Nikola Corporation Faces Wider Q3 Losses Due to Massive Electric Truck Recall, But Observes Rising Orders for Hydrogen Fuel Cell Trucks

Increased recall budget of $400 million to address battery issues in existing electric trucks dents Nikola Corporation's third-quarter finances, despite rebounding orders for its hydrogen fuel cell electric trucks, especially in California aided by incentives.

Nikola Corporation reported significant Q3 losses, largely due to the recall of its battery-electric trucks which led to an increased recall budget of approximately $400 million. The recall was necessitated by multiple fire incidents linked to coolant leaks within the battery packs. The company has opted to replace battery packs in recalled trucks with new packs from an alternative supplier, with repair costs estimated at $61.8 million.
Despite the recall setback, Nikola reported increased orders for its hydrogen fuel cell electric trucks. To date, the company has received 277 non-binding orders. Nikola attributes this positive market response to the significant incentives provided by the Advanced Clean Fleets Rule, HVIP, and ISEF, which offer up to $288,000 and $408,000, respectively, per hydrogen fuel cell electric truck in California.
Nikola anticipates restarting deliveries of its upgraded battery-electric trucks, dubbed '2.0', to customers starting from the first quarter of 2024. Even amidst the ongoing recall, Nikola received an order for 47 BEV trucks from one dealer.
The Q3 financial strain was quite apparent as the company witnessed a gross loss of $125.5 million, increased from $30.2 million in the same quarter of the previous year. Its adjusted EBITDA loss also widened to $188.6 million from $107.9 million, while adjusted EPS loss of 30 cents exceeded the feared 14 cents.
Despite the burgeoning losses, Nikola has managed to keep a steady financial footing with total cash and access to capital amounting to $705.8 million, at the end of the quarter. The company believes it has sufficient cash on hand to sustain operations into 2024, while also maintaining access to capital for funding business plan execution and addressing recall-associated costs.