Q2 2024 Earnings Summary
- Nikola is actively reducing its bill of material costs by negotiating with key suppliers, focusing on volume thresholds that provide cost reductions, localizing supply chains, and redesigning components for efficiency. This strategy aims to improve gross profit and reduce costs in the coming years.
- Nikola's fuel cell trucks offer significant advantages over battery electric trucks, such as longer range, faster refueling times, and better performance in certain use cases like cold weather and high altitude. Customers have reported getting an average of 275 miles per fill with refueling times of about 20 minutes, enhancing truck uptime and efficiency compared to competitors.
- Strong customer demand for Nikola's fuel cell trucks is evident, with customers seeking immediate deliveries to utilize available vouchers and expand their zero-emission fleets, rather than delaying orders due to political or rate uncertainties. This reflects confidence in Nikola's technology and its appeal to fleet operators looking to meet sustainability goals promptly.
- Nikola faces significant cash burn and liquidity concerns, with the CFO acknowledging that the company may be close to running out of cash by the end of the year: "we'll be getting close to being out of cash."
- Potential supply chain challenges may hinder Nikola's ability to obtain key components needed for production, especially as they may compete with larger OEMs for limited parts in 2025 and 2026.
- Nikola's business model is heavily reliant on government subsidies and regulatory support, exposing it to political risks; changes in policies or administration could negatively impact the availability of such support.
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Cash Burn and Funding
Q: How will you manage cash burn and funding needs?
A: Tom acknowledged that unrestricted cash stands at $256 million. Given the current burn rate, they anticipate nearing the end of cash by year-end. They are confident in securing additional funding and aim to operate next year without the need for continuous market raises. They are engaging with investors to ensure they have enough cash to run operations without delaying key projects like hydrogen infrastructure and next-gen vehicle development. -
Monetizing Regulatory Credits
Q: How will monetizing credits impact the bottom line?
A: Tom explained they expect to generate $45,000 to $50,000 per unit from CARB credits. These credits contribute 100% gross profit and could become a significant revenue stream as volumes grow. Other states are considering similar programs, potentially expanding this opportunity. -
Competition from EV Trucks
Q: How do you view competition from EV trucks like Tesla?
A: Stephen noted that customers have found battery electric trucks from competitors have limitations such as reduced range and long charging times. Nikola's fuel cell trucks offer longer range, quicker refueling in about 20 minutes, and better performance in conditions like cold weather and high altitude. Customers appreciate the advantages of fuel cell technology for specific use cases. -
Supply Chain Risks Amid High Diesel Demand
Q: Are you confident about obtaining parts amid high diesel demand?
A: They haven't seen any supply issues to date. Most supply constraints have been related to new tech components rather than common parts shared with diesel trucks. They have received no indications from suppliers about future issues and believe they are in good shape. -
Strategic Partnerships Expansion
Q: Where are you focusing potential strategic partnerships?
A: Stephen discussed building partnerships in areas like hydrogen supply and components, especially in regions where hydrogen is prevalent like Asia. They aim to build a purpose-driven coalition to lower costs, defer capital, and fund the business. Thomas added that they provide opportunities for partners looking to invest in hydrogen infrastructure and growth vectors. -
Reducing Bill of Materials Costs
Q: Are there plans to further reduce the bill of materials?
A: Yes, they are working with key suppliers to achieve volume thresholds that reduce costs. With five suppliers making up 65% of the bill of materials cost, they are concentrating efforts there. They are also localizing suppliers and redesigning parts for efficiency. The next-gen vehicle offers an opportunity for a bigger cost reduction. -
Customer Demand and Order Cadence
Q: Are customers delaying orders due to rate changes or elections?
A: No, most customers are trying to cycle vouchers now, especially in California. They are eager to receive trucks as soon as possible. The focus is on building pilots and aligning with customers' sustainability goals rather than concerns over rate changes.
Research analysts covering NKLA.