Nikola motors – worth more than Ford?

Despite the evident economic carnage caused by COVID-19 lockdowns, stock markets around the world have been remarkably buoyant. Some individual stocks have done even better, soaring into the stratosphere on the back of optimism. one fascinating example is new cleantech darling Nikola motors. Nikola was of course the first name of noted electrical inventor Tesla. Sound familiar…?

While there is no shortage of Tesla sceptics out there, even they have to admit that the company actually makes and sells cars quite successfully and was already doing so on its IPO in 2010. Nikola is trading at a higher market capitalisation than Ford (as of the close of trading on 15 June) on the promise of 14,000 orders for its hydrogen powered trucks. The thing is the company has decided not to take any deposits, so there’s no obligation for these potential customers to become real customers when the trucks finally materialise (none of them have been built yet). These potential customers may wish to wait and see whether or not the trucks actually match up to their requirements and whether or not there will be enough refuelling stations (Nikola hasn’t deployed its refuelling stations yet either) and if the company can deliver servicing and maintenance as required (a lease package is on offer which includes fuel and maintenance). Oh, and they are apparently developing a sideline in electric-powered dune buggies and jetskis?

Lest anyone think this is all one big illusion, the company does have some serious backers. IVECO, the truck maker, has set up a joint venture with Nikola to manufacture the first iteration of its truck, a battery-powered one. It has lined up a contract for servicing and putative customers include Anheuser-Busch, maker of fizzy beverage Budweiser who have said “put us down for 800 of your big rigs”.

Here at NEM risk bulletin, we are not stock pickers. So, we am not trying to advise anyone to buy, sell or short this company. If it succeeds, the CEO Trevor Milton will go down in history as one of the great entrepreneurs for executing the company’s strategy on several levels simultaneously: manufacturing (both battery-powered and fuel-cell vehicles), sales, servicing, widespread deployment of electrolysers and refuelling facilities and – perhaps most importantly – financing. He has built five businesses before but only two succeeded and were on a much smaller scale.

What this illustrates – apart from perhaps the weird psychology of investors’ irrational optimism – is the excitement the nascent green hydrogen industry is generating. It continues to be many things to many people – zero carbon heat for heavy industry, pollution free vehicle fuel, a way to soak up excess renewables and balance out the electric grids and a key agricultural input (via ammonia-based fertiliser). This won’t be the last hydrogen hype story we hear for sure.