Nikola Sticks To Go-To-Market Plan For Battery, Hydrogen Trucks In Wake Of Fraud Allegations

Nikola’s management team say the hydrogen- and battery-truck startup remains on track with plans to sell heavy-duty, zero-emission vehicles starting in late 2021 and has enough money to fund operations for at least a year after being hammered by allegations founder Trevor Milton lied about its technology and misled investors.

“We are in a strong position currently, after the most recent fundraise. That puts us in a well-capitalized position to execute going forward,” CEO Mark Russell tells Forbes. Those funds will be used for construction of Nikola’s Coolidge, Arizona, factory, first large-scale hydrogen fuel stations and getting battery-powered Tre trucks into production by late 2021. “We’re adequately capitalized through the end of next year and even beyond if we need to.”

The Phoenix-based company, which won’t generate meaningful revenue until 2022, reported about $699 million of cash at the end of the second quarter and total assets of $925 million in its 10-Q filing with the Securities and Exchange Commission. Nikola said in a June SEC filing when it listed shares that it plans to raise $700 million “between late 2021 and early 2022.” That plan is unchanged, Russell says. 

Nikola’s circumstances have been clouded by a sensational report by Hindenburg Research, a financial research firm run by analyst Nate Anderson, that accused Milton and the company of fraud and misrepresentation. Among its allegations, the “breakthrough” battery system Milton said Nikola was working on last year doesn’t exist and that it claimed to have designed technology and vehicle components purchased from other manufacturers as its own. Anderson has a short position in Nikola shares, and profited from a plunge in the stock’s value triggered by the report. Nikola fell 64% from $50.05 on Sept. 8, the day the company announced a major potential alliance with General Motors, to $17.88 on Sept. 29.

Nikola has positioned itself as the fastest mover in the hydrogen vehicle space, a technology that’s been around for decades but hasn’t find broad market adoption owing to a lack of fuel stations and expensive components needed for the zero-emission powertrain. Costs for hydrogen fuel cells, batteries and high-pressure fuel tanks have fallen significantly in the past decade and new options for making hydrogen from wind- or solar-generated electricity have made it a more compelling option in recent years, particularly for heavy-duty trucks. Toyota, Hyundai Motor, Daimler, Cummins and other global manufacturers are also readying hydrogen-powered trucks and powertrains, though none has moved as aggressively as Nikola. 

Shares rebounded in Nasdaq trading Wednesday, rising 13% to $20.20.22 at 2:54 PM Eastern.

Along with General Motors, Nikola has industrial partnerships with Bosch and CNH Industrial/IVECO, a European commercial vehicle manufacturer, which are also investors, and is working with companies including Nel Hydrogen, Meritor and South Korea’s Hanwha Solar. 

Milton resigned as executive chairman on Sept. 20, and was replaced by Steve Girsky, the Nikola board member who helped orchestrate the company’s public listing and introduced it to GM. Girsky was GM’s vice chairman following its bankruptcy and also worked as a financial analyst for decades.

Though Milton frequently claimed Nikola had industry-leading fuel cell and battery technology, the company seems to have positioned itself as a platform to get hydrogen-powered commercial vehicles into commercial operation as quickly as possible. Rather than possessing breakthrough tech, its most unique aspects appear to be its business plan based on a network of hydrogen and battery-charging stations to support fleets of commercial vehicles it leases to customers, such as brewer Anheuser-Busch. 

In terms of proprietary technology, Russell pointed to software developed in-house for Nikola’s electric trucks. “What’s 100% ours is the software. For an electric vehicle, the software is the key,” he says. “The vehicle software and the infotainment system is 100% ours.”

The Hindenburg report also triggered a review of Nikola by the SEC and Justice Department, neither of which will comment on the matter. Nikola has said it alerted the securities regulator to review the Hindenburg report. Both Russell and Nikola Chairman Steve Girsky declined to discuss potential SEC or DOJ inquiries.

The turmoil has complicated the completion of Nikola’s partnership with GM that would provide the Detroit-based automaker with an 11% stake in Nikola. Under a 10-year deal, Nikola would use GM’s new Ultium lithium-ion battery system and Hydrotec fuel cells, their first commercial application. GM would also “engineer, homologate, validate and manufacture” the Nikola-designed Badger pickup truck that’s powered by batteries and fuel cells.

“Our transaction with Nikola has not closed,” GM spokeswoman Julie Huston-Rough said Tuesday. “We are in discussions with current Nikola management and will provide further updates when appropriate or required.”

Nikola anticipated the agreement would be finalized by Sept. 30, according to an SEC filing. The deal can be terminated by either GM or Nikola if there’s no agreement by Dec. 3.

GM’s cooperation is crucial to Nikola’s Badger pickup project because it relies on a chassis, powertrain components and production provided by the automaker. Russell declined to say whether Badger will still be produced if GM drops out of the partnership deal. He also wouldn’t say how many orders for the truck have been refunded since in the past few weeks. Paid reservations for Badger, ranging from $250 to $5000, opened up on June 29. If the GM deal moves forward, production is to start in 2022. 

Testing of prototype versions of Nikola’s hydrogen fuel cell big rigs with customers is to start in 2022, followed by commercial production starting at the Coolidge plant in 2023. That factory is also to make Tre battery-powered trucks in 2022, following initial production in Ulm, Germany, at a plant operated by partner IVECO late next year. 

Aside from its product targets, the company said it’s canceling an in-person “Nikola World” event for late this year owing to the ongoing Covid-19 pandemic. The event is a large-scale public demonstration of its vehicles, partnerships and future plans.

The Hindenburg allegations focused heavily on comments made by Milton and characterized the company as “an intricate fraud built on dozens of lies” he told. 

Both Russell and Girsky defended the accuracy of Nikola’s SEC filings to Forbes. Girsky also said he stands by the due diligence done by his company, VectoIQ, which merged with Nikola in June to help take it public. 

“I was an analyst for almost 20 years and I’ve poked holes in business models like this for 20 years,” Girsky says. “We brought a group of experts in to poke holes in the model, we talked to the partners, we diligenced the company, we diligenced the partners, and our diligence was very forward-looking, not backward looking.”

Nikola has also been in talks with energy companies, including BP, to partner on hydrogen fueling stations, though those talks have been on hold following the allegations against Milton.

Russell wouldn’t identify specific companies Nikola is talking to and said construction of its hydrogen stations doesn’t depend on a potential partnership.

The company’s current “milestones don’t depend on a partner and the capital raise plan was that we can go forward without one,” he says. “We plan to go do it ourselves if we have to, but a partner helps us go faster and reduces the risk.”