On the surface, it might actually look like Nikola is winning. It’s the hot new car electric company on the block. It already passed Ford (NYSE:F) and Fiat Chrysler (NYSE:FCAU) in market capitalization. Nikola (NASDAQ:NKLA) cofounder Trevor Milton even claimed he could outduel Elon Musk.
What’s not to like?
Well, besides creating $0 in revenue so far, it’s about to compete directly with titans of the industry: something Tesla (NASDAQ:TSLA) never had to face.
The sleek design and the blatant Tesla imitation has retail investors drunk with excitement. But they’re about to wake up with a massive hangover.
Nikola has been unabashedly taking aim at the entire automobile industry, including Tesla and Ford. Their new Badger truck looks like a rip-off of the Ford F-150; the truck their cofounder aims to out-sell.
Ford, however, just announced plans to have its electric F-150, and an electric van, on the market by mid-2022.
On Wednesday, Ford COO Jim Farley told CNBC,
We are No. 1 in the pickup and the van market in Western Europe and the U.S., and this is our chance. We are electrifying and we’re a brand people trust.
Do you hear that, Nikola lovers?
Ford, a company that’s been around for over 100 years, with a proven track record and a solid base of supporters, will be directly competing with Nikola’s headlining vehicle.
But that won’t be Nikola’s only competitor.
Amazon-backed Rivian already has its R1t electric pick-up truck available for preorder. GM has announced the 2022 release of an electric Hummer. And of course, the godfather Elon Musk plans to release Tesla’s Cybertruck at roughly the same time as Nikola’s Badger.
But that’s not the only reason why betting on Nikola is such a terrible idea.
Unfortunately, Nikola has other issues. All four of Nikola’s truck models will run on hydrogen. Nikola Badger is the only one that will come with a fuel-cell electric vehicle (FCEV) version and a battery electric vehicle (BEV) version.
While some have claimed that hydrogen reduces carbon footprints even more than electric batteries, there’s a reason car companies have mostly avoided the energy source.
Simply put, hydrogen is far less efficient. The process of converting the hydrogen reduces the energy output by 62%.
In the case of the passenger car, everything speaks in favour of the battery and practically nothing speaks in favour of hydrogen.
Analysts have been quick to point out the absurdity of Nikola’s rally.
Sam Abuelsamid, a transportation analyst at research firm Guidehouse Insights, told Bloomberg:
People are looking at this as the next Tesla, and they’re being stupid. Investors are being ridiculous. While I think the tech absolutely has the potential to be disruptive, I don’t know that Nikola in and of themselves are, necessarily.
It appears as though some investors have started to do their research as well. Nikola’s stock is already deflating.
It’s dropped over 15% since closing yesterday at nearly $80 a share.
The news from Ford didn’t help. And Elon Musk just hyped his plans for an electric semi-truck , sending TSLA stock careening over $1,000 a share.
To recap, Nikola doesn’t have the technology, the infrastructure, or the reputation of its competitors. So why has it sky-rocketed in market value?
Retail investors have been captivated by the name and the look, both of which were borderline plagiarized from other companies. Throw in an ambitious cofounder and investors were firing up their Robinhood apps to FOMO their money into a purely speculative bet.
While Nikola may end up being a fine car company someday, it still has much to prove.