How Nikola Makes Money: Hydrogen-Electric Trucks

Nikola Corp. (NKLA), an organization that designs and plans to fabricate hydrogen-electric vehicles, first turned publicly traded in early 2020. Its shares greater than doubled inside days of finishing a reverse merger in early March with VectoIQ Acquisition Corp., which was listed as VTIQ on the Nasdaq earlier than the deal. Its inventory value has had some unimaginable rises and falls since then.

Not like electrical carmaker Tesla Inc. (TSLA), which makes use of electrical vehicles which are recharged by plugging them in, Nikola plans to construct autos that use hydrogen gas cell expertise. Hydrogen gas cells produce electrical energy by combining hydrogen saved in a tank with oxygen from the air. Hydrogen gas cell autos have related advantages to pure electrical autos however take much less time to recharge and have an extended vary.


Key Takeaways

  • Nikola is a rising producer of battery and hydrogen cell-powered electrical autos.
  • Nikola was plagued with controversy in its preliminary years however is popping round beneath new management and making progress.
  • The corporate will not be but turning income, but it surely generated income (however nonetheless posted losses) in 2021 and 2022 after just a few years of making no income.

Nikola Historical past

Nikola was based by Trevor Milton in 2015. He named the startup after Nikola Tesla, taking the well-known inventor’s first title—the final title was already taken. Earlier than founding Nikola, Milton was CEO of dHybrid Techniques, which developed compressed pure fuel gas techniques. Milton served as CEO till the merger with VectoIQ when he moved to the chief chair place. He was changed as CEO by Mark Russell. Russell joined Nikola as president in 2019 and has over 20 years of expertise within the manufacturing business. Earlier than he got here to Nikola, he had most just lately labored as COO and president of Worthington Industries, a metal merchandise producer specializing in pressurized fuel cylinders.

Nikola first introduced it had agreed to a take care of VectoIQ, a publicly-traded particular function acquisition firm (SPAC), in early March 2020. VectoIQ was based in 2016 as a SPAC to hold out a merger, asset acquisition, or different related enterprise mixture with a number of companies. SPACs, often known as clean examine corporations, sometimes increase funds by way of an preliminary public providing (IPO) with out having any established marketing strategy in place. VectoIQ raised $200 million by way of an IPO in Might 2018 and greater than $700 million from traders.

Within the third quarter of 2022, Nikola produced 75 Tre BEVs, delivering 63 to sellers. It additionally continued testing its FCEV with its companions Walmart and TTSI, collectively logging greater than 15,000 miles.

Nikola’s Enterprise Imaginative and prescient

Certainly one of Nikola’s main initiatives, and one of many causes it raised money to begin out, is in order that it might start the rollout of its hydrogen station infrastructure to assist the vitality wants of the battery and hydrogen gas cell-powered vehicles it plans to fabricate and promote. Producing hydrogen-electric vehicles with zero emissions is only one facet of the enterprise.

These vehicles will want hydrogen refueling stations, and Nikola plans to construct such stations all through North America. Nikola plans to make use of solar energy at its fueling stations which can be supplemented with grid energy. The electrical energy will then be used to carry out “hydrogen electrolysis”—working electrical energy by way of water to separate it into oxygen and hydrogen, which might then be used as gas. Along with vehicles, the corporate plans to fabricate hydrogen-electric sports activities autos, corresponding to jet skis and off-road 4x4s.

Nikola Controversy and Management Change

On Sep. 10, 2020, short-selling agency Hindenburg Analysis launched a report alleging that Nikola and its founder, Trevor Milton, had lied extensively concerning the sort of expertise Nikola had. Nikola has referred to as the accusations “false and defamatory.” By Sep. 15, the SEC and Justice Division introduced they’d be investigating Nikola over the allegations. On Sep. 20, 2020, Trevor Milton introduced he was resigning as chair and was changed by Stephen Girsky, a board member and former GM vice chair. Nikola’s inventory dropped from $42 a share on September 9 to beneath $20 by the top of the month.

Additional Blows to Its Repute

On November 30, 2020, it was reported that GM was severely scaling again a previous settlement with Nikola. GM deliberate to offer Nikola with fuel-cell expertise, however the auto large now not needed an 11% stake within the startup, nor wouldn’t it assist construct the Badger pickup truck. As soon as once more, extra dangerous information brought about Nikola’s inventory to plummet. The corporate’s shares dropped 27% from the shut of buying and selling on Nov. 27, 2020, to the shut of buying and selling on Nov. 30, 2020.

On Feb. 26, 2021, Nikola stated that in a evaluation of Hindenburg Analysis’s allegations, it discovered 9 statements made by the corporate or Mr. Milton had been both wholly or partially inaccurate. Nevertheless, the evaluation, which was commissioned by Nikola’s board and performed by outdoors legislation agency Kirkland & Ellis LLP, didn’t make any conclusions regarding whether or not or not the incorrect statements violated any statute.

The Remaining End result

On July 29, 2021, Nikola’s founder, Trevor Milton, was indicted by a grand jury and charged with securities and wire fraud. Milton was accused of mendacity about most points of the corporate to pump up the inventory value and defraud traders.

On Dec. 21, 2021, Nikola agreed to pay $125 million to the SEC to settle the investigation into Trevor Milton. Beneath the phrases of compensation, the corporate would make 5 installments over two years. The primary cost was to be made on the finish of 2021. Nikola, nonetheless, didn’t admit or deny wrongdoing in agreeing to pay the settlement.

The corporate remains to be in search of reimbursement from Milton for the prices and damages associated to the federal government and regulatory investigations.

Nikola’s Financials

Like many younger corporations, Nikola will not be but worthwhile and certain will not be for a number of years. The corporate delivered its first two Tre battery electrical automobile (BEV) vehicles in December 2021 as a part of a pilot testing program and has since manufactured and delivered many extra. It additionally stated it estimated supply of between 255 and 305 semi-trucks in 2022. It doesn’t count on to start producing its hydrogen gas cell electrical autos (FCEVs) till the second half of 2023.

The little income Nikola has generated over the previous two years has been from the sale of its BEV vehicles. Nevertheless, prices and bills are nonetheless way over its revenues—Nikola generated a web lack of $29.3 million within the second quarter of 2022 and $30.2 million within the third quarter.

The corporate’s web losses attributable to widespread stockholders in 2021 and 2020 had been $690.4 million and $384.3 million, respectively.

Is Nikola Corp a Good Funding?

It is dependent upon your outlook, danger tolerance, and the way you worth an organization. Earnings experiences present progress, however the firm remains to be younger and establishing itself. Essentially, it seems to be on observe to income, however it’s nonetheless too early to say. Within the third quarter of 2022, it had a present ratio of 1.75 and a fast ratio of 1.14, suggesting it may repay its short-term money owed—that is at all times good to see in a younger firm. Web losses proceed to develop every quarter, however revenues are additionally growing.

Is Nikola Owned By Tesla?

Nikola and Tesla are separate corporations, so Nikola will not be owned by Tesla.

Will Nikola Inventory Go Up?

Many elements trigger a inventory’s value to go up and down. Administration at Nikola seems to be working exhausting to seat the corporate firmly within the electrical automobile business and develop its buyer base, however it’s too early to inform what’s going to occur to its inventory value.

The Backside Line

Nikola is a budding electrical automobile producer with a watch on logistics. It’s constructing electrical and hydrogen-powered vehicles to fulfill the logistical wants of companies that depend upon transportation to maneuver items.

The corporate had a rocky begin attributable to some unscrupulous conduct, but it surely seems to have righted itself and begun shifting towards profitability. Nevertheless, it stays to be seen if it may energy by way of the tough and aggressive highway forward of it.