Why will Nikola Motors fail and go bankrupt?

Do you know when Nikola Motors (NKLA) went public, its founder Trevor Milton sold $70 million worth of shares? Do you know that he claimed Nikola is producing 3 Gigawatt electricity at their headquarter, which was false? Do you know Nikola misled investors by showing a video of a Nikola truck going on the highway, but that truck was not operational and was only going downhill? 

Trevor Milton, the founder and former chairman of Nikola, did many shady things. However, Nikola Motors will not fail because Trevor misled investors. It will fail because they rely on Hydrogen Fuel Cell (HFC) technology. Let us explain the problem of the hydrogen fuel cell infrastructure.

Around 1880, Thomas Edison discovered the Direct Current (DC). An example source of DC is a battery. Our mobile phone battery, 12V car battery, produces Direct Current (DC). Opposite to DC is Alternating Current(AC). Our power lines at home are AC.

A green energy vehicle does not produce carbon emissions such as carbon dioxide (CO2), carbon monoxide(CO), etc. Currently, there are two types of green energy vehicles. One is the Battery Electric Vehicle (BEV), and another one is Hydrogen Fuel Cell Vehicle (HFCV). An example, Tesla cars are BEV, and the Toyota Mirai is HFCV.

Hydrogen Fuel Cell technology is not new. It has been in the market for decades. Moreover, since 2014, Toyota is selling a Hydrogen Fuel Cell car called Toyota Mirai. 

Battery Electric Vehicle:

Electricity is the only fuel for Battery Electric Vehicles (BEV). The core operating principle of the BEV is straightforward. There is a battery and a motor. The battery runs the electric motor, and the motor drives the car. Depending on the BEV manufacturer, some may choose to change some operating principles if required. For example, Tesla uses an AC motor in their car. So, for the motor, they convert DC to AC using an efficient alternator. However, the core design principle of a BEV remains very simple for every manufacturer.

Electricity Lifecycle for BEV:

  • Produce electricity at Power plants.
  • Distribute electricity through transmission lines.
  • Electricity reaches our home.
  • We plug our BEV to a charging port.
  • Electricity recharges the battery of our car.
  • When we use our car, the battery electricity runs the motor.
  • The electric motor drives our car.

This whole process is entirely similar to how we recharge and use our cell phones. Moreover, this entire process from start to finish is more than 70% efficient. 

Furthermore, all the required infrastructure — electricity generation, transmission, and storage — is already in place for BEV. It does not matter wherever you go on this earth; electricity is available. Even if it is not available, we can effortlessly generate electricity from wind and solar.

Before we proceed further, remember that the battery is the storage medium of electricity in BEV.

Hydrogen Fuel Cell Vehicle:

If we analyze the Hydrogen Fuel Cell Vehicle (HFCV), we would see that HFCV is inferior in cost and energy efficiency than BEV.

Hydrogen is the only fuel of HFC vehicles. However, we need to produce Hydrogen for our HFCV. Hydrogen is abundant in nature; for example, Water (H2O), methane gas (CH4), and biomass all have hydrogen.

There are many ways we can produce Hydrogen: Steam reforming, Electrolysis, Gasification, Renewable liquid reforming, etc.

Steam reforming:

Currently, steam reforming is the dominant hydrogen production method in the industry. In this method, natural gas reacts with high-temperature steam to produce hydrogen, carbon monoxide, and carbon dioxide. 

Electrolysis:

In this method, the electric current splits water (H2O) into hydrogen and oxygen. If the electricity comes from renewable energy such as wind or solar, this hydrogen is entirely green and considered a renewable energy source. In this method, we are merely storing electric power into hydrogen gas. However, this is an inferior way to store electrical energy compared to storing electricity in a Battery. Electrolysis is inefficient and wastes a lot of energy.

Distribution of Hydrogen Gas:

Once we produce the hydrogen, we need to distribute it. There are three distribution methods for hydrogen — Pipeline, High-Pressure Tube Trailers, and Liquefied Hydrogen Tankers.

A pipeline is very costly, and only 1,600 miles of hydrogen gas pipeline is available in the US, mostly in Illinois and California. Another way to transport hydrogen gas is to use high-pressure tube trailers. However, it is expensive and viable only if the delivery location is less than 200 miles from the hydrogen factory. Cryogenic liquefaction is also a very costly process. In this delivery method, hydrogen is cooled less than -239.96 degrees celsius to transform it into liquid form.

All the distribution of hydrogen described above is costly. To make Hydrogen Fuel Cell Vehicle (HFCV) popular among consumers, we need to build thousands of Hydrogen refueling stations nationwide. Without hydrogen fueling stations, it will be tough to convince people to buy an HFC vehicle.

You can visit the US government website to locate available hydrogen stations. From the website, it is apparent that approximately 50 hydrogen refueling stations are available in the contiguous US.

On the contrary, electricity is available everywhere. There are more than 32,000 electric charging stations available in the US. Furthermore, you can recharge your battery electric vehicle (BEV) at your home.

Inside the HFC vehicle, we need another process to combine Hydrogen and oxygen to produce electricity. We use this electricity to recharge our vehicles’ onboard battery and power the electric motor. The hydrogen fuel cell, which extracts electricity from Hydrogen and Oxygen, works around 55% efficiency. Moreover, HFC has reliability issues.

Alternatively, we also have a hydrogen combustion engine. But this is a poor idea for consumer vehicles. The engine efficiency is at around 25% and, in real-world scenarios, produces nitrogen oxides and water.

Here is the full energy flow for hydrogen fuel cell vehicle:

Electricity -> Water -> (energy loss) Hydrogen + Oxygen -> Compress hydrogen (energy loss) -> Transport hydrogen (energy loss) -> Gas station -> Fill-up vehicle with hydrogen -> Hydrogen fuel Cell (55% efficiency, 25% for hydrogen combustion engine) -> Electricity -> Motor.

If we combine all of the above energy loss, we don’t know the ultimate efficiency of a hydrogen vehicle. 

However, even if we consider all the losses from electricity generation to the vehicle’s electricity consumption, the battery-electric car’s operating efficiency is more than 70%.

Hydrogen needs to solve Circular Problem:

HFC is in a circular problem. Let’s explain.

After 2010, many companies tried to capture the mobile market with different OS. Samsung with Tizen, Ubuntu with its Ubuntu Touch, Mozilla with Firefox OS, Windows with Windows Mobile, Blackberry with Blackberry OS. All of them failed not because their mobile OS was inferior but because their App Store did not have many apps. Without a good app store, consumers would not buy a mobile phone. Without a lot of customer base, software developers would not develop apps for that mobile OS; if developers do not make apps for the mobile OS, it’s app store will lack apps. Again, without a good App Store, consumers would not buy that mobile phone. 

Hydrogen vehicles have this same circular problem. Building a hydrogen refueling station is not profitable for business owners if there are not enough HFC vehicles on the road. However, if there is not enough hydrogen refueling station, consumers would not buy Hydrogen vehicles. How will you solve this problem? 

Hydrogen vehicles are costly to operate:

Hydrogen vehicles operating cost is 4x more expensive than battery electrics. Let’s look at an example. Toyota Mirai vs. Tesla Model 3 long range. 

Toyota Mirai:

Tesla Model 3 long range:

  • Price: $48,000 (excluding autopilot)
  • Range: 310 miles (75 kWh Battery)
  • Operating cost: $0.06/mile.

As you can see, the battery-electric vehicle is simple, straightforward. All the infrastructure and technology is already in place. On the other hand, cost-effective hydrogen production and distribution are not available yet. HFC technology is not cheap or efficient. 

In short, Battery electric vehicles are superior to hydrogen fuel cell vehicles in every possible aspect. Hydrogen Fuel Cell is the main selling point of Nikola Motors. We can see that hydrogen fuel cells and their infrastructure have already lost to battery electric vehicle technology and infrastructure from a technological perspective.

Additional Problems:

These are the problems that plague Nikola Motors.

Nikola Motors has no manufacturing:

Building a prototype of something is one thing, and producing that product in a factory on a massive scale is another thing. Nikola Motors have not shown us any HFC technology prototype yet. Let alone make it on a large scale. As of today, they sourced a few HFC from a third party and retrofitted them into their vehicle.

Nikola Motors has zero software:

Software is a critical part of an electric vehicle. However, the way Trevor Milton described the software in their vehicle in the following video is embarrassing. 

Conclusion:

Everything has pros and cons. But when two different technologies try to solve the same problem and one technology has a clear edge over the other in every possible way, there’s no point clinging to inferior technology. In this case, HFC is the inferior one.

Trevor Milton was the main driving force and face of Nikola. But now he has resigned from Nikola. There are no visionary or key public figures at Nikola anymore. So, Nikola Motors neither have hardware and software technology or any leaders. We don’t see any path to Nikola Motor’s survival. And this is why we believe Nikola Motors will fail and go bankrupt.

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