Electric heavy-duty truck manufacturer Nikola has encountered a hurdle in its path to commercializing its battery-electric truck, the Tre. The company’s shares experienced a decline in early trading Monday following a battery-related recall.
Late Friday, Nikola (NKLA) announced a voluntary recall of over 200 of its battery-electric heavy-duty trucks due to the potential risk of battery fires. The decision came after an investigation carried out by a third-party firm revealed that a battery fire at Nikola’s headquarters on June 23 was likely caused by a coolant leak.
By the first half of 2023, approximately 240 battery-powered trucks were sold and in use within customer fleets. Nikola has yet to provide details on the percentage of recalled trucks from its delivered inventory.
CEO Steve Girsky emphasized, “At Nikola, safety is of utmost importance. As soon as our investigations were concluded, we committed to keeping everyone informed, and we will continue to prioritize transparency as we gather more information.”
Nikola has advised fleet operators to retain the trucks in service until repairs can be made. However, it is crucial that the trucks are parked outside and that the main battery disconnect switch remains in the “ON” position for real-time vehicle monitoring and the operation of safety systems.
In premarket trading on Monday, Nikola stocks fell by 13%, while S&P 500 and Nasdaq Composite futures experienced modest gains of 0.3% and 0.4% respectively.
This decline comes after a significant surge in Nikola’s stock value. Over the past three months, shares had increased by approximately 154%, largely driven by orders for Nikola’s hydrogen fuel cell-powered trucks.
It is important to note that this recall does not affect the fuel-cell trucks, which Nikola plans to begin shipping in the third quarter of 2023.
As this recall unfolds, Wall Street analysts are expected to provide their insights. Currently, eight analysts cover the company, with approximately 13% giving the shares a Buy rating. The average Buy rating ratio for stocks in the S&P 500 stands at about 55%. The average analyst price target is $2.70 per share, while Nikola closed at $1.95 on Friday.