Despite challenges, Nikola strives to set a ‘clean’ trend in transportation

The growing popularity of electric vehicles has given rise to speculation that advancements in alternative energy technology might render conventional vehicles obsolete. Nikola Corp. (NASDAQ: NKLA), a pioneer in hydrogen fuel cell technology, is on a mission to transform the trucking industry.

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Read management/analysts’ comments on quarterly reports

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Recently, the Utah-based startup got a major boost after General Motors (GM) offered to acquire an 11% stake, in a deal aimed at helping it design and build vehicles that run on non-fossil energy. However, the deal is yet to be finalized. It assumes significance considering Nikola’s growth strategy that is focused on partnerships.

Nikola being a pre-revenue entity, research & development expenses will remain elevated in the foreseeable future and that will weigh on the bottom-line. When it comes to investing in the business, the current level of liquidity might not be sufficient. On the positive side, the company has relatively low liabilities.

Next year, we’ll be able to – we will be building further prototypes, some of which will go on the road for road testing and will be used in customer fleets. And then next fall, we will be producing regular customer sales. So the end of 2021 and that we will be shipping the units from serial production into regular customer fleets.

Mark Russell, CEO of Nikola

Mixed Results

The company, which is yet to start commercial shipment, did not generate revenues in the third quarter. Market watchers were looking for a modest top-line number. It incurred an adjusted loss of $0.16 per share during the three-month period, which was better than the projected loss. Net loss widened to $117.3 million or $0.31 per share from $15.5 million or $0.05 per share last year.

It is estimated that the COVID-related disruption would not have a major impact on production and long-term business goals. Once commercial production starts, the company expects to cash in on the zero-emission drive being launched in many parts of the country.

‘GM Deal Intact’

Putting an end to speculation, the management said its talks with General Motors over acquiring equity stake are progressing as planned. It also said the company’s German arm is making steady progress with the Nikola Tre truck, which is currently in the assembly stage.

Commenting on the GM deal, chief executive officer Mark Russell said during the post-earnings conference call, “The agreement with GM was going to give us options for the next generation of our vehicle which would be based on a non-cylindrical cell, GM is developing an Ultium battery system that’s based on pouch or large format cells, that would have given another option for generation two of our vehicles.”

SEC Scruitiny

Earlier, the management approached the SEC to clarify its stand on the allegations raised by a short-seller that the company’s claims about its technology were highly exaggerated and that some of its statements were misleading.

Tesla, Inc. (TSLA), which is believed to have inspired Nikola’s founders in choosing the brand name, surprised the market last month with record revenue growth and earnings that more than doubled from last year. The results indicate that the carmaker is on its way to rule the electric vehicle market for now.

Nikola’s stock has been in a downward spiral after the initial spike that followed the company’s Wall Street debut five months ago. After peaking in early June, the stock has lost 77% and is currently trading slightly below $20.