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Graham Griffin
Graham Griffin
Articles (63) 

California Law Set to Boost Tesla and Nikola

Clean trucking initiatives could boost EV profits

At the end of June, the California Air Resources Board, known as CARB, passed a new law that will likely further increase interests in electric and alternative fuels companies.

The new law, named the Advanced Clean Truck Regulation, is set to start in 2024 and is aimed at CARB’s goals of reducing greenhouse gas emissions by 40% and a 50% reduction in petroleum use by 2030. The law requires that an increasing percentage of manufacturer sales of medium to heavy-duty vehicles reach zero-emissions standards between 2024 and 2035.

CARB has found that the majority of these vehicles travel less than 100 miles each day when operating in an urban environment. Due to the stop-and-go nature of traffic in cities, traditional gas and diesel vehicles fall short in efficiency compared to electric and alternative fuel vehicles. Under the law, major fleets and companies maintaining fleets will be required to report on their operations and enter new zero-emissions vehicles into service.

Companies like EV giant Tesla (NASDAQ:TSLA) and public newcomer Nikola (NASDAQ:NKLA) are both set to take advantage of the new California law. Alongside these two media dominant companies are smaller competitors Plug Power Inc. (NASDAQ:PLUG), Workhorse Group Inc. (NASDAQ:WKHS) and Ballard Power Systems Inc. (NASDAQ:BLDP), which will likely aim to take advantage of the new law.

Tesla

In the first quarter of 2020, Tesla reported profitable earnings, with Wall Street predicting losses. The company reported delivering over 90,000 cars in the second quarter, an increase in deliveries from its first-quarter report.

On June 7, Tesla was trading at $1,371.58 per share with a market cap of $254.39 billion. Tesla has continued to hit record numbers throughout 2020.

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GuruFocus gives the company a financial strength rating of 5 out of 10 and a profitability rank of 3 out of 10. Tesla has continued to issue increased levels of long-term debt in recent years. The company’s cash-to-debt ratio of 0.54 places it higher than 53.29% of the industry. Tesla has claimed a goal of positive free cash flow for 2020.

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Nikola

Nikola is a designer and manufacturer of battery-electric and hydrogen-electric vehicles, electric vehicle drivetrains, vehicle components, energy storage systems and hydrogen fueling station infrastructure.

Nikola founder Trevor Milton posted on social media last week that the company had sold out of its top-tier deposit package. The company initially skyrocketed in price after first going public at the beginning of June. Since then, the company’s share price has begun to teeter off, yet still remains well above the initial value.

June 7 saw the stock trading at $43.43 per share with a market cap of $15.34 billion.

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Nikola has proposed dates of sales sitting around 2023, which would place it in an ideal situation to take advantage of the new California law.

Disclosure: Author owns no stocks mentioned.


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