What happened

Shares of Nikola (NKLA 2.58%) are in free fall today. They were down 11.2% as of noon ET on Tuesday. The electric vehicle (EV) stock reported its first-quarter numbers this morning, but that's not what the market's worried about. Nikola is ending a joint venture in Europe and in a surprise move, making a huge business shift: It's deviating from its core business of electric trucks to focus elsewhere.

So what

Nikola produced 63 Tre battery-electric trucks in Q1 and delivered 31 units to dealers. Although deliveries were higher sequentially, Nikola produced more than twice as many Tre battery-electric vehicles (BEVs) in Q4.

Investors, of course, want to see the company ramp up, not reduce, production, so Nikola's latest numbers were unexpected. There is, however, a major reason behind the lower production.

This morning, Nikola stated it is "reprioritizing and refocusing" the company on four areas:

  • North America.
  • Hydrogen fuel-cell trucks.
  • HYLA brand hydrogen refueling business.
  • Autonomous technologies.

If you've noticed, Tre BEVs aren't on Nikola's core business list anymore. That's because Nikola wants to focus on hydrogen fuel-cell trucks instead, which is also why it has now paused the production of Tre BEVs to accommodate hydrogen fuel-cell trucks on its assembly lines. More importantly, Nikola says Tre BEVs will only be a "build-to-order" product henceforth.

In the other major move, Nikola is ending its joint venture with Iveco Group in Europe to focus exclusively on the North American market where it sees more opportunities in clean energy, including hydrogen.

Now what

Long story short, Nikola is transforming from an electric truck maker to a hydrogen company as it sees tremendous opportunities in the industry. Nikola revealed it had orders for more than 140 hydrogen fuel-cell trucks from 12 customers as of today, and it expects to start production in July.

While that sounds promising, the hydrogen fuel-cell industry is still in its nascent stage. With Nikola still running up losses and burning cash, and its net loss even widening in Q1, investors need time to figure out what the company's sudden and huge change of plans could mean for its future.