Officials in Coolidge, Arizona, report that Nikola Corp. (NASDAQ: NKLA) is making significant construction progress on the first phase of its $600 million electric truck assembly plant.
It’s a bit of positive news for the beleaguered startup. Nikola last week saw the collapse of an equity tie-up with General Motors and a two-day, 40% drop in its stock price as early investors dumped shares at their first opportunity.
With those events over, attention shifts to Nikola’s planned milestones, including prototype battery-electric truck production in Germany and building its U.S. plant.
“Everything is moving the way it’s supposed to,” Gilbert Lopez, economic development director for the city of Coolidge, told FreightWaves last Wednesday. Coolidge is a town of 13,459 residents 56 miles southeast of Phoenix and 69 miles northwest of Tucson.
“I’ve seen where it was said, ‘Well, the groundbreaking occurred and nothing happened,”’ Lopez said. “Well, the plans had to be turned in and reviewed. On a project this size, you don’t start building without plans.”
The months between the July 23 groundbreaking and the start of construction Sept. 30 led to social media posts by Nikola detractors. Drone flyovers of the desert property and comments from builders at a public meeting in September about water at the site suggested a lack of progress.
“The water supply of an industrial site comes from multiple potential sources,” Nikola global head of manufacturing Mark Duchesne told FreightWaves in early October. “We have wells on site which we could use to self-serve our water supply. Or we could use water from the Global Water, the company that Coolidge has contracted water supply with.”
Root of suspicions
Suspicions about delays in plant construction coincided with allegations of fraud and deception by Nikola founder Trevor Milton. A blistering Sept. 10 report by short seller Hindenburg Research came two days after Nikola and GM announced a $2 billion agreement under which the automaker would take an 11% ownership stake in Nikola.
The report’s claims, some of which Nikola disputed, delayed the expected Sept. 30 closing of the deal. Milton resigned Sept. 20 as executive chairman and gave up his board seat following inquiries and subpoenas of Nikola officials by the Justice Department and the Securities and Exchange Commission.
GM backed away last Monday. Instead, GM and Nikola agreed to a nonbinding memorandum of understanding. Nikola may buy Hydrotec fuel cell stacks for its Class 8 hydrogen-powered trucks. No equity tie-up. No contract manufacturing of Nikola’s Badger electric pickup that Milton hyped as a competitor for the Tesla Cybertruck.
Share sell-off
As founder and Nikola’s largest shareholder, Milton was the focus of last Tuesday’s lockup expiration on 161 million shares of stock. He owned 91.6 million shares, about 25% of the company. Free to sell some or all of the shares, Milton’s actions were unknown as of last Friday.
Fuel cell supplier Robert Bosch sold 4 million shares, reducing its Nikola stake to 4.9%. Nikola filed a report with the SEC because Bosch’s stake fell under 5%. Bosch can sell its remaining 18.8 million shares without Nikola filing another report.
Nikola shares closed Friday at $18.88, down 10 cents after two days of small gains. Nikola shares traded as high as $93.99 on June 9, a few days after it began trading under the symbol NKLA when its business combined with special purpose acquisition company (SPAC) VectoIQ.
Construction deadlines
Nikola faces some pressure to stay on track with construction. It beat a two-year start-of-construction deadline set by Pinal Land Holdings (PLH) by five months. PLH provided the 430 acres for the plant in February 2019.
Nikola has to complete construction by February 2024 or forfeit a $4 million security deposit. The money will be returned when the project is complete. Delays could cost Nikola $200,000 a month. If it bails, PLH can keep the security deposit or take back the land.
PLH President and CEO Jackob Andersen told FreightWaves everything he’s seen suggests the project is progressing apace.
“I don’t think I’ve ever seen so much equipment in one place,” Andersen said.
Tax incentives
Like most major projects, Nikola could benefit from local and state incentives forgiving up to 49% of its construction, sales and property taxes. That’s in exchange for the investment and a promise of as many as 1,800 new jobs when the plant is operating on two shifts.
“Right now they’ve got their footing and foundation permit in for two buildings,” Coolidge City Manager Rick Miller told FreightWaves. “One of the buildings is about 75,000 square feet. The other building is about 275,000 square feet.”
The first phase is a pilot plant where Nikola plans to assemble battery-electric Tre models from imported kits as soon as mid-2021. Those will be mostly hand-built. Automation comes later.
“Once the Phase 0.5 is done, they’ll be in here immediately with the next phase,” Miller said.
“I think they’re meeting all the thresholds and timelines they’ve mentioned from day one,” he said. “So if you want to give them a one to 10, I would give them a 10.”
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