Nikola cuts 100 jobs and slows production of electric trucks

Electric truck maker Nikola Corp. lays off 7% of its workforce — and 100 employees — and slows production of its battery-electric trucks because the more it produces, the more money the company loses.

In a news-filled third-quarter earnings report on Thursday, Nikola also said it was revising an executive compensation plan that could have turned multimillionaires into top executives if certain share price thresholds were met.

Executive compensation plan revised

Nikola lowered the $40 and $55 per share thresholds and extended a $25 per share bogey through June 2024. The moves allow Nikola to return $58.8 million to its balance sheet.

Nikola shares traded around $3 on Thursday, far from hitting the lowest level of $25 per share, which would allow executives to secure stock awards they agreed to in 2021 in exchange for the Accept $1 a year salary for three years.

Economic headwinds, rising inflation and borrowing costs, and unforeseen costs related to the purchase of struggling battery supplier Romeo Technology prompted Nikola to withdraw production guidance for the fourth quarter and 2023. It said it will not meet its already lowered estimate of building 300 battery-electric trucks this year.

Nikola has also indefinitely delayed construction of the third phase of its $600 million facility in Coolidge, Arizona.

The company remains on track to deliver hydrogen fuel cell electric trucks in the second half of 2023 and to complete the second phase of the Coolidge plant, which would allow it to build 20,000 Class 8 trucks per year.

“Sufficient” liquidity for the next 12 months

Nikola had approximately $1 billion in cash at the end of the third quarter with $400 million in cash and cash equivalents.

It can sell $312 million of stock through an existing equity line of credit and $295 million under a market arrangement with Citigroup Global Markets. This deal has already sold $105 million.

Total cash increased from $841 million at the end of the second quarter and is “enough” to fund Nikola’s business plan for the next 12 months, CFO Kim Brady told analysts on a earnings call on the third quarter.

Nikola’s earnings of $24.2 million exceeded analyst estimates by $2 million. A loss per share of 28 cents was 10 cents lower than analysts had expected. An early 10% gain in the stock price turned negative during the earnings call. Shares closed up 10.91% at $2.93 on Thursday.

After purchase Romeo surprise

After buying the ailing battery pack maker, Nikola learned that Romeo was subsidizing battery pack cases at $110,000 each. It takes Nikola five quarters to bring those costs up to the level of the competition.

“We have a significant gap between average selling price and unit cost, so we’re losing money,” Brady said. “It’s important, at least for the next five quarters, that we’re very thoughtful about this. We want to make sure we are as prepared as we think we are by 2023. We know the market could get worse.”

Nikola will reduce operating and capital costs by 20% to 30% in 2023, Brady said.

Why deal with battery electric?

JP Morgan analyst Bill Peterson asked why Nikola is pursuing battery-electric trucks when other manufacturers can make them more efficiently and cost-effectively.

“We feel good that we have two [zero-emission] Legs you can stand on,” said Nikola President Michael Lohscheller. “In the end, the customer decides.”

Nikola has more intentions to purchase the fuel cell truck, which will start production in the second half of 2023, than battery electric trucks. Originally, the company had planned to only offer the battery-powered truck in Europe.

“I think there are many possibilities for the fuel cell. But I think it’s very good that we both have alternatives,” said Lohscheller.

Cowen analyst Jeffrey Osborne seemed to agree.

“We see a more significant demand acceleration in 2024 as fleet decarbonization targets come into effect and California regulation begins,” he wrote in an investor note.

Most trucks in dealer inventory

Nikola delivered 75 battery-electric Tre models in the third quarter when all 93 early models were recalled. A seat belt issue has been identified in cabs imported from manufacturing partner Iveco.

Customer deliveries for the quarter were just 14 trucks. Another 97 are in dealer inventory. Retail sales are slow because of lagging charging infrastructure and reimbursement from a California rebate program.

As a small company, Nikola can’t offer much to help early customers meet their charging needs for electric trucks they’ve purchased. Larger established companies such as Daimler Truck North America, Volvo Trucks North America and Paccar Inc. sell chargers and help fleets tackle tedious and expensive infrastructure installation problems.

Editor’s note: Updates with stock closing price and analyst commentary.

Nikola acquires Romeo Power to ensure battery supply

Nikola managers play the long game and take $1 a year after the SPAC salary

Rely on hydrogen: Nikola plans 60 stations by 2026

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