Nikola has announced plans to replace the battery packs in its electric trucks due to safety concerns following multiple fires.
This decision comes after the company faced setbacks due to its acquisition of Romeo Power, a battery pack supplier that has since become obsolete.
Nikola’s battery case
Nikola’s predicament stems from its acquisition of Romeo Power in August 2022, a move aimed at securing a stable battery supply for its electric trucks.
However, this acquisition has led to a series of challenges. Notably, the battery supplier had been offering significant discounts to Nikola – a benefit that disappeared after the acquisition.
Manufacturing issues with the battery packs resulted in a recall of 209 model year 2022-2023 Tre battery-electric vehicles (BEVs) in August. This recall was prompted by underhood fires linked to coolant leaks in the packs.
Further fires were reported despite the recall, exacerbating concerns about the safety of Nikola’s electric trucks.
Don’t catch fire
Nikola has not disclosed specific details about the recall, leaving customers in the dark regarding the timing and location of the pack replacements.
Unlike typical recalls where the cost is shared with the supplier, Nikola, in this case, bears the full financial burden. Because Romeo Power is undergoing liquidation, Nikola is solely responsible for covering the expenses related to the recall.
The exact cost of the recall remains undisclosed, but Nikola appears to be hastening the sale of newly authorized shares to generate funds for this unexpected expense. It will reportedly address the case during detailed discussions in its upcoming third-quarter earnings call scheduled for November 2, 2023.
The great recall
In response to these safety concerns, Nikola recently informed owners of its Tre BEVs that it would cover the cost of returning the trucks to its facility in Coolidge, Arizona, where the defective battery packs will be replaced.
The company estimated that the replacement process would take approximately 60 days, depending on the availability of new packs. However, it remains unclear where Nikola will source these replacement packs, given its unique configuration for hydrogen-powered Tre fuel cell electric vehicles (FCEVs).
This recall has had a ripple effect on businesses relying on Nikola’s electric trucks, according to Freightwaves.
WattEV, a truck-as-a-service startup operating 14 Tre BEVs in California’s CEO is concerned. “We couldn’t take the chance,” says CEO Salim Youssefzadeh. “We are taking the battery recall seriously and are waiting for more information from Nikola.”
Damage control
To cope with the financial strain resulting from the recall, Nikola has expedited the sale of new stocks, doubling its authorized shares to 1.6 billion.
This move has allowed the company to issue convertible notes worth $165 million and allocate shares to cover debts owed to hedge fund Antara Capital. Consequently, outstanding shares increased by over 26% between August 1 and September 20, reaching approximately 985 million.
As Nikola navigates this challenging situation, the uncertainty surrounding the recall and the company’s ability to resolve the issue swiftly have left stakeholders and customers eagerly awaiting further updates during the upcoming earnings call.
About the author
Marce has contributed tech to various prominent publications since 2018, offering a transparent perspective into the tech industry and its effects on its users. She now spends her time developing insightful content for industry players. You know, when she's not gaming or geeking out about the latest fad.
