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Don’t Be Taken for a Ride: Nikola Corp (NKLA) Is Not the Next Tesla

Last Updated September 23, 2020 1:59 PM
Mark Emem
Last Updated September 23, 2020 1:59 PM
  • Nikola’s market cap now exceeds that of Ford despite zero revenue projections for this year.
  • The renewable energy carmaker will release its first truck next year.
  • Unlike Tesla, Nikola will enter a market with an ever-growing number of players.

Days after it started trading following a reverse merger, renewable energy carmaker Nikola Corporation (NASDAQ: NKLA) has surged over 500%.

Nikola, NKLA stock
NKLA has surged since the stork started trading last week following a reverse merger. | Source: TradingView

In the words of executive chairman and co-founder, Trevor Milton, Nikola is “worth more than Ford and FCA [Fiat Chrysler Automobiles]”  and is “Nipping on the heels of GM.”

Trevor Milton
Nikola co-founder Trevor Milton celebrated the company’s market cap exceeding Ford’s. | Source: Twitter 

Trevor Milton is no Elon Musk

In some corners of the market, Nikola Corporation is being likened to Tesla (NASDAQ:TSLA).

Nikola’s co-founder has even boasted that he is one of the few people in the world who can outcompete Tesla CEO Elon Musk . Said Milton:

There’s very few people that can out-Elon in this world and I’m one of them. Nikola is the pioneer in heavy-duty trucking and Tesla’s just really following in our footsteps.

That’s an idle boast–Nikola Corporation is another run-of-the-mill startup that shouldn’t lose Elon Musk any sleep. The only thing the two companies have in common is that they are both named for Serbian-American inventor Nikola Tesla .

The problem with hydrogen

The renewable energy carmaker  currently boasts four trucks planned for release in the months and years to come–Nikola One, Nikola Two, Nikola Tre, and Nikola Badger.

All four trucks are hydrogen-powered, with Nikola Badger  the only one coming with a fuel-cell electric vehicle (FCEV) version and a battery electric vehicle (BEV) version.

There is a reason why hydrogen has not taken off as an alternative to fossil fuels in road transport despite the technology existing for decades.

For one, hydrogen as an energy source is highly inefficient . The process of converting energy into hydrogen, compressing, chilling, and transporting it before transforming the hydrogen back into energy results in 62% energy loss. If the initial energy amount were 100 watts, only 38 watts would remain for the intended use.

Most importantly for consumers, BEVs are a cheaper solution relative to FCEVs.

Hydrogen is a highly inefficient energy source. | Source: Twitter 

Nikola Motors makes Tesla’s money problems look like child’s play

Tesla’s skeptics like to point out that the Elon Musk-led firm has only had a handful of quarterly profits since listing publicly. But Nikola’s fundamentals look even worse when you consider the growing competition that Tesla didn’t have in its early days.

Nikola projects zero revenues this year  and only expects to generate the first $1 billion in sales in 2023. It was founded half a decade ago, but Nikola has already lost nearly $190 million. At the end of 2019, the company’s cash in hand amounted to roughly $86 million .

Its first truck will be released next year, and two FCEV trucks will be released in 2023. By that time, Nikola will be competing in the truck space with not just Tesla but the Amazon-backed Rivian and the legacy carmakers.

Tesla is a favorite among short-sellers. Will that change because of Nikola? | Source: Twitter 

So, in short, Nikola is not the next Tesla–except perhaps in short interest.

Disclaimer: The opinions in this article represent the author’s opinion and should not be considered investment or trading advice from CCN.com. The author holds no investment position in the above-mentioned companies.