Nikola Corp briefly became an investor darling last year. Founder and now-departed CEO Trevor Milton had boasted of developing hydrogen-powered trucks and world-leading lithium batteries—but revelations questioning these claims led to his abrupt exit.

The company is left battling to convince shareholders and customers that it can make good on its promises, as it tells Hydrogen Economist about its revised plans.

Last summer the company was ascendant; its shares peaked at $93.99 in June, giving it a market valuation greater than US auto industry giants Ford and Fiat Chrysler despite the Arizona company producing zero revenue.

Meanwhile, General Motors (GM) announced on 8 September that it had agreed an 11pc stake in Nikola, which the Detroit firm said was worth $2bn. As part of the deal, GM would build battery electric and fuel-cell versions of Nikola’s planned Badger dual-cab pickup truck.

“This is a pivotal, make-or-break year for Nikola to get back investor confidence” Ives, Wedbush Securities

Then followed a shock report by short-selling activist investment firm Hindenburg Research that described Nikola as “an intricate fraud built on dozens of lies over the course of Trevor Milton’s career”.

Understandably, GM reneged on the agreement. It stated in a memorandum of understanding on 30 November that, while it would supply fuel-cell systems to Nikola, it would not be taking an equity stake or manufacture the Badger. Nikola abruptly scrapped the model.

“It has been a nightmare few months for Nikola as well as its investors,” says Daniel Ives, managing director of equity research at New York’s Wedbush Securities.

“Nikola has an interesting vision, and it continues to have very strong ambitions. They talk the talk—but they have not walked the walk. Investors need to see execution and have more confidence in the story that they can ultimately be successful in their EV and hydrogen strategy.”

Nikola had claimed to have developed advanced proprietary battery technology, but it actually intended to instead buy from a third-party. It then discovered this technology was only at the conceptual stage, Hindenburg wrote.

Hindenburg also questioned Nikola’s hydrogen fuel-cell technology. All its key components are either bought or licensed from third-parties despite Nikola’s claims to have developed them in-house, Hindenburg wrote. It added that the vehicles Nikola presented in videos and on a physical stage as being functional, finished products were little more than models.

While Nikola described the report as “false and defamatory”, Milton quit and he and the company are facing multiple investigations, including by the US Securities and Exchange Commission and Department of Justice.

Revised plans

In a written response to questions from Hydrogen Economist, Nikola says its Tre battery-electric semi-truck (BEV) will use batteries from Romeo Power Systems.

“Nikola has engineered, in conjunction with its business partners and suppliers, the electrification elements of the Nikola Tre,” Nikola responded when asked which components it developed in-house.

c.80pc – Nikola’s share price fall since June peak

“During this process, Nikola engineers have taken the lead on the human-machine interface, infotainment, battery pack engineering and integration into the e-propulsion architecture, vehicle thermal management and the e-axles.”

Commercial production of the Tre BEV is set to begin in Germany in Q4 2021 and Nikola's under-construction Arizona plant in 2022, while the hydrogen fuel-cell semi-truck, Nikola Two, will start production in 2023, Nikola responded, but declined to reveal order numbers.

Wedbush Securities’ Ives describes Nikola’s production plans as “aggressive timelines”.

In the halcyon days of last June, Cowen Equity Research initiated coverage of Nikola with an outperform rating and a price target of $79, noting how it would not just manufacture trucks but also sell energy as-a-service that would enable it to extract more than four times the “economic value” from a typical truck sale by leasing the vehicle and providing fuel and servicing on subscription.

However, following the Hindenburg report, Cowen reduced its price target on the stock to $47, citing various risks including potential production delays and the possibility its battery or fuel-cell technologies are inferior to competitors.

An extensive hydrogen refuelling network across the US and Europe is “the lynchpin to Nikola’s entire strategy”, says Ives.

“Nikola will need partners such as BP and others to help build that out across Europe and the US. Nikola can get there, but it is a tougher sell today than it was six-to-nine months ago,” says Ives.

Nikola declined to provide further details, saying only that it would make announcements on its refuelling network “in the near future”.

Yet Nikola can rebuild customer and investor confidence, Ives predicts. “It will be challenging, but that is why investors are giving them the benefit of the doubt,” he adds.

“There is execution risk, which is why this is a pivotal, make-or-break year for Nikola to get back investor confidence.”

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Author: Matt Smith