Nikola takes small steps towards big electric, hydrogen trucking goals

US-based heavy-duty electric and hydrogen truck maker Nikola began 2022 in much the same way as it ended 2021, unveiling domestic deals on 5 January and 6 January for its Tre BEV model that could lead to larger purchases.

The company, which faced mockery of its concepts and products as well as US regulatory discipline on its journey from a start-up to publicly traded company, is beginning to build some sales momentum. But the road for manufacturers and the infrastructure surrounding heavy-duty haulage using battery electric vehicle (BEV) and hydrogen-based technology will be arduous and long, say analysts.

The manufacturer said 5 January it had signed a letter of intent for the purchase of 10 Tre BEV with USA Truck. The deal also includes an option to buy a further 90 Nikola trucks over the next two years. Nikola's partner Thompson Truck Centers will provide service, maintenance, and the infrastructure for the trucks. The trucks will be delivered in the first half of 2022, the companies said.

Van Buren, Arkansas-based USA Truck has over 2,000 drivers and expects the deal with Nikola to further its environmental, social, and governance (ESG) goals. The company is already recycling the metal from its repairs, recycling oil and oil filters, and deploying low-rolling resistance tires as part of its ESG efforts, it said.

A day later on 6 January, Nikola said Saia LTL Freight had inked a letter of intent to purchase or lease 100 Tre BEVs after the "satisfactory completion" of a demonstration program involving three trucks that is set to begin in the first half of 2022. If this works out, the first 25 of the order for 100 Tre BEVs will be delivered in 2022 and the remainder by the end of 2024. Johns Creek, Georgia-based Saia LTL Freight specializes in less-than-truckload services.

Before that, in late December, Nikola said Oak Brook, Illinois-based bulk liquid specialist Heniff Transportation Systems signed a similar deal to the USA Truck agreement, with an initial acquisition of 10 cabs. Deliveries are expected to commence in the first half of 2022. Upon successful deployment, Heniff would buy an additional 90 trucks, Nikola said.

At present, Heniff has a fleet of more than 2,000 tractors. CEO Bob Heniff said the deal was part of an acceleration of electrifying the company's fleet.

Nikola began delivery of Tre BEV model cabs in 2021 and expects to be able to supply customers with the Tre FCEV, short for fuel cell electric vehicle and powered by hydrogen, in 2023 and its Two FCEV sleeper option (which allows the driver to sleep more comfortably in the cab on long-haul trips) from 2024 onwards. In an FCEV, the power generated by the fuel cell stack is used to drive an electric motor, and Nikola's plans also involve an onboard rechargeable battery.

While deployment of Nikola's FCEV models is a little behind that of the Tre BEV, the company in October said a deal was in place for Aliquippa, Pennsylvania-based PGT Trucking to lease 100 Tre FCEVs following the "satisfactory completion" of a demonstration program. Delivery of the cabs to PGT is expected to begin in 2023 when production commences at Nikola's Coolidge, Arizona, manufacturing facility, the truck maker said.

Manufacturing plants

Tre FCEV production will also begin 2023 in Germany in partnership with European truck manufacturing powerhouse Iveco, which is controlled by CNH Industrial, part of the transportation holdings of the Agnelli family, the driving force behind the rise of Italian car manufacturer Fiat.

Nikola and Iveco inaugurated the manufacturing plant in Ulm in September. The trucks will be based on the Iveco S-WAY truck platform. Tre BEV production will start in 2022.

Launching the battery technology first will drive the maturity of the underlying platform before adding the fuel cell as a range-extension technology, the partners said.

Iveco has a number of other partnerships underway to develop alternatives to existing fuels used by trucks. In December, the company said it had teamed up with industrial gas specialist Air Liquide to develop heavy-duty hydrogen trucks as well as refueling solutions. In November, Iveco said it was working with Italian utility Edison on deploying LNG-powered, heavy-duty trucking options. The deal was part of a raft of options for Iveco, CEO Gerrit Marx said in a statement, and built upon existing biomethane-powered trucking options the company already offers.

Nikola and Iveco's FCEV plans are based on another partnership with an established manufacturer the US company has linked up with—German engineering group Bosch. The Tre FCEV and Two FCEV models will use a Bosch commercial vehicle fuel cell stack, the companies announced in September.

Such partnerships, and others in the hydrogen infrastructure environment, have substantially lowered the risk surrounding Nikola as well as the company's potential capital requirements, according to DA Davidson Senior Research Analyst Michael Shlisky.

Nikola has hydrogen production and fueling station deals in place with Canadian pipeline and storage specialist TC Energy, truck stop operator TravelCenters of America, Indiana-based gasification plant owner Wabash Valley Resources, and renewable gas producer and distributor Opal Fuels.

The multi-layered nature of Nikola's dealmaking reflects the hurdles the company and its BEV and FCEV competitors face in building the infrastructure to kickstart the sector's growth.

The transportation industry has never seen a transition like this before, American Trucking Associations Energy and Environmental Counsel Glen Kedzie told Net-Zero Business Daily 4 January. There's no flipping a switch and everything being ready, he said. The diesel infrastructure the US haulage industry of today took 75 years to build, Kedzie noted. Building the alternative infrastructure for BEVs and FCEVs will require lots of expertise, money, and patience, he added.

Distance from Milton

Patience has been a requisite for Nikola backers and investors over the past couple of years as the company dealt with the fallout from comments by founder Trevor Milton.

After charges were filed by the US Securities and Exchange Commission (SEC), the company agreed to pay a $125-million fine and promised to give the agency all the help it requests, but Milton is still facing criminal proceedings in New York. Nikola's settlement with the SEC in 2021 was over charges it defrauded investors by misleading them about its products, technical advancements, and commercial prospects.

The SEC said Nikola misled investors by misrepresenting or omitting material facts about the refueling time of its prototype vehicles, the status of its headquarters' hydrogen station, the anticipated cost and sources of electricity for its planned hydrogen production, and the economic risks and benefits associated with its contemplated partnership with a leading auto manufacturer.

Nikola said 21 December that the first installment of the fine would be paid by the end of 2021. The company said it had taken action to seek reimbursement from Milton for costs and damages in connection with the government and regulatory investigations. A spokeswoman for Nikola declined to comment on what stage its efforts seeking redress were at when contacted by Net-Zero Business Daily.

Milton, meanwhile, is still being targeted by the SEC and the US Attorney for the Southern District of New York, charged with securities and wire fraud over the development of products and technology at Nikola.

Part of the New York charges involve Milton taking advantage of going public by merging with a Special Purpose Acquisition Company or "SPAC," rather than through a traditional initial public offering (IPO). The criminal and civil charges against Milton were the most aggressive charges in connection with a SPAC and de-SPAC transaction—taking the company public after the SPAC has identified a target—that the US Department of Justice (through the US attorney's office) or the SEC had brought to date, lawyers from Clifford Chance said in an August note.

SEC Chairman Gary Gensler said in December there were 181 de-SPAC transactions in 2021, with a total deal value of $370 billion, compared with 26 in 2019. Gensler said in December he wants to offer potential SPAC investors the same protections when it comes to disclosure, marketing practices, and gatekeeping obligations as is available for traditional IPO investors.

Transforming trucking

Nikola is now a public company, subject to full SEC scrutiny in its statements such as the latest announcements on deals with buyers and partners, of which there are expected to be good deal more, because a great deal of change is coming to the trucking industry, experts say.

The distance trucks are travelling is decreasing, with the whole supply system changing, according to ATA's Kedzie, which is a positive change for BEV and FCEV truck manufacturers.

The move to BEVs, FCEVs, and hydrogen trucks is going to happen, the only questions are on the timing, said Kedzie. The first adopters will those players who use a hub and spoke methodology, with 50- or 100-mile roundtrips, he said. This type of customer is the focus of the Tre BEV and Tre FCEV, according to Nikola.

Posted 06 January 2022 by Keiron Greenhalgh, Senior Editor