Published on March 3rd, 2020 | by Kyle Field0
Nikola Receives New Cash Injection As Part Of Merger With VectoIQ, NASDAQ Listing
March 3rd, 2020 by Kyle Field
Nikola is merging with VectoIQ as part of a move that will see the new company being listed on the NASDAQ at an estimated post-merger valuation of $3.3 billion. The new company will operate under the Nikola Corporation name and be listed under the stock ticker “NKLA.”
In conjunction with the merger, another $525 million will be injected into the company by institutional investors including Fidelity Management & Research Company, ValueAct Spring Fund, and P. Schoenfeld Asset Management LP. The new funds Nikola will help the company to move some of its lengthy list of hydrogen fuel cell and battery electric prototype and concept vehicles into production.
“In our two-year quest to find a partner that was a proven technology leader and focused on making a global difference, Nikola was the clear winner,” said Stephen Girsky, CEO of VectoIQ and former Vice Chairman of General Motors Corporation. “Nikola’s vision of a zero-emission future and ability to execute were key drivers in our decision.” Girsky will join the board of the new Nikola Corporation after the merger is finalized.
A key component of that expansion is the build-out of a network of 700 hydrogen fueling stations to underpin the deployment of its fuel cell vehicles. To date, Nikola has invested funds into improving hydrogen production and the infrastructure required to support it as a key prerequisite for its future vehicles.
On the investor call announcing the merger this morning, we learned that each station would require an estimated $17 million of capital expense per fueling station. That’s a significant chunk of coin and underscores the need to strategically deploy new fueling stations along critical routes for early customers. Supporting arterial routes for early customers will enable Nikola to get the most bang for its buck on each and every early fueling station it builds.
Even if the company spent every penny of its new $525 million investment, it would only be able to build the first 30 fueling stations. If the company instead positions its first hydrogen fueling stations to support early customers, it can tap into the massive backlog of committed early orders. That’s the only path forward, so look for Nikola to forge close partnerships with early customers as it begins not just the production ramp, but the installation of fueling stations.
At present, Nikola has a backlog of more than 14,000 pre-orders for its vehicles, representing a lucrative $10 billion of potential early revenue if the company can successfully ramp up production. Translating a long list of pre-production vehicles into their final production form and ramping production has been the proverbial Mount Everest of challenges that has thwarted the plans of many founding new energy vehicle companies.
Nikola has positioned itself well to tackle the summit and ramp up to volume production of its vehicles by partnering with a wide range of established partners in the heavy trucking space like Meritor for suspension and related components, CNH Industrial, IVECO, Bosch, Nel for hydrogen production and fueling, and Ryder for service.
The first production vehicles to roll out of Nikola’s factories in Coolidge, Arizona and partner facility being operated by IVECO in Ulm, Germany will be battery electric variants as the company works to deploy its first hydrogen fueling stations to support its fuel cell vehicles. The location of Nikola’s future factory in Coolidge is currently little more than a dirt lot in the middle of the desert but the company plans to use the new cash injection to break ground on its new manufacturing facility once and for all.
Curiously, the company has not secured any orders of battery electric trucks yet, meaning that all 14,000 pre-orders for its vehicles are for hydrogen fuel cell trucks. Nevertheless, the company expects to bring in $150 million in revenue in 2021 from sales of an estimated 600 battery electric trucks.
Production of Nikola’s hydrogen fuel cell electric trucks is slated to begin in 2023 after which production will quickly ramp to fill customer orders. Just one year later, in 2024, the company expects battery electric truck sales to hit 7,000 with hydrogen fuel cell electric truck sales hitting 5,000, according to statements from the company shared on the investor call this morning. The rapid production ramp is a tall order to fill, as hydrogen fuel cell electric trucks are far more complicated than the pure battery electric trucks the company will produce initially.
Nikola is working to woo fleet managers into the Nikola ecosystem with a new bundled lease offering that rolls all vehicle, maintenance, and fueling costs into a simple 7-year, 700,000 mile lease payment. Internally, the company sees the new lease program as lucrative, with $173,000 cash being generated for the company over the life of each vehicle lease.
For customers, Nikola expects the new leases to provide a path to zero emission trucking at “competitive pricing to diesel.”