By on June 19, 2020

Money might never sleep, but Wall Street never seems to learn.

We all remember those stories from a few years ago about Tesla being overvalued by investors. Hell, a quick Google shows me there are opinion pieces on that topic from just a few months ago.

Now comes Nikola.

The Phoenix-based startup has done, well, next to nothing (sub. required) and yet it has a valuation that’s jaw-dropping, all because some folks see it as the next Tesla.

Indeed, the company doesn’t just use the other half of Nikola Tesla’s name, but founder Trevor Milton just had a media meltdown that would make Telsa chief Elon Musk happy.

I don’t want to wade too deeply into Milton’s beef with Bloomberg over this article, but it does appear that Milton doesn’t understand the usage of anonymous sources in journalism, or that the Bloomberg piece gave him a chance, on record, to tell his side of the story.

In brief – anonymous sources from within the company told Bloomberg that Milton made deceptive statements about a prototype truck that suggested it could move under its own power when it couldn’t. Milton tells Bloomberg he never intended to deceive, and was clear about the truck not being drivable.

It’s no scandal for prototype automobiles to be non-running, or barely running. The “legacy” automakers show concepts in those states all the time. The scandal here is that either Milton attempted to deceive the public and investors, or he didn’t but employees thought he did. Furthermore, Milton seems to think Bloomberg wrote a hit piece, which is why he’s threatening to sue over it.

Which, from what I’ve seen, would be a mistake – the Bloomberg story appears to me as being journalistically and legally sound. Suing just because you don’t feel like a story is flattering is a shitty move – although it did (eventually) help Peter Thiel take down Gawker. Even then, specific circumstances in that case prevented the blog from surviving a judgment against it.

Four paragraphs on the Bloomberg piece? Damn, I got more into the weeds than I wanted. Nevertheless, it speaks to a larger point – Wall Street is putting a lot of hopes into small automakers that have almost zero in the way of product and leaders that seem to think attempting to discredit legitimate, accurate, and fair journalism is a great PR strategy (narrator voice: It isn’t).

I get it. Investors see a company they think can “disrupt” an industry, and they believe it will go on to great heights, and they want to get in on the ground floor. Once the hype boosts their stock, they want to keep that value high for obvious reasons. So any real-world facts that poke holes in the bubble are dismissed as being prevented as shorts trying to manipulate the price, or as journalists acting shady to “push a narrative.” Never mind that it’s never really spelled out why a journalist would want to publish inaccurate facts to break the spell.

In Tesla’s case, initial success breaking into a very difficult industry led to over-exuberance. And Musk’s abilities as a pitchman, plus other successes, such as with SpaceX, didn’t hurt. Tesla promised to bring EVs to the masses, and to do the same with autonomous driving, while also revolutionizing the dealership-based sales and service model. Even smaller ideas, like the over-the-air updates, would bring huge, positive changes to a staid automotive industry. Or so the pro-Tesla story goes.

The truth is more nuanced, of course. Tesla has stuck around, which in itself is impressive – most automotive startups fail hard, since building vehicles is crazy expensive and immensely difficult. Not to mention selling and servicing them, once they’re built.

Now, Tesla has four models, but only one is truly “affordable”, and then only in base trim. It’s still a niche automaker, not a full-line one. And while it did some interesting things with the shopping and service process, it didn’t force the rest of the industry to scrap the dealer model, as least not as of yet.

It also needs to be said that while Tesla and the company’s fans love to say it drove innovation from the established automakers, this claim is dubious – the other automakers were already working on EVs, autonomous driving, and things like OTA updates. How much Tesla is responsible for pushing them to develop these features more quickly (or at all), and how much is coincidence, is a question with no easy answer – but it’s not as simple as Tesla types paint it. Hell, GM’s EV1 was part of the inspiration behind the original Tesla Roadster.

Yet, Tesla gets valuations that the rest of the industry doesn’t, despite only selling four cars, most of which are out of the average buyer’s price range. Not to mention that Tesla buyers need access to EV chargers. Or the infrastructure problems plaguing all EVs – range anxiety, charge times, quantity and accessibility of chargers. Those problems will likely be solved someday, perhaps soon, but they aren’t yet. Only now are EV ranges catching up to the low end of what gasoline cars offer.

Telsa has had production problems, too, many of which are likely the growing pains that any automotive startup would face.

Enter Nikola. Just like Tesla, the company is getting investor love on what it MIGHT do, someday. All we know about it so far is that it’s built a prototype big rig, has plans to build a plant and have it operating at full capacity some eight years from now, and it has a rendering of a light-duty pickup truck that it’s hinted it will pair with an existing automaker to build – yet it hasn’t named the automaker or said anything to suggest those plans are concrete and not just hype. Nikola has also had some production challenges, as outlined in the Bloomberg piece.

Meanwhile, Ford might bring in $115 billion of revenue this year, and its market cap has been less than Nikola’s at times during trading.


Before you accuse me of being anti-EV, or in the pocket of the legacy OEMs, or a short, or having a financial stake in Ford/GM/FCA/whoever, or a Musk hater for my criticisms of Tesla’s and Nikola’s valuations, let me assure you I am not any of those things.

I think EVs will someday be the lion’s share of the fleet, with the internal combustion engine relegated to some sporting and utility vehicles. I have no beef with Musk, despite being critical of him in these pages – I was hard on him when I thought it necessary, but I cover Musk and Tesla fairly, as does TTAC, and I’ll give credit when it’s due.

Nor do I have a financial stake in this, to my knowledge – it would be a conflict of interest for an auto journalist to knowingly own stock in an OEM, and while I have a 401K and other retirement accounts like everyone else, I do not know which companies I have stake in.

I just have this old-school belief that companies should earn investors’ trust with successful products and business plans, as opposed to hype from a pitchman CEO and products that look good on paper but barely exist in the real world.

I’m sure any day traders reading this will tell me I’m naïve, because even if you don’t believe Tesla and Nikola will be the successes that the valuations suggest, you can probably make money off them somehow. I don’t know much about the stock market, but I’m sure there’s money to be made no matter what happens.

That said, I don’t fully get the logic behind those investors who are true believers. I can understand trying to cash out while the price is still high, should the bottom fall out, but the folks who really think that Tesla and Nikola will deliver on promises of revolutionary disruption five or 10 years from now strike me as quite irrational. Whether they hold stock, drive a Model S, or merely root for the brand’s success out of some sense of brand loyalty.

Tesla may yet be a full-line make that will compete with GM and the rest on the same level. Nikola could beat out Daimler and others to produce a zero-emission hydrogen fuel cell semi-truck.

Yet, for now, one company is a niche player, despite all the attention it gets paid, and the other is a startup that’s just now, well, starting up.

Maybe Wall Street needs to sober up.

[Image: Nikola]

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39 Comments on “What the Hell, Wall Street?...”

  • avatar
    SCE to AUX

    The only things Nikola and Tesla have in common are:
    – they are in the EV space
    – they have overvalued stocks.

    Other than that, there is no comparison. Tesla has built over 1 million vehicles since 2008, with 4 models in production, and 3 more concept vehicles headed to production (Roadster 2, Semi, Cybertruck). Real People (sorry GM) have ridden inside these concept vehicles.

    Tesla has the Supercharger network (paid for on its dime), and 3 plants producing cars and/or batteries, with 2 more on the way (counting the solar cell business), and an established sales/service network. And they have a worldwide presence.

    Nikola is just the definition of vaporware.

    • 0 avatar

      I think the comparison is more Tesla 6-10 years ago. When they had only built the roadster. Now I agree still overvalued but no longer questionable that they can actually make something.

      Now Nikola does have some contracts and now a buttload of cash so I expect something happens but we’ll have to wait and see.

  • avatar

    I think most people have ten over the notion that Tesla will somehow be disruptive. The problems that face EV’s are not going away, there will be no miracle breakthrough that suddenly solves all problems. No miracle battery breakthrough, EV’s will still weigh about 1000 lbs more than an equivalent ICE. No miracle 5 minute charge time, not in the real world. And EV’s will never reach price parity with ICE vehicles. EV’s will remain niche indefinitely. And there will be no robo-taxis.

    • 0 avatar
      SCE to AUX

      I have to agree with you there.

      Of course I remain a fan of the EV driving and ownership experience, but without a battery breakthrough, cost and mainstream acceptance will remain elusive. And this makes it really difficult for the bean counters to accept an all-in EV development program at larger mfrs, when they know they’ll lose money on it until they can sell Tesla-like volume.

      The only reason Tesla has gotten so far is because Mr Musk is a True Believer like no other, and a nut. Other mfr CEOs have to be convinced, and they have more to lose.

      • 0 avatar

        Great points. Speculative investors care about growth. When Tesla started, they had nothing to lose, they either grew or disappeared. From a stock perspective, bets were placed on this unlikely scenario of growth, not profitability, and for some it paid off. Traditional manufacturers have a lot to lose, as investing in EV’s do not grow the market, they replace a sale of a profitable ICE with a non-profitable EV. You can see why they were slow to move. If the EV market moves more mainstream, which is not a given, costs and innovation will help, but I think ICE will be here for a long time.

    • 0 avatar

      ” EV’s will still weigh about 1000 lbs more than an equivalent ICE. ” Really? Where do you get that? Where are your numbers? You’re making statments, but clearly don’t follow the industry. Let’s look at real numbers. Most companies seem to think their either close to or at 500 Wh/kg for gravimetric density. That would put a 300+ mile battery’s cell weight at about 150 kg or 330 lbs. Making batteries lighter also mean you can use a smaller battery for a given range. A smaller battery reduces cost, weight, and effectively increases the miles/hour charging rate.

      No miracle battery breakthroughs that solve all problems? We’ve been getting plenty of them. There’s the coating technology that’s giving most batteries million mile longevity. There’s the cobalt reduction/elimination technology that’s reduced costs. There’s Tesla’s tabless technology that should reduce weight and cost, there’s the Maxwell dry electrode technology, and Toyota’s solid state battery. Maybe not one to solve all the problems, but we seem to be getting hundreds of solid breakthroughs that solve individual sets of problems.

      Most of the time and for many people, the 10 to 15 minute quick charge time at a supercharger or other high capacity charger isn’t an issue. Fueling for an ICE is actually more time consuming and cumbersome. With my EV, I can plug into a 12kW charger at home and have a car fully fueled with 300+ miles range ready to go. Most of the time, I’m only making 10 mile trips. So at 12Kw with a car that gets 4 miles per kW, I might only be looking at 3kW to replenish. So, that’s a 15 minute recharge at home. Then the charger is essentially off and not drawing much power. But the car is ready to go. With an ICE you’re always checking fuel level, then having to go out of your way to get the gas. Fighting traffic to get in, finding a working pump, then fighting traffic to get out. It takes longer than five minutes.

      The fact is that EVs will cost less than an equivalent ICE (and if you consider 0-60 time, they are already on parity), will have more range than an ICE if you want it, and give you much better performance in terms of NVH and acceleration. Technology moves forward and most people forget that. I’m entering this on a desktop computer that is about the size of cassette case. It’s 64 bit, 64 bit operating system, quad core with 8 gig of memory and a 64 gb solid state disk running a 4k resolution 28″ monitor. It communicates with the world at 943 mbs over wired ethernet and 5gb/s usb. Plenty of people over my career would say that something like this would never exist and many of them pointed out the laws of physics as a reason. It exists and I’m using it. The size of a cassette tape. What you say about EVs sounds very familiar.

      • 0 avatar

        Achieving 500 Wh/kg in a production vehicle isn’t yet possible. That’s also not the whole of an EV’s battery, just the weight per cell.

        The packaging of the cells adds weight, as does the protection needed for crash-worthiness, as well as the cooling system required to keep the battery from overheating.

        The Tesla Model-S 85 kWh battery in toto weighs 1200 lbs. Getting the weight down to 330 would be the very breakthrough most think isn’t coming.

      • 0 avatar

        mcs, my dad gave me his EMC 213 tube tester a couple weeks ago. Are you saying I won’t be using it much on my next computer? :-)

      • 0 avatar


        I presume you’re talking of kWh, energy, when you use Kw which is some nonstandard way of writing kW, which stands for power. I thought that you were a fairly scientific/engineering type, but nobody I know would make a basic error like that. Kind of has me wondering if you are hazy on basics. Reassure me. “Everybody knows what I mean.” is not an answer. Because if you don’t they likely don’t – it’s the most common error you see written by regular people trying to sound as if they have a clue.

        4 kW per mile is like saying 5.2 bhp per mile.

    • 0 avatar

      I think Mopar has it right, above. Tesla has moved the dial towards battery-electric far more quickly than the others intended. Up until the first Model S in 2012, any available BEV vehicles were pretty much “compliance cars” built specifically to meet minimum regulated requirements for inner-city use. While Tesla may have been inspired by the EV-1, don’t forget that the EV-1 was literally yanked from users’ hands and openly destroyed after only a couple years of “real world testing.” GM showed no obvious interest in continuing to study the concept even AFTER some of those regulations went into effect. In fact, all the brands were quite willing to lose money on a one-off type of EV or hybrid, with the exception of Nissan, whose Leaf consistently ran longer battery-only mileage than any other outside of Tesla. Oh, GM, Ford and even Fiat/FCA had their compliance cars but they cost the company far more than their MSRP and GM’s one effort to “compete” on a more realistic basis turned out to be an over-engineered piece of junk that didn’t really come into its own until the second version and only marginally improved on the efforts of Nissan (longer overall range) and Toyota (longer battery-only range.)

      The Model S by Tesla proved you could go 200 to 300 miles easily with a “conventional sedan” on batteries alone AND have far superior performance and handling over anyone else’s “compliance car” designs. Add to this that Tesla also started building its own fast charger network (Superchargers) to allow long-distance travel and suddenly the BEV was no longer just a city car. Tesla proved this point with a coast-to-coast trip from Fremont, CA to New York, NY for the January New York International Auto Show in 2014–driving through a dust storm and two blizzards while en route. They left Fremont with two Model S cars and two ICE cargo vans as support vehicles. Both Teslas made the trip without issue; one of the cargo vans had to be left behind in Minnesota (I believe) in one of those blizzards, to be replaced by a rental in Chicago to complete the trip. Total trip time was just over four days using already-established charging locations.

      So to doubt the effect that Tesla has had on the drive to electrification is specious, at best. Clearly if Tesla had NOT demonstrated such superior capability both in performance and range, even now we wouldn’t see anything bigger than the Nissan Leaf BEV on the roads and still be looking at less than 100 miles of battery-only range by most of them. Tesla has most certainly been disruptive to the automotive industry and continues to be so even now, as almost nobody was even considering a battery-electric pickup truck before Elon Musk’s first mention in 2016. In fact, only one company was even considering something like a plug-in hybrid pickup…having already been building dual-fuel ICE hybrids off of Ford and GM platforms for several years. Even that brand has yet to actually produce a BEV version yet, beyond a few prototypes while two different companies have chosen to begin their BEV efforts with a pickup truck and a full-sized SUV.

      Getting back to the gist of the article though, I do agree that both Tesla and Nikola are overpriced for what they are doing but Nikola in particular makes far less sense since their original concept was to be pure BEV and only switched to going hydrogen fuel cell after Tesla beat them to a working prototype with their BEV Semi. Nikola shouldn’t even be near the price it has and its semi-IPO of merging with a presumably-weak company already on the stock market has raised many questions about its methods of now trying to finance its initial capitalization through questionable means. As SCE to AUX put it, Nikola is pure vaporware where at least Tesla has been producing real vehicles for consumer use for now over ten years. Tesla’s forward-looking efforts at least appear probable where Nikola can’t even show itself capable of starting production. So even though I feel Tesla’s price is higher than it should be, it at least has a strong basis from which to work and would be far more balanced at half the price. Nikola doesn’t belong anywhere near even a quarter of its current pricing.

  • avatar

    @Tim: You missed the main factor that’s driving some of Tesla’s valuation. It’s not their car business that’s so enticing, it’s their power distribution business that many analysts think they’ll make the lion’s share of their money. It fact, some see Tesla as a power distribution company that makes cars on the side.

    • 0 avatar

      Here are some articles on Tesla’s move into power distribution. I think it’s going to be bigger than their auto business. Buy power at night when it’s cheap, sell it back at peak when it’s expensive. Buy low, sell high.

      Tesla applies to become a electric utility in th U.K.

      Peaker plant in California:

  • avatar
    Art Vandelay

    I lived through the 90’s. Some of these companies will survive but most of them are the and pixelon. Get any article from back then and replace dot com with ev startup and you’ll see where this ends up.

    The really interesting question is who plays the role of Microsoft and Netscape.

    • 0 avatar

      Yep for every there are 1,000 – its like the lottery, you gotta play to win while understanding that 99.999% are losers. So in 10 years where will Nikola be? Well let me check my crystal ball and get back to you on that.

  • avatar

    “Wall Street” is not a single entity. It’s a grocery store in which short-term traders fling bananas at each other, speculators try to catch the flying bananas in the belief that they will eventually reach the moon, and investors fill their cart with toilet paper because it’s on sale.

    Three guesses which group is not buying Nikola right now.

  • avatar
    Paul Alexander

    As real as Rivian. Create a ‘prototype’ you can push onto a stage, purchase decommissioned auto plants for pennies on the dollar with public funds and not enough capital to ever actually bring said plants into operation, launch IPO and profit! Rinse and repeat. Gotta love these PR grifter scam artists!

  • avatar

    A company with zero net income worth more than Ford Motor. Sounds good to me!

  • avatar

    “I just have this old-school belief that companies should earn investors’ trust with successful products and business products…”

    Where are these magical Utopian automotive companies which I can buy from and invest in? Please tell me.

  • avatar

    Before you do yourself a disservice with any/all kneejerk replies… watch COMPLETELY the Autoline Nikola show.
    If you can understand what the highly-motivated guy has to say, then that is why people are revved up about this.

    We need more enterprising folks like this and ZERO people that tear down the hard work of others.

    • 0 avatar

      @FThorn: The monologue by Trevor has a lot of misleading data and promises capabilities that simply aren’t available yet. How can he promise 100% clean electrolysis at each and every refueling station? The only way possible is to go completely off-grid and he clearly states he will be using local energy to power the electrolysis process which means he can only promise about 30% truly clean and the rest using fossil-powered generation.

      He is absolutely right about one point: hydrogen will be far more effective in commercial use as compared to private use. When you’ve got a vehicle capable of carrying enough conversion plate to meet the demand then batteries only need to be used for acceleration boosting and regenerative braking. Class 8 trucks, railroad locomotives, blue-water ships… all can easily benefit from hydrogen powered electricity as compared to diesel. But when he starts talking about the infrastructure and efficiencies then he starts giving misleading data. But worst is that the aerodynamic design patents for the truck are invalid, with prior art going as far as 40 years prior to their designs. These designs come from Airflow Truck Company, the founder of which modified a factory cabover way back in 1984: Then you get to look at Shell’s “Starship”, which was revealed and was on the road already about the same time as Taylor displayed his supposedly non-working prototype.
      Finally, take a close look at this MAN aerodynamic truck from 2012:

      To be blunt, it’s almost all hype. I’m not saying it can’t work but he’s promising far more than he can deliver. He says he’s already got everything lined up, including a builder who has been building commercial trucks for decades yet for some reason has not been actually named, even now.

    • 0 avatar
      Art Vandelay

      So the fact that the dude is motivated supports this stock valuation how?

    • 0 avatar


      *Thank you* for that link. I really enjoyed that – like more than anything I’ve seen in awhile. Trevor Milton’s parting comments are priceless.

      Speaking of kneejerk reactions, it’s interesting to watch the C&D guy start to try to poop all over everything (as he sits in his car with the a/c off because he’s recording audio – the technology he is crapping on would solve one problem for him right there).

      [And note to self: I really should use my biscuit joiner more often (it makes the glue-up go so smoothly).]

      The semi-truck profit margin story goes a long way toward explaining the stock valuation. And the ‘convoluted’ way they went public makes sense now.

      Thanks again.

  • avatar
    Master Baiter

    Not everyone who buys a stock does so because they think the company will succeed. Speculators are buying in the hopes they can turn a quick profit by selling high later.

    • 0 avatar

      In the rare times that Tesla makes money, it’s because of selling credits to other mfgrs so they can meet government mandates. Unless there’s a similar deal for truck mfgrs, no way Nikola makes any profits.

  • avatar
    schmitt trigger

    Poor Nikola Tesla.
    During his lifetime, he revolutionized the electrical industry yet he died poor, with pigeons as his only friends.

    Over 70 years after his death, people continue making money from his name. In addition to the after-mentioned EV companies, there is a Tesla semiconductor in Bangalore, and there was another electronics company in former Czechoslovakia.

    There was also a telecom Nikola Tesla company in Yugoslavia, which after its dismemberment became Ericsson Nikola Tesla.

    Heck, there even was an American Rock&Roll band called Tesla.

    I am pretty sure his name has been associated to other companies as well, but Googling Tesla will mostly provide an overwhelming amount of hits related to Tesla Motors.

    • 0 avatar

      @schmitt trigger: I highly recommend you do some reading on Nikola Tesla; you’d be surprised at just how much he developed in the way of electrical engineering. One way or another, nearly every one of those companies you mention are actually using Tesla-designed concepts and he was a very wealthy man… multiple times. He also tended to spend all of his income on new designs–as well as his partying–going broke again as he tried to make those new concepts work.

      It is because of Tesla that we use Alternating Current in the electric grid.
      It is because of Tesla that we are able to step that current higher or lower while simultaneously decreasing or increasing the voltage.
      It is because of Tesla that we are able to control vehicles remotely–originally by wireless signals.
      It is because of Tesla that we have such an electronics technology as we enjoy today.

      We speak of Thomas Edison as the “Wizard of Menlo Street” but the real Wizard was Nikola Tesla.

  • avatar
    schmitt trigger

    Vulpine; Thanks for bringing all of this.
    Indeed Tesla was a fascinating individual and I’m actually a fan of his. I actually have a T-shirt with his face that I purchased on a trip to Croatia.

    And for a high school project I was part of a team who built a high voltage Tesla coil. Loved those sparks!!

    What I meant with my post, which perhaps I did not elaborate properly, is how many organizations have associated to his name.
    And they are doing it because the name has an aura of technological prowess.

    For better or worse, he did not leave descendants, otherwise his state would already have sued all those companies.

    Can you imagine in the future a musical group calling themselves Steve Jobs? They would be sued in a milli-second.

    • 0 avatar

      Just so you know, the Tesla “band” uses a Tesla Coil to make their music.

      • 0 avatar

        I think you have the wrong “Tesla” band there. Try these:

        • 0 avatar

          @SPPP: I’m impressed. Never heard of ’em until now, despite their age. I like their sound, too.

          • 0 avatar

            They’re pretty talented. They never quite made it into the spotlight, but I understand they toured with some of the biggest bands, back in the hair band days.

          • 0 avatar

            According to the commentary under the video, they’re still touring.

          • 0 avatar

            Tesla was huge on the Hairband scene. And at least as big as “Slaughter”. I recommend “Firehouse”.

            I guess true Hairbands never reached the “spotlight”, mainstream, top 40, etc, as Motley Crue did. But I’ve got a Tesla CD somewhere.

        • 0 avatar

          I love Tesla. I first heard them in 2002 in San Jose HP arena. Went there with friends to see Keith Emerson. He with his band and Tesla opened for Scorpios who were the main act. Tesla rocked the house, that’s what rock concert supposed to be like, boundless energy and total dedication. Tesla stole the show. After Tesla Scorpios were underwhelming, commercial, typical made up rock band from Germany. After couple of Scorpio songs we left home.

          • 0 avatar

            At one point, Kiss opened for Cheap Trick. Eight months later, Cheap Trick opened for Kiss.

  • avatar

    They could merge with Tesla, and become Nikola-Tesla.

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