June 10th, 2020

Such a hot topic. Is NKLA the future? Are they a TSLA killer?

There are many factors involved. But none which I would consider more important than cost per mile driven.

I have a bias. As a TSLA shareholder, I am more invested in TSLA succeeding.

But even beyond that, I have been brainwashed (all media is brainwash) into being extremely sceptical that hydrogen is viable.

For hydrogen to be viable, you need to have refuelling stations. No refueling stations and it doesn’t really matter how good the trucks are.

Nikola has a plan for refuelling stations. So here are the right questions to ask:

  • How much does one refuelling station cost?
  • How many vehicles can be refuelled per hour?
  • How long does a refuelling station take to build?
  • How much does the fuel cost to produce?
  • Is it produced on site, or trucked in?
  • Is it produced with clean renewable energy or not?

Nikola needs to compete on all of the above questions to be taken seriously. First and foremost, the refuelling stations need to exist. Ramping up production of fuelling stations could fail due to supply chain, lack of funds etc.

Assuming you have a route and a refuelling station on that route, we need to be certain that this refuelling station can scale with demand. In a perfect world, logistics are worked out ahead of time so that no truck ever waits to refuel. So what does that look like? Can Nikola trucks refuel every 5 minutes with liquid hydrogen? Or do they need to repressurise the hydrogen tank for 20 minutes?

If the trucks can truly refuel in 5 minutes, great. But how much did the refuelling station cost? This impacts scale. With a finite amount of money, and no current infrastructure to support hydrogen currently, we are going to need a lot of refuelling stations. What is the cost per station? Assuming Nikola doesn’t have infinite amounts of money, they will be limited to being able to build refuelling stations according to their cash levels. The less the cost of a station, the more they can build. The cost will have to be way way way lower than the €1.5M price tag cited by Now You Know. If costs are too high, it will inhibit ability to scale.

Ok, so let’s give the first two points the benefit of the doubt and assume they are solved in a competitive fashion. How long does the refuelling station take to build? This might not matter as much, but will also affect ability to scale. Obtaining permits and sourcing all the components will take some amount of time. This duration could delay timelines by months, years or even decades. But assuming that all permits are inked and the green lights are given worldwide to build out these new networks and they don’t take too long to build, let’s assume we have the infrastructure so soon, that it isn’t an inhibiting factor. We will also we need to assume all hydrogen stations were built without any headline FUD issues.

So Nikola has a refuelling network and they are making trucks. With all the efficiency loss, is the truck really going to be cost competitive? For this we would need so much abundant renewable energy producing an abundance of stored hydrogen. It is seemingly a wasteful conversion process rather than using electricity directly.

If we give Nikola the benefit of the doubt that they are heading down a sustainable path that will help utilise abundant clean energy and their supply chain, assembly lines and production ramp is met with minimal friction and their cost per mile is competitive than there is nothing to worry about right?

Well, even if Nikola could beat Tesla in a cost per mile for the overall cost of vehicle and fuel, Nikola could be at a major disadvantage if Tesla pulls off autonomous full self driving.

I am definitely sceptical that with such a high fail rate for new automotive startups in the United States Nikola would be an exception as well. But I wish NKLA well and good luck. I am not your target market and I am not going to invest in you until I see production success.

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I am TSLA Long. Model 3 Owner. Brother of a Model 3 owner. Son of a Model S owner. I have reservations for Slate Roof and Cybertruck. I am a Tesla speculator and fanboy. I am not a financial advisor. Investing in anything comes with inherent risk.