In late October, California provided an update on the ambitious sustainability goals it had set for vehicles on its roads. Among them was a bar set that 6% of all heavy trucks sold in the state should be zero-emission vehicles (ZEV) by 2024.
Not only did California meet this goal ahead of schedule in 2023, but it exceeded it with 7.5% of new trucks sold this year being ZEVs, amounting to 7,639 units in total.
This must have been great news for the flurry of ZEV-makers that went public via SPACs in 2020 and 2021, right? Well, it’s complicated.
So far, de-SPACs do not appear to be making up much of that pot of vehicles yet, but this could soon change. By early next week, the six most prominent ZEV de-SPACs will have reported their earnings and many are expected to have news to share for the California market and beyond.
That Nikola (NASDAQ:NKLA) was the first to report is perhaps fitting as its early retail popularity and scandalous fall became emblematic of the times. It is now helmed by CEO Steve Girsky who came over from its SPAC partner VectoIQ in the wake of the ouster of its founder.
Since taking over in August he’s had to deal out with the fallout from Nikola’s absorption of another trucking de-SPAC, Romeo Power. Acquiring the company for $0.74 per share last year diversified Nikola beyond fuel cell technology into electric battery trucks and increased its manufacturing base.
But, Romeo’s legacy costs have come back to bite in the form of a battery recall that cost Nikola -$61.8 million this quarter alone, wiping out any positive momentum towards profitability.
The good news, Nikola emphasized in its earnings release, is in California.
Orders for Nikola’s fuel cell truck models have soaked up 96% of the state’s HVIP vouchers defraying $288,000 of the cost of a new ZEV purchase and about half of the vouchers for a program offering a $408,000 incentive. It’s racked up at least 223 non-binding orders from 23 customers for such vehicles and announced their commercial launch in September.
A new part of the state’s climate strategy also clicks in with the start of 2024, after which all new trucks registered at California’s ports must be ZEVs, representing an eventual market of about 30,000 vehicles that Nikola plans to attack.
California also weighs on Hyliion’s (NYSE:HYLN) plans three years out from its combination with Tortoise.
Initially, only major truck manufacturers and OEMs Cummins (NYSE:CMI), Daimler (DE:DTG), Ford (NYSE:F), Navistar, PACCAR (NASDAQ:PCAR) and Volvo (ST:VOLV) had models certified as ZEVs for the purpose of these programs. Hyliion’s electric drivetrains for heavy trucks now also have such certification, but the company is nonetheless considering divesting the unit due to the high costs of proceeding with manufacturing.
Instead, it it is excited by the prospects of its KARNO generators that can be used to charge all sizes of EVs as well as maritime vessels and buildings. With this application closer to full commercialization, it hopes it can dangle a ready-made truck technology for the California market to a buyer.
It reported no revenue in its quarterly release today, but noted it finished the period with $324 million in cash and it expects it will only burn about $40 million of that through the end of the year as it works to debut KARNO in 2024.
Fellow de-SPAC Hyzon Motors (NASDAQ:HYZN) is collaborating with Hyliion on a fuel-cell variant of its heavy truck drivetrain design, should it continue to pursuit it. For its own part, Hyzon is also pushing hard to get its trucks and retrofits on the road in California having secured incentives of $240,000 and $120,000, respectively, for each offering.
But by shooting higher technologically to the fuel cell space, Hyzon also faces a longer developmental and regulatory runway, now two years out from its combination with Decarbonization Plus. It has notched orders for small numbers of vehicles in Australia and New Zealand, but a California market update is expected in its own third quarter earnings release on November 14.
Xos Trucks (NASDAQ:XOS) can count on $160,000 vouchers from the state for its own mobile charging units and $85,000 for its stepvans, some of which may be bought by the California itself, as it contracted Xos as an official vendor to purchase vehicles for its state and local agencies.
NextGen‘s former target reports its third quarter earnings after close today, but already tipped that the period was its biggest quarter for deliveries with 105 vehicles making it to end customers – primarily its 2023 Stepvan.
Two more ZEV de-SPACs also have models that would qualify for California’s programs, but appear to have found their initial customer bases in other locales. Lightning eMotors (OTC:ZEVY) has specialized in medium-sized buses, 55 units of which it delivered last quarter.
Its initial deployments have been to fleet customers in Utah and Colorado and it is also expected to report supply disruptions connected to the Romeo recall when it reports November 14. In fact, it sued Romeo and Nikola over alleged breaches for delivery contracts in March as a potential plaintiffs suit over its own failure to meet projections stirred.
Two years after its combination with GigCapital 3, it expects $35 million to $45 million in revenue from the sales of 300 to 350 units for 2023. It appears unlikely it will break even this year as it posted an adjusted EBITDA loss of -$17.1 million in the second quarter.
Even when announcing its combination, Lightning eMotors did not expect to be cashflow positive by 2023. But, it has still fallen far short of the marks it aimed for at the time of $640 million in revenue projected for this year with $50 million in EBITDA and a $1.1 billion-revenue year around the corner in 2024.
Its Montreal-based peer Lion Electric (NYSE:LEV) may also largely stay off of California’s roads for the foreseeable future. It has gotten more than 1,600 vehicles on the road – mostly school buses since its 2021 combination with Northern Genesis. Most of these have benefited from Canada-specific incentives and have been purchased by municipal agencies in that country.
Its bus and heavy truck models are nonetheless eligible for some heavy California state discounts as well and it won an initial bid for 10 school buses for the Los Angeles school district back in 2021.
On November 7, it reported that it generated $80.3 million in revenue with a relatively narrow EBITDA loss of -$3.9 million. It also just opened a 900,000 square foot factory in Joliet, Illinois to produce its lines, which could help it compete with school bus leaders like Blue Bird (NASDAQ:BLBD) that have EVs of their own.
All and all, this has helped Lion Electric stand out as the best performer of this bunch by a decent margin, last closing at $1.69. Nikola continues to be the largest company in total market cap, however at over $1 billion despite trading these days just over $1.
The narrative around these six companies is overwhelmingly that they failed to meet the targets they set in their initial investor presentations and that remains true. But most have nonetheless succeeded in getting vehicles on the road and continue to benefit from an incentives scheme that should in theory provide some business for them if they keep keep driving towards the bright Californian sun.
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