(Bloomberg) — Nikola Corp. has left a trail of inconsistent statements and contradictory announcements that are now coming under scrutiny from short sellers eager to poke holes in the electric-vehicle company’s success story.
Hindenburg Research, which holds a short position in Nikola stock and stands to gain if the shares fall, released a report Thursday detailing what it called “dozens of lies” about the company’s capabilities, partnerships or products. The firm used internal emails, analyzed photos and even cited an investigator dispatched to rural Utah to test how far a car would roll down a hill. Nikola said Hindenburg’s report was full of falsehoods but hasn’t offered anything specific to rebut the allegations.
It doesn’t take a hedge fund or a private eye to determine that Nikola, which struck a partnership this week with General Motors Co., has a pattern of discrepancies. A look at some of its announcements and filings, along with statements and tweets by Executive Chairman Trevor Milton and other management over the past few years, yields other examples that weren’t part of Hindenburg’s report. “It’s a bit confusing trying to follow Trevor on his various social media outlets about the timing and cadence of communication of the different variables that you’re talking about,” Jeff Osborne, a Cowen & Co. analyst, told executives on an Aug. 4 conference call.
Nikola’s shares have tumbled 24% since the Hindenburg report, which, among other sources, cited a Bloomberg story from June about the company exaggerating the capabilities of a truck. Its slump over the last three sessions was 36%.
“We are committed to doing our best to keep the investing public and all of our stakeholders informed and up to date at all times,” Chief Executive Officer Mark Russell said Friday in an emailed response to questions from Bloomberg about the following items.
Under Construction
At a press event on July 22, ahead of the groundbreaking of Nikola’s Coolidge, Arizona, factory, Head of Global Manufacturing Mark Duchesne fielded a question on when construction would get underway. “That one is an easy answer,” he said. “Start of construction is tomorrow.”
The timeline was repeated by Milton the following day in a tweet. But “construction” turns out to be a broad term.
To facilitate the groundbreaking ceremony, the city of Coolidge issued Nikola a temporary use permit on July 13. The document, obtained by Bloomberg, allowed the company to do some limited ground clearing and preparation for holding the event, along with listing a plan for coronavirus safeguards. It didn’t allow further construction to start beyond that. The company also obtained a Pinal County dust permit around the same time, a legal requirement in Arizona.
On Aug. 7, the company received its at-risk grading and drainage permit, City Manager Rick Miller said by phone. The permit allows Nikola to clear dirt and do drainage work on the site, but as yet the company doesn’t have the permits required for foundation work, plumbing, electrical or vertical construction, Miller said. The permits are available through public-records requests.
On Wednesday, Nikola said in a tweet that Coolidge’s city council had approved the company’s “factory masterplan” and that “construction can now go forward.” This is only partly true, Miller said. It was the planning and zoning commission that approved a “major site plan.” The approval will allow Nikola and its architects and engineers to apply for the next batch of permits.
In a statement, Nikola said that by “construction” it meant everything from groundbreaking to seeking permits. Now that its building plan is approved, “the various permits will be obtained in cadence with the steps of the construction. We remain on schedule for Phase 1,” the company said in an email.
“The factory will be up in 12 months,” Milton said in a live broadcast on Instagram on Friday night. “The permit was just issued by the city. We are all good to go.”
Puzzling Partnership
Nikola has a stated ambition of manufacturing hydrogen-powered fuel cell semi trucks by 2023. Since 2017, it has had an agreement for German auto-parts supplier Robert Bosch Gmbh to “develop, build, test and support” various components for Nikola’s prototypes including a fuel-cell system, battery packs, steering pumps and motors, according to a regulatory filing in March.
The details of which partner is contributing what to the project has shifted over time, and the future of the deal has gotten hazier.
Nikola agreed to pay Bosch around $40 million for the development, according to the filing. In a presentation to investors in April, Nikola described the agreement with Bosch as a “co-development” and strategic supply chain partnership and said the company would jointly own any intellectual property developed with Bosch.
However, Nikola executives have regularly stated that Nikola designed, developed and will provide much of the technology for its vehicles — not Bosch. On Friday, Chief Financial Officer Kim Brady said that Nikola will provide only 15% of the parts in battery electric semi trucks due to be built in Ulm, Germany, while partner Iveco provides the rest. However, he added that Nikola’s input represents 90% of the truck’s value.
“We are responsible for Nikola Tre — the batteries, e-axle, e-motors, inverters, BMS system, infotainment system,” Brady said. “All the key electric propulsion systems come from Nikola.”
As recently as Aug. 25, Bosch has said that it’s “working with the company to make the fuel-cell drive for trucks suitable for mass production.”
On Monday, Nikola announced that GM — not Bosch — will mass-supply a fuel cell system for Nikola’s Class 7 and 8 semi trucks, as well as the battery packs for its debut electric pickup, the Badger. On Friday, Nikola clarified that Bosch will supply semi truck fuel cells in Europe, while GM will have exclusivity everywhere else.
“Bosch is an investor, board member and supplier to Nikola. They help us in many facets of our business as our partner,” Nikola said.
Milton bristled at a claim by a Twitter user that Nikola was jilting Bosch in favor of GM.
“Bosch as a company with a dedicated hydrogen strategy welcomes the decision of GM to enter this market as an important player,” Bosch spokesman Tim Wieland said in an email. “Beyond that, Nikola and Bosch have been working together for several years, not only on the fuel cell power train but also on other innovations like the steering system and the Mirror Cam System for the first prototypes of the Nikola trucks. The two companies will continue to cooperate in the future, also on fuel cells.”
Game Changer
Nikola’s narrative about its battery strategy has also shifted over time.
In November 2019, Nikola issued a press release claiming to have “game-changing” battery cell technology that it would unveil at an event in 2020. Nikola also said it had entered into a letter of intent to acquire a “world-class battery engineering team” to help bring the new battery to pre-production.
“We are talking about doubling the range of BEVs and hydrogen-electric vehicles around the world,” Milton said in the statement.
In July, Milton tweeted that Nikola would “make the entire pack like the top guys do” for its upcoming pickup truck, called the Badger. He said that all internal components, such as batteries, inverters, software and controls, are Nikola’s own intellectual property. “We own it all in house,” he said.
Milton clarified in a tweet on Thursday that Nikola’s change of direction — to use GM’s Ultium battery technology for the Badger — was a result of cost analysis and cost savings.
Beer Trucks
Back in March, Nikola said in a presentation to investors that it has a “signed binding agreement” to provide Anheuser-Busch with as many as 800 hydrogen fuel cell electric semi trucks. What the presentation didn’t say was that Anheuser-Busch committed to buy fewer trucks than that, and doesn’t have to buy any at all.
The deal was first announced in May 2018 and stated the trucks were originally expected to be integrated into Anheuser-Busch’s dedicated fleet by the end of 2020, according to a press release.
That timeline isn’t going to be met. During the Aug. 4 earnings call, Russell, the CEO, updated investors on the deal, saying, “We do believe that we’ll be able to give them test prototypes before the end of 2021; serial production or mass production of the fuel cell truck will not begin until 2023.”
That does corroborate with the timeline for production set out in a July filing — and to be fair, lots of people’s plans have changed this year. But in the same filing, Nikola revealed that Anheuser-Busch retains the right to cancel the truck order, though there’s no indication that will happen. The contract also has lease terms and rental rates that may be hard for Nikola to meet, according to the filing, “depending on our ability to develop our trucks and hydrogen network according to current design parameters and cost estimates.”
The agreement between the two companies states that Anheuser-Busch gets priority of delivery for as much as 20% of Nikola’s initial “production line of Class 8 vehicles.” To get production going by 2023, Nikola must work to have dedicated equipment in Anheuser Busch’s breweries and distribution centers by the end of 2021, according to the deal terms. Anheuser-Busch only agreed to use at least 600 trucks — the 800 figure, according to the document, is an estimate of what the brewer will need.
“They have been, and continue to be, a great long-term partner in our shared vision of a zero-emission future (a Nikola Two prototype hauled our first load over public roads for them in St. Louis not too long ago),” Russell said in the statement Friday, referring to Anheuser-Busch. “Our original agreement with them has been modified over time. The current agreement terms are as we set forth in our earnings call.”
Anheuser-Busch didn’t respond to a request for comment. The partnership with Nikola will help the brewer transition its entire long-haul fleet to zero-emission vehicles, Anheuser-Busch said last November.
Prototype Production
On July 13, Milton said European partner Iveco was already producing vehicle prototypes.
“We have a truck coming in to production right now with 720KwH, the largest battery we know of anywhere in the world coming in to production,” Milton said on the TC’s Chartcast Podcast. “We have five of them coming off the assembly line right now in Ulm, Germany.”
On Aug. 4, during the company’s debut earnings call, Russell echoed the sentiment, saying that the first five prototypes were “coming off the end of the facility at this point.”
Those statements were a mischaracterization of Nikola and Iveco’s progress in Ulm, according to two people familiar with the matter. The assembly line is still under construction and not yet operational or building prototypes, the people said. There are prototypes being built by hand in a workshop, one of the people said.
“As stated previously, the first five production prototypes of the Nikola Tre are being completed, by an assembly team at the Ulm facility. Also as stated previously, the Nikola/IVECO JV mass production line facility in Ulm is still under construction, and is on track for the start of regular serial production in 2021,” Russell said Friday. “We anticipate that a number of current IVECO personnel will join the Nikola/IVECO JV production team in Ulm.”
Nikola’s Guidance
Here’s when Nikola has said it will hit its big milestones, based on filings, statements and interviews:
(Corrects type of truck to be built in Germany in fourth paragraph of “Puzzling Partnership” section)
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