Nikola Corp (NKLA) 2020 Q4 法說會逐字稿

Greetings, and welcome to the Nikola Corporation's Fourth Quarter and Full Year 2020 Earnings Conference Call. (Operator Instructions). As a reminder, this conference is being recorded. We will now begin the video presentation.

(presentation)

Thank you. It's now my pleasure to introduce Britton Worthen. Thank you. Britton, you may begin.

Thank you, and good afternoon, everyone. Welcome to Nikola Corporation's Fourth Quarter and Full Year 2020 Earnings Call. With me today is Mark Russell, Chief Executive Officer of Nikola; and Kim Brady, Chief Financial Officer. During today's call, we will share our views on the business environment and our financial year results for the December 2020 quarter and our outlook for the March 2021 quarter and the full year 2021. The press release detailing our financial results were distributed a little after 2:00 p.m. Mountain time this afternoon.

The release can be found on our Investor Relations section of the company website, along with presentation slides that accompany today's call. Today's presentation and Q&A include certain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions, and as a result, are subject to risks and uncertainties.

Many factors could cause actual future events to differ materially from forward-looking statements in this communication. For more information about factors that may cause actual results to materially differ from forward-looking statements, please refer to the earnings press release we issued today as well as the Risk Factors section of our quarterly report on Form 10-Q for the quarter ended September 30, 2020, and our annual report on Form 10-K to be filed with the Securities and Exchange Commission in addition to the company's subsequent filings with the SEC.

Forward-looking statements speak only as of the date they are made. Readers should be cautioned not to put undue reliance on forward-looking statements. With that, I will now hand the call over to Mark.

Thanks, Britton. We're pleased to welcome you to Nikola's Fourth Quarter and Full Year 2020 Earnings Call. During the quarter, we made significant organizational and other changes, to sharpen our focus and align our resources to execute on our core objectives. On today's call, I'll provide an overview of what we achieved, including updates on the Nikola Tre BEV testing and validation, our long-term electricity rate agreement with APS and progress at our manufacturing facilities in Ulm, Germany and Coolidge, Arizona.

I'll also recap some of the organizational and strategic decisions we made during the quarter. And then Kim will discuss our financial results for the fourth quarter and provide you with some expectations for 2021. And then, of course, we'll do our best to answer your questions after that. Let's kick things off with an update on the status of the first 5 Nikola Tre BEV prototypes.

All of the trucks are complete and are now in the commissioning process. We have 4 trucks here in the United States, 2 are at northern proving grounds for cold weather validation and powertrain and durability testing, 2 trucks are on the test track here in Arizona for torque, speed and payload testing. One truck is in Hannover, Germany for brake commissioning, including regeneration, ABS, traction control and electronic stability control.

And the next batch of 9 prototype trucks are being assembled at the Ulm, Germany facility. Moving on to our rate schedule with APS in December. Last year, APS and Nikola finished negotiations on a special rate that the Arizona Corporation Commission unanimously approved on January 12. This is a huge accomplishment for Nikola and represents an essential milestone for the company and executing our plan to produce hydrogen fuel for our customers at price parity with diesel.

As many of you know, 80% to 90% of the cost of hydrogen production from electricity is for the cost of electricity. We believe that the rate schedule with APS will allow us to produce hydrogen fuel for customers in the region at or below a price parity with diesel fuel. The rate agreement also gives us the flexibility to look at hub-and-spoke model production and distribution. And since the rate schedule is so favorable, we can build centralized hydrogen production hubs and then transport fuel to dispensing stations and locations where favorable electricity rates may not be available.

It's a big step for Nikola. It reflects the understanding of the benefits we bring to the grid and to the utilities. Our hydrogen production facilities have the potential to help balance renewable energy into the grid by curtailing during peak periods of demand and provide utilities with newfound revenue during periods of off peak. We continue to believe that this has laid the foundation and groundwork for our station network, and this agreement will serve as a foundation and model for future negotiations in other regions and with other utilities.

Next, we'll provide an update on progress at our joint venture manufacturing facility and IVECO's industrial complex in Ulm, Germany. As of today, the dismantling and building refurbishment, including the civil works, such as the floor and HVAC and power and plumbing systems has been completed. And the next step will be installation of the automated guided vehicle system.

The installation of that system is on pace and should begin completion next month. And the logistics warehouse, the internal logistics system, the end of the line and finishing and the IT infrastructure and the ordering and installation of production tooling and equipment are all on pace for completion of the facility by the end of May with trial production set to begin in June of 2021.

Moving on to our greenfield manufacturing facility. Nikola began steel erection at the Coolidge, Arizona facility during the fourth quarter. And today, the steel work is almost complete. The roof is ongoing. Siding is scheduled to follow. The manufacturing equipment has started to arrive on site, and installation of that will begin in May.

Nikola is currently hiring and training manufacturing technicians for this facility, and our efforts are being fully supported by the city of Coolidge and the building and engineering departments, and we're on track to begin trial production this summer.

Next, let's talk about some of the strategic decisions we made during the quarter, beginning with General Motors. On November 30, last year, we announced our revised deal with GM, the revised memorandum of understanding that we executed made much more sense for both of us. GM will supply Nikola with their hydrotech fuel cell system, helping us to commercialize investments that they made into their fuel cell program and giving us a dual source, a second source for our fuel cells in addition to Bosch. So between Bosch and GM, we have 2 world-class fuel cell system suppliers.

As part of this new MOU, GM and Nikola will no longer develop the Badger pickup truck. The decision to cancel the Badger means that Nikola will no longer be committed to pay up to $700 million of CapEx related to Badger-specific tooling in the manufacturing facility there. And our shareholders will no longer face $2 billion of dilution for stock, which would have been paid to GM for the in-kind services for the Badger.

Moving on to the cancellation of our BEV refuse truck program. On December 23, last year, we announced the discontinuation of the BEV refuse truck program with Republic Services. After careful analysis, along with Republic, both of us realized that it would take 12 to 24 months longer than we previously anticipated. And in addition, the previously planned upfront development costs ballooned up over $200 million.

That additional time and resource needed to be dedicated to the program would have distracted us from executing on our core deliverables. The cancellation of the refuse program was one of the last difficult, but necessary steps and a series of decisions we took during the quarter to restructure the organization and to realign and focus our resources. We now believe Nikola is in the best position the company has ever been to execute on our core business plan.

Next, I'd like to give some color regarding COVID's effect on our business. The pandemic has caused significant supply chain disruptions into Tier 2 and Tier 3 in the supply base, as consumer spending in parts of the economy have recovered to near-COVID levels. We see pent-up demand hitting the supply chain, creating global critical parts shortages for components like HMI and electronic systems.

We're also facing a battery cell shortage. At this time, we don't have final commitments for our cell allocation for 2021 from our battery suppliers. We'll have greater visibility into our cell allocation commitments towards the end of the next quarter, and we'll give you updates once the information becomes available. Furthermore, we've had to modify our working practices, including employee travel policies, nonessential people working from home and various work restrictions imposed by local governments, especially in Germany.

In light of all of these uncertainties, we believe it will be prudent to revise expectations for Nikola Tre BEV deliveries in 2021, down to a range of approximately 100 trucks, which will represent approximately $30 million in sales. Regarding our ongoing regulatory and legal matters, the company made a fulsome disclosure in our Form 10-K, which we filed to the SEC today.

To be mindful of the call's length here, we encourage you to refer to Form 10-K for the updates on these legal and regulatory matters. With that, I'll turn it over to Kim, who will discuss the financial results for the quarter. Kim?

Thanks, Mark, and good afternoon, everyone. As Mark alluded, Q4 was a peculiar time for Nikola. However, we have been able to refocus on our core businesses and realign our vehicle programs to ensure we have the right people, process and plan for execution. I'm really excited about what we have ahead of us in 2021 as we continue to execute on our milestones and deliver the first Tre BEV in Q4 2021.

Now to review our fourth quarter financial results. In the fourth quarter, net loss was $147.1 million. And on a non-GAAP basis, adjusted EBITDA totaled negative $65.5 million. Adjusted EBITDA excludes, among other items: one, $46.3 million in stock-based compensation; two, $19.5 million on regulatory and legal matters and other professional service fees incurred in connection with the Hindenburg report from September 2020; three, $14.4 million in impairment charges related to Powersports; and four, $1.8 million in normal depreciation and amortization.

Research and development expenses for the fourth quarter were $67.5 million, including $8 million of stock-based compensation expense. R&D expenses consist mainly of costs incurred in the development of Nikola Tre BEV and certain remaining outside engineering costs for Powersports. SG&A expenses were approximately $64.9 million, of which, $38.2 million is stock-based compensation expense. SG&A expenses include about $19.5 million related to regulatory and legal matters, mainly regarding external legal capital costs.

Nikola maintains a D&O insurance policy with $12.5 million total coverage and a deductible of $15 million. As of December 31, 2020, our total head count exceeded 450 full-time employees and is growing at a rapid pace as we continue to build our team in engineering, supplier quality management and energy.

Turning to the balance sheet. We ended the fourth quarter with approximately $841 million of cash and cash equivalents. Our restricted cash balance was $8.4 million, comprised of cash collateralization of our equipment term loan and the required deposit to P&L landholding to construct the Coolidge, Arizona manufacturing facility. As of the balance sheet date, we had a $4.1 million equipment note fully secured by the restricted cash on our balance sheet.

The note was expired and was repaid in Q1 2021. We have no other debt outstanding as of December 31, aside from our Phoenix headquarters lease obligation. Our capital expenditures totaled $31.1 million year-to-date and $15.9 million during the fourth quarter. Capital expenditures are comprised of the construction of our Coolidge greenfield manufacturing facility, purchases of in-process equipment and Nikola's portion of investment into our joint venture in Ulm, Germany.

We ended 2020 with 391 million shares outstanding. Weighted average shares outstanding for the fourth quarter were 386 million. GAAP net loss per share for the fourth quarter was $0.38, and non-GAAP net loss per share was $0.17. Non-GAAP net loss per share excludes stock-based compensation, regulatory and legal matters previously mentioned and impairment charges.

Now turning to the 2021 outlook and guidance for our calendar year. We anticipate during Q4 2021, we will make deliveries of the first Nikola Tre BEV to launch customers. As Mark previously mentioned, we are experiencing some COVID impact, including work restrictions in Germany and parts shortages and lead time challenges with certain suppliers. As such, we think it would be prudent to adjust our Tre BEV delivery commitment to approximately 50 to 100 BEV trucks.

We expect revenue generated from Tre BEV sales in 2021 will be in the range of $15 million to $30 million. The gross margin related to Tre BEV sales will be over negative 150%. This is attributable to low scale production volume and high cost of bill of materials for the first 200 to 300 BEV trucks.

As we scale up our production volume, forecast of 1,200 Tre BEV trucks for 2022 and 3,500 Tre BEV trucks for 2023 and localize our North American supply chain, we anticipate a sharp drop in the bill of material costs in 2022 and 2023. We believe our Tre BEV bond cost could be -- could drop by approximately 40% to 45% in 2022, followed by a further decline of 25% to 30% in 2023. Our full year 2021 estimated R&D is in the range of $305 million to $315 million, including $27 million of stock-based compensation. Estimated SG&A for the full year 2021 is $235 million to $245 million, which includes $152 million of stock-based compensation. Total estimated operating expenses will be in the range of $540 million to $560 million on a GAAP basis. And approximately $360 million to $380 million, excluding stock-based compensation.

Total shares outstanding at the end of 2021 will be about 400 million, and we expect weighted average shares for the full year ended December 31, 2021, will be approximately 395 million. By the end of 2021, we will have approximately 1,000 employees, comprised of roughly 180 manufacturing plant employees and 820 corporate employees.

Our anticipated capital expenditures for the fiscal year 2021 are $210 million to $230 million. Our capital allocation plans include Phase 1 Coolidge manufacturing plant and associated assembly equipment, hydrogen infrastructure, hydrogen and technology development equipment and fuel cell electric vehicle engineering equipment.

For the first quarter of 2021, estimated R&D is in the range of $70 million to $75 million, including $6 million of stock-based compensation expense. Estimated SG&A is in the range of $60 million to $65 million, which includes $37 million of stock-based compensation. Total estimated operating expenses will be in the range of $130 million to $140 million on a GAAP basis and approximately $87 million to $97 million, excluding SBC.

Our anticipated capital expenditures for the quarter are $50 million to $60 million. Now that we have put our business restructuring behind us, we are looking forward to achieving the following milestones in 2021. First, start-up trial production at our joint venture manufacturing facility on IVECO's campus in Ulm, Germany in June 2021; second, start of trial production at our greenfield manufacturing facility in Coolidge, Arizona, in Q3 2021; break ground on our first commercial hydrogen station infrastructure; fourth, announcement of hydrogen collaboration partners and electricity procurement agreements; and fifth, delivery of Nikola Tre BEVs to customers during the fourth quarter of 2021.

This concludes our prepared remarks. We will now open the line for questions.

Operator?

(Operator Instructions) Our first question comes from the line of Jeff Osborne with Cowen & Company.

A couple of questions on my end, and thanks for all the detail on the guidance. It's very helpful. Can you just give us an update on the order book for Tre or when we'll move out of the validation and testing phase, both in the Northern States and Germany and when people can do ride and drives and hopefully get a book of business growing?

Yes, Jeff, that's a great question. We obviously have had a lot of interest in the Tre. That interest started in the summer of '19 after we unveiled the unit at Nikola world and concept. And that's when we found out that North American customers really wanted the Tre into America. So we started working on the battery version of the Tre for the North American market at that time.

And in just about a year, we have production prototypes in production testing and validation. And obviously, there's a lot of customers who are interested in it. We have conversations going on with many customers in North America. The launch is in North America first, of course. We'll deliver to our launch customer here in the fourth quarter, the first vehicles.

And those discussions, while being delayed by the controversies last fall and delayed now by COVID just a little bit, are ongoing. We anticipate, just as you mentioned, Jeff, that -- and we'll have -- we'll be able to conclude agreements with a launch customer at least and possibly multiple launch customers after we're able to show them production prototypes that have been fully validated and tested, which we think will happen in the April, May time frame.

We're already setting up times where we can bring customers to the track and get them in the trucks and get them actual ride-and-drive experience, which we think will be at the time that we'll be able to finalize and conclude negotiations for specific customer orders and contracts.

We don't have any shortage of interest. Everybody wants -- everybody's question is when can I get a truck. So what we're trying to do is come up with agreements with a launch customer who's going to be committed to us and help us with the development and even share a little bit of risk with us as we go forward in launching these vehicles.

Like Anheuser-Busch did and has done and continues to do on the fuel cell side, we're looking for that kind of a launch customer on the battery side, the Tre battery vehicle side. And we anticipate we'll be able to get that done in the next upcoming quarter in all likelihood. So good question.

Got it. And just with COVID and everything going on with the delay in parts and whatnot, with the guidance for Tre, is there any delays as it relates to the fuel cell variance of either vehicle being available for sale in the '23 time frame? I know that's a long ways away, but I just wasn't sure if your KPIs are being hit on that.

Yes, that's another great question. At this point, we don't -- we do feel like we have enough time between now and launch that we can have a chance to recover from any delays we're experiencing there. We are experiencing delays on the fuel cell program in the same way. We're just not that -- we're not so close to the start of production there that we think we have to push anything back at this point.

We think a lot can change in the next 18, 24 months. And we hope that we can overcome some of these shortages. The critical ones to us, of course, we've already mentioned battery cells, semiconductors and products that incorporate semiconductors are in really short supply right now. But we think there's a good chance for that to get ameliorated over the next 8, 12, 18, even 24 months.

Our next question comes from the line of Daniel Ives with Wedbush Securities.

So my question is on the partnership side. Have you now seen just, what I'll call surge or spike in interest from partnerships, whether it's on the hydrogen fuel cell side or on others, if I compare where we are today versus, let's say, 3 to 4 months ago?

Daniel, we definitely have more, I would say, intensity in those discussions. Obviously, what happened last fall gave everybody a pause. And at this point, I think the people have seen that we've gotten refocused. We're back to execution mode. And that has increased the intensity of the discussions with potential partners.

You've also seen a number of people get into our slipstream in terms of -- especially fuel cell vehicles and hydrogen. A lot of people now trying to trail us and catch up to us, copy us, et cetera, on that front. We used to be kind of all alone there, not that long ago. And now there's a lot of big names who are also jumping into this space and doing the same things we're doing.

That also lends credibility and also, as I said, increases the intensity of those discussions. We're also refining our approach. We have made a lot of progress. Our need for partnerships has evolved. We've actually done some things that partners could have helped us with if we had done some of the deals we were talking about last year. We've actually already accomplished those things. So our need for partner help is reduced on some fronts in some areas. But we're still interested in being partnered up with people who bring a lot to the table and who are interested in what we bring to the table.

These things are like marriages. Both parties need to bring something to the table and -- for it to work well. And that's certainly the case at this point. There are still a number of really attractive, potential partners for us that can help reduce our risk or help us speed things up and bring essential things to the table. And we think we bring a lot to the table as well.

So those conversations are ongoing, and we're back to serious negotiations once now that the uncertainty of last fall is pretty much behind us.

And then I think last year during fourth quarter that some of the conversations will likely spill into Q1. And of course, that's the case. But as Mark alluded, we are having a number of discussions, and we feel confident that we'll be able to share the progress on many of those discussions in the upcoming months.

So just sort of paraphase and then just tell me if you agree or disagree. Like here it is, you have a ton of partnerships that you guys are in discussions, the fall comes, things obviously get put on ice. Well -- and now it feels like that's really starting to come back pretty quick.

And we likely could expect, over the coming months or whatever, 2 to 5 months, more partnership than maybe a lot of these have even started prefall, they just basically pause until everything calmed down. Is that a correct characterization?

That is correct. We did see some pause in some discussions that we had ongoing last year. We also have some new ones. There's a lot of activity in this space, as you know. So we've restarted most of the discussions that we were having last year, rather, we've reengaged on a serious level with most of the discussions we had last year. And then we've added a couple of new ones.

People who have come to us with ideas and with things they want to talk about, so.

I think what you'll find is that as we make some additional announcements, you will find that we have been very thoughtful on how we think about hydrogen value chain. And our view of hydrogen potential partners have expanded, and it will give you greater confidence in terms of how we're thinking about the rollout of the hydrogen pathway.

Our next question comes from the line of Chris McNally with Evercore ISI.

So my question is around the hydrogen station partners. I was curious if we could get an update. Again, lots of discussions, but how close you are to finalizing maybe the first tranche of stations. It sounds like the strategy is moving more towards multiple partners rather than one broad partner as you discussed previously, but also on timing, how long from breaking ground on a station, can it be tested ahead of '22 for some of the beta trials?

Yes, that's a great question, Chris. First of all, let's talk about the likely focus. You saw our announcement about the rate schedule that we have with APS and their service area, which is really groundbreaking, and it's going to be a model for us in other discussions in other areas with other utilities. That tells you that, that's an area of focus for us. We're definitely focused on that area. And as you said, there's multiple potential partnerships.

There's multiple potential models of hydrogen supply chain that are -- you're going to see here. Within that APS rate area, we have the rate that we would need to generate on site. And that's the base station design that we worked on with Nel for the last several years, where we can produce and dispense up to 8 tonnes a day or 16 or 24 or higher and 8-tonne increments in a -- on location by using the electric rate that's favorable to diesel on a location.

And then as you get to, say, on the West side of the APS service area, West on Interstate 10 corridor closer to the California market, there we might see us producing hydrogen in bulk. And then transporting that hydrogen either in a compressed form or liquid form into the Southern California market, for example, where we're not going to get that kind of rate, most likely in the Los Angeles Basin, et cetera.

So you're going to see different iterations of the infrastructure. You're going to see different -- more than one type of partnership as well. As you said, things have evolved at this point, and there's probably no one partner that could provide everything that we're looking at in terms of what -- we're looking at in terms of partnership, what they bring to the table.

So you're probably going to see multiple partners. You're going to see multiple forms of infrastructure as we go forward. There will be solutions that are tailored to an individual location and solutions that are tailored to specific partnerships.

And Chris, in certain -- just one more thing. In certain locations, we may not even consider actually having centralized hydrogen generation. It may be possible in certain locations where gray and blue hydrogen may be available where carbon is captured. So we're focused on really CI score. And we think there are value streams that can be captured where we can't actually purchase hydrogen and able to deliver to our stations and we're only responsible for actually dispensing.

So there are a number of value chains that we are considering to optimize overall hydrogen pathway.

And again, Kim's point about CI, which is carbon intensity, by the way, that's what we're looking at as the overall scorecard for how green a solution is. So we are looking at situations where people are making hydrogen from sources that otherwise would be emitting carbon, but they're capturing and sequestering.

So we're looking at those as well in some locations also. And your other question, Chris, was about the time line. When we actually start construction on a station, depending on the kind of infrastructure that we have there, it determines how long that construction time is. A generating and dispensing station, the construction time is about 12 months. And we took -- we beat that slightly for our dispensing location here at our headquarters.

We think for generating and dispensing location, we could do the whole thing in 12 months. And that would be after the completion of all permitting and paperwork is all done. So what we've had in our presentation materials prior has been 18 months as a benchmark, which represents 6 months of permitting time and 12 months of construction.

In some jurisdictions, the permitting time might be a year or more. There's parts of California where I think you're probably looking at more than a year in some cases. Here in Arizona, we get permits very rapidly. So it's going to be on the much shorter end of that scale.

Construction time is a year. Permitting time is somewhere between a month and a year usually. And so we kind of approximate that from announcement to commissioning is about 18 months on average.

That's very helpful on the fueling strategy. And if I could squeeze in one that's related to that. You guys released the 3 variants on the hydrogen truck this week. I'm curious how that relates to the Budweiser trials. If you look at Slide 6, you're talking about the pilot in '22. Will this -- will the pilot still be initially focused on the long haul?

I mean, originally, he was talking about Nikola Two where the timing is actually more like 2024? Or will Budweiser actually use some of the regional Tre launching in 2023 for the pilots in early 2022?

Great question, Chris. The focus within Anheuser-Busch is on fuel cell vehicles. They've been our partner for developing fuel cell vehicles for a long time now, and they will be using both vehicles. The Tre fuel cell is going to be suitable for routes that are up to 500 miles, whereas the 2, we're getting to exceptionally long ranges at this point. That's why we released that portfolio requirement because we're going to have a 900-mile at least variant of the Nikola 2 sleeper. And that will cover the longest routes that AB has in North America.

The 500-mile truck will cover a good chunk of those routes and will be available slightly sooner. So we anticipate that the first vehicle that AB will be running from Nikola will be the Nikola Tre fuel cell with up to 500 miles of range. And then in '24, we'll add the sleeper for the longers haul.

A prototype route for AB with us is in Nice, California where they have a large brewery that serves the market here in the Southwestern United States, primary route for the Van Nuys Brewery is to the Chandler, Arizona warehouse, which services the southern part of Arizona. And that's about just over a 400-mile route.

So the Nikola Tre fuel cell could service that route. There are longer routes that AB has that will tip into the Nikola 2 range category. But we think that there's going to be a lot of routes AB has that we can cover with the Nikola -- the Tre fuel cell.

Our next question comes from the line of Joseph Spak with RBC Capital Markets.

I actually wanted to follow-up on Chris' line of questioning right there. So I think originally, the Tre fuel cell was Europe-only. Maybe you could just indicate -- give us some indication of what your potential customers were telling you that made you decide to bring in a Tre version of the fuel cell to the U.S.?

And then I know that the Nikola 2 fuel cell seems like it was delayed a little bit. Was that related to trying to get it -- get the higher mileage variant out there? And ultimately, even if the mix is changing between 2 -- Nikola 2 and the Tre a little bit here, does this -- is your 2,000 fuel cell target by '23 and 5,000 by '24 still valid?

I'll start there?

Sure. We have not changed any of our forecast for 2023 and 2024 and 2025 with regards to our fuel cell trucks. I think what we have done is that we have found that there's some confusion about in the marketplace with respect to our fuel cell products. And one thing that we have done, especially in the last couple of months is that we have spent a lot of time really trying to understand the market and segment the market and understanding the needs and where the gaps are.

And when we think about BEV trucks versus fuel cell trucks, we know that there's a gap where BEV is not able to provide the right solution. And so we believe we've got compelling products that we can meet the medium-haul market. And then as well as having a new chasis, new truck when you think about Nikola 2 for -- that can meet really the long-haul segment of the market.

So we feel that we have the best product that's out there in terms of being able to really attack those subsegments of the market.

And Joe, your question about the Europe versus U.S.A. That's another example of the United States market and the customers here. I'll -- helping us to see that we needed to adjust our strategy. We had a number of customers who are going to be customers with the Tre battery, say to us, we like this truck a lot. If you had a fuel cell version that could go longer-range still with a full payload, particularly if you could make it a little bit more aerodynamic for the higher speeds that you see in the U.S. compared to Europe, we would buy it.

So that's why we decided that we would go next to the Tre fuel cell variant for the U.S. market because we can follow right on the Tre battery truck. It's the same platform, it's the same basic vehicle. We just replace a lot of the battery with fuel cells, and we put -- or with the hydrogen storage, and then we put the fuel cell stack in there -- the system that we have developed in there.

And we slightly changed the geometry of the truck. If you look at the renderings in the release we put out there a couple of days ago, you'll see that there's a slight arrow front to the Tre fuel cell. It's the same truck underneath, but it's got a more aerodynamic structure, nose is slightly lengthened.

And based on the simulations, which we'll verify with real trucks here shortly, that truck is much more aerodynamic. The coefficient of drag has substantially improved by that revised geometry. And so we think that the Tre fuel cell will actually be very suitable for a good chunk of the North American market. It's going to be suitable for the higher speeds that you need for interstate travel.

It's going to cover a lot of the interstate market that's under 500 miles, and we think we will be able to sell a lot of those trucks. And that's the reason why we go next from the Tre battery, we go to the Tre fuel cell. And the 2 comes out a little bit later. And now our focus on the 2 is to make sure that we have a very high mileage distance, long distance vehicle to cover that portion of the market that really needs the long distance, particularly as the hydrogen fueling network that we're building out becomes more available and our coverage gets better.

You're getting to the point where you've got pretty good coverage in Europe on the natural gas front, but you still have the best-selling trucks in the European natural gas truck market is the longest-range version. IVECO, our partner, has a 1,600 kilometer or 1,000-mile truck that is their #1 seller in Europe. And that's even after you've got a lot of places where you can fuel that, a lot of places you can fuel the compressed natural gas version and even a number of places now where you can fuel the liquid natural gas version.

They still sell a lot of really large trucks there because a portion of the market, particularly the for hire carries and the third carriers in the third-party logistics market, they need a longer-range truck. And they're going to need one for a long time to come until the fueling network gets really dense.

So that's why the 2 is now at the end of the introductions in '24. And it's focused on being as long range as it can be. That's another reason for the announcement is that we're now up to 900 miles on the 2 range. I'm personally not satisfied with that. I want to push it even further if we can. We'd like to get to that 1,000-mile number they get in Europe for their natural gas truck they've got there.

But we're right now at 900 miles, and we'll keep pushing that envelope as we get closer to the introduction there.

Great. The second question, maybe we could just turn to capital. So I think back in August of last year, which I know was a lifetime ago, but I think you talked about second half CapEx of like $100 million. I think it only came in '18. And then originally, like $290 million for '21, I think from the original deck, and now you're saying $220 million. So cumulative CapEx is lower.

How much of that is a realignment of the priorities you talked about versus a delayed spend or maybe some efficiencies? And what does that mean for the language you had in some of your prior filings about a capital raise in late '21 or early '22?

Great question. I would say all of the above. As you know, in 2020, we did defer some CapEx, but when it comes to spending, especially for hydrogen stations, it was important that we found the right solution that made sense. And so it made sense for us to defer that to 2021.

But when it comes to CapEx, it's something that we think about very carefully. As you know, we -- this is investors' money and capital allocation decision is super important, and we want to be thoughtful and while we understand that we need to meet all of our timetable and commitments with respect to BEV trucks and fuel cell trucks. And we're making sure that we have right capital deployed in -- for operating expenses to ensure that we need the time line.

In terms of CapEx, I think we have that provision right for 2021. We have a pretty good idea in terms of what we need to spend to get to 1.0 phase completed for a greenfield manufacturing facility. And there are some CapEx related to having -- making sure that our own facility is online by June. So all that's going well, and we anticipate CapEx allocated for those 2 projects that will be fully spent with respect to when it comes to hydrogen stations and partners.

There, we are trying to be a bit more flexible, recognizing that there could be a number of different options and configurations. And so we need to be flexible in terms of how we think about the CapEx. But we do believe in the overall context of $225 million, $230 million that we're allocating for 2021, we think we'll have enough flexibility.

Now it's quite possible that especially when it comes to second half of the year. And if we find that there are great opportunities as we continue to partner and that perhaps we may need to accelerate capital spending when it comes to hydrogen side. We will certainly update the market.

In terms of capital raise, I think we have always been clear that at some point, we thought that it would be prudent pursuing a capital raise sometime in 2021. We'd like to make sure that we have adequate capital, at least a year in advance or potentially 1.5 years, 2 years of worth of capital for our operating expenses and capital expenditures.

And so we will, time to time, tap the market, and we do think that so far the market has been strong. So do not be surprised if we do end up tapping the market this year. But we do that because we want to make sure that we have ample liquidity at least 12 months to 18 months in advance.

Our next question comes from the line of Mike Shlisky with Colliers Securities.

Can I start with a question on the APS deal for electricity? Can you maybe give us some color as to some of the moving parts behind that contract? I mean this is a commodity that trades openly. So somewhere you're giving and somewhere you're getting. So can you give us some color as to how you got the good price? And is there any kind of minimum offtake or a minimum amount you need to actually take from APS to get the kind of price?

Yes, great question, Mike. The rate schedule that we have with APS, which is very competitive, by the way, and very innovative, was a result of a lot of work and a lot of education of stakeholders because we had to convince the utility that this was going to be a good deal for them. We had to convince the state regulators that oversee the utility that this was good for the ratepayers as they are publicly regulated utility. And we had to also convince the people who we're going to be touching on the grid that this is going to work well.

So the key aspects of the agreement are that we have this rate available throughout the service area for the quantities of electricity that we're going to need, which are very large. And what our advantages to the market is off peak, which is during the night every day, year round. And during the solar season is during the peak of solar production during the day. At solar noon you have a lot more electricity coming into the grid than is needed when it's not a hot day here in the Southwest.

And then the peak hits, the peak of the peak here in the Southwest is in the hottest months of the year, which is the late summer. And that's in the late in the day. After the solar noon, you get -- the solar production starts to fall off. But everybody is running their air conditioners. And so you get around 5:00, you usually get a peak somewhere between 4:00 and 7:00 p.m.

We have the ability in making hydrogen to be able to curtail for a period of time during the peak, particularly in that peak of the peak time of year for the Southwest grid. That was -- that's gold for the utility and the grid operators because we're not going to add anything to their peak because we're going to -- in the peak of the peak, we just curtail for a few hours every day. We can do that. We've got buffer built into the system to do that.

And then we're a newfound revenue for windmills and hydropower turbines and other sources of renewable energy. And even noncarbon-generating energy sources like nuclear plants, I wish there's a great one here in the Southwest just down the road from us that has a lot of life left. That doesn't add any carbon by making electricity. And at night, that capacity is just -- is wasted, no revenue, no use.

Well, at night, we're going to make hydrogen with that now, and that's going to be -- that's found revenue for the utility and for the ratepayers. And then we don't add anything to their peak problem in the afternoon during the peak times of the year. So that's why we get this very, very competitive rate because we represent the future of the electric grid.

If you're going to get renewable energy like wind and solar into the grid and use it effectively, you either need massive kind of storage of some kind like big grid batteries, which are expensive and degrade quickly, or you can have us do it basically marginally for free, well even -- and we'll pay you for the electricity that you're not keeping -- able to develop during the off-peak hours, and we're not going to add anything to your peak problem.

So we think this is a model. We think that everybody around the country, in the United States and around the world -- we have similar discussions going on in Europe, by the way, are going to be able to quickly look at this and see that it makes sense to do this just about everywhere because the amount of renewable energy goes up every day, every week, every month. And the challenge of balancing the grid goes -- gets bigger and bigger every week and every month, every year.

And hydrogen can be part of the solution for that. I think we just proved that in the APS model here. And we're looking forward to replicating that in other jurisdictions and other -- with other utilities.

Got it. I also wanted to ask about the pricing of the Tre that you put in your outlook here. This could be me, I might be crazy. I remember seeing in the past just by dividing what was in some of the earlier slides that the ASP of the Tre BEV to start was going to be about $250,000. And it looks like here, same calculation, looks about $300,000.

Again, I could be working with the some old stale data here, but has anything changed? Maybe it's price of steel or some of the other kind of raw materials here? Or is this just a different pricing schedule? Or again, am I working with some old data?

You're working with some older data, Mike, that original price benchmark was established by the only product in the market at first, which was being priced at $250,000. That was a much inferior product to what we're going -- what we're going to have in the market here is very shortly and what we're going to prove to customers that they can get from us.

That was a much lower range, less capable, less sophisticated vehicle, but it was the only one available, and it was being sold for $250,000. Right now, we see pricing in the market going north of $300,000, very rapidly for more capable state-of-the-art vehicle. So that's why you see that number changing. We'll continue to use the most up-to-date market reference that we have for our modeling purposes to help you out.

Thank you. Ladies and gentlemen, this concludes our Q&A session and thus, our call today. We thank you for your interest and participation. You may now disconnect your lines.