Nikola Corporation (NKLA)

[WeTheMarket]

Nikola Motors on the right track
Article by Sven Jösting
November 8, 2023
https://hydrogeit.de/blog/2023/11/08/nikola-motors-auf-dem-richtigen-weg/

Following is the Google translation into English:

On the right track – as a startup in the H2 market of the future
While there have been mainly falling quotations for the Nikola Motors share so far, the price change now seems to be beginning. The falling prices are partly due to short sellers, who speculate massively against the company on the stock market; in the short term, there were more than 200 million shares sold short. Reason for optimism is provided by the commentary on the annual press conference on the 3rd quarter, which Nikola sees – in my words – on the right track. The Company raised approximately $250 million in liquidity in Q3 and now has $705 million in capital access. The damage caused by recalled battery-electric trucks is estimated at $61.8 million (warranty reserve). According to the company, this will not only fix the problem, but also use batteries from an as yet unnamed supplier, which have advantages over the previous model. In addition, the trucks will be equipped with additional features that give the driver more options in the field, for example, preparing the truck for the journey remotely via a mobile phone app (heating in winter, air conditioning in summer, etc.) until the driver arrives. After the conversion, the battery-electric trucks will find their way back to customers in the 1st quarter.

"Orders up, Cashburn down and Cash up"
There are 277 letters of intent for the purchase of hydrogen-powered trucks. In the current 4th quarter, 30 to 50 of these are expected to be delivered and generate between eleven and 19 million US dollars in sales. In the case of battery-electric trucks, a single order for 47 e-trucks has now been won – despite a previous recall. Over the next two years, Nikola expects to deliver an average of 250 to 300 trucks of both types per quarter. Cash burn is expected to be $100 million in the quarter, excluding the financial impact of the battery electric truck recall in the current quarter ($61.8 million, of which only approximately $38 million is net capital outflow). And the better the scaling in the production of the trucks, the more cost-effective they can be produced, which means that a good profit margin can be expected. Remember: In the future, money will be earned primarily with electricity and hydrogen and not per se with the hardware, the e-truck. Nikola is only at the beginning of his (success) story.

Hotspot California
Nikola is concentrating on the US state of California for good reasons, as not only do it offer the best subsidies (up to US$ 408,000 per truck), but logistics companies are under great time pressure to replace their diesel-powered trucks with CO2-free drives (battery or fuel cell/hydrogen). As early as 2024, only newly registered trucks will be allowed to be used in Californian ports if they are powered by battery electricity or hydrogen fuel cells. We're talking about more than 30,000 trucks in this segment alone – a perfect boost for Nikola Motors. Focusing on California in the early stages is therefore exactly the right step. There are more than three million trucks on the road here alone, and by 2030/35 there will only be e-trucks. In this truck segment, the competition for Nikola is manageable for years to come. A look at the vouchers for e-trucks that have already been approved is encouraging: 96 percent of the vouchers in the HVIP program (HydrogenVoucherIncentiveProgramme) are for hydrogen-powered trucks and 50 percent for battery-electric trucks. Impressive!

Legal battle against company founder Milton won: 165 million US dollars beckon
The protracted legal battle against company founder Trevor Milton has been won. The latter must now pay 165 million US dollars (the verdict was handed down on October 20) to Nikola, which also includes legal costs that Nikola had to advance and is now getting back. It should be noted here that there is still no statement about when the money will flow (could Nikola possibly withdraw shares from Milton?) and Nikola itself still has to pay part of it to the Securities and Exchange Commission (SEC), since it has reached a settlement for the payment of $125 million and has to fulfill it itself. However, if this $165 million flows in a timely manner, this will of course be very conducive to Nikola's liquidity situation, as SEC payments are spread over the coming years.

Goals sound ambitious – but they are realistic
Currently, Nikola can produce 2,400 trucks of both variants per year. To be profitable, it needs a sales volume of 1000 trucks in 2024 and 1500 trucks in 2025. From the company's point of view, these targets are considered realistic if Nikola delivers 250 to 300 trucks per quarter. In my opinion, there will also be some major orders and declarations of intent such as the letter of interest with Anheuser Busch (800 trucks) will flow into the order backlog.
Conclusion: Nikola is well on its way to positioning itself as a first mover for CO2-free trucks in the USA – first in California, later throughout the USA and in parallel also in Canada, where large subsidies of up to Can-$380,000 per truck are also beckoning. Comprehensive subsidy programs act like a turbo because truck buyers can meet the pressure of regulations and receive great financial incentives. The development of the hydrogen infrastructure is being carried out in-house and is financially supported by corporate partners such as Volterra (EQT). It is also getting a boost from a $10 billion program from the Biden administration to build seven hydrogen hubs in the U.S. The stock market will not be able to avoid evaluating Nikola as a startup in this new market with premature praise, because the prospects could not be better: in the right market at the right time. Nikola's management team is considered excellent, with CEO Girsky pointing out that they have top managers who don't really need to work for a startup. However, they take great pleasure in contributing their knowledge and realizing the company's visions.

My vision: What would happen if Nikola Motors produced over 100,000 electric trucks annually in two to three years and these were mainly powered by hydrogen and electricity generated in-house? Where do you think the share price will be, even if another 200, 500, million new shares will be issued in the meantime to finance equity? The current share price reflects a lot of skepticism and little imagination for the future. But that's about to change.

By the way: In a Nikola forum on Facebook, a mobile hydrogen filling station of the Nikola subsidiary HYLA was seen at a depot of Pilot Flying J. Investor legend Warren Buffet has invested eleven billion US dollars here for 80 percent. The company operates over 800 depots across the U.S. with a turnover of $40 billion and is also active in energy trading. The company has a cooperation with General Motors for several thousand e-charging stations. Hydrogen filling stations would also do well there, wouldn't they? From Nikola?!