Cash-strapped Nikola Corp. is selling its stake in a European joint venture with Iveco Group for $35 million and 20.6 million shares of Nikola stock. It will prioritize hydrogen and fuel cell trucks in North America and phase out battery-electric models except for special orders.
The end of the joint venture, formed in 2019 when CNH Industrial invested $250 million in cash and partial ownership of a plant in Ulm, Germany, far from ends the relationship.
Iveco gets a license to keep developing vehicle control software for the jointly developed Tre battery-electric and fuel cell-electric vehicles. Nikola gets the North American license to Iveco’s S-Way truck and related component supply. That includes joint intellectual property ownership of Generation 1 eAxles developed with FPT Industrial, Iveco’s powertrain brand.
First hint of change in Nikola-Iveco relationship
The first hint of a change in the Nikola-Iveco relationship emerged in March when Iveco CEO Gerrit Marx decided against remaining on Nikola’s board of directors. In a news release overnight Monday, Nikola disclosed the JV was dissolving. The first battery-electric Nikola Tre models were built in Ulm and shipped to Coolidge, Arizona, where Nikola now produces the trucks.
In a first-quarter earnings report, the company said Iveco would “cheer for our long-term success.”
It might do more than cheer.
If a critical shareholder vote to double the number of Nikola’s authorized shares fails on June 7, Iveco could be waiting as a savior. Without additional shares to sell, Nikola has said it might not have enough cash to pay interest due on $200 million it borrowed from hedge fund Antara Capital in 2022.
Hydrogen and fuel cells first is back-to-the-future strategy
Nikola disclosed in its Q1 earnings report that it:
- Refocused the business on hydrogen fuel cell truck production and will take only special orders for Tre BEVs going forward.
- Sold 31 Tre BEVs to wholesale dealers, which completed 33 retail sales from existing inventory. Nikola has 152 BEVs in inventory worth $123.6 million to sell down through its dealers.
- Took orders for 140 FCEVs from 12 customers.
- Built the first two of 10 Gamma versions of the fuel cell truck for customer testing while targeting serial production in July.
- Would pause production at its plant in Coolidge from the end of May until July to convert the assembly line to accommodate BEVs and FCEVs on the same line.
When founded, Nikola focused solely on fuel cell truck development. It planned a battery-electric truck for Europe only, but ultimately decided to produce it first in the U.S. Now, the company is returning to the original plan.
Nikola quarterly loss grows along with cost of sales
The startup electric truck manufacturer and hydrogen distributor reported a loss of 26 cents per share, or $169 million, compared to a loss of 21 cents, or $152.9 million, in the same quarter a year ago. Revenue of $11.1 million topped the $1.9 million reported in the January to March period of 2022. But it cost Nikola $44 million to generate the revenue.
The company ended the quarter with $206.3 million in cash including $85.2 million of restricted funds. It has credit facilities of about $547million but has just 66 million shares of stock it can use to generate cash. Nikola added $96.5 million of net proceeds from follow-on and direct stock offerings that closed in April.
“We want to be clear, much of this capital availability is dependent upon additional shares being authorized by our stockholders in June and registering those shares per the applicable agreement, along with certain other contractual limitations and market conditions, including stock price,” CFO Stasy Pasterick said on a call with analysts.
In the news release, the company said it reduced its spending and cash burn during the quarter. But it is still struggling to bring down the cost of battery packs after acquiring Romeo Power, its main battery supplier, in August 2022. Romeo had been discounting each pack by $110,000, which Nikola is now trying to make up by producing the battery packs in-house.
Nikola has first-mover advantage in FCEVs
Tightening its focus to hydrogen fuel distribution and fuel cell trucks removes Nikola from having to compete with legacy manufacturers that have a big head start in BEVs and the resources to scale production that Nikola lacks.
By contrast, Nikola has a first-mover advantage in fuel cells for long-haul trucking. Hyundai Motor Co. said last week that it is taking orders for its Xcient fuel cell truck imported from South Korea. Separately, Kenworth and Peterbilt said they would begin fuel cell truck production and sales in 2025 using Toyota Motor North America’s second-generation fuel cell system.
Nikola benefits from incentives of up to $288,000 per FCEV from California and $40,000 per truck from the federal Inflation Reduction Act. It got a boost last week when startup infrastructure developer Voltera Power agreed to invest up to $1 billion to build and run 50 HYLA-branded hydrogen stations over the next five years.
“We like the strategic focus and view the FCEV as a differentiated product leveraging Bosch technology and third parties for hydrogen fueling; however, with limited ability to raise capital coupled with the overall macro environment and lack of investor enthusiasm for emerging EV companies, we are moving to the sidelines,” TD Cowen analyst Jeffery Osborne wrote in an investor note Tuesday.
Nikola shares closed down 13.04% at 86 cents on the Nasdaq on Tuesday. The company issued a notice of going concern with the Securities and Exchange Commission in February over auditor concerns about its liquidity.
Editor’s note: Updates with information from analyst call, analyst comment and closing stock price.
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Anonymous
Why are people still talking about this company? Didn’t their CEO go on the run when it was revealed the whole company was a fraud? Is this just sunken cost fallacy run amok?