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Courtesy of Nikola.
Batman versus Superman. Yankees vs. Red Sox. Nikola Tesla against Thomas Edison. These are some of the greatest rivalries of all time.
There’s another rivalry in the burgeoning electric truck sector: Nikola versus Tesla.
Tesla (ticker: TSLA) is now the most valuable automotive company in the world, affecting the entire automotive industry with its battery-powered cars. Nikola (NKLA), 10 years after Tesla’s inception as a publicly traded company, has similar aspirations: to be the most valuable trucking company on the road.
Tesla, of course, is best known for luxury cars as the Model S, which can fetch more than $ 100,000. Nikola, meanwhile, plans to make big rigs, heavy trucks that share interstate highways with cars. But Tesla has a battery-powered electric semi-trailer planned for 2021 that will compete with Nikola’s offerings. In addition, both Nikola and Tesla are manufacturers of pure game electric vehicles with no legacy of gasoline or diesel transportation.
Tesla is an older company, producing billions in sales as well as net profit. Nikola does not plan to generate cash flow for a few more years. But Nikola has the advantage over Tesla in one respect: stock market valuation. His actions are more valuable at this point in Nikola’s history than Tesla’s.
Nikola walked out the door valued at about $ 12 billion. Tesla was valued at approximately $ 2 billion after its 2010 initial public offering.
Tesla
During its IPO, Tesla raised about $ 225 million by selling shares for $ 17. Since then, Tesla has raised approximately $ 15 billion net of debt payments in the past decade to build its electric vehicle business.
Sales in that span have gone from approximately $ 100 million to the expected $ 30 billion in 2020. Tesla’s market value has soared from approximately $ 2 billion to $ 280 billion.
It took Tesla about 5 years after its IPO date to sell 100,000 vehicles cumulatively. It took approximately 9 years for Tesla to generate a positive free cash flow.
Tesla’s heavy truck will run on batteries. It has made some notable early sales, including trucks destined for shipping leader JB Hunt Transport Services (JBHT).
The batteries that power electric vehicles, at this point, are heavier than a Nikola hydrogen fuel cell, including the weight of the fuel, or a diesel engine and its fuel. The weight penalty limits long distance shipping opportunities. Weight is the enemy of large platforms: it limits the amount of cargo they can carry, which limits income. But there are many heavy truck applications, such as hauling (moving things around a port or warehouse), or shipping less than a truckload, abbreviated as LTL, where weight is not an issue.
Old Dominion Freight Line (ODFL) is a great LTL carrier. You haven’t ordered the Tesla semi yet.
Nikola
Nikola has also hired some top-notch customers for its futuristic fuel cell truck, including Anheuser-Busch InBev (BUD), the beer producer and distributor, who has ordered 800 trucks.
Nikola is starting with hundreds of millions of dollars on her balance sheet. The company has, in fact, raised almost $ 1 billion in its process of becoming a publicly traded company.
The company is not yet generating sales. They are not yet producing trucks. An electric truck will go out in 2021 and its hydrogen fuel cell truck will go out in 2023.
Nikola is betting his future on low-cost hydrogen fuel. In addition to making trucks, he plans to generate and sell the fuel. Nikola plans to generate cash flow around 2024 or 2025. Additionally, he plans to spend around $ 2.5 billion between now and then build a manufacturing facility as well as hydrogen service stations in the US.
The company will need more than the cash it has available to do that, just like Tesla. It will probably finance some of the gas stations with debt.
The existences
Nikola’s shares have increased approximately 170% since special-purpose acquisition company Vectoiq announced plans to merge with Nikola. (Vectoiq’s shares were converted to Nikola’s shares.) Tesla shares rose 90% in the same span. Both of these returns are much better than the returns of the Dow Jones Industrial Average and S&P 500.
Batman and Superman eventually settled their differences. Perhaps the Nikola-Tesla competition can end up benefiting both shareholder bases.
Write to Al Root at [email protected]
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