The Investor Diary Entry #38: May 9, 2023
Nikola Corp stock analysis is next on my list that is related directly to my investment activity. The first thing that I started doing a couple of days ago is pull up Nikola Corp latest annual report and started reading it.
I think I was hasty when I first read the company profile. I thought it was within the field of producing Hydrogen. It turned out to be much more complicated than that.
As I understood it, Nikola Corporation is made up of three businesses. I am still reading the report; therefore, I cannot make final decisions on the company, but I just finished reading the description of the first business which is producing heavy-duty trucks that fall within two categories; Fuel Cell Electric Vehicles (FCEV), and Battery Electric Vehicles (BEV).
The second business which I am still reading is their energy business which is divided into two main sections; Hydrogen fueling ecosystem, and integrated BEV charging solutions.
The third business is Autonomous driving solutions. This business, I still know nothing about, but I was actually surprised to know that they want to get into that field.
Each one of Nikola’s businesses is within a huge industry, and I really don’t understand the logic behind Nikola wanting to be in all three. I read their reasoning, especially about the first two, the truck manufacturing and the energy businesses, and how they see the benefits of having those two businesses under their umbrella, but honestly I am not sure if this will work.
As I said it is too early to make a judgment as I am still starting my analysis, and within the first third of their latest 10-K report.
Heavy Duty Truck Manufacturing
Reading Nikola Corporation profile, a person will see that Nikola defines itself as a company that will revolutionize the commercial transportation sector by introducing zero emission trucks.
The way that I understand it is that they are starting with what is called Class-8 trucks in both categories FCEV and BEV. To facilitate the adoption of its trucks it is going to build a whole hydrogen fueling ecosystem and BEV charging solutions.
Therefore, the way the business model works is that they are a zero-emission truck manufacturing company that has its own hydrogen fueling and electric charging infrastructure to facilitate the adoption and sales of its trucks to interested clients.
The third element that I still did not read about, that Nikola is planning to add autonomous driving solutions to its trucks to add the benefits this feature to their competitive advantage.
What I liked is that fueling ecosystem and BEV charging solutions will not be built exclusively for Nikola trucks, but they are built to be used by all FCEV and BEV trucks regardless of their brand.
What I don’t know if Nikola is planning to develop its own autonomous driving solution, or is it going to use one that is being developed by another company.
If Nikola is planning to build its own autonomous driving system, then we are looking at three huge companies in one. For a startup that has been founded in 2015 that plans to build and operate such businesses at the same time is something really scary for me.
What Would Make Sense To Me
The competitive fields within the Both EV Truck Manufacturing and Autonomous driving solutions has many big names with massive experience and ready to use infrastructure.
Specifically within the FCEV and BEV truck manufacturing, the annual report admitted that this field has massive competition from brands with heavy experience. Not knowing still how Nikola is planning its move into the autonomous driving business, does not allow me to talk much about it here in this diary entry.
Since there are many companies building FCEV and BEV trucks, what would have made more sense to me, is to see Nikola concentrating on building the fueling and charging infrastructure for the newly forming industry, without getting into the truck manufacturing business.
FCEV & BEV Related Technology
There is another strategy that Nikola could have followed, which is building specific FCEV & BEV components to the existing competition, instead of building their own trucks and selling them to end users.
The detailed process would entail receiving the trucks from the truck manufacturing companies, and installing the related FCEV and BEV related components at its own facilities. This way it can also add another service which is installing the autonomous driving solutions to those same clients.
Accordingly, it would be only developing the technology and manufacturing the components responsible for making the trucks zero-emission, but not for its own truck, but rather for the existing truck manufacturing companies. This is in addition to the installation of the autonomous driving solution that is not being developed by Nikola.
For the Autonomous driving solution, it can either enter into an exclusive agreement with one of the specialized companies developing such a system or install the system based on customer requirement.
Final Verdict
At this stage there is no such thing as a final verdict. What I merely did here, was put down all the concerns that were in my head while I was reading the Nikola Corp’s annual report.
Away from presenting fears and looking in the other direction, Nikola seems to be confident in the way it is moving forward. For example, its agreement with IVECO is bringing a lot of value for both companies. The technological specialization coupled with the geographical specialization within the agreement is extremely positive.
What Tesla is doing in the small vehicle market today by slashing prices and reducing margins, is something that will for sure happen in the EV truck manufacturing industry. We are talking about startups that are still making losses and are still expected to keep burning cash.
Very tricky.
Conclusion
Will, I don’t think there is a conclusion to arrive at here except that I am glad that wrote this analysis. Now I can continue reading and conducting my Nikola Corp stock analysis based on the concerns that I just organized in my head by writing this diary entry.
Yesterday I was reading the annual report with all these thoughts and ideas jumping up in my head, making me lose focus with every paragraph that I was reading.
Now I will be able to continue my analysis in a more focused manner.
The Investor
Tuesday 9 May 2023
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second as a place that I can share my ideas publicly hoping that others will share their ideas and learn from each other, and lastly as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking those links I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
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