One of Tesla’s biggest competitors in the electric car world is experiencing some self-inflicted hard times. After reports emerged of a huge fraud scandal at hydrogen-electric truck startup Nikola, its founder Trevor Milton is officially stepping down.
Financial analysis and investment firm Hindenburg Research said earlier this month that Nikola is an “intricate fraud built on dozens of lies over the course of its founder and executive chairman Trevor Milton’s career.”
Milton posted a statement on Twitter, saying, “The focus should be on the Company and its world-changing mission, not me. I intend to defend myself against these false allegations leveled against me by outside detractors.”
His departure comes as Nikola now faces investigations by both the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). The company’s shares fell nearly 28 percent in pre-market trading following the news.
In the wake of Milton’s departure, Nikola is shuffling its leadership. One stalwart is Mark Russell, the startup’s CEO. Known as Milton’s “handpicked” successor, Russell will stay in his current position.
Meanwhile, Stephen Girsky, a previous vice chairman at General Motors, will assume Milton’s now vacant role as Nikola’s executive chairman. He and Russell aim to work together “to become a vertically integrated zero-emissions transportation solutions provider.”
While Nikola has downplayed the report from Hindenburg, it didn’t push back on one point. The startup admitted that its first semi-truck, the One, could never actually propel itself. Nikola showed off the vehicle in a 2018 video. Now, it appears that the truck was simply rolling down a hill and that camera tricks were used to make it appear like the vehicle was moving at a high speed. Shockingly, the truck reportedly didn’t even house the hydrogen-electric powertrain that Nikola had worked on for years.
In essence, the Hindenburg report accuses Nikola of never producing anything of value. It claims that Milton and other leaders promoted the company by over-promising features and inflating worker experience.
Although it isn’t exactly in the spotlight, General Motors (GM) has been put in an awkward position by Milton’s departure and the surrounding claims. The automobile titan recently partnered with Nikola and will manage the production of the startup’s “Badger” electric-hydrogen pickup truck.
In a statement following Milton’s resignation, GM said, “We acknowledge Trevor Milton’s departure from Nikola and the decision of the Nikola board to move forward. We will work with Nikola to close the transaction we announced nearly two weeks ago to seize the growth opportunities in broader markets with our Hydrotec fuel cell and Ultium battery systems, and to engineer and build the Nikola Badger.”
After the report from Hindenburg, GM’s deal with Nikola seems strange. If the startup truly has nothing of value, what would GM stand to gain by working with it?
Yet, it also calls into question what Nikola brings to the partnership besides its hype-fueled brand. The startup has promised to build its own batteries and fuel cells internally. Now, GM appears to be taking over and will supply those components.
This is certainly an odd—and evolving—situation that is worth monitoring.