Interview with Trevor Milton, founder and executive chairman of Nikola Corporation (NASDAQ: NKLA)

Trevor Milton, the Nikola Corporation founder and executive chairman agreed to answer some pressing questions from me and the Tesla Twitter community about the Nikola Badger, the Nikola semi-trucks and their hydrogen production plans.

Leading up to our interview, Trevor appeared on various TV shows, podcasts and YouTube videos. During his appearance on the “Autoline Network” podcast, Trevor discusses, among other things, the hydrogen station at their company HQ in Phoenix, AZ. I started the interview with a follow up question referring to this topic. 

Trevor, you said on the “Autoline Network” podcast that you have the largest hydrogen station in the western world at your HQ [in Phoenix, Arizona]. How much H2 [Hydrogen] are you producing there per day right now and at what price?

Trevor: The station is designed to store and pump about 1,000 kg's per day. Electrolyzers are going in now and should be operational with zero emission solar production by Nikola World 2020. We have 2.5 megawatts of solar going up now at the facility. The station functions now, but we do not sell it to the public.

OK, so for the record: You’re currently producing no hydrogen but you’re planning to produce 1 metric ton/day using 100% solar energy by the end of the year? What are you going to use it for by then? 

Trevor: The permitting process of producing hydrogen takes much longer than storing and pumping it. We spent the last year building the largest hydrogen station in the western world in Phoenix, AZ at our HQ. Now we will spend the next 5 months installing the hydrogen production (Electrolyzers, Power Electronics, Thermal, Etc.) into that station.

You don’t have any trucks on the road yet that require hydrogen, what are you going to use it for starting in December?

Trevor: We currently go through hundreds of kilograms of hydrogen each month in testing with the two trucks we built. That testing happens on tracks and off the highway for safety. Is the truck safe enough to drive on roads? Yes. But we don’t trust other drivers so we keep testing it on private tracks for safety.

Are you worried that other drivers could potentially crash into the prototype and cause a hydrogen explosion because the H2 tanks are not safe yet? Are you expecting FMCSA certification for the Nikola Two in time for Nikola World 2020 in order to start doing nationwide testing on public roads or is this much further out in the future? 

"It's not very hard to put a truck on the road."

Trevor: Not worried about the tanks, but I am worried about a driver hitting us or pulling in front of us. Those trucks are very expensive to fix. The Nikola Two won't road test until 2022 as we use the track and Dyno rooms to do all of our extreme validation testing rather than on road testing. It's not all about publicity, it's about safety. It's not very hard to put a truck on the road. It's very hard to put a truck on the road and prevent all problems from happening. The Nikola Tre will be on the road testing next year [2021] with customers in the battery electric version that has 720 kilowatt-hours.

"Those trucks are very expensive to fix."

With regards to hydrogen fueling stations for the Nikola Badger pickup truck, you said many times, you first sell the routes to trucking companies before you build the stations. Once all those 700 stations are built (which takes 7 years according to your own statement) will you proceed with the satellite stations or when are they going up? How many are planned? Can the Badger fuel up at the truck stations too or are they exclusively for the semis?

Trevor: We do not build a station until the route is sold out with truck orders. Once the route is sold out, we can handle distribution of H2 within a 250 mile range. That allows us to build smaller stations for Badger and other H2 customers that are not on freeways, but distributed and pumped at smaller locations throughout a city. We start with California and then begin to move to other states as our first H2 stations are going in California but produced outside California for cheaper energy rates and clean energy.

This plan works fine for the semi trucks, I get that and it makes sense but how are your Badger FCEV customers going to fill up before your H2 station network is available throughout the country? What’s the timeline for those satellite stations?

Trevor: The Badger is a different rollout than the semi-truck. We will allow customers to order the Badger in a BEV [Battery Electric Vehicle] version that is upgradable to FCEV [Fuel Cell Electric Vehicle] once the station comes online near them. It is the only pickup designed to be upgraded in the future. We have 13 stations going up for Anheuser-Busch and those 13 markets we will allow customers to purchase the FCEV first as we will provide smaller stations in those cities for consumers to use. The large semi truck stations will be the main production of H2 and Nikola will distribute that hydrogen to smaller stations around the city. Most consumers will order the truck in BEV then upgrade to FCEV down the road when the H2 comes online.

The ETA for the BEV Badger is 2022. Do you have a timeline for when the FCEV version will start shipping? 

Trevor: The Badger is scheduled for deliveries in 2022 in the battery electric version and following that the fuel-cell version. The time difference we don't know yet but we are expected to enter production sometime in 2022 on the Badger.

On the “Autoline Network” podcast you said: "Our cost of electricity is between three and four cents a kWh for zero emission 100% electricity." and "We can do it on the federal grid zero emission 100% of the time."

In 2019, CleanTechnica published the following:

“Nikola’s Schneider said that each 8 ton station would need an estimated 17.6 MW of solar generation to make them fully sustainable. That is a hefty goal that would require tens of acres of land beyond the 7–10 acre fueling depots themselves. Initially, the 8 ton stations would start up with around 30–40% renewable electricity powering them.”

What is the situation today? Can you indeed produce 100% zero emission electricity to produce Hydrogen?

Trevor: While we do plan on getting all renewable, in some areas it won't be 100% possible. Right now, less than 20% of CA [California's] grid is clean energy. We are contracting with wind, solar and hydro plants for energy and so far have been able to source plenty of energy under $.04 per kWh. Most of it is much lower in the 2.5 [cents] per kWh range. This is where H2 is competitive. It is not more efficient than BEV but it is cheaper to operate per mile in some situations. So far we are seeing 75-90% clean energy in our negotiations which is a big jump from only 20% in the grid.

"While we do plan on getting all renewable, in some areas it won't be 100% possible."

OK, so your original statement about 100% zero emission electricity was not correct and California’s grid is currently at 30% renewable energy (40% if you include hydropower), not 20%. These numbers reflect exactly what your company said in 2019 about how you would start out: 30-40% renewables, which is what the California grid provides as of today. 

Trevor: While it is impossible to say all energy will be zero emission, we believe most all of it will be for Nikola. For legal reasons, we have to show lower numbers so we can beat them. 

Our first stations are planned to use zero carbon / mostly zero emission energy for all our hydrogen production. I wish I could get into more of it, but the additional data is not yet public, and I can’t comment on what is not public. 

I got most of my numbers from Wikipedia. I stated that most of the energy in California has a carbon footprint and is dirty, which is true. The exact amount is debatable depending on year but according to Wikipedia 44% is from natural gas alone and a majority when you add in diesel and coal in. 32% was renewable in 2018. 

The numbers are not super important to our model, the important part is, our energy will be carbon free and mostly zero emission with our hydrogen production which has a greater impact on our carbon footprint than using the grid energy.

You have a big pre-order from Anheuser-Busch and based on your recent comments, I assume you’re going to start with a Los Angeles to Phoenix truck route in 2022? You already have the Phoenix H2 station in the works which means, you will need one in or around LA. How are you going to finance that and when is it supposed to be online?

"We are funded to pay for the network with cash."

While I can’t comment where the first stations are going, we are funded to pay for the network with cash. As of now, we have over 700MM [$700,000,000] cash in account and the network for AB [Anheuser-Busch] is a very small part of that capex.

When referring to being “funded to pay for the network with cash” are you talking about all planned 700 stations or just the 13 for Anheuser-Busch? 

Trevor: The network I'm referring to is specifically the 13 stations that would be funded through the contract with Anheuser-Busch. As you know we make almost 1 million dollars in revenue per truck so we borrow or sell those leases and we are able to pay for the infrastructure in cash. We also have over 700 million dollars in our account and we are able to use that capital to cover some of the first stations as well.

Why have you started taking pre-orders for the Badger before there is an actual prototype available for buyers to see, touch and sit in and why are you not using those deposits to finance the development/production of the final product? 

Trevor: This is all marketing. Even bad press (We get some of) is good press. Hundreds of thousands of new people start knowing about Nikola each month throughout the world even through the bad publicity sometimes. The rest is good publicity. Tesla took months leading up to their reveal to get interest for their truck. We are doing similar, just a different way. It also shows true commitment from customers which many people critiqued us for. By Nikola World we will have a huge backlog of truck orders. We also keep those reservation holders in the loop which makes them great supporters. It also allows us to call out the skeptics naturally and then prove them wrong which makes people like you even more. It is not everyone's way of doing things, but we like to be different and have fun. The truck is real and we start showing off parts of it leading up to Nikola World in September. (Check my latest tweet)

What you are saying about the Tesla Cybertruck is not quite accurate. Tesla announced the Cybertruck event just a few weeks before the event where they showed the actual prototype. They teased a few pictures before but I’m talking about taking actual deposits for pre-orders. Can you please clarify the reason for not using deposits to finance development/engineering/production of the Badger?

And since you’re not using them, what happens to them in case you’re going out of business before you can deliver the Badger, are those deposits lost or do you keep them in an escrow account that would be protected and refunded in such a case?

Trevor: I was under the impression that Tesla has announced the original pickup program in 2012. In 2014 he said it would be 4-5 years out. In 2016 and 2017 he gave details about the truck and sizing. In 2018 he said the prototype would be ready. In 2019 a teaser photo was distributed by his team and then finally unveiled later in 2019. He had 7 years of hype building up to the truck and talked about it many times to gain attention. I apologize if I made anyone feel like I was misleading them. I feel like Nikola was expected to perform like Tesla when we had only a month or two leading up to reservations, not 7 years. 

We are not using anyone’s deposits to develop or produce our products. We feel like that is too similar to kickstarter and brings additional risk to consumers that is not needed. To answer your question, all deposits are labeled deposits, placed in a different account and not spent except for refunds when requested by the deposit holders. If we went out of business, all deposits would be refunded without penalty to the consumer and without risk. We believe we are the only group that has agreed to that. I do believe we have not gotten the credit we deserved with that decision.

I was not referring to Elon’s casual remarks to questions asked by reporters a few years ago, I was talking about taking pre-orders for a non-existing product.

As a Nikola shareholder, I would be worried about the fact that you are not using the deposits for the pre-orders to get the product to market.

Trevor: Pre-order deposits may run into a couple hundred million dollars. But ultimately we are very well-funded right now and we don't need that money. It's a sign of commitment from customers and from us. For now, we have made the agreement that we will not touch anyone with money as we develop these vehicles. If things change we will certainly allow all customers to know that and to refund their money if they choose to do so. But as of right now we have no intentions of using their capital to develop our programs since we have plenty of capital on hand and cheap options for more capital

According to the SEC S-1 acquisition form, you're issuing up to 2,000,000 shares to your consultant (aka @DieselBrosTV) and if your statement about "a couple hundred million dollars" in deposits is accurate you already reached that limit. Can you confirm that they receive (or have received) NKLA shares currently worth over $100,000,000? 

Source: https://sec.report/Document/0001047469-20-003604/

Trevor: We do not have a couple hundred million in deposits yet but we do anticipate achieving it. We planned for what to do with all the money and decided to leave it in an account and not use it as it grows. I typed "may" achieve a couple hundred million. The stock paid out will only be for converted, legitimate reservations that do not cancel. That is down the road and none have been issued.

The mentioned SEC form reads "reservation fees from prospective customers". Are you saying that only deposits for reservations that get converted to actual orders are counted towards the pay-out? Can you say how much $ you have received until today?

Trevor: Only converted reservations that last a specific amount of time, non refunded, legitimate reservations get paid in stock. We have not paid any out. Unfortunately I can't comment further than that on the agreement.

Last but not least, many are wondering if there will be a frunk in the Badger and if yes how big is it going to be?

Trevor: The Fuel Cell version does not have a frunk but the BEV version does. I am not sure the size in cubic ft but I can ask and get back to you on that.

That’s great because many people like that, me included. Just a size comparison to existing EV’s would be fine. Tesla Model S size? Bigger, smaller?

Trevor: The frunk is currently smaller than the model 3 frunk for size comparison.

I would like to take the opportunity to thank Trevor for taking the time for this interview. There are, however, still some unanswered questions specifically regarding the installation of the hydrogen network for the Nikola Badger. In a press release in February 2020, Nikola unveiled the Badger and promised:

Initial hydrogen station locations are finalized and will be announced this quarter

Pre-orders have started and while we are currently in Q3, specifics around where and when those hydrogen stations are going to be installed have yet to be released.

Disclosure: I am not holding a position in Nikola Corporation shares or warrants and have no intention in doing so in the near future. I am a long term shareholder in Tesla Inc.