Batman versus Superman. Yankees versus Red Sox. Nikola Tesla versus Thomas Edison. These are some of the greatest rivalries of all time.
There’s another rivalry brewing in the burgeoning sector of electric trucks:
Tesla (ticker: TSLA) is now the world’s most valuable car company, disrupting the entire automotive industry with its battery-powered cars. Nikola (NKLA), 10 years after Tesla’s start as a publicly traded company, has similar aspirations—to be the most valuable trucking firm on the road.
Tesla, of course, is best known for luxury automobiles such as the Model S, which can retail for more than $100,000. Nikola, for its part, is planning to make big rigs—heavy-duty trucks that share interstate highways with cars. But Tesla has a battery-powered electric semi-truck planned for 2021 which will compete with Nikola offerings. What’s more, both Nikola and Tesla are pure-play electric vehicle makers with no legacy of gasoline- or diesel-powered transport.
Tesla is an older company, producing billions in sales as well as bottom-line profits. Nikola doesn’t plan to generate cash flow for a few more years. But Nikola has the upper hand on Tesla in one respect: stock market valuation. Its shares are more valuable at this point in Nikola’s history than Tesla’s were.
Nikola came out of the gate valued at about $12 billion. Tesla was valued at roughly $2 billion after its 2010 initial public offering.
During its IPO, Tesla raised about $225 million selling stock at $17. Since then, Tesla has raised, roughly, $15 billion net of debt repayments, over the past decade to build its electric-vehicle business.
Sales over that span have gone from about $100 million to an expected $30 billion in 2020. Tesla’s market value has soared from roughly $2 billion to $280 billion.
It took Tesla about 5 years after its IPO date to sell 100,000 vehicles cumulatively. It took about 9 years for Tesla to generate positive free cash flow.
Tesla’s heavy-duty truck will run on batteries. It has made some notable early sales including trucks destined to shipping leader
J.B. Hunt Transport Services
Batteries powering electric vehicles, at this point, are heavier than a Nikola hydrogen fuel cell, including fuel weight, or a diesel engine and its fuel. The weight penalty limits long-haul shipping opportunities. Weight is the enemy of big-rigs: it limits the amount of freight they can carry, thus limiting revenue. But there are many heavy-duty truck applications, such as drayage (moving things around a port or warehouse), or less-than-truckload shipping, abbreviated as LTL, where weight isn’t an issue.
Old Dominion Freight Line
(ODFL) is a large LTL shipper. It hasn’t ordered the Tesla semi yet.
Nikola has also signed up some blue-chip customers for its futuristic fuel cell truck, including
(BUD)—the beer producer and distributor— which has ordered 800 trucks.
Nikola, is starting out with hundreds of millions of dollars on its balance sheet. The company has raised, in fact, almost $1 billion in its process of becoming a publicly traded company.
The company isn’t generating sales yet. They aren’t producing trucks yet. An electric truck is due out in 2021 and its hydrogen fuel cell truck is due out in 2023.
Nikola is betting its future on low-cost hydrogen fuel. In addition to making trucks, it plans to generate and sell the fuel. Nikola plans to generate cash flow around 2024 or 2025. What’s more, it plans to spend about $2.5 billion between now and then building a manufacturing facility as well as hydrogen filling stations across the U.S.
The company will need more than the cash it has on hand to do that—as did Tesla. It will likely finance some of the fueling stations with debt.
Nikola stock is up about 190% since special purpose acquisition company Vectoiq announced plans to merge with Nikola. (Vectoiq stock became Nikola stock.) Tesla shares are up more than 100% over the same span. Both returns are far better than returns of the
Dow Jones Industrial Average
Nikola shares rose 11% in Monday trading. Tesla shares tacked on almost 9%.
Batman and Superman eventually worked out their differences. Perhaps the Nikola-Tesla competition can end up benefiting both shareholder bases.
Write to Al Root at [email protected]