In 2020, EV start-ups exploded and as investor appetite for SPACs ramped up, so did the arrival of EV SPACs to market. Sadly, this was not to last. As many established car manufacturers shift into the EV space, the appetite for EV start-ups has lost its lustre. And according to Axios, shares of 19 EV and EV-adjacent SPACs have dropped by around 50% from their share price highs.
One of these is Nikola (NASDAQ: NKLA), which is now trading 81% below its 52-week high. It’s an EV company specialising in developing electric semi-trucks along with hydrogen fueling infrastructure.
But its First Quarter 2021 Earnings were not quite as bad as expected. So, does this mean it’s put its woes behind it and is setting up for a brighter time ahead?
The fact that it’s focused on providing a hydrogen fuel-cell solution for long-haul trucking, may just give it the advantage it needs to succeed, but there’s still considerable doubt in investor minds.
In its recent earnings call the company confirmed, construction of its greenfield manufacturing facility in Arizona is underway. This plant will produce around 2,500 trucks annually.
Meanwhile, in collaboration with IVECO and OGE Energy (NYSE: OGE), Nikola intends to start installing hydrogen infrastructure and fueling solutions throughout Germany.
Traditional automakers have an edge
As the world transitions to greener energy EVs are earning their place and that looks set to continue. The trouble is there can only be so many successes and it’s unlikely that the majority of EV start-ups will ultimately go the distance.
So, for investors, finding the likely winners is key. Last year EV optimism was in plentiful supply but this year the brakes are on. Global chip shortages, inflation worries, and a dose of reality appear to be making investors more cautious in their approach.
There’s also been a much bigger push from the old-timer auto makers. This is exciting for consumers and also for investors. Successful companies like Volkswagen (ETR: VOW3) and Ford Motor Company (NYSE: F) already have a strong reputation and credibility that newcomers lack. They’re also more likely to have easier access to funding.
Will Nikola need to raise more capital?
When it comes to succeeding in the auto industry, access to money is key. The expenses are never ending as extensive testing for safety and durability are paramount. This means there’s a high chance Nikola will need to raise more capital to continue its R&D.
The company currently has sufficient battery supplies to ship the first 50 to 100 Nikola Tre trucks. These are designed for short to medium-haul journeys. The Tre comes in two designs. Tre BEV (Battery-Electric Vehicle) and Tre FCEV (Fuel-Cell Electric Vehicle).
The semiconductor chip shortage could well affect its supply chain and production thereafter. Which would likely lead to more share price volatility.
Nikola has seen no shortage of drama in its short publicly listed life. That’s unlikely to change in the year ahead so investors need to be prepared to weather the storm.
Ultimately, the company is likely to face one of three future outcomes. It will succeed and make shareholders rich, it will fail and go bankrupt, or it will be bought over/merged with a bigger entity.
The company is not yet making money so it’s hard to evaluate which of these three outcomes are most likely. Buyers beware.