Startup electric semi-truck manufacturer Nikola improved its market position by moving forward with a deal to purchase battery-technology outfit Romeo for upwards of $144 million.
The move gives Nikola operational control over production and engineering while insulating it from supply chain disruptions plaguing other truck-makers. The merger also comes at a time when Romeo may have been on the cusp of failure, indicating its future was reportedly in “substantial doubt.”
“With control over the essential battery-pack technologies and manufacturing process, we believe we will be able to accelerate the development of our electrification platform and better serve our customers,” Nikola Chief Executive Mark Russell reportedly said. “Part of this is defensive, to make sure nothing disruptive happens here. But the real motivation is strategic. We’re taking control of our battery destiny and bringing this in-house.”
Nikola was Romeo’s primary customer and the Tre BEV semi-truck has gained steam, earning tax credits and purchase incentives in California and New York, among others. Nikola officials reportedly agreed to provide Romeo $35 million in interim funding to stay afloat until the acquisition is completed.
On Tuesday, Aug. 2, Nikola board members mustered enough votes to increase its shares by 600 to 800. The decision reportedly clears the way to raise more than $200 million in capital, more than enough to complete the Romeo transaction. The zero-emission truck manufacturer reportedly ended the second quarter with upwards of $360 million in cash on hand. But its burn rate through the end of the year has been estimated at $400 million. Adding Romeo’s assets and capabilities would save the electric truck-maker approximately $360 million through 2026.
“Romeo has been a valued supplier to Nikola, and we are excited to further leverage their technological capabilities as the landscape for vehicle electrification grows more sophisticated,” Russel reportedly said.
The fledgling Nikola company began shipping its first Tre BEV semi-trucks early in 2022 and is expected to move up to 500 by year’s end. Demand for zero-emission commercial motor vehicles continues to rise, largely driven by increasingly stringent environmental regulations. Although the Arizona-based truckmaker has made significant strides, it finds itself in a tightly competitive field.
General Motors and South Korean battery producer SK Innovation, among others, have poured more than $30 billion into advancing the technology. The ability to haul freight over greater distances hamstrings the industry. Electric semi-trucks made by Volvo reportedly reach 150 miles, Tesla Semi Class 8 vehicles hit 500 miles, and Nikola leads its competitors, touting a maximum range of 750 with its upcoming Nikola Two sleeper.
Nikola Tre BEV’s cost approximately $300,000, depending on options. The California Air Resources Board offers a $120,000 voucher to offset some of the costs of transitioning to qualifying zero-emissions vehicles. The New York Truck Voucher Incentive Program reportedly reduces the costs by as much as $185,000.
Sources:
https://www.barrons.com/articles/nikola-stock-price-shareholder-vote-capital-51659530366?tesla=y
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