advantages for Arrival including low capital investment and operating costs as well as efficient scalability. When fully optimized, each van microfactory is expected to have an estimated footprint of 30,000 square meters (or approximately 320,000 square feet) and to be able to manufacture 10,000 vans per year assuming two shifts per day. Each microfactory is expected to be staffed with approximately 250 to 300 employees. Arrival anticipates each microfactory will take approximately six months to complete after the building is ready for equipment installation. The reduced time to completion of Arrival’s microfactories compared to a traditional OEM manufacturing facility is due in significant part to the absence of metal stamping and there being no requirement for a paint shop.

The capital investment required for each microfactory, including expenditures on production equipment, battery assembly, site readiness and logistics equipment, is estimated to be approximately $45 million to $55 million over the medium-term
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to long-term. When comparing to a traditional OEM, Arrival’s microfactories do not require capital investments in paint shops, metal stamping or welding, which it believes gives Arrival a capital expenditure advantage over a traditional OEM facility. Over the medium to long-term, Arrival expects a fully optimized van microfactory to generate $100 million of gross margin per year.

Arrival can deploy additional vehicle manufacturing capacity by commissioning additional microfactories. Arrival can locate its microfactories close to its customers. The flexibility of Arrival’s microfactories is intended to also enable the design and development of purpose-built EVs for its customers. The presence of Arrival’s microfactories in numerous communities worldwide could also support local job creation and create taxable income for local governments and municipalities.

In-House Plug-and-Play Components

Arrival has developed cutting edge hardware that positions it to achieve substantial cost reductions for parts, share components across multiple vehicle platforms, offer upgradeable components throughout a vehicle’s lifecycle, and utilize these components that have been designed specifically for assembly using microfactories. The criteria Arrival used to determine which components to design internally included cost reduction opportunities, improved customer experience characteristics, and the ability to incorporate plug-and-play modules whereby the components can be connected via software.

Certain components that Arrival has designed in-house include DC-DC modules, input output modules, HMI modules, battery modules, and the drive control unit. Arrival currently outsources certain other components including braking systems, airbags, safety belts, and steering systems as these are important safety systems with lengthy development and validation timelines.

Cost savings for components can be achieved by leveraging Arrival’s intellectual property portfolio. Because Arrival owns the intellectual property for the design of many of the components developed in-house, it can select efficient Tier-2 or Tier-3 automotive suppliers to manufacture those components. Since Arrival developed the intellectual property in-house, it also saves on Tier-1 supplier development costs.

Arrival components incorporate over the air (“OTA”) connectivity, allowing for updates to improve efficiency and functionality, while also providing data to fleet operators about their component status and health. In addition, the plug-and-play nature of Arrival’s components has been designed to maximize the interchangeability across its various vehicle platforms. This interchangeability affords Arrival the opportunity to be more cost-efficient with its design, procurement, and manufacturing processes. The in-house design of Arrival’s plug-and-play components over time is expected to reduce the overall time to market for the development of vehicles, such that it targets that new vehicle platforms can be designed and developed in approximately 18 months over the long-term, compared to three years or more for internal combustion engine vehicle manufacturers.

Arrival has completed more than two years of on-road testing and development for the majority of its in-house plug-and-play components. These components are also designed to meet industry-standard automotive-grade requirements. Arrival has secured more than 60% of its production suppliers nominated across a mix of Tier 1, 2 and 3 suppliers. The remaining nominations are all underway. Arrival has prioritized long lead items so what is remaining will have faster turnarounds from request for proposal to nomination. Arrival anticipates its supplier network will be fully established in time to meet its initial vehicle production timelines.

Modular Skateboard

Arrival has designed modular skateboard platforms that enable flexible vehicle configurations and automated microfactory assembly. Arrival’s skateboard structure is the foundation over which it can engineer specific purpose-built vehicles that meet the local requirements and specifications of its global client base.

A key component of the Arrival skateboard is its aluminium structure that optimizes strength and stiffness. It was designed to be modular and flexible to accommodate different vehicle types and sizes. The same skateboard platform can be used for front-wheel drive, rear-wheel drive, and all-wheel drive vehicles. Extrusions and castings allow Arrival to reduce tooling costs and capital investment requirements when compared to traditional stamped sheet metal construction. With Arrival’s composite panels and adhesive joining processes, the modular skateboard platform eliminates welding and standardizes interfaces between skateboard components. Arrival’s skateboard platforms are designed for different weight classes,
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enabling vehicles for different segments, while still sharing many of the same Arrival in-house developed components. The design of Arrival’s skateboard also provides flexibility for different battery pack configurations. By changing the number of Arrival battery modules, the vehicle battery pack can be customized to suit customer needs and lower the vehicle’s acquisition cost.

Arrival’s skateboard enables a fully flat floor from the front of the driver compartment to the rear of the vehicle. The low floor design leads to increased cargo efficiency and a low step-in height. Arrival’s skateboard is extremely flexible and can be used across multiple vehicle types leading to increased scalability across its vehicle product suite.

Consistent with Arrival’s modular plug-and-play components, the Arrival skateboard was designed for production in its microfactories utilizing its robotic cell technology. Arrival’s skateboard has passed simulation crash tests and Arrival has commenced physical tests. Arrival believes the development of its modular skateboard will meet its initial vehicle production timelines.

Proprietary Composite Materials

Arrival has developed proprietary composite materials that are lightweight and result in lower tooling costs for its production process. These proprietary composite materials are used for both exterior and interior body panels. The characteristics of Arrival’s proprietary composite materials positions it to provide bespoke panel designs to its fleet customers. Arrival’s proprietary composite materials do not require traditional metal stamping or painting during the production process. These processes are cumbersome and expensive and, without them, Arrival believes its microfactories can achieve significant cost savings both in capital investment and operating expenses.

The proprietary composite materials are lightweight and versatile and have lower tooling costs compared to traditional sheet metal dies. The composite material tooling also has significantly shorter lead times than traditional sheet metal dies. The underlying raw materials are widely available and are automotive grade.

The ultra-tough durability of Arrival’s proprietary composite materials reduces the cost of repairs compared to traditional sheet metal panels that require frequent cosmetic repair or replacement. This durability contributes to the TCO savings achievable with Arrival vehicles. Arrival believes the development of its proprietary composite materials will meet its initial vehicle production timelines.

In-House Developed Software Architecture

A core enabler to Arrival’s competitive positioning is its in-house developed software architecture. Arrival’s software team consists of more than 1,100 software engineers and members of Arrival’s digital team as of December 31, 2021. Arrival believes its centralized software architecture has entered into the fifth generation of development, which it believes positions it as one of the leading software-centric EV manufacturers. Arrival’s hardware and software architecture are decoupled and provide it the ability to harmonize its system infrastructure across its plug-and-play components. Arrival’s software architecture has been designed utilizing cloud-based connectivity. Each of Arrival’s EVs is supported by OTA upgradable plug-and-play components. Additionally, Arrival’s software architecture has been designed to support open API’s, which provide its fleet customers the ability to integrate and connect Arrival’s EVs into its own software platforms. Arrival’s in-house software architecture also includes autonomous-ready capabilities.

Internal Tools. As part of Arrival’s in-house developed software architecture, it has developed software applications to improve its design and development capabilities both for its EVs and for operations inside of its microfactories. This software allows Arrival to design and manufacture purpose-built EVs that provide solutions to meet its customers’ local needs and specific requirements. Arrival’s in-house developed software architecture also enables the functionality of the robots and the AMRs operating in its microfactories. Arrival believes having control over its design and manufacturing software positions it to continuously improve the performance of its EVs and the efficiency of its microfactory production processes.

In-Vehicle Software. Arrival has designed in-vehicle software that both elevates drivers’ and passengers’ experiences while also providing pertinent vehicle performance data. Certain of Arrival’s driver software applications are expected to include in-console route planning and directions. For Arrival Buses, riders would be able to receive route status information along with local community event information. For Arrival Bus operators, additional revenue opportunities could be available through software enabled exterior advertising displays. Arrival’s in-vehicle software was designed to provide access to
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vehicle data through an API interface. Arrival’s in-vehicle software has also been designed to optimize hardware usage, such as leveraging sensors across multiple functions.

Customer-Facing Software. Arrival’s customer-facing software was designed utilizing cloud-based tools to maximize its customers’ ownership experience. Arrival’s diagnostic software tools are expected to provide customers the ability to remotely monitor their EVs performance, detect early vehicle symptoms, and schedule predictive maintenance. Arrival’s fleet management software architecture is expected to provide customers with a highly algorithmic fleet management portal. Applications include fleet simulations and direct route assignments to drivers. Other informative fleet analytics can be incorporated based on a specific customer’s preferences.

Intellectual Property

Arrival’s commercial success depends in part upon its ability to obtain, maintain, and protect its intellectual property (“IP”), core technologies and other proprietary technology that it develops, to operate without infringing, misappropriating or otherwise violating the intellectual property and proprietary rights of others, and to prevent others from infringing, misappropriating or violating its intellectual property and proprietary rights. Arrival protects its intellectual property rights in the U.S., the U.K., Europe, and abroad, through a combination of patents, trademarks, designs and trade secret protection, know-how, continuing technological innovation, confidential information and other measures to develop and maintain its proprietary position, as well as having confidentiality and invention assignments and other contractual agreements with its employees, consultants, contractors and third parties. As a result of Arrival’s strong IP portfolios, up to approximately half of the Arrival Van and approximately two-fifths of the Arrival Bus components by value are either owned or controlled by Arrival.

As of December 31, 2021, Arrival had more than 275 claimed innovations from 87 patent families that have been filed in various jurisdictions including the United States Patent and Trademark Office, United Kingdom Intellectual Property Office and the European Patent Office. The filed innovations can be broadly organized into the following categories:

Battery related innovations
Composite material innovations
Microfactory and vehicle design flow innovations
Modular hardware and modular software innovations
Robotics related innovations
Van innovations
Bus innovations
Car innovations
Miscellaneous inventions related to vehicle parts/and systems

As of December 31, 2021, Arrival owned 18 issued U.S. patents and pending U.S. patent applications and over 207 issued foreign patents and pending foreign patent applications. As of December 31, 2021, Arrival owned three registered U.S. trademarks and pending U.S. trademark applications, as well as 19 registered foreign trademarks and pending foreign trademark applications in at least 14 countries worldwide in addition to the EU.

Arrival expects to develop additional intellectual property and proprietary technology in the above categories over time. As Arrival develops its intellectual property or technology, it will continue to build its intellectual property portfolio and further assess whether additional trademark or patent applications or other intellectual property registrations are appropriate, when it believes it is possible, cost effective, beneficial and consistent with its overall intellectual property protection strategy. Arrival also seeks to protect its intellectual property and proprietary technology, including trade secrets and know-how, through limited access, confidentiality and other contractual agreements with its suppliers, customers and collaborators.

Regarding the coverage Arrival seeks under its existing patent applications, there is always a risk that alterations from its products or processes may provide sufficient basis for a competitor to avoid infringement claims. In addition, the coverage claimed in a patent application can be significantly reduced before a patent is issued and courts can reinterpret patent scope after issuance. Many jurisdictions, including the United States, permit third parties to challenge issued patents in administrative proceedings, which may result in further narrowing or even cancellation of patent claims. Arrival cannot be certain that it will be able to adequately develop and protect its intellectual property rights, or that other companies will not claim that it is infringing upon their intellectual property rights. Arrival cannot provide any assurance that any patents will be issued from its pending or any future applications or that any current or future issued patents will adequately protect its
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intellectual property. For this and other risks related to Arrival’s proprietary technology, inventions and improvements, see “Item 3.D. Risk Factors.

Research and Development

Arrival has invested and continues to invest significant resources into ongoing research and development programs as it believes its ability to grow its market position depends, in part, on breakthrough technologies that offer a value proposition for Arrival’s customers and differentiation from its competitors.

The majority of Arrival’s research and development activities take place within its headquarters facility in the U.K. and at its development partners’ facilities located around the world.

The primary areas of focus for research and development include, but are not limited to:

Rapid Engineering Design Tools
Mobility as a service offerings
New vehicle concepts, platforms and segments
Components development
Materials research
Fintech and insurance
New servicing and maintenance technologies and solutions
Robotics
Digital sales platform

Arrival believes that its technology will provide the following current and future opportunities:
Arrival’s modular skateboard platform allows for multiple vehicle platforms and variants. Arrival believes this configurable design enables customization for local markets and accelerated entry into new vehicle segments.
Arrival is building multiple customer-facing software packages such as vehicle health monitoring, fleet optimization tools, and driver applications that work with its vehicles.

Sales and Marketing

Arrival plans to initially market its EVs directly to large van and bus fleet owners through its sales teams in the U.S., the U.K. and Europe. Over time, Arrival expects to expand these sales teams to cover more regions. In addition, Arrival is developing an online sales tool targeting small to medium enterprises. Arrival also intends to support customer outreach through marketing campaigns on Arrival’s website, social media platforms, interviews, podcasts, press releases and potentially physical experience centers to build awareness. Arrival’s marketing strategy is focused primarily on using online methods and positive experiences that generate word of mouth.

Arrival’s initial target customers for the Arrival Van are large commercial vehicle fleet owners, such as delivery and logistics providers, e-commerce companies and other operators of large in-house fleets. Over time, Arrival expects to also target the small to medium size enterprises and individual owners who make up the majority of the market. Arrival expects that its microfactory approach will allow it to expand rapidly across multiple countries and cities around the world.

Arrival has signed non-binding orders, letters of intent and/or memorandums of understanding with various customers that outline the potential development and commercialization of its vans and buses. Arrival expects that these orders, letters of intent and/or memorandums of understanding will evolve into potential production supply agreements with purchase commitments as the start of production date approaches. However, none of the existing orders, letters of intent and/or memorandums of understanding provide for a firm commitment on the part of the customer and are generally conditional on vehicle trials and subject to cancellation or modification at any time. Arrival is currently building pre-production buses for use in customer trials throughout next year. There can be no assurance that Arrival will receive production purchase orders from these customers. Until and when Arrival receives such production orders, such customers are not obligated to purchase the vehicles.

The Arrival Car is being developed to address the global need to shift ride-hailing and car sharing services, with over 30 million estimated drivers across the ride-hailing sector, to electric to reduce emissions and improve air quality in cities.

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Parts and Servicing

Arrival anticipates that servicing and maintenance of its EVs will be lower than the traditional internal combustion engine vehicles due to there being fewer moving parts and considerably reduced mechanical complexity of the components. The increased reliability of Arrival’s EVs will mean that less preventive maintenance is required when compared to internal combustion engine vehicles, leading to better uptime and lower maintenance costs.

Arrival is building a network of service providers and a preventive maintenance program to address its customers’ needs including announcing four initial partners in the U.S.: Amerit Fleet Solutions, Bridgestone Retail Operations, NAPA AUTO PARTS and Valvoline and four initial partners in the EU: ARC Europe Group, Kwik Fit, Rivus Fleet Solutions and ZF. Arrival vehicles have a system of sensors and controls that allow for precise monitoring of the vehicle and component operation performance. Arrival intends to use this data to provide smart predictive maintenance with the aim of decreasing downtime and costs by identifying a potential problem before it results in a breakdown. Arrival’s system has been designed to provide over the air updates and software fixes when the vehicle is parked. This could potentially reduce the time for repair and improve uptime.

In cases where a customer has its own maintenance infrastructure, Arrival intends to identify and provide procedures for items that can be maintained at the customer’s shops. This could include procedures such as tire changes, wiper and windshield repair, and brake servicing. In cases where the customer does not have a maintenance infrastructure or for more complex items, Arrival could either service the vehicles itself or use third party partners.

If a vehicle requires maintenance of a complex system such as the battery, some of those items can be swapped or replaced. This would allow Arrival to repair the faulty component quickly while minimizing vehicle downtime. Arrival also plans to develop a network of trained technicians who can travel to a customer or service partner site as necessary.

Regulatory Landscape

Arrival is, and will be, subject to extensive vehicle safety and testing and environmental regulations in the European Union, the United Kingdom, the United States and other jurisdictions in which it manufactures or sells its vehicles. Government regulations regarding the manufacture, sale and implementation of products and systems similar to Arrival’s EVs are subject to future change. Arrival cannot predict what effect, if any, such changes will have upon its business. Violations of these regulations may result in substantial civil and criminal fines, penalties and/or orders to cease the operations in violation or to conduct or pay for corrective work. In some instances, violations may also result in the suspension or revocation of permits and licenses.

Set out below is a brief description of the more material regulatory requirements in the European Union, the United Kingdom and the United States, which are the jurisdictions in which Arrival initially will conduct most of its operations. Arrival does not expect regulatory requirements in other jurisdictions into which it expands its business will be materially different from those described below.

Vehicle Safety and Testing Regulation

Arrival’s bus and van products have been designed to meet the requirements applicable to passenger buses and delivery vans in the United States, the European Union and the United Kingdom.

United States

Arrival’s vehicles are subject to, and comply with, numerous regulatory requirements established by the U.S. National Highway Traffic Safety Administration (“NHTSA”), including applicable U.S. federal motor vehicle safety standards, and bumper and theft prevention standards.

In addition to U.S. federal motor vehicle safety standards, Arrival must comply with other NHTSA requirements and other federal laws and regulations administered by NHTSA, including early warning reporting requirements regarding warranty claims, field reports, death and injury reports, recalls and owner’s manual requirements. Arrival also must comply with the Automobile Information and Disclosure Act, which requires OEMs to disclose certain information regarding the OEM’s suggested retail price, optional equipment and pricing. Further, this law allows inclusion of fuel economy ratings, as determined by the U.S. Environmental Protection Agency, and crash test ratings, as determined by NHTSA, if such tests are conducted.
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Arrival is also subject to regulations issued by the United States Department of Transportation, in particular the Federal Motor Carrier Safety Administration and the FTA relating to vehicle safety and operation, the United States Federal Communications Commission relating to its approval of radio frequency devices and orders issued by the California Air Resources Board, including relating to low-emission vehicles and greenhouse gases, the Advanced Clean Truck Rule and Zero Emission Powertrains.

Arrival’s vehicles may also be tested and rated according to the NHTSA New Car Assessment Program (“US NCAP”) and the Insurance Institute for Highway Safety’s vehicle rating program.

European Union

Arrival’s vehicles are subject to, and will comply with, the European Community Whole Vehicle Type Approval (“ECWVTA”) Framework EU 2018/858, including 72 different regulations in scope for cars, commercial vans and transit buses relating to areas including passive and active safety, steering equipment, vehicle construction, electromagnetic compatibility and vehicle range.

In addition to regulatory compliance in Europe, Arrival is also targeting a five-star European New Car Assessment Programme performance for its car and a platinum rating under the European New Car Assessment Programme for its vans.

The Arrival Bus, Arrival Car and Arrival Van consist of many electronic and automated components and systems. Arrival’s vehicles are designed to comply with the International Standards Organization’s (“ISO”), Functional Safety Standard. This standard addresses the integration of electrical systems and software and identifies the possible hazards caused by malfunctioning behavior of the safety-related electrical or electronic systems, including the interaction of these systems. Arrival’s approach in following ISO 26262 exceeds the minimum regulatory requirement for a safety system to address complex electronic systems which is mandated in some regulations (e.g., braking and steering).

Arrival vehicles will be approved by an approval authority pursuant to the ECWVTA following witness testing and a factory audit to confirm procedures for Conformity of Production. As part of this activity Arrival is implementing ISO 9001, an internationally recognized quality standard, in its production facilities and relevant supporting organizations within the group. Vehicles leaving the Arrival microfactories will be supplied with a Certificate of Conformity which is used to demonstrate compliance with the requirements of ECWVTA 2018/858 during the vehicle registration process.

United Kingdom

Following its exit from the EU, the U.K. has adopted the EU requirements, so in addition to European type approval, Arrival will also provide the same documentation to the U.K. authorities and receive a U.K. national type approval. There is no additional testing required and the technical requirements are the same as for EU markets.

Other Markets

Market analysis has shown a strong correlation between European and US regulatory requirements and other key target markets, requiring minimal design changes to gain regulatory approval in these markets, including:

Gulf States – based on U.S. requirements
China – based on EU requirements
South Korea – based on EU, U.S. requirements
India – based on EU requirements
Brazil – based on U.S. requirements

Arrival’s vehicles have been designed to meet the regulatory requirements of the most rigorous subdivisions/states within each jurisdiction. Arrival has considered the most rigorous requirements from each market in which the vehicles will be deployed, including industry standards and other due care requirements determined by Arrival above and beyond the regulations.



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Vehicle Accessibility Requirements

The Arrival Bus is designed to meet applicable regulations relating to vehicle accessibility, including a wheelchair ramp at the front door, wheelchair securement areas, priority seating, interior design to permit movement of wheelchairs and other riders throughout the vehicles. Arrival is conducting an analysis to ensure that non-transit and digital products are all accessible to a range of users.

Battery Safety and Testing Regulation

Arrival’s vehicles and batteries have been designed to comply with the latest regulatory requirements relating to the transportation design, testing, manufacture and use of lithium ion batteries, electric power trains, and Rechargeable Electrical Energy Storage System, of road vehicles.

Arrival’s vehicles are designed to ISO standards for electrically-propelled vehicles in vehicle operational safety specifications and connecting to an external power supply. Additionally, Arrival is incorporating other ISO battery system standards in its vehicles.

Environmental Regulations

Arrival’s microfactories are set up for environmental best practice, and Arrival is working towards recognized standards such as ISO 14001 for environmental management. The relatively small footprint of a microfactory means it can fit into existing industrial land, reducing the need to clear large areas for development. This also means planning rights and permissions are often already in place for the activities carried out in the factory, reducing time from inception to deployment. Arrival’s activities are subject to environmental regulations, based on the location and scope of operations; an overview of these is provided below:

Environmental Permitting

Many national and local authorities require industrial sites to obtain permits for carrying out operations which have the potential to cause environmental impacts. For example, in the U.K., the Environmental Permitting (England and Wales) Regulations 2016 include aspects such as carbon emissions from fuel-burning appliances, use and storage of hazardous substances, and discharge of wastewater/effluent amongst other factors. Arrival’s microfactories are exempt or below thresholds for many of these permits due to their relatively small size, and the fact that Arrival does not require hazardous aspects such as paint spraying lines. Arrival reviews and manages any potential requirements for environmental permits through its environmental management system, comparing the operations at each site with the most up to date regulations to ensure any permits required are obtained, complied with, and kept up to date.

End of Life Vehicles

The EU end of life vehicle ("ELV") regulations are in place to ensure vehicle manufacturers design, produce, and manage their vehicles to reduce waste and maximize material recovery at the point a vehicle is dismantled. Arrival complies with the ELV regulations through various initiatives such as providing guidance for dismantling, labelling of recyclable materials, compliance with material restrictions as detailed below, and will provide a take-back service for vehicles with a negative or zero value where required.

Hazardous Waste and Battery Recycling

The disposal of hazardous wastes and batteries is subject to regulations in many regions, such as the Hazardous Waste (England and Wales) Regulations 2005 in the U.K., and the Resource Conservation and Recovery Act (RCRA) in the U.S., and Arrival takes responsibility for any hazardous wastes which may be generated at its sites. For any damaged or scrap lithium-ion batteries, Arrival works with local recycling partners to ensure batteries are packaged, stored, and transported in compliance with UN 38.3 Transportation of Dangerous Goods, UN 3480 Lithium Ion Batteries.

Carbon and Energy Reporting

Arrival participates in carbon and energy reporting schemes, such as the Streamlined Energy & Carbon Reporting (SECR) regulations in the U.K. Arrival will report its energy usage and resulting carbon emissions annually, and report on current and future energy efficiency measures to further reduce its impact on the environment.
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Restricted and Banned Substances

Arrival produces vehicles for a global market, where varying regulations exist depending on vehicle type and location. Arrival works closely with its suppliers and holds them to international standards such as those collated by the Global Automotive Declarable Substances List for hazardous and restricted substances, tracking the compliance of all vehicle components.

C. Organizational Structure

Arrival is comprised of a holding company with three significant subsidiaries which were wholly-owned by Arrival as of December 31, 2021 and continue to be wholly owned as of the date of this annual report:

Arrival Luxembourg SARL - a limited liability company (Société à Responsabilité Limitée (S.à r.l.)) incorporated and resident in Luxembourg and governed by the laws of the Grand Duchy of Luxembourg
Arrival Ltd - a limited liability company (private company limited by shares) incorporated and resident in the UK
Arrival Automotive UK Ltd - a limited liability company (private company limited by shares) incorporated and resident in the UK

D. Property, Plant and Equipment

Facilities

London, U.K. – Global R&D Office Headquarters

In July 2018, Arrival moved into its research and development office headquarters in London, which comprises over 80,000 square feet. Over 820 employees work out of this location (when not working from home).

Charlotte, NC – U.S. Headquarters

In December 2020, Arrival signed a lease for its U.S. headquarters in Charlotte, North Carolina which comprises over 40,000 square feet of office space. Arrival expects to hire approximately 150 people primarily with engineering, sales, marketing and finance backgrounds.

Banbury, U.K. – R&D Site

Since 2017, Arrival has been operating out of its research and development facility in Banbury, U.K. which consists of more than 110,000 square feet and where Arrival is capable of designing, building, and testing prototype vehicles in-house. Over 220 employees work out of this location (when not working from home).

Microfactories

Arrival has two microfactories currently being commissioned.

Bicester, U.K. – Van Factory

In December 2019, Arrival leased property located in Bicester, U.K., which comprises over 198,000 square feet. Arrival intends for this microfactory location to initially focus on building Arrival Vans. Arrival is already installing production equipment in the Bicester microfactory to validate the microfactory processes. Six of seven technology cells have been installed and Arrival expects to complete equipment installation in the second quarter of 2022, with the start of production of Arrival Vans expected in the third quarter of 2022. The location of the site is well suited for a manufacturing facility due to the availability of a trained labor force in the area and its proximity to London, which is expected to be a major U.K. market for Arrival Vans. The facility has an estimated capacity of producing 10,000 Arrival Vans a year.

South Carolina – Bus Factory

In October 2020, Arrival leased a property located in Rock Hill, South Carolina, which comprises over 193,000 square feet. Arrival intends for this microfactory location to initially focus on building electric buses with Arrival’s vertically integrated
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approach to vehicle production. Installation at Rock Hill was temporarily paused in December 2021 with Arrival moving low level production of Arrival Buses to the UK. Rock Hill will recommence installation at a later date for future production of Arrival Buses for the US market after successful trials. Arrival is expected to begin operations at Rock Hill when demand for buses in North America accelerates. The location of the site is well suited for a manufacturing facility due to the trained labor force available in the area, its proximity to several large urban centers and the available logistics links.

North Carolina - Van Factory

In March 2021, Arrival leased two buildings located in West Charlotte, North Carolina, USA, with both locations comprise over 572,000 square feet Arrival intends for one of the buildings to be used as a microfactory initially focused on building Arrival Vans. The other building will be used as a regional logistics hub to support the adjacent microfactory as well as the microfactory in Rock Hill. Arrival is expected to begin operations at West Charlotte in the third quarter of 2022, with start of production in the fourth quarter of 2022. The location of the site is well suited for a manufacturing facility due to the trained labor force available in the area, its proximity to several large urban centers and the available logistics links. The facility has an estimated capacity of producing 10,000 Arrival Vans a year.

For more information on property, plant and equipment see Note 6 “Property, Plant and Equipment” to the consolidated financial statements included elsewhere in this annual report.
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ITEM 4A. UNRESOLVED STAFF COMMENTS

None.
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ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis provides information which Arrival’s management believes is relevant to an assessment and understanding of Arrival’s results of operations and financial condition. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to Arrival’s plans and strategy for its business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in “Item 3.D. Risk Factors” of this annual report, Arrival’s actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. This discussion should be read in conjunction with Arrival’s audited historical consolidated financial statements and other financial information included elsewhere in this annual report.

Overview

Arrival was founded with a mission to transform the design, assembly and distribution of commercial EVs and accelerate the mass adoption of EVs globally. Founded in 2015, and now with over 2,600 employees, Arrival develops technologies and products that create a new approach to the design and assembly of EVs. Arrival believes its in-house developed components, materials, software and robotic technologies, when combined with its low cost and scalable microfactories, will enable it to produce EVs that are tailored to the needs of local markets with an attractive TCO to its customers.

The initial focus for Arrival is the production of commercial EV vans, buses and cars. Arrival believes this segment of the automotive market is currently underserved by other EV manufacturers and is a global market with significant scale opportunities. Arrival also believes the commercial vehicle segment will move quickly to EVs, and that this migration will be supported worldwide by local, state, and national government policies that either encourage EV usage via subsidies or enact usage taxes on fleet operators who continue to operate internal combustion engine vehicles. Arrival also believes that commercial fleet operators will be attracted to Arrival’s vehicles in particular, because of their attractive TCO. Commercial fleet operators have well understood range requirements, and the vehicles typically return to a central depot every evening where they can be charged overnight. For these reasons, Arrival expects the commercial vehicle fleets to migrate to EVs even more quickly than automotive retail segments.

The Arrival Van is designed for commercial use by large fleet owners particularly in the transportation, e-commerce and logistics industries with an estimated total addressable market of approximately $280 billion. The expected start of production for the Arrival Van is the third quarter of 2022. In 2020, Arrival finalized an investment and signed a vehicle sales agreement with UPS, which included an initial order of 10,000 electric vans EVs with an option to purchase an additional 10,000 electric vans, subject to modifications or cancellation at any time. This agreement has a total aggregate order value of up to $1.2 billion (€1.0 billion) in revenue (including the option) and may be canceled or modified by UPS at any time. In July 2021, Arrival and LeasePlan, one of the world’s leading “car-as-a-service” companies, entered into an agreement pursuant to which LeasePlan will be the preferred operational leasing partner for Arrival Vans. Additionally, Arrival and LeasePlan entered into a vehicle sales agreement in September 2021, pursuant to which Arrival agreed to provide LeasePlan with priority to purchase an initial amount of 3,000 vans and LeasePlan agreed on a best efforts basis to purchase such vans. In July 2021, Arrival partnered with ATN to produce Arrival Buses in connection with a $2.0 million grant ATN received from the FTA.

The Arrival Bus is designed for use by public and private transit operators, with an estimated total addressable market of approximately $154 billion. Arrival has entered into non-binding orders, letters of intent and memorandums of understanding with potential customers to purchase Arrival Buses, which are expected to start production in the second half of 2022.

On November 4, 2019, Arrival and HKMC entered into an agreement to jointly develop vehicles using Arrival’s technologies. This partnership will leverage the use of Arrival’s microfactories and software innovation. Arrival benefits from HKMC’s global footprint and economies of scale with the aim to reduce the cost of components. The joint development agreement will expire on November 3, 2024. This development agreement prevents Arrival from developing EVs with other traditional OEMs until November 3, 2022.



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Updated Microfactory and Other Cost Estimates

Production of saleable Arrival Buses is expected to start in the UK in the second half of 2022 to meet local demand with Rock Hill production starting at a later date. Arrival’s Bicester, U.K. microfactory is expected to start production of Arrival Vans in the third quarter of 2022. Charlotte, North Carolina, USA is expected to start production of Arrival Vans in the fourth quarter of 2022.

As of December 31, 2021, total capital expenditure at Arrival’s microfactories consists of capital expenditure for both production and non-production, including site readiness and logistics:

Bicester, is Arrival’s lab microfactory where it has prioritized being on time for the start of production of the Arrival Van. As a result, Arrival expects total capital expenditure at Bicester, to be approximately $75 million, through 2022.
From the learnings gained at Bicester, Arrival expects total capital expenditure at Charlotte, to be lower than at Bicester, with continued reductions in capital expenditure per microfactory as it scales beyond the initial microfactories.

Other Company Costs

In order to reduce risks relating to the start of production and enable Arrival to scale, it is incurring additional costs, including: (i) a decision to assemble battery modules and bring logistics in-house, which is adding capital expenditure and operating expenditure; (ii) pre-payments to LG Energy Systems (as assignee LG Chem) to secure battery cell line capacity for the next few years; and (iii) higher selling, general and administrative expenses as it scales sales, finance and legal.
In addition, Arrival is experiencing industry-wide increases in the expected cost of raw materials including aluminium and petrochemicals.
Arrival also expects higher working capital in its first factories to ensure it has the necessary components and parts to start production of its vehicles.

Vehicle Volumes and Revenue Expectations for 2022

Subsequent to the Business Combination, Arrival revised certain aspects of its business plan and it has invested additional capital to further develop its platforms, and to secure components and batteries for production. As a result, Arrival has revised its anticipated microfactory rollout, and now expects significantly lower vehicle volumes and revenue in 2022. The company continues to expect Arrival Van production to begin in Bicester in the third quarter of 2022 and Charlotte in the fourth quarter of 2022 and expects to produce and sell 400 to 600 Arrival Vans in 2022 as it ramps production in these two microfactories. For Arrival Bus, Arrival will be building saleable Arrival Buses in the UK in the second half of 2022 and expects these buses will be primarily used in additional customer trials in 2022. The priorities for 2022 are completing Arrival Bus and Arrival Van vehicle certification, starting production with Arrival’s unique method and ensuring the highest possible quality for its first vehicles.

Key Factors Affecting Operating Results

Arrival is a pre-revenue company and believes that its performance and future success depends on several factors that present significant opportunities for it but also pose risks and challenges, including those discussed below and in the section of this annual report entitled “Item 3D Risk Factors.”

Product Development

Arrival has announced five vehicle programs: the Arrival Bus, Bus for emerging markets, Arrival Van, Large Van and Arrival Car. Arrival expects to be building saleable Arrival Buses in the UK in the second half of 2022 and expects these buses will be used in additional customer trials in 2022. The company continues to expect Arrival Van production to begin in Bicester, in the third quarter of 2022 and Charlotte in the fourth quarter of 2022 and expects to produce and sell 400 to 600 Vans this year as it ramps production in these two microfactories.

Arrival has made significant progress in the design of its EVs and components parts, as well as in the development of its manufacturing and assembly processes and vehicle and manufacturing technology platform:
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Prototype Arrival Vans have been built and are being tested.
Arrival completed the first assembly of an Arrival Van skateboard structure robotically in a microfactory technology cell using its proprietary AMRs marking a significant step towards start of production.
First two Bus milestones of Trial Bus production and Bus Proving Ground trials achieved.
Arrival has installed and is running production equipment to manufacture the battery modules used on both the Arrival Bus and Arrival Van.
Arrival has installed and is running production equipment to manufacture composite panels at its Bicester microfactory.

Arrival is striving to successfully complete certain major development activities in order to meet its expected production dates.

Arrival’s team of over 2,600 employees, including engineers, scientists, technicians and staff, is committed to achieving the milestones to meet its current production and commercialization timelines to enable the Company to achieve its expected production dates. For example, Arrival expects to complete bus product validation and van product validation in the first half of 2022. Validation is a process by which compliance with all regulatory and performance requirements is demonstrated through testing of physical prototypes. Validation is the final step before a vehicle is certified for sale. These milestones are critical to Arrival’s development timelines, though may be subject to unanticipated delays outside of the Company’s control such as the ability to obtain sufficient capital to support production.

Capital Requirements

Until Arrival can generate sufficient revenue from product sales, it is dependent on its ability to raise sufficient capital from third-party sources. Arrival finances its operations with the proceeds from the Business Combination, private placements of its securities, public offerings of equity and/or equity-linked securities, debt financings, collaborations, and licensing arrangements.

Commercialization

Arrival plans to initially market its EVs directly to large van and bus fleet owners through its sales teams in the U.S., U.K. and Europe. Over time these sales teams will be expanded to cover more regions. Arrival is also developing an online sales tool for small to medium enterprises. Arrival’s customer outreach will be supported through marketing campaigns on Arrival’s website, social media platforms, interviews, podcasts, press releases and potentially physical experience centers to build awareness. Arrival will also work with key partners for additional coverage. Arrival’s marketing strategy is focused primarily on using online methods and positive experiences that generate word of mouth.

Arrival currently has an order from UPS for its Arrival Van for 10,000 vehicles with an option to purchase an additional 10,000 Arrival Vans, subject to amendment and cancellation by UPS. The total aggregate value of this order is approximately $1.2 billion (€1.0 billion) in revenue (including the option). Arrival has also received non-binding orders, letters of interest and /or memorandums of understanding from several other customers expressing interest in the Arrival Van and Arrival Bus, with total orders, letters of interest or memorandums of understanding of approximately 134,000 vehicles as of March 2, 2022, including the 10,000 vehicle order and 10,000 vehicle option from UPS. Although all orders, letters of interest and/or memorandums of understanding are non-binding and subject to cancellation or modification at any time, Arrival believes they demonstrate demand that will potentially lead to binding orders once the Company begins production of the Arrival Bus and Arrival Van and potential customers are able to see first-hand the performance and value of these vehicles. In July 2021, Arrival and LeasePlan, one of the world’s leading “car-as-a-service” companies, entered into an agreement pursuant to which LeasePlan will be the preferred operational leasing partner for Arrival Vans. Additionally, Arrival and LeasePlan entered into a vehicle sales agreement in September 2021, pursuant to which Arrival agreed to provide LeasePlan with priority to purchase an initial amount of 3,000 Arrival Vans and LeasePlan agreed on a best efforts basis to purchase such vans. In July 2021, Arrival partnered with ATN to produce Arrival Buses in connection with a $2.0 million grant ATN received from the FTA.

Regulatory Landscape

Arrival is, and will be, subject to significant regulation relating to vehicle safety and testing, vehicle accessibility, battery safety and testing and environmental regulation in the United States, European Union, the United Kingdom and other markets. These requirements create additional costs and possibly production delay in connection with design, testing and
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manufacturing of Arrival’s vehicles. In addition, demand for Arrival’s vehicles will be heavily influenced by government mandates and the availability of subsidies.

COVID-19

On January 30, 2020, the World Health Organization declared the COVID-19 outbreak a “Public Health Emergency of International Concern” and on March 11, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of COVID-19 include restrictions on travel, quarantines in certain areas and forced closures for certain types of public places and businesses. COVID-19 and actions taken to mitigate its spread have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the ge