How did Nikola Motors product launch go so horribly wrong?
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The purpose of this blog is to analyse the failure of the first Nikola Motor product launch (Nikola One), the bad marketing that was connected and determine the knowledge areas that led to the failure of this project. Furthermore, we are going to look at how these knowledge areas, five process groups and defining the project’s success could have been utilized in a better way. (Schwalbe, 2017)
The biggest motivation for this blog was my deep interest and passion for electric vehicles. I am involved in several investing sustainability sector investing groups where I am constantly exposed to different scenarios and realized that everything that I am exposed to is not what most people are exposed to. Not a lot of people in my class seemed to ever hear about Nikola, the electric hydrogen truck manufacturer, which motivated and interested me to dive deeper into it as I do tend to gravitate towards things that are not mainstream.
Nikola Motor was attempting to launch its first product, the Nikola One, one of the first hydrogen-powered electric trucks to ever exist. The company was doing a lot of marketing campaigns and the CEO took a lot of action to ensure that stakeholders would remain happy and become even more interested. When reading the last sentence, it seems like normal business procedures, however as stated before, we are going to see where the product launch project went wrong.
*Author Disclaimer: There have been fraud claims made against the company and the former CEO of Nikola Motor, that has yet to be determined if Trevor Milton is liable or not. Because fraud will be only determined if the court finds Trevor Milton guilty for his involvement in the company and actions during his time at the company, the mentions of fraud will not be further discussed or mentioned in this blogt except for the appendix. This is to prevent allegations of defamation even though this blog is solely for educational purposes and with the intent to earn EC’s. (United States of America Vs Trevor Milton, 2021)
The allegations of fraud and intent to lie to the public will be partially ignored in the analysis of this project, however, some actions by Trevor Milton that were accused of being fraudulent are analysed within the blog, but are only limited to being analysed within the knowledge areas and learning outcomes for this course. (Margolin and Biase, 2021)
Project Analysis
Scope, risk, resource, quality, procurement and schedule management all lent a hand to the downfall of this project but will be less touched up upon as the word count is quite limited. The company did not properly make a make-or-buy analysis as the company would have determined that even with General Motors on their side, they did not have the resources, time or capacity to bring an up-to-standards quality product to the market. The company did not have scope management in place, as the company promised an innovative industry breakthrough product, but had no idea how to get there.
1.1 Knowledge Areas
A few knowledge areas were mentioned above, and it can be determined that all knowledge areas were involved in the failure of this project, however, the below-mentioned knowledge areas are the ones that affected the outcome of the projects the most.
1.1.1 Project integration management
The project selection method was rather simple, serial entrepreneur Trevor Milton who was around 33 years old when he founded the Nikola Motor Company back in 2015. The reason and selection method for this company were very similar to the other reasons other electric car companies started getting founded, Tesla. Tesla’s popularity, as well as its stock price, was starting to grow pretty quickly, and everyone around the world started noticing this shift in consumer demand and trends. Toyota started gaining popularity in the hydrogen vehicles spectrum, to be different from Tesla, Nikola chose the Hydrogen route. (Toyota, 2016)
Trevor Milton had experience with retrofitting trucks with natural-gas-capable components and thought that creating hydrogen-powered trucks was similar enough. (Campbell, Bushey and Aliaj, 2020)
Entrepreneurs, companies, governments and organisations around the world, like Mr Trevor Milton, were inspired to start their version of Tesla to capitalize on the growing trend. Trevor Milton’s idea and project idea immediately gained some attention as it has a name very much connected to Tesla, from the inventor ‘’Nikola Tesla’’ of course and also gained attention because it wanted to use hydrogen fuel cells instead of Lithium-Ion batteries.
The company started with having no real plan, project management strategy, technology, project charts or implemented any other integration management systems. Trevor Milton saw Tesla was becoming very successful and he wanted a piece of the pie with hydrogen-powered electric trucks. The CEO even went so far as to purchase a third-party design but later claim it was his own. (Staff, Bhalla and Maler, 2020)
1.1.2 Project communications management
Project Communications management is one of the biggest catalysts for this project failure as it conveys a false expectation for the project’s result. This not only influenced the failure of this project but has also damaged the reputation of other people and companies involved which will be more deeply discussed in chapter 4.1.3.
The downward spiral of the company started to gain attention when it unveiled its first product, where Trevor Milton stated that the truck was fully functional and road-ready when it was not at the time. The lies even got worse after a promotional video was made where the Nikola One truck was ‘’driving’’ down the road. The company communicated and indicated that the truck was being driven on hydrogen-powered energy, which indicated that a huge milestone has been achieved. This not only made customers more excited for their products, but it has also made investors more excited, pushing the share price higher up. The truck shown in the promotional video was being rolled down a steep hill, meaning the truck was a non-functioning display truck. Please have a look at appendix B to get a picture of the rolling-down truck. To see an example of Trevor Milton’s social media false statements, please have a look at appendix C
Conflict management was also very poorly controlled in this situation as what Trevor Milton was communicating to the public was not representative of the actual company operations. The conflicting information being shared should have been corrected and the former CEO should have been closely managed by authoritative stakeholders.
The founder and CEO of the time Trevor Milton did not properly communicate with his team about what is the status of his company and projects, in this case, Nikola One (the company’s first product). The company did not have a clear plan on how to communicate with management, engineers and its stakeholders. The company failed to even have proper status and progress reports as the then CEO at the time, Trevor Milton, falsely or inaccurately give updates on the milestones the company has been making.
After the CEO, Trevor Milton stepped down, which he was practically forced to do so by the stakeholders of the company. A financial 2020 Annual Report was published where they specifically list all the ‘’inaccurate’’ statements Trevor Milton has made. (Nikola 2020 Annual Report, 2020)
For a specific list of the statements made by the former CEO Trevor Milton please have a look at appendix A.
1.1.3 Project stakeholder management
The company completely discarded its stakeholders in this project failure, however, it can be argued that the stakeholders should have done more in-depth research. Not only did the company and its employees suffered due to its first product launch, but its investors and potential partners suffered as well. Because if a short-selling firm Hindenburg could have conducted proper research, so could Nikola’s stakeholders, especially when billions are involved. (Lynch, Frank and Brimmer Katcher, 2020)
A more notable potential stakeholder was GM, whose reputation and share price was temporarily damaged due to its affiliation with Nikola Motor by planning to have an 11% stake in the company and was getting ready to supply Nikola with different technology and industrial support. General Motors backed out of purchasing 2 billion US dollars (11%stake) worth of Nikola Motor shares, 700 million US dollars worth of assets, new product line collaborations and other forms of support. (Nikola 2020 Annual Report, 2020)
Companies that have pre-ordered these trucks have also been affected by this, the stakeholder of those companies. Say if a company was dependent on these trucks and they hear that most of the advancements and statements stated by the CEO of the company were false, they might have to cancel their pre-orders and ask for a refund for their own financial and reputational safety.
Conclusion
It can be concluded that communication played a huge role in the downfall of this project. It can be recommended that if the former CEO Trevor Milton never made misleading statements so publicly, he still would be CEO, the Nikola One product would have still been launched, the share price of the company would have not been heavily damaged, and the reputation of the company and its stakeholders would have not been damaged. If they were more transparent and clearer that the ‘’driving working truck’’ in the promotional video was rolling down a steep hill, expectations would have been lowered and people wouldn’t have felt mislead.
As mentioned in chapter 4, because automotive experts conducted dept research and concluded that the company that Company’s activities and rate of progress are consistent with that of an average emerging OEM (Original Equipment Manufacturer).
It can also be determined that the scope, schedule, quality, risk and procurement were all up to standards to the general public if the CEO haven’t made the statements, promises, allusions he had communicated in various ways to the public. It can also be determined that in management and staff meetings, certain things were agreed upon, however, to make his company seem more attractive to investors, lies and dramatizations were used in explaining the company’s progress.
It seems that the founder and CEO of the company had very poor project integration management. Even though it is normal to hop on a successful trend, the CEO did not have any proper plan in place and even went so far as to lie that he had the passion and that he had designed the first product, Nikola One, himself.
Lastly, the fault of this project failure can be directed towards the stakeholders of this company. It was partially the investors, partners, competitors, managers and clients’ responsibility to do their due diligence before, pre-ordering, investing and partnering with a company. None, except for Hindenburg properly double-checked Trevor Milton’s statements and promises. If the competitors themselves did their research as well, it could have helped the investors of not only Nikola but the competing companies themselves. Thus, it can be recommended that the parties that were involved in this company should have done more research into this company and should have taken immediate action. The failure of the first product launch, share price crash and reputational damage could of all been avoided if these actions were done by the stakeholders.
Looking at the five process groups, monitoring and controlling processes should have been applied more heavily. Looking at the project’s definition of success, the parties involved determined success based on what Trevor Milton was saying, not what the reality was in terms of the quality of the project and product (Nikola One).
As always, thank you so much for reading our blog post, if you liked this blog post, you might also like Important companies that will help with the Electric Vehicle Infrastructure in 2021. Want to see where Nikola Motor is now? Check out their website for yourself here.
References
Lynch, T., Frank, J. and Brimmer Katcher, W., 2020. Nikola Sets the Record Straight on False and Misleading Short Seller Report. [online] Nikolamotor.com. Available at: <https://nikolamotor.com/press_releases/nikola-sets-the-record-straight-on-false-and-misleading-short-seller-report-96.pdf>
Campbell, P., Bushey, C. and Aliaj, O., 2020. Nikola: the clues in Trevor Milton’s past that investors missed or ignored. [online] Ft.com. Available at: <https://www.ft.com/content/168be1c5-5f54-473f-b373-096b8a511ba9> [Accessed 4 October 2021].
Nikola Motor Company. 2021. Nikola Homepage. [online] Available at: <https://nikolamotor.com/> [Accessed 29 September 2021].
- Nikola 2020 Annual Report. [ebook] Washington, D.C: Nikola, pp.50-122. Available at: <https://d32st474bx6q5f.cloudfront.net/nikolamotor/uploads/investor/annual_report/document/2/2020_Annual_Report.PDF>
Toyota, 2016. Toyota 2016 Annual Report. [online] Toyota Motor Corporation Official Global Website. Available at: <https://global.toyota/en/ir/library/annual/archives/>
Justice.gov. 2021. United States of America Vs Trevor Milton. [online] Available at: <https://www.justice.gov/usao-sdny/press-release/file/1418421/download> [Accessed 4 October 2021].
Margolin, J. and Biase, N., 2021. Former Nikola Corporation CEO Trevor Milton Charged In Securities Fraud Scheme. [online] Justice.gov. Available at: <https://www.justice.gov/usao-sdny/pr/former-nikola-corporation-ceo-trevor-milton-charged-securities-fraud-scheme> [Accessed 4 October 2021].
Staff, R., Bhalla, A. and Maler, S., 2020. Nikola Corp’s founder purchased truck designs from third party – FT. [online] Reuters.com. Available at: <https://www.reuters.com/article/us-nikola-truck-idUSKBN26H138> [Accessed 29 September 2021].
Schwalbe, K., 2017. Introduction to Project Management, Sixth Edition. 6th ed. Minneapolis, MN: CreateSpace Independent Publishing Platform, pp.37-60.
LEE, T., 2020. Nikola electric lorry just rolling downhill in promo video. [online] BBC News. Available at: <https://www.bbc.com/news/technology-54161343> [Accessed 29 September 2021].
Twitter. 2020. Hindenburg Research. [online] Available at: <https://twitter.com/HindenburgRes/status/1304028473808359425> [Accessed 29 September 2021].
