Lars-Peter Thiesen, Opel’s head of deployment strategy for hydrogen and fuel cells, has been part of fuel cell powertrain development in Germany since the start and has played a decisive role in shaping its direction. Here, in conversation with H2-international, he calls for a technology-neutral attitude to e-mobility that takes account of both battery- and hydrogen-based forms of electric transportation and makes the case for a demand- and market-centered approach rather than one dictated by directives. He also sees hydrogen as the transportable storage medium of the future for renewables and accuses those who criticize its efficiency of a narrow perspective.
H2-international: Dr. Thiesen, could you describe the advantages of a fuel cell power system in three or four points?
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Thiesen: A fuel cell vehicle is a zero-emission vehicle. It is electrically driven and the exhaust emits only water vapor. The second point is the refueling time. You can fill up the vehicles at 700 bar in three minutes. Plus, there is a standardized process that applies internationally, which isn’t the case for battery electric where there are vast differences. Then there’s the long range. And a fourth point that’s particularly relevant to our application in the Vivaro-e Hydrogen: We get the full cargo space compared with combustion engines or battery electric power units, which is no trivial matter when it comes to a fuel cell powertrain.
How do you achieve that?
Through what we call the “mid-power concept.” Here, the fuel cell is only around half as big as the maximum power output of the electric engine, with the benefit that the system fits under the hood. The hydrogen tanks located in the subframe replace the large traction battery of the battery electric power unit, and an additional smaller battery under the seats acts as a power buffer and energy reserve. Consequently neither the cargo space nor the utility of the vehicle is compromised.
And what are the disadvantages of a fuel cell power system?
Essentially we are facing three challenges: The first is refueling infrastructure. In Germany we have a globally unique system of about 100 fuel stations, but for customers who are completely reliant on hydrogen this fuel station network should be extended further. Secondly, the costs of vehicle components are still relatively high because the part volumes are still small. The key to success here is economies of scale in order to bring the costs down further. And then there is the third challenge in that we need sufficient green hydrogen in the medium term, in other words hydrogen that is produced in a sustainable, carbon-neutral way.
Why has the technology not caught on by now? You’ve been working in this area for more than 20 years. The technology seems to be fully developed or rather a calculable entity, am I right?
Yes, that’s right. We’ve overcome significant hurdles in terms of technical development. However that has taken time. Cold start capability is a case in point. The fuel cell power system produces water vapor that can freeze in subzero temperatures if it remains in the system. If you’d asked me in 1999, I’d have said: As an industry we’ll have it sorted in two to three years. In the end it took 10 years. As a result, Opel had the first fuel cell car that could be parked at an outdoor temperature of -20 °C without auxiliary units.
The other point is that the e-offensive has pushed hydrogen development into the background. In addition there has been an overwhelming need for consensus among industrial partners who each have their own interests, such as: Should the hydrogen that the fuel cell runs on be directly pumped in or made on board by reforming gasoline or methanol? How should the hydrogen be stored in the car: in liquefied or compressed form? After extensive testing of both technologies we have opted for compressed hydrogen. But then: What pressure level makes most sense: 350 or 700 bar? We were the first manufacturer to put a car with 700-bar technology on the road. That was a long-term multi-stakeholder project involving many different parties: other manufacturers, the oil and energy sector, system manufacturers and fuel station operators. Having gone on this long journey, I’m delighted that we are now able to offer the first serial-produced product – the Opel Vivaro-e Hydrogen – which is already being used by initial customers such as Miele.
You’ve been on this ride since the beginning. How was it possible to keep the fuel cell project moving forward?
In 1999 I sat down with the other manufacturers, the energy industry and the transportation ministry, and we agreed that hydrogen would be the fuel of the future. In 2002 we founded the Clean Energy Partnership, a demonstration project that ran in Berlin and other major cities in order to show policymakers, the public and customers that hydrogen is a feasible fuel for cars. We were able to convince the ministry of the benefits of adopting a holistic strategy. The National Organisation Hydrogen and Fuel Cell Technology (NOW) was established as a consequence in 2008 with the aim of not just promoting R&D projects, but also encouraging the ramping-up of the market with appropriate infrastructure. The next milestone was the launch of H2 Mobility in 2015 in order to solve the chicken-and-the-egg problem through the construction of at least 100 fuel stations. And finally in 2020 Germany’s national hydrogen strategy was rolled out with the aim of rapidly scaling green hydrogen.
Critics would counter that by saying you shouldn’t combust green hydrogen in private vehicles; rather you should put it to industrial use instead.
Quite true. It’s then also said that we need it primarily for certain branches of industry, for instance the steel industry. I completely get that too. Only in that case it might require a certain price per kilogram of EUR 1 or EUR 2. But much higher prices can be realized in the transport sector. Our stance is quite clear: You should leave it up to the market to decide which sector gets green hydrogen rather than dictating it via directives. That’s the only way things are going to work.
Is that realistic without state funding?
After 20 years we’ve now reached the most exciting point. We’re no longer at the demonstration stage but we haven’t quite reached mass production yet. We’re working on scale-up. The volumes are still relatively low and the components are still expensive. That’s why state support is still needed at this stage to ensure market entry. The funding, which entirely benefits the end customers, allows us to offer them attractive leasing rates.
But your fuel cell technology is competing with batteries, right? Or do you not see it as competition?
It’s not an either-or situation; you can have both. For customers and for us as a company, we need both – the technologies are complementary. Here’s one example: We have many customers with a business model that centers on the employee taking the car home, for instance installers or service technicians, as is currently the case at Miele which is using the Vivaro-e Hydrogen. Often these employees aren’t homeowners; they have no way of recharging. The car is parked in the street and the next morning they are off again. This is where you need the traditional fuel station model. What I’m trying to say is: If we want transportation to be 100 percent emission free in future, then there are a lot of customers who can’t be served by battery electric but for whom a fuel cell vehicle would be highly suitable. That’s why we need both technologies, because there are commercial sectors that can’t go about their business using battery electric vehicles.
So it’s batteries for private individuals and fuel cells for business?
As battery electric vehicles continue to proliferate, we are getting a clearer idea about how they are used – as well as their limitations. We know, for example, that 44 percent of Stellantis delivery van customers do not travel further than 300 kilometers (186 miles) in a day. Conversely this means, however, that 56 percent do travel further. And in those circumstances it’s important you don’t spend ages stopped at a charging station. Even if charging speeds can be increased in the foreseeable future, it’s still possible that lots of people will be there before me at the charging point. This is where a three-minute refill of hydrogen has a clear advantage – something we know very well from previous fuels.
When will fuel cells for cars be produced in significant numbers?
At the moment we are focusing initially on the key delivery van segment. A larger model will also be brought out in two years’ time. In addition, we intend to ramp up the production capacity from the current 1,000 vehicles to 10,000 vehicles in 2024. In terms of cars, we’ll have to see how the market and the situation develops.
The political mainstream at the moment favors battery electric mobility, not least with regard to the better efficiency it offers compared with hydrogen. How do you respond to your critics?
If I want to recharge at the same moment that a wind turbine happens to be turning, provided I have the time and the opportunity, it makes most sense to use that energy for battery electric transportation. In terms of practicality, there are, though, as I’ve already mentioned, sectors where it doesn’t work. What’s much more crucial is the bigger picture: In the future we’re going to need far more renewable energy because Europe and the wider world have set themselves the goal of becoming carbon neutral. But this energy won’t be produced on our doorstep; it’ll be produced where it is cheap to do so. For instance in Australia, where the generation costs for wind power are between one and two cents per kilowatt-hour. That’s well away from the place of consumption so it has to be transported somehow. It’s here that hydrogen will play an important role as a storage medium for renewables. And if I’ve first converted this energy into hydrogen using electrolysis to make it storable and transportable, then it makes perfect sense to use the hydrogen in that same form in fuel cell vehicles and not to convert it back into electricity to charge up a battery car.
This is why the efficiency discussion about the refueling and recharging of an individual vehicle is far too restricted. You have to see the big picture rather than just take a narrow view of things, like what the efficiency is on my doorstep. In this context it’s far too simplistic to rely on just one technology. We’ve developed the Vivaro-e Hydrogen because we recognize that it’s an appropriate choice for certain groups as well as for the future.
Uncertainty still remains about what will become of the proposed mobility center in Munich. The German transportation ministry (BMDV) only had the following to say to H2-international: “The BMDV has, as agreed in the coalition treaty, put the concept of the German Center for Future Mobility (DZM) from the previous legislative period through a comprehensive review and realignment process. A concept for the realignment of the center is currently being consulted upon. […] The activities of the ITZ [hydrogen technology and innovation center] will be pursued by the BMDV, independently of the German Center for Future Mobility (DZM).”
The one piece of new information, which came out in February 2023, was that the town of Gera in Thüringen would not be considered as a new location. Transport publication Verkehrsrundschau reported that the town is allegedly “no longer in the running as an external site and test area for the planned Munich center whose areas of research are expected to include digitally interlinked logistics.”
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It had previously become clear that Munich was no longer likely to be considered as a location, but the idea of a nationwide mobility center itself was still being retained. The Munich-based Tageszeitung newspaper reported in April 2022: “The end of the German Center for Mobility (DZM) in Munich seems to be a done deal. Our newspaper understands from the chairman of the CDU/CSU in the German parliamentary budget committee, Florian Oßner, that the coalition government has dropped Munich as a location. ‘Today, colleagues have not only rejected our application for increased funding, but have also decided to withdraw Munich from the overall concept,’ says Oßner.”
The German transportation minister at the time, Andreas Scheuer (CSU), had initially promised support to the tune of EUR 400 million (see H2-international, August 2021), only for this to be subsequently taken away by the coalition. The message since then remains unchanged: The concept is being reworked in line with the coalition agreement.
At the turn of the year, the Biennale Internationale Malerei took place in Hamburg under the patronage of Michael Westhagemann, then economy senator for the Free and Hanseatic City of Hamburg. In Bergedorf Castle from November 8, 2022 to January 31, 2023, 47 paintings created using various techniques were displayed – on the theme “Umwelt im Ökologiediskurs: Wasserstoff” (the environment in ecological discourse: hydrogen). According to Cornelia Schmidt-Hoffmann, leader of the district Bergedorf, the event, which had been postponed several times because of the pandemic, enjoyed an “incredible response.”
The cultural exchange non-profit Hamburg-Übersee e.V., which chooses a new banner every two years, lauded together with its own gallery Galerie KAM (formerly Kunststätte am Michel) “das Supermolekül H2”, as formulated by press speaker Sven Jösting, this year. And so it says for example in the description of the above painting from Alexander Franklin Jagelowitz, translated: “Hydrogen in the eye ‘drops’ of the beholder. Green it will ultimately be, but all the other colors associated with the energy form for the production of hydrogen have their merits. And the water for the production will be gotten mainly through desalination of sea water all around the world… here is the framework for the all-sides-seeing hydrogen eye. Almost Masonic!”
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Jagelowitz, a painter, set designer and graphic artist from Lithuania, said about it, “Chaos is for me the beginning of all things and of my creative work. We know a lot and then nothing at all.” His many-times distinguished works have presence in numerous museums and private collections at home and abroad.
The cover picture of this edition of H2-international also came from this exhibit. It is a mixed media on canvas from Liliane Orlinski and bears the title “Am Ende wird er grün sein – der Wasserstoff” (it will be green in the end – hydrogen). The artist stated, “What an energetic dynamic there is in hydrogen! I’ve chosen here a weighting in the color spectrum of hydrogen, where the proportion of each color corresponds to the future development of the respective type.”
Hyzon Motors needed to provide the clarified figures for fiscal year 2022 on February 13, 2023 at the latest in order not to endanger its listing on the NASDAQ in accordance with rules and regulations. Now, the company has requested a new hearing, as Hyzon along with KPMG is under a comprehensive new audit for also the complete set of figures for the first business year, of 2021. As far as we know, there is a further extension time of 40 to 60 days. A hearing appointment for March 16th was requested and granted.
The current decline in the share price, in my view, is owed to investors fearing that it will be taken off the stock exchange. Hyzon, before the accounting irregularities, was financially well-positioned. Trucks are being delivered with much publicity, and they are seeking personnel after important management positions were newly filled. In the extreme case, the listing could continue on another exchange, the over-the-counter (OTC) market, as there are fewer regulatory conditions there.
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From the sound of the press releases, I assume that Hyzon is creating clarity and will be able to keep its listing on the Nasdaq. Clear however is also that short sellers – around 18.5 million shares were sold short and thus over 20% of the free float – will take advantage of the current uncertainty. But even short sellers may be inclined to stock up in anticipation of the 16th of March, since with the expected (by me) positive outcome of the auditing, the shares will make up a lot of ground at the stock market and so the company will be completely newly valued.
For traders as well the coming three weeks will be very exciting, when a high volatility in the development of the share price (price swings of 5, 10 or even 20 percent in just one trading session, depending on the news situation) must be assumed. Hyzon is addressing – like Nikola Motors – exactly the right first big market in the area of hydrogen mobility: commercial vehicles. Whoever as an investor has concerns here should get off and then get back on again when all uncertainties have been removed. Indeed a tough buy.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
PR-wise, it’s still quiet at Ballard, even though there’s definitely many projects and pilots being worked on there. News I would expect on March 17, 2023, when the figures for fiscal 2022 are published, as the executive board then always also presents a forecast and an outlook. The ramp-up of fuel cells, for example in trucks and buses and on rail, is just at the beginning, where there are already indications. Ballard is right at the forefront.
For example, in the European bus sector: The information source Sustainable Bus recently reported that 4,152 battery-electric buses were newly put into service in Europe in 2022, as well as 370 FC buses. Of these 370 H2 buses, 292 are likely running with technology from Ballard Power, as the company supplies major OEMs with the modules (106 for Van Hool, 104 for Solaris and 82 for Wrightbus). This is a very good indicator for the future.
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Ballard competitor Toyota recently won a contract with German customer DB Regio to supply the fuel cells for its 60 buses from the Portuguese bus manufacturer Caetano. It shows that individual orders are now becoming increasingly larger, as customers like bus fleet operators are counting on scaling effects and are out of the pilot project stage. This market is just now beginning to develop, when the H2 infrastructure is being more intensely addressed in Europe, the USA and Asia. Ballard is very well positioned here and can deliver.
CrossWind chooses Ballard FCs for 1-MW FC system
This project, in my opinion, will become the blueprint for many similar ones: CrossWind is a cooperation between Shell and Eneco. Purpose is a wind farm project on the North Sea called Hollandse Kust Noord Offshore Wind Farm (total capacity: 759 MW, annual capacity: 3.3 TWh per year). After it goes into operation, it should provide 1 million households with green energy.
CrossWind relies on many complementary technologies that make green energy work as efficiently as possible. Surplus electricity is stored in batteries or hydrogen – depending on availability and capacity. Using the fuel cells from Ballard, this hydrogen will then be efficiently converted into electricity for a secure supply. This project has flagship character and should certainly result in further orders in the coming years. Unfortunately, nothing has been said regarding the value of the order.
Short seller attack has no impact on Ballard
Just a few weeks ago, it sounded as if the Indian billionaire Gautam Adani could be interested in a stake in Ballard and put its FC stacks to use in various ways in India (there is an MoU as basis). He has planned, like billionaire colleague Ambani (Reliance Group), to invest 50 billion USD over a period of five to ten years in hydrogen. This is now no longer likely, as Adani and his corporate conglomerate was recently the subject of a devastating article from short seller newsletter Hindenburg Research (see below). Over 100 billion USD loss in value was the consequence. For Ballard, though, this has minor impact, as Adani has a continued interest in putting FCs to use (in commercial vehicles, locomotives, ships, and so on).
Specifically, Adani has chosen as a first project to make a mining truck H2-ready, where the Group itself is the customer for this retrofitting, but Ashok Leyland, a subsidiary of the Hinduja Group, has presented its vehicles as candidates. This is actually the much better news, since Ashok Leyland would be quite an ideal partner for Ballard in India. A joint stack production comparable with the joint venture of Ballard and Weichai Power in China would also be ideal for India. Because Ashok Leyland is #4 in the world for buses and #19 in trucks and #2 in commercial vehicles in India. Viewed this way, the negative news to Adani has almost no bearing on Ballard. However, Adani is of course still interesting as a major customer for Ballard. This shows once again: Everything has two sides.
The case of Adani – The power of short sellers
Hindenburg Research is already known to you: The US investment research firm based in New York City primarily targets publicly traded companies in the hydrogen industry. Hindenburg bets via short selling on falling share prices of the companies concerned and fuels the downward trend with its own negative securities analyses. Desired price drops are the foreseeable consequence. This is a form of price manipulation, as Hindenburg itself participates by carrying out short sales in advance of publishing and establishes short positions in shares as well as bonds of the target company, combined with put options – and all this before the publishing of its own newsletter.
I would label this as front running, as it almost seems like an insider deal. Insiders have special knowledge, but they’re not allowed to make use of it. For me, a clear conflict of interest. Nevertheless, it seems that Hindenburg (the name is supposed to recall the airship), with some research, has every right, even if this is exploited for its own interest and some interpretations are questionable. In this way, companies like Nikola Motors (who showed off a truck that was rolled downhill without a motor) have already been targeted, whereupon its founder had to leave the company.
In the case of Adani, Hindenburg references his “non-transparent” company network, shareholdings and financing (the amount of debt) as well as conceivable advantage through proximity to the Indian prime minister Narendra Modi. The two come from the same province and belong to the same caste. In addition, the awarding of contracts for the construction of airfields or ports may have been made without public tenders, was a conjecture from Hindenburg.
Exactly how Hindenburg here itself profited through the short sale of shares or bonds of the various publicly listed Adani companies has unfortunately been concealed. Clear is that the damage to Adani is not only materially tremendous; it also had a psychological impact on the whole of India and its political structures. At the end of the day, all this naturally leaves marks, even if it can be assumed that Adani, with the right communication strategy, will present information that helps them, as the conglomerate as a whole is vital for the basic functioning of India.
Exactly companies like Adani can and will bring India to the forefront in terms of renewable energies and hydrogen. There may be a contradiction in promoting coal on the one hand and counting on green energies on the other, but a transformation is happening through it as well: The profits from the one area will be reinvested in the other. Fortescue Future Industries of Australian billionaire Forrest also earns its money from ores and raw materials but reinvests the profits in renewable energies. Most oil companies are behaving similarly or plan to do so, and want to increasingly redirect high profits from oil production into renewable energies and hydrogen.
Lucky hand with Forsee Power
Ballard’s participation in French special battery manufacturer Forsee Power, started in 2021, is already paying off. A remarkable 58 percent sales growth was reported by Forsee for fiscal year 2022 (111 million EUR). In just a few years, turnover could become over 500 million EUR. Ballard had invested up to 40 million USD via purchase of IPO stock in the company and holds 10 to 20 percent.
Ballard and Forsee are working very closely together. Forsee is the supplier of the batteries that come with every Ballard bus module delivered and serves the same customer base as Ballard. That’s real synergy. Both are investing in new production facilities in the USA to profit from the IRA (Inflation Reduction Act). Forsee is reporting that the current order volume is commensurate with sales in 2022. In 2023, the batteries for 1,000 buses (hydrogen and battery-electric) are to be delivered. Forsee is also beginning to supply batteries for trains (is Ballard under the patronage of Siemens Mobility here?) and soon also for trucks.
Side note: It’s been said again and again that it will take some time until significant turnovers or even profits can be seen at Ballard. That will all come. Ballard is establishing strategic production sites (in the USA, Canada, Europe and China). The exploitation of the facilities is only a question of time. I expect this starting 2024. In China, important support programs for the hydrogen economy are in the starting blocks. Will these turn out smaller than the US and EU programs? Not a chance. Ballard is building the basis for high growth.
This is comparable to the development of a mine: The first step is to identify the site (geological surveys, test drilling); then, to invest in the infrastructure and, only after this has been completed, to start mining the raw materials. That often takes a year, or two or three, to really get going. With Ballard, the development of the stacks or MEAs is the basis. The construction of production facilities follows and accordingly the scaling of production. Pilot projects are running in parallel. At the end of the day, production will be ramped up, and the company will serve the newly emerging markets and make money from it.
As for buses and trucks, CO2-free (battery- and/or hydrogen-powered) vehicles are just now starting to be produced worldwide. Ballard has the most comprehensive experience in this area, namely through FC buses that are already successfully in use around the world (Ballard inside). Keep this in mind, because the stock market anticipates the future, even if it takes longer until a breakthrough. Use weak phases in the positive sense in the price and buy again step by step to attain a good average price, offers itself as the right strategy.
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
On January 25th of this year, the Analyst Day took place at company headquarters in Phoenix and was – as I saw it – a big success for Nikola. Via streaming, I was able to get an impression of how more than 300 representatives from shipping companies, suppliers and energy companies as well as from politics and the media came together to inform themselves about the plans of Nikola directly on site.
There, it was said that HYLA is to become the new core brand for hydrogen at Nikola. This name combines the first syllable of hydrogen with the last syllable of Nikola. CEO and president Michael Lohscheller stated: “Nikola is the only company that has succeeded in unifying a revolutionary new product – the hydrogen fuel cell truck – and the entire supply chain for the H2 energy infrastructure under one roof.”
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Michael Lohscheller at IAA Transportation 2022
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On February 23, 2023, the figures for the fourth quarter of 2022 along with the entire year of 2022 were published: The turnover for Q4 2022 reached only 6.5 million USD (expectation: 32 million USD). The total loss for year 2022 was 784.2 million USD (includes 255.4 million USD stock-based compensation).
The explanation for the low turnover in this quarter of 2022 is that Nikola has delivered only 20 battery-electric trucks. The majority of the vehicles produced were retained as inventory – for good reason: The Tre BEV was so optimized that the costs were able to be reduced by over 100,000 USD per truck. A tremendous savings considering that the starting version of this truck cost a good 380,000 USD and a subsidy amount of up to 190,000 USD per vehicle is possible.
“People always think we’re a truck company, but maybe we’re actually an energy company with a truck division. The infrastructure is probably more important than the truck itself. That’s why we try to think the other way about hydrogen.”
Michael Lohscheller, Nikola CEO
The savings success was based on a combination of the optimization of energy management, the software, the batteries, the application of materials and the low personnel requirement through automation. Viewed so, the lower than expected turnover also means less loss and a more favorable price for the buyer of the BEV. It’s clear that money will only be made here with scaling. Much more important, though, is the outlook, as the Tre FCEVs (H2 trucks) are coming to market in the second half of the year.
The loss for year 2022 amounted to 784.2 million USD. Included in this is 255.4 million USD of stock-based compensation. In addition to 323 million USD in cash and equivalents (freely available and restricted), other equity stood ready at the end of 2022: namely, 232.2 million USD from the running ATM program, another 75 million USD from a convertible bond and 312.5 million USD from the share-based credit line of VC Tummin. So altogether 942.7 million USD in liquid assets stood available for 2023, which is sufficient to finance the whole year through (self-assessment by the company). Additionally, subsidy payments for the Tre FCEV and BEV units to be delivered are expected.
For the entire year 2023, delivery of 250 to 350 Tre BEVs and 125 to 150 Tre FCEVs is expected, which corresponds to a turnover for the year of 140 to 200 million USD. In 2024, turnover could already exceed the 1 billion USD mark, as demand for emissions-free vehicles is rising and, little by little, Nikola can reap the fruits of its automated production line.
To address the chicken-and-egg problem, Nikola is itself producing hydrogen – along with partners – and building up the necessary infrastructure. By 2025, a minimum of 60 hydrogen refueling stations of its own are to be established. In addition, Nikola has created a mobile hydrogen fueling station concept that can hold 960 kgH2. The tank filling time per truck is under 20 minutes.
Nikola in the medium and long term wants to earn money predominantly with hydrogen as a consumable, and do so with rising quantities and earnings potential. The IRA of the Biden administration can be a turbo for it, as green hydrogen is being subsidized with 3 USD per kg. Perhaps a similar program is also coming in Europe, where Nikola along with partner Iveco have taken E.ON on board to prepare hydrogen for the refueling of the trucks.
Nikola partner Iveco is also going into electrification
DSC_0161.jpg – s. Dropbox
Listed in CARB program since February
The hydrogen-powered trucks from Nikola have been allowed funding by CARB (California Air Resources Board) as part of its program HVIP (Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project). A result of this is a financial funding of 240,000 up to 288,000 USD per vehicle in this economically strongest state in the USA.
The US government is giving another 40,000 USD per truck on top of that via the IRA. (For battery-electric models, funding through CARB lies at 120,000 to 150,000 USD per unit, on top of the 40,000 USD subsidization via the IRA). Concurrently, the IRA provides for other subsidies that pertain to the production of hydrogen as well as the production facilities for the trucks (battery-electric and hydrogen-powered).
Through HYLA, Nikola has already created a future daily capacity of 300 metric tons of hydrogen per day. Nikola is positioning itself via various paths and production types, and is producing H2 supply security without depending on a single supplier. Without hydrogen as a consumable, the FC trucks cannot be sold – the chicken-and-egg problem is solved.
DOE credit of over 1.3 billion USD as game changer
This credit as part of the IRA would be perfect for Nikola. The company is virtually predestined to receive this support and to invest it in hydrogen infrastructure and production. Whether in the end it’s 1.3 billion USD, only part of that or all of it but in tranches over several years is inconsequential. Important is the psychological effect, since if Nikola has this money available, the total liquidity would be in a healthy state. The solvency of this startup would then experience a noticeable improvement. The refinancing of the loan could be done peu à peu through the issuing of shares over the years so that borrowed capital becomes own capital. But these are just my expectations for now – and only that.
LoI for 100 FC trucks from GP Joule
Nikola has recently signed a letter of intent with German all-rounder in renewable energies GP Joule to supply 100 hydrogen-powered vehicles. GP Joule operates wind and solar farms, is building its own network of hydrogen refueling stations and is set on its own H2 production. A perfect combination, is our summary. GP Joule had also signed an LoI with a basic agreement for 5,000 hydrogen-powered trucks with Clean Logistics – we reported – which can no longer be realized after the negative developments of the past weeks, as Clean Logistics needed to file for bankruptcy (see p. 6). There are only very few truck manufacturers now who can supply such vehicles. Nikola is a good choice here. These FC trucks designated for the European market will not be deliverable until 2024, however.
Partnership with Fortescue Future Industries
Fortescue Future Industries (FFI) as well, the company of Australian billionaire Forrest, will be working with Nikola in hydrogen production in the future. The two companies are planning a collaboration in hydrogen projects. Specifically the site in Buckeye in Phoenix, Arizona, where Nikola’s own hydrogen production is planned. Here it is even conceivable that FFI will have a 51 percent stake (Nikola 49 percent) while Nikola could get full rights over the hydrogen. Nikola has already invested over 16 million USD in the form of land purchases.
Plug Power, on the other hand, has ordered 75 hydrogen-powered trucks from Nikola. Furthermore, it’s been said that they want to work together in the supplying of hydrogen as well (Nikola as a customer of Plug). Plug is supplying the technology for hydrogen liquefaction. Nikola is therefore taking various complementary paths in order to make hydrogen available in the needed quantities and to not end up with any dependencies.
CTO Christian Appel at Mission Hydrogen
As part of the series of webinars at Mission Hydrogen, Christian Appel, Chief Technical Officer (CTO) of Nikola, has provided a lecture in which he presents the status and plans of the company. Appel worked in managerial roles at companies like Bosch. Nikola, according to his assessment, is perfectly positioned to play a major role in the decarbonization of heavy transport. After all, they have already invested a good 2 billion USD in production facilities and in the development of the company with now approximately 1,500 employees.
The hydrogen-powered trucks will be on the market in the second half of 2023. Test vehicles are already on the road and in daily use at customers like Walmart and Anheuser-Busch. As it appears, Nikola will be one of the first to offer an FC truck at the large series production level. Then, with 70 kg of hydrogen in the tank, distances of 500 miles (805 km) could be traversed.
Special safeguards
For the energy management in the hydrogen-powered trucks, Nikola is relying on AI, since the battery and fuel cell must be perfectly matched to each other throughout every road condition and power demand: At times, the hydrogen is to run the electromotor via the FC; at others, the electricity comes from the battery, which is then recharged sometime during the trip. An important influencing factor is whether the truck is on flat roads or hilly areas or in the mountains. Climate zones are taken into account as well.
When it comes to safety, Nikola does not rely only on government stipulations and industry standards but also on its own criteria, for example, for crash tests. The tanks not only have a special thermal protective coating but are equipped with a system of sensors like that for an airbag (crash detection system). Additionally, the hydrogen tanks are especially resistant to damage (for example during collisions) and can withstand high temperatures up to 1,000 °C, for example in a tunnel, for more than 30 minutes.
Safety software system
To further raise the safety, Nikola is counting on PlusDrive. This is an assistance system for the truck driver, who perfectly complements the personal software, expressed the truck manufacturer. The driver develops into a pilot sitting in his cockpit. It’s a lot more than just lane sensors. The system calculates driving distances, determines the speed – according to road conditions and traffic – and sensor technology helps prevent accidents. By using the various camera systems, the driver has everything in view, up to and including the use of radar. Even the condition of the hydrogen as well as the fuel level are continuously monitored. The driver is warned – whether about pedestrians, cyclists, other vehicles or road conditions. PlusDrive is considered a frontrunner of this technology for use in commercial vehicles, and Nikola is one of the first users. Implementation in their vehicles is to occur by the end of 2024.
Prospects
In the second half of the year, the hydrogen-powered Tre FCEV Class 8 will go onto the market. Gamma versions for test purposes are already in test trials with customers. About this, Nikola says, “We believe we are the only commercial EV company to offer an integrated mobility solution consisting of truck and energy.” Nikola is benefitting from not only the subsidy for H2 in the amount of 3 USD per kg (IRA) but additionally from another subsidy from California in the amount of 1 to 2 USD per kg (LCFS). In only a few years, the company wants to produce and sell 300 tonnes per day. That would mean an annual turnover of 400 to 500 million USD and the possibility of fueling 7,500 trucks per day.
Mobile H2 refueling stations can be produced for two-thirds of the price of a fixed fueling station and allow for increased flexibility. Four of them are currently under acceptance. The integration of Romeo Power (batteries) is proceeding according to plan. This involves the automation of the battery production as well as the integration of the FC stacks (Bosch) in a production line for the two truck variants, with considerable cost reduction potential.
Nikola aims for 1.7 percent market share in the USA in 2026
The truck maker expects to sell a total of 1.7 percent of all the Class 8 trucks in the US. According to ACT Research, in 2026 around 360,000 trucks of this class will be demanded in the USA. That means: 1,000 to 1,250 BEV and 5,000 to 6,000 FCEV units. With that, Nikola would be looking at a turnover in the billions range. Sales from hydrogen is to reach 450 to 500 million USD in 2026 at any rate. Starting 2025, the company plans to attain a sustainable increase in earnings.
My conclusion
For me, the share of Nikola Motors has the highest price potential out of the analyzed H2 shares. The investment in this share is at the same time certainly the most speculative, as the company must be seen and assessed as a startup. A few pieces of good news can immediately lead to larger swings to the upside, as the share price is very strongly influenced by short sellers (about 105 million shares sold short as per March 2, 2023, which corresponds to over 25 percent of the free float).
Thus, STA Research has rated the share as a “strong buy” – with initial price target of 5 USD. The average expectation of six analysts sees the stock at 8.20 USD in the course of the next 12 months. I share this expectation. As a result of the figures for the 4th quarter, however, Deutsche Bank (3 USD) and Wedbush (4 USD) have reduced their price targets for the time being. For me, these are momentary snapshots, as every quarter leads to new appraisals, but investment in a startup should be seen as an engagement for the long term.
Proper growth will begin in the second half of this year with the delivery of the Tre FCEV (and the sale of hydrogen) and could then dramatically decline in the following years. Nikola must acquire new liquidity, however, which I see as unproblematic, considering the prospects and partners. The current weak prices remain buy prices. However, it is undoubtedly a highly speculative investment. Think of yourself as an investor investing in the early hours of a startup. With Tesla, the beginning years were very rough, but then they reached high altitude.
Will Nikola become another Tesla – but for trucks?
Disclaimer
Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.
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