What happened
Electric vehicle (EV) company Nikola (NKLA 7.23%) was a star on the stock market Tuesday, rising to close nearly 11% higher. A business update issued after market hours the previous trading day was the catalyst for such optimism.
So what
Friday afternoon, Nikola published its "progress update," in which it took pains to say that its efforts at efficiency should lead to a notable decline in costs.
The document is a follow-up to the EV company's remarks on the subject in its first-quarter earnings report. Nikola reiterated that it is attempting to streamline its operations by measures such as a reorganization of its workforce, a concentration on its home North American market, and supply chain localization.
The rationalization of its employee rolls has already resulted in the dismissal of around 270 of the company's workers. Nikola said this move will cut its personnel expenses by over $50 million per year.
All told, the measures being undertaken by the next-generation truck maker are expected to reduce annual cash utilization to under $400 million by next year.
These measures make sense for the still money-losing company, which has entered a new phase of its operations. It has successfully launched its Tre EV semi-truck and said it will soon begin production of a long-planned hydrogen model.
Now what
In its press release on the matter, Nikola quoted CEO Michael Lohscheller as saying, "We are proactively managing costs and reducing expenses. We are streamlining operations, including our organizational structure, to efficiently execute our objectives."
While the positive investor reaction to the update was understandable, caution should still be exercised with this stock. Nikola is still in a relatively early phase of its corporate life, and the market will be expecting it to follow through on both that hydrogen truck rollout and the cost-saving push.
