Electric-truck maker Nikola has little in the way of momentum. But at least the modest amount of propulsion it does have is real this time.
The Arizona-based company infamously faked a promotional video to prove that its hydrogen-powered truck engine was functional. In fact the vehicle was using gravity to roll downhill. Short seller Hindenburg Research figured this out, and eventually so did the US Department of Justice. Nikola’s founder Trevor Milton is set to serve four years in prison for securities fraud over faking the company’s prospects.
Nikola did not collapse immediately after Milton’s legal problems. It very fitfully commercialised its hydrogen fuel cell-powered trucks, along with conventional battery electric trucks. But like many other clean energy concepts that raised hundreds of millions in capital during the pandemic boom, the company’s operating chops failed to match marketing hype.
Deliveries of an estimated 350 last year, for example, fall far short of the promise of thousands of trucks by 2025 that Nikola made when it went public in 2020, merging with a special purpose acquisition company. Its gross margin remains deeply negative. And Nikola’s cash burn of $150mn per quarter could soon force the company to restructure its debt either in or outside bankruptcy court, the FT has reported.
For all this, Nikola deserves credit for trying something hard: hydrogen-powered technology. Vehicles powered by hydrogen take only a few minutes to fuel up. Using hydrogen to generate electricity through an on-board fuel cell also means that vehicles can have a lot more energy ready for any given weight than they can cram into a battery-powered EV.
That makes the technology potentially useful for heavy and long-distance transport, precisely the technical challenge that Nikola has taken on. Difficulties abound, of course. Among other issues, the hydrogen fuelling infrastructure for passenger vehicles has really been built only in California.
Nikola’s current CEO Steve Girsky has credibility and industry experience. He is a former General Motors executive who had led the Spac deal. And the company was hopeful that an ecosystem where both private enterprise and government policy would prioritise hydrogen power would create the conditions for Nikola to prosper.
As it is, time is running out. Nikola ended the third quarter with less than $200mn liquidity. Its debt balance is in the hundreds of millions of dollars while its market capitalisation — once closing in on $30bn — has shrivelled to just $60mn.
Assuming creditors eventually take over the company, the question is whether Nikola is stripped for parts, such as its intellectual property, or reorganises as a standalone business. In this case there at least looks to be something worth saving. Nikola’s bet on hydrogen differentiates it from other auto start-ups littering the side of the road.
sujeet.indap@ft.com