Republic Services (NYSE: RSG) has placed an order for 2,500 battery-electric garbage trucks from Nikola Corp. (NASDAQ: NKLA) canceled, raising new questions about the electric truck startup’s ability to generate revenue to keep its business plans alive. The development of the trucks based on the Nikola Tre would take too long and cost more than expected, Nikola said in a press release on Wednesday. The goal of working with Republic was to design and build the industry’s first fully integrated garbage truck based on an emission-free battery-electric drive platform and body. It would also incorporate several new systems. In a conference call with investors Wednesday morning, Nikola management said the Republic program was $ 200 million over budget. According to Jeffrey Osborne, an analyst with Cowen Inc., the program would require a bottom-up redesign instead of using the Tre base chassis as planned. “Given the resources and investments required, this was the right decision for both companies,” said Mark Russell, Nikola CEO. We support and respect Republic Services’ commitment to providing environmentally friendly and sustainable solutions for their customers. ” Republic tests a Mack LH Electric garbage truck. A second Mack LH Electric works for the New York City garbage collection. Mack is taking orders for electric garbage truck sales in 2021.
The Milton Factor
The loss of the Republic business is the second downfall for a project by founder and former Executive Chairman Trevor Milton. His much touted Badger battery-electric pickup truck was canceled as a $ 2 billion deal with General Motors Co. (NYSE: GM) broke in late November. Milton left the company in September after a damning report by short seller Hindenburg Research alleging that Nikola was built on a series of lies and misrepresentations by Milton. The Justice Department and the Securities and Exchange Commission are investigating the allegations. “Given the spate of bad news for Nikola over the past few months, this wasn’t the news investors wanted to see under their Christmas tree,” Wedbush Securities analyst Dan Ives said in an investor note Wednesday. “The company still has a Kilimanjaro-like climb to climb to regain the road’s credibility by 2021.” Nikola plans to begin shipping the battery-powered Tre in the US in 2021. The company has not named any other customers for the truck. Russell said earlier that local authorities have shown interest in the Cabover model because it has a tight turning radius and is easy to maneuver in urban areas. The Tre was originally only planned to be manufactured and sold in Europe. Prototypes are produced in a joint venture with CNH Industrial N.V . (NYSE: CNHI) subsidiary Iveco built in a plant in Ulm, Germany. An early Tre prototype was shipped to Arizona, where Nikola is building a $ 600 million assembly plant. The Tre would first be assembled from imported kits. Nikola is also planning to break ground for its first commercial hydrogen filling station in 2021. Nikola has signed a contract with Arizona Public Service to purchase electricity at a discounted rate. Making hydrogen through a process called electrolysis requires a lot of electricity. Selling hydrogen at a price comparable to diesel fuel is only profitable if the electricity used to produce it is cheap. “Nikola continues to focus on implementing our battery-electric and fuel-cell-powered commercial vehicle programs and the energy infrastructure they need,” said Russell. Nikola stock traded at $ 15.19 at 10:54 a.m. EST on Wednesday, down 9.77%. Milton remains Nikola’s largest shareholder with more than 88 million shares, about 25% of the company’s stock.
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