Shares of electric-heavy-truck start-up Nikola (NASDAQ:NKLA) were surging on Monday morning, after the company announced that it had received an order for electric garbage trucks from waste-hauling giant Republic Services (NYSE:RSG).
As of 11:15 a.m. EDT, Nikola's shares were up about 12% from Friday's closing price.
Nikola said in a statement that Republic Services has agreed to purchase at least 2,500 battery-electric garbage trucks, with an option to increase the order to 5,000 trucks in time.
The trucks will use the cab and chassis from the Nikola Tre, the smallest of Nikola's heavy trucks, with battery packs that provide around 150 miles of range and garbage-truck bodies that will be developed with Republic. Nikola said that it expects to begin testing in early 2022, with full production and deliveries in 2023.
The trucks will be built at Nikola's Arizona factory, which is currently under construction.
Nikola's founder and chair, Trevor Milton, said that the garbage trucks will add scale to the Tre platform, helping to drive down costs, while giving the platform early real-world experience to ensure that it meets fleets' lifecycle requirements.
"We are excited to have [Republic] participate in the design process," Milton said.
In the grand scheme of things, 2,500 trucks isn't a big order. But it's a strong vote of confidence in Nikola's business plan and ability to deliver real products -- and that is (or should be) important to auto investors.
With a $15 billion-plus market cap, cash in the bank, and strong partnerships, but no revenue, and none expected for at least a year, Nikola is something of a gamble for auto investors. Whether its stock is worth what investors are paying for it now will depend entirely on whether, and how well, it can execute on its promising plan.
We won't know the answer to that for a while, but it's encouraging that a big buyer of trucks thinks enough of Nikola's plan and team to place an order like this one. That's why the stock is up today.