Though Ford is a ubiquitous name, a much lesser known company known as Nikola Corp surpassed the American car manufacturer in value this past summer. The increase in valuation stemmed from the enthusiasm of investors and the promises made by its former executive chairman.

            Despite their success this past summer, however, they have recently fallen upon more difficult times. The executive chairman left the company and share investments fell approximately 80% below their peak from the summer.

            The model which generated such a boost in value is predicated on the support of big-name investors and industrial giants. But the longevity of a boost in value is contingent on the company delivering on its promises and doing so in a cost cutting way.

            Nikola was founded in 2015 by Trevor Milton. It was one of the startups attempting to turn the auto sector into a cleaner energy environment. Nikola differed from other clean car startups in the automotive sector in the sense that he focused more on trucks than regular cars. This had long been a difficult objective for green energy automakers due to the size of trucks and the largeness of a battery needed to support them.

            But Milton looked beyond the common template of using batteries to power cars. Instead he found that there was potential for hydrogen to be used. Hydrogen is not a fossil fuel and is thus a green way to power vehicles. There is one drawback to hydrogen, it is costly.

            In order to surmount the challenge of cost, Nikola devised a strategy to eliminate costs. The company decided that “hydrogen-powered vehicles could be economical if the same company that built them also sold the fuel to run them, “ according to Wall Street Journal.

            “The only way to drive that cost down was to integrate it in with the truck to where, when you buy our truck, we provide the hydrogen service to you, all the fuel you need for the entire life of it,” then executive chairman Trevor Milton said on a podcast in July. “And you just pay us per mile.”

            This approach helped to boost the value of Nikola to consumers, but soon issues arose. According to Gordon Johnson, energy analyst at GLF Research, their business model is based on “unproven concepts about renewable energy.” As such, significantly more research in order for the company to be successful.

            Overall, Nikola has a visionary model of how to revolutionize the automotive industry, but its future success is predicated on the development of technology. As such, it is a good idea to keep an eye on Nikola, but also understand that their success may not be seen for another decade or so.