Following a hint that this was coming during its Q1 2023 earnings report, Nikola Corporation shared a business update that includes plans for decreased cash usage and a “reorganizing” of its workforce. The EV startup is prioritizing the North American market as it looks to lean down and optimize to ensure the continued production of its zero-emissions trucks.
Nikola Corporation ($NKLA) continues to fight on as a viable business in zero-emission commercial vehicles after a bumpy past filled with deceit. Since its new executives have taken over the helm, Nikola has bounced back as a viable contender that has no intention of giving up.
We’ve seen the company restructure multiple times in the past in order to optimize, especially as it pertains to the production of its zero-emissions trucks and the batteries that power them. To cap off 2022, Nikola Corporation stumbled a bit, but there was plenty of optimism when looking ahead to this year.
Last month, the startup shared its Q1 earnings for 2023, which again relayed growing losses. As a result, the company announced a shift in its business strategy that would include a honed focus on its native North America. This move included a sale of its stake in its European joint venture with Iveco Group, equating to $35 million in cash back in addition to 20.6 million shares of stock returned.
Today, Nikola Corporation shared a progress update that includes non-essential business spending and will now include a slight cut to its current workforce.
Nikola trims fat to optimize EV and hydrogen business
Nikola shared a bullet point list of its business optimization strategy today, outlining actions previously alluded to in the aforementioned Q1 report alongside some new decisions. Current CEO Michael Lohscheller spoke:
Nikola has initiated a more focused business plan this quarter, concentrating on North America, zero-emission truck production, and our HYLA hydrogen business. Our battery-electric truck is in the marketplace and performing well for our customers, and the hydrogen fuel cell electric truck will go into production in a matter of weeks. We are proactively managing costs and reducing expenses. We are streamlining operations, including our organizational structure, to efficiently execute our objectives.
To lean down and optimize cash in hand going forward, Nikola shared it is in the process of enacting the following business actions:
- Realigning cost structure and reducing cash use by reorganizing workforce and rationalizing spend in all areas of the business.
- Concentrating on the North American marketplace, including the planned sale of the company’s joint venture share to Iveco Group.
- Localizing the supply chain where possible, including transitioning battery manufacturing from Cypress, Calif. to the Nikola plant in Coolidge, Ariz., along with planned assembly of Bosch fuel cell power modules in Coolidge. Both actions are expected to reduce material cost of the trucks.
- Prioritizing a capital-efficient approach for the HYLA hydrogen energy infrastructure business, including a strategic partnership with Voltera to develop up to 50 hydrogen stations over the next five years.
- Focusing on launching the company’s Class 8 hydrogen fuel cell electric truck in Q3, which currently has 178 sales orders from 14 end customers.
- Optimizing production at the Coolidge, Ariz. manufacturing facility to accommodate Nikola’s battery-electric and hydrogen fuel cell electric trucks on one assembly line.
- Ongoing restructuring of legacy Romeo business and shut down of legacy Cypress operations.
Notice that first one? It may not sound like much, but it’s a biggie. It’s never fun to report any layoffs, but it’s something Nikola feels it must do to optimize its business going forward. According to the company, about 150 employees assisting in Nikola’s European programs will be let go alongside another 120 employees working at the startup’s Phoenix and Coolidge sites.
The job cuts alone are expected to save Nikola over $50 million in cash spending annually, while 900 employees will remain at the company. The company states it is “supporting those affected with transition assistance.”
Due in part to the actions being taken above, Nikola Corporation expects to decrease its cash usage to under $400 million annually by 2024. All eyes will be on Nikola’s next quarterly report to see how the business is faring following this latest shift in business strategy.
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