Within the electric vehicle space, few if any competitors not named Tesla (NASDAQ:TSLA) have generated as much discussion – and hot debate – as newcomer Nikola (NASDAQ:NKLA). With the company’s Badger pickup truck – which will offer electric and hydrogen-electric powertrains – it theoretically represents a viable challenge to Tesla’s dominance. However, “theoretically” is the operative word here. As you can tell, Nikola stock has come down a long way from its peak.
No doubt, this led to many criticizing the upstart organization. While the Nikola Badger is a looker in my opinion, its more concept than reality. In contrast, look at Tesla. Depending on what day it is and Wall Street’s mood at the time, it’s either the biggest automaker in the world or running a close second.
And that, as TSLA bulls will remind you, is justified. Tesla has several production cars, manufacturing facilities and raging demand, all attributes that support its bullish narrative. Compared to Nikola stock, the rookie challenger is a fanciful idea.
Let me be clear about NKLA – I understand the core criticisms against the underlying company. This is speculation, pure and simple. But as far as gambles go, I think this is a smart one for discerning, patient investor.
Because let’s face it – at one point, Tesla was also an idea. Plus, it wasn’t too long ago that several analysts questioned the company’s sustainability and cash burn. Yet the EV maker pushed on relentlessly and high-conviction stakeholders enjoyed their rewards.
Therefore, it’s not out of the realm of possibility that Nikola stock could do the same. From a business perspective, I would suggest that it’s probable that NKLA will be in the race moving forward.
Filling the Demand Gap Can Boost Nikola Stock
Several years ago, I had the chance to drive Mercedes-Benz’s first-generation CLS. Though I relished the driving experience, the car was controversial because of its “flying pancake” styling. And like it or not, it set the trend for four-door coupes.
The problem? By definition, coupes are two-door vehicles.
Now, it’s arguably not so much of an issue with a passenger car. But apply this logic to a pickup truck and it just doesn’t work. That’s the main obstacle facing the Tesla Cybertruck. With a triangular and sloped roofline, you unnecessarily limit interior space and overall usability.
However, this is where Nikola and by deduction Nikola stock could fill a consumer demand gap. For the folks that criticize NKLA, they largely do so from an investment perspective (i.e. no sales). But they should view it from a pickup truck driver’s angle. If they do, they’ll recognize that the Badger is equally familiar and futuristic, using Car and Driver’s description.
The former attribute will be particularly important for any EV maker to penetrate the pickup segment. As you may know, the Ford (NYSE:F) F-series is the most popular truck in America. And the Toyota (NYSE:TM) Tacoma is the most popular mid-size pickup truck. They didn’t achieve their respective successes because of weird design. Instead, they deliver utility in a smart, robust chassis.
In other words, the less creative you get with your pickup design, the better. What I appreciate about the Nikola Badger is that the innovation is mostly on the inside. They didn’t set out to reinvent the wheel.
NKLA Knows Its Customers
Before you rip off an angry email, I get that Tesla’s Cybertruck is priced below all the competitors above. However, I still believe that the business strategy underlining Nikola stock as it pertains specifically to pickups is superior. I’m willing to bet that consumers will pay extra not to drive something that looks like it came out of a Robocop movie.
Take your pick, they all look equally stupid.
One of the reasons I’m optimistic on Nikola stock longer-term is the same reason I changed my mind on Ford. You’ll notice that in their EV foray, they’re deliberately refusing to rock the boat. And with pickup trucks, most consumers want specific design elements. Thus, designs here tend not to change dramatically.
However, you can’t say that about the Cybertruck. In this case, Tesla is almost telling the consumer what they want, not the other way around. I don’t think it’s any coincidence that the trucks mentioned above, save for the Cybertruck, resemble prior designs.
Don’t get me wrong – Tesla will be difficult to unseat in the sedan segment. But in the pickup realm, Nikola has a much, much better idea. And as TSLA proves, good ideas can go a long distance.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long NKLA and F.