US market analysts have identified Toyota and Hino’s recent announcement of a hydrogen fuel cell truck program as a harbinger of problems for the strife riddled hydrogen truck start up Nikola, with one commentator identifying five reasons why Toyota will eat Nikola’s lunch.
Market analyst Bill Zettler reckons Toyota’s might and power will be too much make it tough for Nikola on a number of fronts.
“Nikola Corp. has had many public relations issues ever since its inception, and Toyota’s recent announcement that it will deliver, in conjunction with part-owned Hino Motors, a hydrogen-fuelled prime mover in 2021 is another one,” is another sats Zettler.
He adds that the fact that this would be in direct competition with Nikola’s hydrogen FCV semi, known as the Two, due to be delivered in 2023, is probably the key reason why Toyota will find ascendancy in the impeding market fight.
“Competing with Toyota-Hino will not be easy, and there are five reasons why Toyota will probably win this race,” he added.
Reason One, according to Zettler is that Toyota is a huge company with revenues of $US275 billion per year, while Hino is a subsidiary of that generates $US16 billion revenue per year, while in contrast, Nikola reported $36,000 in revenue for its most recent quarter.
He adds that, Nikola has $US925 million in assets ($US698 million in cash) vs. $US12 billion for Hino alone.
“With all that cash, Nikola can certainly gear up to produce vehicles, but it will take a while and Hino is ready to go right now,” says Zettler.
Zettler balances this with the fact that, Nikola now has the expertise of General Motors on its side, with revenue of $137 billion a year and and the wherewithal to support Nikola’s future development.
Reason number two according to Zettler is that Toyota jumped the gun back in 2017 when it installed FCV fuel cells in a Kenworth meaning the company has experience in in heavy trucksnot only with Hino but with FCV-powered trucks.
Actual experience in heavy trucks either with internal combustion engines or with fuel cell electric trucks is something that neither Nikola nor GM has, and certainly not in the past four decades for GM.
“Toyota will be contributing its extensive FCV fuel cell knowledge via 5,680 FCV patents,” says Zettler.
“In fact, the company is releasing all its FCV patents to the public, causing another potential problem for Nikola,” he added.
“Free patents make anyone who wants to get into the FCV fuel cell power business an expert by using Toyota’s patents, and that means more potential competitors for Nikola,” he says.
Zettler says he was only able to find 26 Nikola patents, none of which apply to fuel cells, with nine of them applying to windows and doors.
The third reason Zettler cites for Toyota’s ability to eat Nikola’s lunch is experience, emphasising that Hino has been “in the truck business for 75 years while Nikola has been in the business for about 75 weeks”
“In 2019, Hino produced 197,000 trucks, and so far Nikola has produced zero trucks,” the analyst said.
“And once Nikola produces the vehicles, how will it sell them? Currently, the company is trying the direct route by selling to large users such as Anheuser-Busch,” Zettler points out.
“Hino, on the other hand, not only sells directly but also has more than 200 dealers just in the US alone, providing service and parts as well as sales,” he adds.
“On the road trucks have a need for service, wherever they happen to be, so the question is how will Nikola handle its customer needs, a hint perhaps is that GM’s thousands of service centres across America may be a possibility, says Zettler.
Reason number four revolves around realising the difference between share prices and real underlying value in a company.
“In the age of an IPO-per-day and spaced out SPAC’s producing Nikolas by the score, it is no wonder that old-line companies like Hino, and GM for that matter are tossed prematurely into the dustbin of auto history,” he points out.
“Hino is a world-wide company selling 200,000 trucks a year with a total of $US16 billion in sales and has a market value of $US3.8 billion, while Nikola is a new company currently with zero sales and very little projected for at least the next two years or so and it has a market value of $US9 billion.
“If Hino beats Nikola to market with the first viable FCV Class 8 truck, then will its market value go up dramatically? I doubt it,” Zettler continued.
However he says that if this happens a big drop in Nikola’s market value would possibly ensue.
Finally Zettler believes that GM’s investment in Nikola might be a stealthy way to spin off its electric vehicle business.
Zettler points out that GM CEO Mary Barra said recently after being asked about an EV spin-off that ‘they are open to looking at and evaluating anything that we think is going to drive long-term shareholder value’.
“Barra said that nothing is off the table,” Zettler added.
“Might I suggest that comment would fit in perfectly if the company would expand its connection to Nikola with more EV products beyond just trucks,” he says.
GM could contribute more EV products to the combined company, as well as unlimited resources currently unavailable to Nikola and that might mean that Nikola’s heavy duty aspirations are stifled and pick up trucks may become its bread and butter, particularly if Toyota and Hino capture the Class 8 Hydrogen fuel cell market according to Zettler.