It seems like everybody's talking about Nikola (NKLA -2.08%) these days. The alternative-fuel trucking upstart now has a bigger market cap than Ford despite never having sold -- or even manufactured -- a single non-prototype vehicle. But that hasn't stopped people from comparing it to Tesla (TSLA -1.38%), the reigning king of alternative-fuel vehicles, which is also preparing to enter the trucking market. 

Nikola's plan has been tried before...unsuccessfully. But here's why it might succeed where others have failed. 

The Nikola Badger electric pickup truck in an outdoor scrub brush setting

Nikola has generated lots of hype by unveiling a rendering of its Badger all-electric pickup. Image source: Nikola Corporation.

Nothing new under the sun

Twenty years ago, hydrogen fuel cells were seen as a green vehicle power source with huge potential. Since then, alternative-fuel vehicles have faced an uphill battle. Government subsidies to promote the technology have been inconsistent at best, and practical considerations -- like limited refueling stations and costly technology -- have conspired with relatively cheap gasoline prices to confine hydrogen vehicles to a niche. 

Just ask the folks at Plug Power (PLUG -2.94%) and Ballard Power Systems (BLDP 7.45%), which have been working on the technology since the 1990s. Despite their decades of work, roads full of hydrogen-powered vehicles don't seem any closer to reality. 

Baby steps

Plug and Ballard have developed their hydrogen technology the "right" way: They've started small, working in niche markets that play to fuel cells' strengths.

Plug has found the material-handling market (read: warehouse forklifts) well suited to fuel cell power. Round-the-clock warehouse shifts make hours-long battery charging sessions inconvenient, while a hydrogen fuel top-off only takes a few minutes. While this makes up the bulk of Plug's revenue, the company has tried (and tried, and tried) to make inroads into the heavy-duty motile market (trucks, vans, and buses). Ballard has been even more focused on this market.

Success in the heavy-duty motile market for both companies has been limited to small orders, like Plug's partnership with StreetScooter to provide 100 fuel cell delivery vans to shipper DHL, or Ballard's contract for 40 fuel cell-powered buses for a city in the Netherlands. In March, Plug announced it was partnering with Colorado-based Lightning Systems to offer a fuel cell-powered Class 6 delivery truck, but it has yet to announce any customers.

This may be the "right" way to build a business -- start small, demonstrate success, and grow bigger -- but in their 20-year-plus histories as public companies, aside from a handful of random quarters, neither Plug nor Ballard has ever turned a profit!

Nikola, however, has one thing Ballard and Plug have never had: hype.

Fake it till you make it

Tesla did some things the "right" way: Its first product was the Tesla Roadster, a high-end battery-powered sports car that could be cost-competitive with other high-end sports cars like the Porsche 911. Once it had made some money from the Roadster, it began to market more affordable models (like the Model S and then the Model 3). However, Tesla's Roadster did something besides provide proof-of-concept for the fledgling car company: It established Tesla as a desirable brand making cool products that almost nobody could afford.

CEO Elon Musk also did a lot of things the "wrong" way, like missing deadlines and quotas, and making outlandish statements that kept Tesla in the news and delighted its legion of fans but left analysts shaking their heads. This shouldn't have worked. And yet, it did. Tesla now has a market cap of more than $180 billion...and still, not a single profitable year in its history.

Now, Nikola -- despite literally being decades behind Plug and Ballard in building a suite of intellectual property, perfecting its technology, and integrating with manufacturers -- has amassed a market cap more than seven times Ballard's and 10 times Plug's, in less than a month. What it does have is a flamboyant founder in Trevor Martin, who has successfully trolled Tesla by riffing off of (some might say, "ripping off") its name, and jumping into two markets -- pickups and semis -- that Musk has been targeting.

And hype. Nikola has lots and lots of hype. 

Is it enough?

As Musk and Tesla have shown, sometimes hype can pay off and lead to a successful -- at least for now -- business. Of course, unearned hype also led to the Fyre Festival. Without even a quarterly earnings statement to look at, it's impossible to know whether Nikola will be able to translate the hype it's receiving into lasting value. 

Investors should think twice before investing significant resources into an untested company based solely on hype. If Nikola ends up being successful, there will be plenty of opportunities to buy in later.