Nikola Corp. is unlikely to sell any battery-electric trucks this year because of semiconductor shortages for critical components, but it will let select customers and dealers use the trucks to build mileage and get retrofits later.
The company said Tuesday it expects to deliver 25-50 nonsaleable “pre-series” battery-electric Class 8 Tre cabover models in Q4. That is half as many as it previously predicted and well below the original projection of up to 600 trucks.
The trucks will be missing microchips that power crash sensors, touch screens and other displays, meaning Nikola cannot transfer their titles to paying customers.
“We’ve got the manufacturing capability to build up to 80 trucks in [the new plant in] Coolidge alone in the fourth quarter, but we may not receive enough of those components by early December to deliver saleable trucks to regular customers,” CEO Mark Russell said on a call with analysts.
“We’ve got the manufacturing capability to build up to 80 trucks in [the new plant in] Coolidge alone in the fourth quarter, but we may not receive enough of those components by early December to deliver saleable trucks to regular customers.”
Mark Russell, Nikola CEO
“The common root cause is the worldwide shortage of integrated circuits and critical chip sets,” he said. Nikola is paying premiums to get faster delivery of some critical components which, if received, could still allow for a few saleable trucks in Q4.
But instead of projected Q4 revenue of $15 million to $30 million, Nikola (NASDAQ: NKLA) could see from zero to $7.5 million, according to Chief Financial Officer Kim Brady. Gross profit, however, could improve by $6 million to $10 million because Nikola would deliver fewer trucks than planned.
Milton in the rearview mirror
It is these challenges, rather than last week’s federal indictment of founder and former Executive Chairman Trevor Milton that are occupying Nikola leadership’s time.
“The approximately 100 pages of charges against Trevor are against Trevor personally, and nothing the company said or filed was mentioned in the indictment,” Russell said. “This is a potential distraction. There’s lots of potential distractions out there, and our job is to keep everybody focused.”
It is uncertain but unlikely that Nikola will face criminal charges since the Justice Department did not allege any wrongdoing by the company when Milton was charged last Thursday. Many of the allegations in the indictment were first reported by short seller Hindenburg Research in September.
Nikola, however, has not been spared financially or reputationally. The company has paid tens of millions of dollars in legal fees, including $11 million in Q2, to defend itself and, because his contract required it, Milton himself.
The possibility of a civil fine from the Securities and Exchange Commission looms. The commission last week filed a civil suit against Milton, who is free on a $100 million bond awaiting trial on the criminal charges.
Show me the money
Nikola arranged for a line of credit of up to $300 million supported by stock sales during the quarter. If all sales are completed by the end of the year, Brady estimates Nikola could have $500 million to $530 million in cash on hand at the end of the year.
But with capital expense costs rising in the second half, he said it is likely Nikola will go to the markets in search of more cash through a follow-on stock offering or convertible debt in the third or fourth quarter.
To avoid dilution in the value of the roughly 400 million current shares, Brady said it would be best to wait for the price to recover. Nikola shares closed Tuesday at $10.21, down 8.7%. Shares have dropped 28% since Milton’s indictment last week.
Milestone update
A retooled plant in Ulm, Germany, with joint venture manufacturing partner Iveco, and Phase 0.5 of a greenfield site in Coolidge, Arizona, are on track. Nikola is building two battery-electric prototypes and five hydrogen fuel cell trucks in Coolidge while the first phase of the plant is finished.
The fuel cell trucks will go to Anheuser Busch (NYSE: BUD) for test freight runs between Los Angeles and Phoenix. Nikola expects to break ground on its first commercial hydrogen fueling station in Arizona in Q4. In a deal with Arizona Power, Nikola is purchasing solar-powered electricity at a discount that it needs for making hydrogen.
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