Does Nikola pivot bode ill for US BEV truck future?

The start-up is shifting strategically away from electric towards hydrogen. The key question is whether the move is company-specific or reflective of industry demand

Phoenix-headquartered truck manufacturer Nikola Motors will pivot away from its Tre BEV model to focus on its hydrogen Tre FCEV, announcing a pause on manufacture of the former and a switch to a produce-on-demand strategy on resumption. “Let me lay it out very plainly: the future of Nikola is hydrogen,” says the firm’s CEO Michael Lohscheller .

There are several compelling reasons for Nikola’s move, including what it sees as its first-mover advantage on hydrogen and the pricing power that may give it, as well as lower production costs for a firm that continues to bleed cash. But the elephant in the room is customer demand — is Nikola’s bet on hydrogen motivated by US hauliers saying hydrogen is what we want, or are the OEM’s specific circumstances motivating it to try to capture what hydrogen demand there is even if electric trucks emerge as the ultimate winner in the sector?

On the firm’s Q1 conference call this week, Bill Peterson , equity research analyst at bank J.P. 摩根 put the question directly: “are people really gravitating more towards the fuel cell?” he asks. And evidence from the call seems mixed.

Unsurprisingly, the firm is keen to talk up demand for hydrogen trucks. “There is a very strong interest in the fuel cell truck,” says Lohscheller of his experience at the recent ACT Expo event in Santa Monica, CA.

“There is interest in the battery electric truck, especially for ports, but overall the topic is really hydrogen and [its] infrastructure. That is where most customers will go,” he continues.

Factors driving this demand, in Lohscheller’s view are the 500-mile range and 20-minute refuelling times— key in an industry “all about uptime that you have to drive the truck”. And Nikola has some figures to back up its claim, pointing to 140 firm customer orders to its dealers.

“This number is going up on a daily basis,” says Lohscheller. “It shows that people want to have this truck now and do not wait. I think we see a clear trend in terms of fuel cell and hydrogen.

Some analysts are positive about the shift, which will see future BEV orders fulfilled by current inventory of 152 vehicles until July, after which manufacture will resume only on order-by-order basis. “I applaud the decision, like the outcome,” says Jeff Osborne , managing director at New York bank Cowen Inc. .

But not everyone is convinced that backing hydrogen is an open-and-shut case. Winnie Dong , vice-president, equity research at 德意志银行 , is concerned that the pivot comes in the wake of “quite a bit of improvement in terms of retail deliveries” for the Tre BEV and “encouraging signs that end customers are taking retail deliveries” in Q1.

And this is where Nikola gets slightly more equivocal. “We have seen uptick on the retail side with 33 trucks being retailed in the quarter… much more than we retailed in the total year 2022,” admits Lohscheller. Q1 also saw 162 wholesale deliveries of the firm’s BEV truck.

“It depends on the applications,” the Nikola chief continues. “The ports in California, they prefer a battery electric truck and we are happy to continue [them].”

What may be more key for Nikola is less an overwhelming shift on the demand side to hydrogen fuel cell over BEV than what it sees as significant competitive advantage in the former. “We have a unique selling proposition because, at the moment, we are the only ones in the market starting production in July,” says Lohscheller.

And this first-mover advantage could also give it greater pricing power.

“On the fuel cell, we have a lot of opportunity with our pricing,” says Nikola CFO Stasy P. . “We are going to be first to market, so we will have a little bit more pricing power there. And we will be able to get a better margin on the fuel cell.”

All compelling points that speak to the logic of Nikola’s pivot. But perhaps not enough to call the whole North American trucking market for hydrogen over electric just yet.