Republic Services Inc.,
its partner in an effort to develop zero-emissions garbage trucks, has agreed to terminate the collaboration, marking a setback for the electric-truck startup as it tries to re-establish credibility with investors.
The Phoenix-based truck maker said Wednesday the two companies will no longer work together to develop battery-electric garbage trucks, and the move will result in the cancellation of Republic’s order for potentially several thousand vehicles.
In August, Republic revealed the Nikola partnership, saying it would purchase at least 2,500 or as many as 5,000 trucks. Republic also said at the time it expected to begin integrating the trucks, which were meant to have a range of 150 miles, into its fleet beginning in 2023.
In a statement Wednesday, Republic said it remains committed to an electrified future and still plans to work with other manufacturers on electric trucks.
Nikola, which went public in June through a reverse merger, has attracted investor attention with its hopes to transform the trucking industry. But in recent months, the company has struggled with a range of challenges, leading executives to fall short on meeting objectives they set for the year—among them securing a large order for trucks still under development.
Nikola shares fell 9.8% in Wednesday afternoon trading.
In a letter to employees, Nikola CEO
said Nikola executives decided to end the Republic collaboration after realizing that fulfilling the order would require Nikola to design an entirely new truck, rather than use designs already in the works.
The five-year-old startup was rocked in September when short seller Hindenburg Research released a lengthy report casting doubt on the company’s ability to deliver on its technology and calling Nikola an “intricate fraud.” Shortly after, Nikola founder
abruptly stepped down, and
a veteran auto-industry executive, was named chairman.
Nikola has called the report’s claims false and misleading.
General Motors Co.
has pulled back on a plan to take an equity stake in Nikola in exchange for building an electric pickup truck for the company, called the Badger.
After surging this summer, Nikola’s stock has taken a beating in recent months as executives continue to deal with the fallout of the short seller’s report and the scrutiny it has brought to their operations.
Nikola’s shares closed at $16.83 Tuesday, down roughly 60% since the Hindenburg report was published in early September.
Nikola executives have said collaborations like the one struck with Republic are central to its business plan, which aims to build zero-emissions trucks and lease them to fleet operators.
Since Mr. Milton’s departure, they have worked to reorient the business, sharpening its focus on heavy trucks and pivoting away from some projects championed by the founder, such as the Badger pickup truck with GM and a plan to sell zero-emissions personal watercraft.
Analysts said the canceled order was a short-term setback, but it would allow the company to better focus on its core business of semi-trucks for long-haul transportation.
“This is likely the last of the ‘restructuring’ that was required to refocus,” Chris McNally, an analyst at Evercore ISI, wrote in a note Wednesday.
Nikola also said Wednesday that it has laid out a road map that has deliveries of its Tre semi-truck starting in the U.S. next year. It said it is planning to break ground on its first commercial hydrogen fuel station in 2021.
Executives have promoted the Republic order, and another one placed in 2018 by
Anheuser-Busch InBev SA’s
U.S. subsidiary for as many as 800 hydrogen-electric trucks, as a validation of its strategy, which aims to disrupt the commercial trucking industry—a sector that has long been dependent on fossil fuels.
A spokesperson for AB InBev didn’t respond to a request for comment.
In September, Ingrid De Ryck, the company’s vice president for procurement and sustainability, said AB InBev would continue to work alongside all its partners, including Nikola, to reach its sustainability goals.
Nikola is trying to overcome other challenges as well.
The allegations raised in the short seller’s report have become the subject of investigations by the Justice Department and Securities and Exchange Commission, the company has disclosed in regulatory filings.
Nikola has said it is cooperating with the inquiries. The Justice Department and SEC declined to comment.
The company is also still trying to secure a partner to build a network of hydrogen-fueling stations, another goal executives had hoped to achieve in 2020. Talks with potential partners, including oil giant
PLC, stalled this fall following the release of the short seller-report, The Wall Street Journal has previously reported.
Mr. Russell said last month Nikola still hoped to conclude a pact with a hydrogen-station partner in 2020, but disruptions caused by the Covid-19 pandemic had slowed progress.
—Micah Maidenberg contributed to this article.
Write to Ben Foldy at Ben.Foldy@wsj.com
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