Nikola Faces Setback with Battery Recall

Electric heavy-duty truck manufacturer Nikola has encountered a hurdle on its path to commercializing its battery-electric truck, the Tre. Shares of Nikola (ticker: NKLA) took a hit in early trading on Monday following the announcement of a voluntary recall of over 200 of its battery-electric trucks due to the potential risk of battery fires. The recall was prompted by a third-party investigation that revealed a battery fire at Nikola's headquarters on June 23, which was likely caused by a coolant leak.

Ensuring Safety and Transparency

In response to the recall, Nikola's CEO Steve Girsky emphasized the company’s commitment to safety and transparency. Girsky stated, "At Nikola, we take safety very seriously. We stated from the beginning that as soon as our investigations were concluded we would provide an update, and we will continue our transparency as we learn more."

Recommendations for Fleet Operators

Nikola has advised fleet operators that they can continue to use the affected trucks until repairs are completed. However, these trucks should be parked outdoors and have the main battery disconnect switch in the "ON" position to enable real-time vehicle monitoring and safety systems operation.

Impact on Stock Performance

The news of the recall had a significant impact on Nikola's stock performance, with a decline of 18% in premarket trading on Monday. This setback comes after a period of substantial gains for Nikola stock, with shares having surged by approximately 154% over the past three months driven by orders for Nikola's hydrogen fuel cell-powered trucks.

Future Outlook

It is worth noting that the recall does not include fuel-cell trucks, and Nikola plans to commence shipping those in the third quarter of 2023. Wall Street analysts are expected to evaluate the impact of the recall in due course. Currently, eight analysts cover the company, with one analyst giving Nikola a Buy rating. The average Buy-rating ratio for stocks in the S&P 500 is around 55%. At present, the average analyst price target for Nikola is $2.70 per share, compared to the closing price of $1.95 on Friday.