Electric vehicle maker Nikola Corporation (NASDAQ:NKLA) reportedly intends to divest the assets of its subsidiary, Romeo Power, within a year of completing the acquisition. In October 2022, NKLA acquired Romeo Power, a battery-pack manufacturer, in an all-stock deal valued at $144 million.
It is worth highlighting that recently, Romeo Power’s battery modules, which are used in Nikola’s electric semi-trucks, were reported to be defective. In addition, engineers working on the battery modules discovered a major problem last year involving corrosion and self-discharge of the cells.
According to Electrek, these faulty battery modules have been identified as the cause of a fire incident at Nikola’s headquarters last week. The incident has raised concerns about the safety of the Nikola Tre Model. The Tre Model had already faced a production halt the previous month due to underwhelming sales.
NKLA Continues to Face Troubles
NKLA has faced ongoing challenges in solidifying its position within the electric vehicle (EV) industry. The company initially positioned itself as a manufacturer of natural gas trucks but later shifted its focus to hydrogen trucks. Presently, NKLA is concentrating on both battery-electric and hydrogen truck production as it seeks to establish a foothold in these key segments of the EV market.
Furthermore, to control costs, the company recently announced plans to lay off about 270 employees. Additionally, NKLA is actively seeking approval from its shareholders to issue more shares as a means of raising capital to sustain its operations.
The scenario remains the same for the other EV startups as well. Last week, Lordstown Motors (RIDE) filed for Chapter 11 bankruptcy protection. Moreover, it accused the electronics company Foxconn of fraudulent behavior as it did not fulfill its agreement to invest up to $170 million in the EV manufacturer.
What is the Future of NKLA Stock?
Turning now to Wall Street, NKLA stock has a Hold consensus rating. This is based on one Buy and three Holds. The average price target of $3.25 implies 137.23% upside potential from the current level.