TSLA - Nikola: The End Is Near

2023-04-17 11:40:07 ET

Summary

• Nikola is decisively losing the technology battle against larger automakers.
• Nikola may soon run out of resources to fund its operations.
• The continual changes in leadership does not bode well for the future.

Nikola ( NKLA ) continues to drop at a precipitous pace despite a global push towards clean energy transportation. The company has seen its valuation plummet from a market capitalization upwards of $30 billion to its current market capitalization of $1 billion. The release of the Hindenburg Research Nikola short report has severely hindered Nikola's ability to generate any meaningful hype for its products.

More relevant however, is the fact that hydrogen technology is clearly falling behind battery electric technology in the clean energy war. With heavyweights like Tesla ( TSLA ) investing tens of billions of dollars in electric vehicle technology and practically the entire auto industry following its lead, Nikola has very little chance of surviving in the coming years.

Nikola continues to see its share price fall.

Losing the Technology War

The hype around clean energy transportation has only gained steam in recent years, with industry giants like Tesla and traditional automakers alike pumping tens of billions of dollars into the industry. Unfortunately for Nikola, not all clean energy technologies have thrived in recent years. In fact, the momentum for hydrogen fuel technologies has slowed significantly compared to that of electric.

Nikola, which was once seen as a leader in the hydrogen transport industry, is now struggling to survive. The company has experienced major delays as opposed to competitors who are pushing ahead. Even Tesla now appears to be ahead in BEV trucking, which is a space that Nikola is specializing in. In fact, Tesla has already starting shipping its BEV trucks to major customers like PepsiCo ( PEP ).

Nikola has also put far too much time and resources into developing its hydrogen technology to make a major switch. The company's only hope now is that it somehow makes a miraculous technological breakthrough while at the same time cutting out delays, which seems highly unlikely under current circumstances. While hydrogen fuel technology may become a viable competitor down the road, it is clearly outmatched as things currently stand.

With juggernauts like Tesla pumping out millions of EVs a year, Nikola stands little chance in terms of manpower, scale, and resources.

Running out of Cash

Not only is Nikola losing the technology race against EV, but it is also running out of resources at an alarming rate. In fact, the company recently announced a $100 million stock offering in a desperate move to raise more funds. According to Reuters , the company only has $123 million and $85 million in cash and restricted cash respectively, which is clearly not enough to compete in an increasingly crowded space.

Even if hydrogen were to have a big role to play in the future, Nikola does not have the funds to capitalize on hydrogen's potential long-term upside. The company barely has enough funds to scale out its manufacturing operations, let alone build out the necessary hydrogen fueling infrastructure. With giants like Toyota ( TM ) investing more heavily into hydrogen and practically the entire auto industry jumping into the EV space, a small player like Nikola stands little chance to prosper.

Leadership Turmoil

Nikola recently announced that three of its directors are stepping down, shaking investor confidence yet again. Mark Russell, who is one of the directors stepping down, also stepped down as Nikola's short-lived CEO last year. The turmoil at the top of Nikola's management does not bode well, especially given the company's already precarious situation.

Conclusion

Nikola still has more downside at its current market capitalization of $495 million. It is hard to imagine the company's BEV and hydrogen vehicles making any long-term impact on the market given the company's current financial situation and the overall competitive landscape. Investors looking to capitalize on clean transportation would be better off looking at larger companies like Tesla and even traditional automakers like Toyota.

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