NKLA - NIKOLA CORPORATION – PAVING THE ROAD TO A HYDROGEN FUTURE
NIKOLA CORPORATION – PAVING THE ROAD TO A HYDROGEN FUTURE
21 DEC NIKOLA CORPORATION – PAVING THE ROAD TO A HYDROGEN FUTURE
Nikola Corporation (NASDAQ: NKLA), a global leader in zero-emissions transportation and energy supply and infrastructure solutions, and Plug Power (NASDAQ: PLUG), a leading provider of turnkey hydrogen solutions for the global green hydrogen economy, announced a strategic relationship focused on moving the hydrogen economy forward.
Nikola President, Energy, Carey Mendes, commented,
“Nikola and Plug share a common vision for sustainable, efficient, energy solutions which supports our commitment to decarbonize the transportation industry. This strategic relationship will help underpin Nikola’s ambitious growth plans to expand the hydrogen energy business and to support the adoption of Nikola’s zero-emission Class 8 trucks.”
As per the agreement, Plug plans to purchase up to 75 Nikola Tre hydrogen fuel cell electric vehicles for green hydrogen delivery, while Nikola is slated to purchase 30 metric-tons per day liquefaction system from Plug for the Ariz. hydrogen hub project. The companies have signed an innovative Green Hydrogen Supply Agreement with synergies for both Nikola and Plug’s business models.
Through its offerings, Nikola is globally transforming the transportation industry. As a designer and manufacturer of zero-emission battery-electric and hydrogen-electric vehicles, electric vehicle drivetrains, vehicle components, energy storage systems, and hydrogen station infrastructure, Nikola is driven to revolutionize the economic and environmental impact of commerce as we know it today.
Nikola Corporation (NASDAQ: NKLA)
Market Cap: $1.08B; Current Share Price: $2.26
Data by YCharts
We take a holistic look at the Company by way of SWOT analysis.
Strength
The Company operates in two business units: Truck and Energy. The Truck business unit is developing and commercializing battery electric vehicles, or BEV, and hydrogen fuel cell electric vehicles, or FCEV, Class 8 trucks that provide environmentally friendly, cost-effective solutions to the short-haul, medium-haul, and long-haul trucking sector. The Energy business unit is focused on developing and constructing a hydrogen fueling ecosystem and providing BEV charging support to meet anticipated fuel demand for FCEV and BEV customers, as well as other third-party customers.
Image Source: Company
The key differentiator of Nikola’s business model is the planned hydrogen fueling ecosystem, which includes (1) hydrogen production and hydrogen procurement, (2) hydrogen distribution, and (3) hydrogen storage and dispensing.
Historically, investing in alternative fuel vehicles represented a high risk for both original equipment manufacturers, or OEMs, and customers due to the uncertainty of the fueling infrastructure. Existing fuel providers have limited incentive to deploy the required resources and capital to develop an alternative fuel infrastructure due to a lack of known demand.
The Company’s approach aims to solve this problem, by pairing dedicated fueling demand from FCEV trucks to the refueling infrastructure to reduce the risk of developing the infrastructure while giving customers the assurance that fuel will be available where and when they need it. It is possible that this strategy could help unlock hydrogen’s potential as the fuel of the future.
For FCEV customers, the Company plans to offer a bundled lease model, which would be inclusive of the cost of the truck, hydrogen fuel, and maintenance. The bundled lease model has the potential to de-risk infrastructure development by locking in fuel demand from dedicated route customers. This lock in demand is designed to ensure high station utilization. The Company believes the hydrogen fueling ecosystem will help accelerate the adoption of FCEVs.
For the BEV, the company plans to offer both direct sale and lease models. By being one of the first movers in the North American market, Nikola expects to capture customers and applicable zero-emission vehicle related incentives, including incentives available to those that are early adopters of BEV technology.
Nikola’s position as a pioneer in the market has attracted global leaders across the supply chain, creating an extensive network for them to leverage. The expertise and know-how of the partners has broadened Nikola’s executional capability, reduced time to market, and helped to solidify their technological leadership.
More specifically, the Company’s relationships with certain leading suppliers and partners also allow them to manufacture and deliver products with high quality standards. For example, Nikola’s partnership with Iveco (OTC: IVCGF) provides flexibility, scalability, and speed to market, while product design and quality control are managed by the Company’s engineering team. Further, this partnership will allow Nikola to enter the European market in a capital efficient manner, and years earlier than originally anticipated.
Opportunity
According to the Environmental Protection Agency, or EPA, and the European Environment Agency, or EEA, the transportation industry causes an estimated 25% to 30% of U.S. and EU greenhouse gas, or GHG, emissions. While heavy-duty trucking represents less than 10% of the transportation industry by volume, it is responsible for approximately 40% of transportation industry GHG according to the International Council on Clean Transportation, or ICCT.
A strong consensus among the largest governments calls for a global push to shift to zero-emission vehicles and the eventual elimination of internal combustion engines, or ICE vehicles. In fact, with ever-expanding e-commerce freight demands, zero-emission vehicles are believed to be one of the only viable options for a sustainable future, and the Company’s product portfolio is well suited to capitalize on this opportunity.
Currently, the global heavy-duty commercial vehicle and the related fueling and maintenance market is estimated at $600 billion per year. According to data provided by ACT Research, this $600 billion total addressable market (TAM) consists of
In addition, the active Class 8 truck population is expected to grow by approximately 5.0% annually from 2019 to 2023.
In other words, the on-going e-commerce and global economic growth is slated to fuel the need for more heavy-duty trucks. It seems that Nikola’s unique product portfolio paired with their hydrogen fueling ecosystem will provide the Company with an advantage over their competitors. It may also allow the Company to provide significant and valuable innovation to the estimated $600 billion TAM discussed above.
Weakness
Nikola Corporation is an early stage company with a history of losses, and they expect to incur significant expenses and continuing losses for the foreseeable future.
The Company incurred net losses of $690.4 million and $370.9 million for the years ended December 31, 2021 and 2020, respectively, and have an accumulated deficit of approximately $1.3 billion from the inception of Nikola Corporation, a Delaware corporation, or Legacy Nikola, prior to the merger with VectoIQ Acquisition Corp., or VectoIQ, through December 31, 2021.
The management believes they will continue to incur operating and net losses each quarter until at least the time they begin significant deliveries of their trucks, which is not expected to begin at least until the second quarter of 2022 for BEV truck and the second half of 2023 for Tre FCEV truck and may occur later. Even if they are able to successfully develop and sell or lease trucks, there can be no assurance that they will be commercially successful. The Company’s potential profitability is dependent upon the successful development and successful commercial introduction and acceptance of the trucks and the hydrogen station platform, which may not occur.
Further, the Company’s alternative fuel and electric trucks, and the sale and servicing of motor vehicles in general, are subject to substantial regulation under international, federal, state, and local laws. Nikola expects to incur significant costs in complying with these regulations. Regulations related to the electric vehicle industry and alternative energy are currently evolving and they face risks associated with changes to these regulations.
To the extent the laws change, the trucks may not comply with applicable international, federal, state or local laws, which would have an adverse effect on the business.
Threat
Competition in the Class 8 heavy-duty truck industry is intense as new regulatory requirements for vehicle emissions, technological advances, and shifting customer demands are causing the industry to evolve towards zero-emission solutions. Most of the Company’s current and potential competitors have greater financial, technical, manufacturing, marketing, and other resources. They may be able to deploy greater resources to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their programs. Additionally, many competitors also have greater name recognition, longer operating histories, larger sales forces, broader customer and industry relationships.
Tesla, Daimler, Volvo, as well as other automotive manufacturers, have announced their plans to bring Class 8 BEV trucks to the market over the coming years. Other competitors include BYD, Peterbilt, XOS, Lion, Volvo, Hyliion, and potentially Cummins.
Due to higher barriers to entry, there are fewer competitors in the FCEV Class 8 market as compared to the BEV market. However, Hyundai and Toyota have chosen to focus their efforts on FCEV as the powertrain of the future. Hyundai has announced plans to offer FCEV trucks and invest in hydrogen stations for refueling. Toyota is collaborating with Kenworth. Daimler and Volvo announced a proposed joint venture to develop fuel cell systems for heavy-duty trucks. Other potential competitors include Navistar, Hino and Hyzon.
Key Takeaways
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Click here to please visit our detailed disclosure
Reference:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1731289/000173128922000016/nkla-20211231.htm
https://www.sec.gov/ix?doc=/Archives/edgar/data/1731289/000173128922000256/nkla-20220930.htm