Report: EV start-up Nikola’s ‘ocean of lies’

The debate about the validity of electric vehicle start-up Nikola is raging in the USA following the release of a highly-critical report into its business practices.

As reported last week, Nikola has done a deal with General Motors to be supplied battery and fuel cell technology for its Badger ute and truck range and for GM to engineer and build the Badger as well.

GM has picked up US$2 billon ($2.74 billion) in Nikola equity out of the deal.

But within days the activist short-seller Hindenburg Research released a report headlined “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America”.

Hindenburg alleges Nikola made non-working products appear as fully functional, staged misleading videos and told “dozens of lies” about its capabilities, partnerships or products, among other issues.

Unsurprisingly, Nikola has rejected the report with a press release, claiming the report was “misleading” and “false and defamatory”.

Nikola said it will take legal action, something Hindenburg says it welcomes.

The claims in the Hindenburg report have been backed up by another short-seller Citron Research, which described Nikola as a “total fraud” and promised to cover half of Hindenburg’s legal expenses associated with a lawsuit.

Nikola and its supporters point out Hindenburg has a stake in the company and benefits when the stock price drops, which it did by as much as 18 per cent after the report was released.

Hindenburg supporters say Nikola’s deal with GM, in which it abandoned its own much-touted electrified powertrain development plans, proves they were overstated by founder Trevor Milton.

Capitalising on the EV mania on the stock market, Nikola went public in a process called a reverse merger in June. Within days the company was valued at more than US$73 billion ($100 billion) and Milton became an instant billionaire.

This was despite the fact the company was still yet to sell a single vehicle. The value has steadily slipped back from that high and the short-seller report accelerated that trend.

Milton is a larger than life salesman with a propensity to make big promises and communicate via tweet in the same way as Tesla boss Elon Musk.

Through the years Nikola – which is named after scientist Nikola Tesla – has secured the support of significant corporate players including Bosch and renewable energy equipment manufacturer Hanwha.

Its reverse merger was overseen by a company called VectoIQ, which includes former General Motors vice chairman and board member Steve Girsky as a managing partner.

When the Hindenburg report was released, Milton immediately attacked its accuracy and promised a “detail report” to rebut the accusations.

However, he later said he would not make any further comment “on the advice of counsel”, which is Kirkland & Ellis, the same corporate litigator that represents General Motors.

The debate about Nikola and its credibility has undoubtedly divided the US automotive community.

For instance, influential Detroit automotive journalist John McIlroy was dismissive of Hindenburg.

“The key thing is he (Hindenburg) has shorted Nikola stock and then he comes out with this long list of accusations against Nikola and what happens? The stock goes down!” said McIlroy.

“I have a big ethical problem with companies doing that sort of thing.

“I’m not going to exonerate Trevor and say Nikola is the greatest thing, I don’t even know if the company is going to work or not.”

But Fred Lambert, the editor-in-chief of the electrek.co website had no doubts what it all meant for Nikola.

“The (Hindenburg) report was all evidence-based and had proof in it. It has started crumbling Nikola’s house of cards,” he said.

“The report shows this pattern of Milton making claims that are not true, that are deceptive, in order to create partnership, hype, in order to get investors behind the company and everything.”

A key point for Lambert was a claim that a prototype Nikola semi was pushed down a shallow hill for a video to make it look like it had an operational powertrain when it did not.

“This claim would be very easy to debunk, just show an unedited version of that video,” Lambert said.

“He didn’t do that because probably he can’t do that.”