OEMs

The Nikola partnership is creating a headache for GM.

So everyone is waiting for the SEC & Justice department to weigh in on whether Nikola is a legit EV/fuel cell startup that just formally aligned itself with GM or if it’s the auto sector version of Theranos. For those not familiar with Theranos, google it or ‘Elizabeth Holmes.’

First off, Trevor Milton the Executive Chairman of Nikola, some would argue isn’t the most humble auto CEO, comparing him to Tesla’s Elon Musk for his level of braggadocios-ness. But let’s be fair, Elon has created multiple companies, some that have been acquired some with products and services currently in the market, creating enjoyment for customers and value for shareholders so although both of their megaphones are large and loud, I’d argue that Elon’s is more deserved than Trevor’s, at least for now.

Second, Trevor’s and consequently Nikola’s initial response to the Hindenburg post was totally weak sauce. For a company whose value once reached ~$34B but has decreased by ~36% over the last 5 days largely due to a report they claim is false and defamatory, you’d think Nikola would come out VERY firmly with evidence to rebut the short seller’s claims. One thing is clear though, the fact that the semi in the promotional video couldn’t power itself is just a really bad look and reinforces the doubts on all of the other 51 questions that Hindenburg posed to Nikola. 

If you are backing them, how does that make you look? More importantly, how does this make you feel? If any or some of the claims are true, how does this make your team look, in particular GM which just two days before the report dropped announced a formal partnership with Nikola? I have a few theories on this that I’ll share.

First, if we look at the structure of the GM/Nikola tie-up, there’s no cash component on the GM side, just services ‘in-kind’ being paid for with shares (11% to be exact) of Nikola. I thought this was peculiar but as I play this out in my head, maybe GM did realize that Nikola wasn’t as far along as Trevor had implied publicly they were but that the tech was promising enough to have GM’s name associated with Nikola’s but NOT enough that they would make a financial commitment to Nikola.

Second, the other theory I have is that GM’s internal corporate development team & lawyers (the formal name of the M&A department) are used to performing due diligence (DD) on manufacturing companies that have much more ‘bricks & mortar’ types of assets that they have a lot more experience pricing. Since we know that Nikola doesn’t have that many PPE types of assets, their IP was likely the most important thing that needed putting a value on which would not really be in the evaluation teams’ ‘wheelhouse’ so they did their best to value it overlooking/undervaluing some significant red flags and potential ‘showstoppers.’ I should mention that a deal like this would also most likely involve an investment bank (maybe more than one), one(s) that have supported GM’s DD process in the past, so if they analyze and determine it’s a bad deal, they’d likely advise GM and Mary to walk away.

The third scenario, which to me is least likely is that the SEC and now the Justice dept. investigate and find that Hindenburg just did a hit job on Nikola to cash in at their expense. GM, Nikola walk away the victims of what’s essentially extortion and they’re none the worse for wear and everyone watches for the next potential trainwreck to arrive.

I think once the Justice dept & SEC both get involved, they’re bound to find some oversight issues, Nikola is after all a startup, a VERY highly valued one but a startup nonetheless. Whether their findings lead to fraud is another thing altogether. But back to GM, if either the SEC or the Justice dept. uncover any significant shortcomings, why would GM make the deal? It would either be because the internal M&A team, as part of their DD, highlighted inconsistencies that Mary decided weren’t showstoppers OR the internal team really shit the bed on their diligence and Mary covered their asses in the press. If I was a GM shareholder, either scenario does not sit well with me, and depending on how deep and wide the potential ‘inconsistencies’ could be, I may lose confidence in the GM leadership.

A couple of final notes – First, according to this article, VectoIQ brought the deal to Mary and GM. VectoIQ is the company that owned the SPAC that Nikola merged into. There are also a few ex-GMers on VectoIQ’s team, so was there a conflict here? No one has brought that up so it could or could not be material.

Second, this is happening to a US-listed, American company so these types of accusations aren’t limited to just one country’s companies.

#GM #Nikola #Hindenburg #thebigshort #SEC #JusticeDepartment #thisisgettingjuicy

CITY SOLUTIONS

More and more cities experimenting with keeping 4-wheeled vehicles outside of their city centers.

It was only a matter of time that some bold, ‘out of the box’ thinking city would experiment with ways to encourage the use of bicycles by offering them for free …for a short period of time. With ANYTHING new, there needs to be awareness and education initially, then a bit of trial before that first step towards adoption and then acceptance can occur. If cities and companies can work together to make the awareness, education, and trial steps, painless or at least less painful for those early adopters, then it could potentially lead to a much larger acceptance among the general populace, creating a lot of goodwill for your brand along the way.

That’s what the city Leeds seems to be doing. I’ve covered many e-bike introductions in this newsletter. Many of them are expensive, prohibitively so which makes this pilot program great since it could reach so many more potential riders! The rider needs to commit (the painful part for them) by placing a deposit on the e-bike, but then they’re given free reign (with a cap on use) to use as they see fit. The initial pilot program is only for 15 e-bikes but it’s a start.

Now, I’ve never been to Leeds (but have heard it’s quite a nice city) so I don’t know how much traffic the city deals with or if it is very bike-friendly, but it does seem like this program could be one of those rare ‘win-win’ situations for the mobility company that decides to work with it and the program was given enough time to marinate in the market.

Last-mile mobility companies, if they believe in their product and could see an eventual path towards profitability by launching in the city, whether they’re pedal bikes, electric bikes, or e-scooters, should jump at the chance to work with cities that are this entrepreneurial, openminded, and forward-thinking.

The time of ambushing a city by secretly dropping a ton of your product onto its streets, only to piss off the city’s leadership and law enforcement, are pretty much over. I mean, if you’re losing money anyway, wouldn’t this be a better way to do it – Increasing awareness of your product/service while working with the same people that would regulate it.  

If there’s a chance your product can become synonymous with a city like Leeds while providing a convenient, affordable, environmentally-friendly, even fun and safe way for people to get around it, why wouldn’t you make that initial contact?

#Leeds #leadingtheway #experimentation #bikefriendly #ebikes #green #sustainable

AVs

LiDAR is going mainstream.

As EVs and AVs have started to mature so has the technology that supports their abilities with LiDAR being the preeminent technology used by most companies with ambitions of supplying the world with robotaxis. There is a notable exception to that group, one company that eschews the use of LiDAR altogether, but we’ll leave that discussion for another day.

As the article implies, since the technology is being more widely adopted, costs are shrinking, pointing to a maturing market. Because of the wider audience, the LiDAR companies are not only signing up more customers but have also attracted more investment which can be plowed back into R&D and commercialization efforts, creating a virtuous cycle. A maturing sector also normally means more competition as companies see the size of the growing pie (market opportunity) and want their piece.

This forces companies to create a ‘positioning’ in the market for themselves in hopes of standing out. What these particular LiDAR companies have decided is that they’ll create differentiation strategies and highlight their product’s features (capabilities), form factor, (size), and pricing. When a market is still maturing, there’s normally room for growth without directly competing with one another so customer acquisition costs are still relatively low. That’s not to say that these companies won’t all be competing with each other for customers in the near future. As the LiDAR technology shrinks even further physically and in cost, it’ll open up even more use cases increasing adoption and usage such as the case with robots and drones, but also attracting even more competitors that think they can compete and win.

Once the market is saturated with companies & products and innovation is more difficult to achieve (law of diminishing returns), pricing, market share, cost management, and an amazing sales team will be the only thing keeping companies ‘in the game’ as customer acquisition costs increase, shrinking margins more and more and crowding out the ‘weaker’ players with uncompetitive products and shallow pockets.

Now, take this LiDAR case and extrapolate it out for all the new-ish technology that’s currently (mostly) only available on luxury vehicles: long-range batteries, next-gen infotainment & connectivity systems, OTA capabilities, ADAS, etc. What many in the sector thought was going to be a 5-7 year timeline for affordability and hence the adoption of these technologies, due to COVID-19, has been pulled in to

With other sectors now also beginning to look at those types of technologies that just 3-4 years ago were NOT affordable or practical due to physical & cost constraints, the future could be so bright for the companies that provide that tech, they’ll need to wear shades!

In general terms, that’s how it should work anyway – So herein ends the marketing lesson. One notable omission that should be mentioned is that there are some pretty serious Chinese tech companies that provide LiDAR and other tech that will likely compete with the US-based companies, if not directly in the US or China markets, most likely in the ROW (rest of the world).

#LiDAR #maturingtechnology #Velodyne #Luminar #Ouster #wideadoption