Nikola Tries to Ignite Market for Its Hydrogen Fuel-Cell Trucks

Nikola’s current order volume is far below the 14,000 hydrogen fuel-cell truck orders the company reported in 2020 when investors’ optimism soared over Nikola’s potential to dominate the market for electric heavy-duty trucks as

Tesla Inc.

had done with electric passenger cars. Nikola’s orders at the time were mostly nonbinding, and the company was years away from having the manufacturing and hydrogen-fueling capacity in place to support that many trucks. Nikola’s stock price, which has been falling for months, recently sank to a new low below $4.

Trevor Milton,

who founded Nikola in 2015 and served as its CEO until 2020, captivated investors and other executives with ambitious forecasts of $10 billion in potential revenue from its early orders. Nikola merged with

VectoIQ Acquisition Corp.

, a special-purpose acquisition company, and went public in the summer of 2020. The company’s valuation soared, at one point surpassing

Ford Motor Co.

as Nikola’s stock price reached a high of $79.73.

Shortly after the stock’s debut, investors began questioning the company’s processes and the timing for turning orders into revenue. A short-seller investor’s report in September 2020 decried Nikola as an “intricate fraud,” and said Mr. Milton exaggerated the company’s technology. Nikola disputed the fraud accusations, but Mr. Milton resigned as executive chairman later that month.

Nikola in late 2021 agreed to pay $125 million to the Securities and Exchange Commision to settle allegations that it defrauded investors.

In July 2021, the Justice Department charged Mr. Milton with securities fraud and wire fraud, accusing him of misleading investors. He pleaded not guilty, and his trial in a New York federal court began in September.

The company, with new leadership, is looking to recapture momentum by making steady progress on its plan to distinguish Nikola from other electric-truck manufacturers by offering leases on hydrogen-electric trucks that include the hydrogen fuel. Nikola said it expects to acquire low-cost hydrogen through partnerships with producers and resell it at prices that are competitive with diesel.

“The unique proposition that Nikola brings is that, as we introduce the trucks, we will also introduce the hydrogen-fueling infrastructure to support those trucks,” said

Pablo Koziner,

who was promoted in August to president of Nikola’s commercial business.

The trucking industry has long been interested in hydrogen’s potential as a lighter-weight alternative to batteries. Hydrogen fuel cells create electricity to power a truck’s electric motor from a chemical reaction between hydrogen and oxygen. But there currently is limited availability to fill up trucks with clean hydrogen made from zero-carbon or low-carbon processes.

Under CEO

Mark Russell,

who took over in June 2020 and plans to retire in January, the company has taken a more restrained approach to disclosing orders that it can fill with its nascent production capacity. Nikola reported just over 1,000 orders for its hydrogen truck in April.

Anheuser-Busch Cos.

signed up for 800 of those trucks as part of Nikola’s lease program.

Nikola executives said they are counting on the company’s battery-powered truck—known as the Tre BEV model—to raise Nikola’s profile in the truck market and provide assembly experience as it prepares to build its hydrogen trucks next year. The BEV’s batteries have a maximum range of about 350 miles, compared with 500 miles for Nikola’s hydrogen truck, executives said.

Producing both types of vehicles adds complexity and costs, analysts said. Nikola is acquiring Romeo Power Inc. to supply battery-pack technologies and manufacturing processes for its trucks. Nikola also is developing a hydrogen-fueling network to ensure that customers can get fuel.

Nikola, which reported revenue for the first time earlier this year, collected $18.1 million in revenue from the quarter ended June 30, mostly from the delivery of 48 battery-powered trucks. The company had a net loss of $173 million in the quarter.

For most trucking companies, the cost of heavy-duty electric trucks remains largely unappealing, analysts said. The initial cost of $300,000 to $400,000 for an electric truck is at least twice as much as that of a diesel model. Nikola said this summer that the average price of its trucks is about $325,000.

In North America, electric trucks account for less than 1% of heavy-duty truck production, which usually ranges from 250,000 to 300,000 vehicles annually. Electric’s share is expected to increase to about 10% by 2027 as tighter environmental regulations make diesel trucks more expensive, according to ACT Research.

Established diesel-truck makers such as

Volvo

AB and

Daimler Truck Holding AG

are also working on hydrogen-powered trucks. Their executives anticipate a slow-developing market for hydrogen and expect battery-powered trucks to be adopted first for regional or local delivery service.

“For those applications, battery electric fits perfectly,” said Rakesh Aneja, chief of eMobility for Daimler Trucks North America, the maker of Freightliner trucks.

In an attempt to set itself apart, Nikola is offering five-year and seven-year leases that include the truck, costs for hydrogen fuel and any service. The leases aim to provide cost certainty for customers. Industry analysts say the leases would transfer more risk to Nikola, which would be responsible for supplying hydrogen fuel at a fixed price without control over the company’s costs for it.

Nikola this summer identified three sites for fueling stations in southern California near the Port of Long Beach. “As we invest in the energy infrastructure,” Mr. Koziner said, “we want customers to take their trucks to those stations and buy the hydrogen that is being produced.”

Write to Bob Tita at [email protected]