Nikola Shifting To Electric Semi Production, Building First Hydrogen Fuel Plant

Nikola Corp. didn’t generate revenue last year but after surviving a rocky period that included an SEC investigation triggered by its former executive chairman the truckmaker says it’s about to start building battery-powered big rigs and is making plans for a large-scale hydrogen plant for trucks powered by that zero-emission fuel.  

The Phoenix-based company on Thursday reported a  $690.4 million loss for 2021 as it poured money into its factory in Coolidge, Arizona, and a truck assembly line in Ulm, Germany, at a plant operated by European partner IVECO. Production of battery-electric Tre BEV semis starts in late March and Nikola wants to deliver as many as 500 this year–if it can get enough lithium-ion cells and other components. Longer-range hydrogen trucks are to be built from 2023.

“If people think that we’re not able to build a truck they’ll be disappointed,” CEO Mark Russell tells Forbes. Interest in its trucks from fleet operators is rising since Nikola started getting early battery-electric units to customer TTSI to test at the Port of Los Angeles late last year. And in January Anheuser-Busch, Nikola’s biggest potential customer, started delivering beer in Los Angeles with two prototype Tre FCEV hydrogen-powered big rigs.

“So far our customers love these trucks. TTSI is running them farther than they’ve ever run an electric truck before–and they test every truck they can get their hands on. And the fuel cell trucks we have with AB are hauling beer every day,” Russell said. “Everything in our business model that we said we could do, so far we’re doing it. As we continue to do what we said we were going to do then the question becomes how fast can we scale it? And how fast can we drive the cost down?” 

Profitability for the heavy-duty startup is still years away, but the fact that Nikola has enough cash to fund its first year of production is an accomplishment given how grim things looked in late 2020, after departed founder Trevor Milton was charged with lying to investors about the company’s technology and market readiness by the SEC–charges he denies. Nikola agreed to pay a $125 million fine to resolve the matter last year and is seeking to recover much of that expense from Milton. Under CEO Russell, the company has streamlined its focus to ramping up production of battery and hydrogen fuel cell trucks and making hydrogen fuel, while jettisoning consumer-oriented projects Milton promoted including an electric pickup and battery-powered ATVs and watercraft. 

Later this year Nikola will announce the location of its first hydrogen hub, a plant that will make the clean fuel using mainly water and cheap surplus electricity it’s arranged to buy from Arizona’s main utility provider. The facility will be designed to produce up to 100 tons of hydrogen per day when fully operational, and much of the cost may be borne by oil and gas giant TC Energy—the company behind the canceled Keystone XL pipeline.

“You’re talking hundreds of millions of dollars here, which is why it’s helpful to have a partner like TC,” Russell said. “They’re looking for the next thing for the future, which they think is going to be natural gas getting replaced by hydrogen and so they’re looking to build that future. That’s why we made this partnership. It’s a marriage made in heaven because they would like to make hydrogen and move hydrogen and we need to consume a lot of hydrogen.”

The location of that hub, which will initially be the primary source of the company’s fuel needs, hasn’t been determined. Under its deal with TC, however, the Canadian energy company could provide a majority of the financing for the fuel plant, according to Russell. 

Though Nikola’s not making money yet, its 2021 results were somewhat better than anticipated, Jeffrey Osborne, an equity analyst for Cowen said in a research note. “The company’s  focus on battery and hydrogen technology and use of strategic partners particularly for vehicle manufacturing should allow for a fairly smooth production ramp,” he said in a research note on Thursday. 

Though Elon Musk’s Tesla also intends to compete in the heavy-duty electric truck market with its Tesla Semi, that model is delayed until at least 2023, well after Nikola begins shipping Tre BEV trucks to its first customers. The company also has tentative orders for 1,400 vehicles so far, including 375 Tre BEVs and 1,010 Tre FCEV trucks. The battery model is for fleet customers who only need up to 300 miles of range per charge, while the hydrogen-fuel Tre FCEV is for long-haul routes of 500 miles or more between fueling. 

While truck-oriented competitors including Daimler, Volvo, Cummins, Hyundai and Toyota’s Hino unit have their own plans for battery and hydrogen trucks, none has set as aggressive a business plan as Nikola, which aims to get zero-emission products to big fleet customers ahead of its larger rivals. In the short-term Nikola could also benefit from spiking oil prices, which are surging further after Russia’s Vladimir Putin invaded Ukraine this week, though the real driver is tougher rules on carbon emissions, Russell says. Ultimately, that’s going to drive demand for the kinds of trucks it’s making. 

“There are 3 million trucks in this country and at least 3 million in Europe that have to be replaced,” Russell said in a results call yesterday. “That’s going to happen either by people who want to replace them and go zero-carbon or by people who cannot operate in certain jurisdictions with the current diesel technology. Diesel is going away. It’s going to be gone and you’ve got to have a zero-emission solution.”

Nikola shares rose 17.7% to close at $8.04 in Nasdaq trading on Thursday.