In a year where Nikola Corp. has experienced everything from layoffs to fires to a new CEO hardly a week after beginning production on a new line of zero-emissions vehicles, the company is weathering its fair share of sudden storms. Now, Nikola’s increasing complications with its battery-electric trucks, and the ramifications of those complications, could push it towards greater hydrogen fuel-cell vehicle production instead of electric.
The seeds of this shift are largely due to Nikola’s voluntary recall of 209 Tre BEVs. The trucks were pulled back due to their risk of a thermal event in the truck's batteries, which were produced by Romeo Power.
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While Nikola has only reported two fires out of the 3,100 battery packs they have produced, and has since begun liquidating Romeo’s assets to make their battery packs in Coolidge, Ariz., one of them led to a fire on June 23 that spread to four other Tre BEVs at the company’s Phoenix headquarters. Nikola later reported that a third-party investigation by Exponent stated “a coolant leak inside a single battery pack was found to be the probable cause of the truck fire,” which then led to thermal runaway in the battery’s lithium-ion cells. The second fire occurred on Aug. 10 on an engineering validation truck, leading the company to recall the over 200 Tre BEVs and begin working towards a solution.
Unfortunately, Nikola’s BEV investigation not only hit the company financially, but could lead to longer delays for their electric vehicles, stated Steve Girsky, Nikola CEO.
"During these investigations, it was discovered that additional process and design changes may be necessary and that cell-level issues may need to be addressed beyond the initially identified coolant manifold replacement," Girsky said Nov. 2.
In the meantime, Girsky also said that that Nikola will retrofit the Tre BEVs with alternative packs, an expensive procedure that has helped place the company’s cost of sales at $124 million, largely due to writing down their battery pack value. Re-engineering, validating, and then retrofitting their previously-sold BEV trucks will also eat into the company’s $61.8 million warranty reserve, even though Nikola CFO Stasy Pasterick has stated that all the money won’t be used at once.
"Actual cash disbursements will take place over the next nine to 12 months as we validate the new components and work through the retrofits," Pasterick said. "We anticipate seeing the majority of that cash spent in the first half of 2024."
These complications contributed to a net loss for the company that numbered over $425 million, 10% more than the first half of the year. It could also necessitate a refocus on Nikola’s hydrogen fuel cell business as their electric processes undergo more development, especially if the company wants to take advantage of sales opportunities in California.
Nikola’s fuel-cell electric Tre first began series production on July 31 and uses a battery pack from an entirely different company, Proterra. While Proterra did file for bankruptcy in August, the Tre HCEV hasn’t experienced the same calamities as the BEV, and has even more opportunity to succeed due to the California Air Resources Board’s hybrid and zero-emission truck and bus voucher incentive project (HVIP).
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According to Nikola, the company’s HCEV trucks constitute 96% of requested hydrogen fuel cell electric voucher requests in 2023, and the company expects to handle 30-50 more HCEV truck deliveries in Q4. That kind of order fulfillment represents $11.3-$18.8 million in revenue, even if the production process is still laboring under supply chain constraints.
"Fuel cell production is currently constrained due to supply chain ramp up,” Pasterick explained. “Due to lower production and delivery numbers for the fuel cell, and the path on the battery-electric production and deliveries until the recall is remitted, we expect gross loss margin will be outsized between negative 115% to negative 135%.”
It remains to be seen if Nikola’s hydrogen business will be able to turn Nikola’s stock shares and provide more context in the zero-emissions fuel race between hydrogen and electric powertrains. As of the morning of Nov. 7, Nikola’s value was around $1.05, putting the company at about $1 billion.
