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Electric truck maker Nikola looks like Tesla 2.0 – except even riskier

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It’s a week before Nikola, the electric truck start-up, debuts on the public market. It’s time to turn the fashion machine on. For some reason its founder and CEO, Trevor Milton, wants to say how much he loves Tesla.

You think he would count Tesla as a rival, if not an enemy. Each aims to conquer the market for long-haul diesel trucks. Each is seeking to claim the role of the brilliant inventor Nikola Tesla, who helped bring electricity to the masses by championing alternating current technology. Whenever the subject is brought up, Elon Musk, CEO of Tesla discharge on Nikola’s core technology, electric fuel cells, considered by Musk to be hopelessly inferior to Tesla’s own lithium-ion battery power systems. “Fool cells,” he calls them.

For memory:

09:03 am, June 02, 2020An earlier version of this story stated that Nikola Motor Co. turned down requests for repayment of a $ 4 million federal loan from the Paycheck Protection Program. The company finally returned the money.

But here’s Milton, blowing kisses. “There are probably no bigger fans in the world than the Nikola employees. Look at our parking lot. Teslas everywhere, ”he says.

“We’re big fans and the reason is this: Tesla paved the way for electric vehicles” while mainstream automakers “were talking about it every day, every day. But they did.

It’s easy to see why Milton, 38, might want to bill his business as Tesla’s second coming. Nikola’s stance is similar to that of Tesla when the electric car maker started in the early 2000s: a renegade start-up promoting novel technology to push internal combustion operators out of the driver’s seat.

Like Tesla, Nikola must also raise considerable sums to finance operations and capital expenditures of investors willing to bear year after year losses.

It worked for Tesla: look at its jaw-dropping stock price. The company never made an annual profit, its growth rate is slowing, and a viral plague has pushed the global economy into a deep recession. Still, Tesla investors remain so bullish that they’ve pushed the stock close to $ 900, giving the company a market cap of around $ 162 billion. If you were Milton, wouldn’t you want to participate in this kind of action?

Milton and Musk both became billionaires because of new investments pouring into their businesses, not corporate profits. Nikola’s income is negligible, a few hundred thousand dollars a year from engineering contracts. Since its founding in 2015, it has lost a total of $ 188.5 million. While Tesla had launched a car before its IPO in 2010, the low-production Roadster, Nikola has yet to sell a single truck.

There may be glory days to come, but the only trucks either company has to show are prototypes. Both announced ambitious deadlines while raising funds, then let the timelines slip away. Nikola claims $ 10 billion in ‘orders’ for 14,000 semi-trailers, but government statements make it clear that these are more expressions interest, cancellable, no security deposit. . Musk says there is high demand for the Tesla Semi, but has not released any order or reservation numbers. It has also claimed advances in battery technology that will allow its large rig carriers to travel 500 miles between charges, but has yet to demonstrate such performance in real life.

Another parallel: Milton and Musk have both been criticized for how they presented their own interests during the COVID-19 crisis. Musk restart of production at its Fremont assembly plant on May 11, defying orders from the Alameda County Public Health Department.

Milton, meanwhile, was taken to task on CNBC for initially denied requests to return $ 4 million in forgivable loans from the federal paycheck protection program intended to help small businesses. This, despite $ 85 million in cash in Nikola’s bank account at the end of 2019, and with an ongoing public deal that will provide Nikola with $ 735 million in new capital.

On this deal, which shareholders are expected to approve today: everything is funded by a complicated financial arrangement which avoids a traditional initial public offering, or IPO. Basically, a shell company was created and listed on the Nasdaq. This company will buy Nikola and fold it back into the shell in what is called a reverse merger, bringing the company’s implied valuation to $ 10 billion, up from $ 3 billion last fall.

Milton defended his PPP attempt by noting that Nikola, with 350 employees, met all the conditions for applying for a loan. Recalled that he recently bought a $ 32.5 million ranch, one of the most expensive real estate deals in Utah history, then asked what he would say to mom and dad stores or to lawn care workers struggling to get loans, Milton noted that he had started five businesses and failed two. “I lost everything twice,” he says. “I even sold all my guns, everything I had … There is no one who knows what they are going through more than me.” Nikola finally returned the money.

Despite all the criticism leveled at them, Milton and Musk each presented bold visions for transportation ecosystems that aim to phase out fossil fuels, and dedicated their time and energy to making them a reality.

At Tesla, Musk is building a global network of company-owned charging stations for the electric cars it sells – with plans to expand into truck charging.

Milton’s ideas are in some ways more ambitious and riskier. Because the storage batteries used in almost all electric vehicles are heavy, current technology limits large trucks to less than 300 miles. Nikola’s significantly lighter hydrogen fuel cell power system will have a range of 700 miles or more, Milton says. Their only waste is water vapor.

No doubt Nikola will be able to make fuel cell trucks. The technology is well understood. Welsh lawyer and inventor William Grove pioneered the technology in 1839. Vehicle manufacturers have been experimenting with fuel cells for decades. Hyundai and Toyota lease fuel cell cars.

The fundamental problem with fuel cells: no room to refuel. You can install a high voltage charger in your garage, but you cannot fill up with hydrogen at home. A few dozen state-subsidized hydrogen gas stations serve fuel cell cars across the state. For heavy trucks, they don’t exist. Nikola will have to build them.

“How quickly will they be able to set up this network? That’s the challenge, ”said Antti Lindstrom, trucking analyst at IHS Markit.

Nikola’s business plan calls for the construction of 34 stations by 2024 and 700 within eight to ten years, many of which have their own electrolysis plants to produce gaseous hydrogen. This is an energy intensive process, but Nikola plans to use solar, wind, nuclear and other energy sources that do not contain greenhouse gases. The cost of each station: $ 15-20 million. The first 10 to 12 will go up to California, partly funded by state subsidies for hydrogen stations provided by California taxpayers.

“It will revolutionize the world of trucking – if it happens,” Lindstrom said. Without a fundamental breakthrough in battery technology, he said, greater range translates into more weight, which means less cargo on board: in the United States, regulations limit loaded trucks to 80,000 books. More batteries also means more recharge time, with a full charge taking hours. Refilling a fuel cell takes about 15 minutes, roughly the same as refilling with diesel fuel. “Hands down, it’s a better solution for long-haul trucks than batteries,” he said.

Rather than just selling the trucks, Nikola will lease its semi-trailers in a package that includes service and maintenance and a long-term fuel contract that locks in prices – which adds risk and perhaps a great reward for Nikola, depending on how efficiently he manages the operation. The total cost of ownership will be the same as for diesel trucks or less, Nikola says.

Several large companies have signed up as partners. Ryder will service and maintain the trucks for Nikola customers under the rental plan through its extensive service network. Bosch embarks on mechanical design. Anheuser-Busch says it will take no less than 800 trucks for Budweiser and other long-haul beers. The first Nikola hydrogen station will be installed near the Budweiser bottling plant in Van Nuys.

Tesla and Nikola announced their large platform plans in 2016. Musk said Tesla will start selling its Semi in 2019. Now it will be at least 2021. Nikola has announced an introduction in 2021 for its fuel cell trucks , but this was postponed until 2023.

The company plans to bring a lithium-ion battery delivery truck to market next year, made in Germany and initially sold in Europe. “We can roll this out now and start generating revenue,” Milton said. The agreement involves a joint venture with CNH Industrial. The company’s Iveco unit, based in Italy, will run the German plant and help Nikola set up a new plant in Coolidge, Arizona, outside of Phoenix. This plant will manufacture the large fuel cell platforms. Construction is expected to begin this year.

Nikola is also planning other products: a hybrid van using a regular battery and fuel cell, a dune buggy type all-terrain electric vehicle and a battery-electric version of the Jet Ski.

Milton is happy to talk about it all. In a traditional IPO, he would be prohibited from pumping the company before a stock offering. The reverse merger allows him to avoid the period of silence and talk about the case.

Talking about a good game is another trait shared by the two CEOs. Like Musk, Milton has been accused of promoting “vaporware” that never shows up or doesn’t deliver on promises. “The best way to prove these critics wrong is to release your products,” he said.

Even better if you can profit from it.



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