Nikola; electric

Nikola Corporation. Credit: Stephanie L Sanchez / Shutterstock.

US-based electric-powered truck manufacturer, Nikola Corporation, faces an uncertain future as investors lose faith, and for good reason.

Nikola’s investors are right to be sceptical

South Korean multi-business conglomerate, Hanwha Corp, is the latest big investor to sell its shares in Nikola. The company plans on divesting half of its stake in Nikola to focus on its own Hydrogen business. The decision to sell stock has come at a time when investors are losing confidence in the truck manufacturer.

Nikola reduced its production targets for 2021, aiming to deliver 100 units to customers by the end of the year, down from its original 600 units. However, despite promising the delivery of the first Nikola Tre BEVs during Q4 2021, the company still hasn’t confirmed any customer orders.

Failure to produce any revenue in 2021 or meet production and sale targets should strengthen concerns shareholders may have about their investment. The company lost $382,725 in 2020. As production commences this year, operational costs are expected to grow with more significant losses expected for 2021.

Legal Investigations could block investment in Nikola

Nikola is planning to sell $100m of stock to investors to raise funds for corporate purposes, including building a factory in suburban Phoenix of Arizona, US. However, the company is currently under an investigation by the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) following accusations of fraud.

Not only did the company incur legal expenses of $28m in 2020, but ongoing investigations and lawsuits could also discourage future investment. The group’s cash reserves are likely to suffer and stockholders risk losing their investment.

Nikola still has time to turn around its fortunes

While Nikola struggles with legal battles and finding buyers, competition in the EV trucking market is growing. There are a number of brands expected to deliver their first electric trucks in 2021. Nevertheless, Nikola still has a chance of becoming successful if the company can quickly rebuild its reputation and reach its end-of-year targets.

At the end of 2020, Volvo introduced its VNR Electric truck to the US and Canadian markets with production taking place in early 2021. However, three months after the commercial release, no orders have been reported. The VNR model also has less horsepower and half the range (150 miles) of the Nikola Tre (300 miles).

Meanwhile, the Tesla Semi Electric Class-8 truck has received orders, including 130 Semis purchased by Walmart Canada in September 2020. However, while Anheuser-Busch, FedEx, PepsiCo and UPS have expressed interest in the Tesla Semi, none have placed the $20,000 per-truck reservation fee. Therefore, the majority of potential customers remain unfulfilled and an opportunity for Nikola to secure orders remains.

Tesla has also delayed production to 2021, giving Nikola more time to restructure its business and reach its end-of-year targets. This has given some investors hope that the Nikola stock will perform in the long-run.

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