UPDATE: Dec. 23, 2020: Nikola and Republic Services have now "discontinued their collaboration on refuse truck development," according to a release from the OEM.

After previously announcing plans to design and build at least 2,500 fully-integrated electric collection vehicles — the waste industry's largest such order by far — Nikola said "both companies determined that the combination of the various new technologies and design concepts would result in longer than expected development time, and unexpected costs." That vehicle order has now been canceled.

"This was the right decision for both companies given the resources and investments required," said Nikola CEO Mark Russell in a statement.

A Republic spokesperson said the company continues "to believe that electrification is the future," pointing to partnerships with Mack and Peterbilt, as well as an investment in battery startup Romeo Systems.

Dive Brief:

• Nikola has sold a minimum of 2,500 electric trucks to waste company Republic Services, according to an announcement Monday. The purchase agreement is pending performance, with the potential for up to 5,000 orders. This has been described as Republic's largest truck order ever for its fleet of approximately 16,000 collection vehicles. Initial testing is expected to begin in Arizona and California, with wider-scale testing in 2022 and full deployment by 2023.
• The vehicles are expected to have a 150-mile range, up to 720 kilowatt hours of battery capacity and the ability to collect 1,200 cans with one charge. Republic anticipates using them for automated side load and front-end load collections. Financial terms were not disclosed, but Nikola Founder and Executive Chairman Trevor Milton told the Wall Street Journal he expects each unit will cost under $500,000.
• The existing Class 8 Nikola Tre chassis and powertrain will be used, with bodies licensed from an undisclosed company. A new cab is being designed specifically for Republic. Nikola will serve as the direct point of contact for all equipment and maintenance needs.

Dive Insight:

In Milton's view, the waste industry is "absolutely primed" for disruption, and its frequent stops are well-suited for regenerative braking capabilities. He said Republic's order will be "the reason why the market will go electrified," but other haulers may have to wait until at least 2022 if they want to buy their own Nikola models.

"Our main focus is Republic because we have a guaranteed commitment, they’re all going to one place, we can service them easier. But we're not going to turn other people away. It just means we want to wait until it's perfect," said Milton. "Once those problems are worked out, we'll open it up to everybody."

According to a virtual press event on Monday, the two Arizona-based companies have been working together on this deal for about a year, and Nikola is building a factory in the state. Milton's experience with waste applications and Republic President Jon Vander Ark's background in the automotive space were said to be helpful factors, leading to an "anchor tenant" commitment to bring Nikola's technology into the national waste and recycling industry.

"Refuse truck customers have always ordered chassis from truck OEMs and bodies from other suppliers. Nikola has fully integrated chassis and body, covering both with a single factory warranty," Nikola CEO Mark Russell said in a statement, adding the automated side loaders and front-end loaders will be zero emissions.

Vander Ark said Republic's previously announced electric truck pilot with Mack is "very much ongoing," but Nikola's technology was repeatedly described as the current market leader. According to Milton, the Nikola model's horsepower capabilities are superior to current trucks and that will address capacity concerns around hills or other challenging conditions commonly associated with electric vehicles.

This year has already seen growing interest in electric refuse vehicles, though the scale of Republic's order surpasses anything to date. Regulatory trends in states such as California are one motivating factor behind the electrification trend, but the decline in total cost of ownership is a primary driver. Maintenance savings, reduced occupational noise exposure for employees, and quieter streets for customers are among multiple other expected benefits.

“You’re not buying 2,500 trucks just because California has mandated it. You’re going to buy 2,500 to 5,000 trucks because you believe this powertrain option will ultimately help your operating efficiency and profitability," said Noah Kaye, a managing director and senior research analyst at Oppenheimer & Co. That trend, combined with Republic's initial move, "should spur on the development of competitive powertrain offerings for the sector."

Mack, Peterbilt, BYD and Lion Electric are among other notable names pursuing their own electric refuse models. Applications are on the road or on the way in multiple states, including among municipalities and companies such as Recology, Waste Connections, and Waste Management.

Until recently, compressed natural gas, or CNG, vehicles have still been the most commonly used diesel alternative for some large players. Pre-pandemic, Waste Management touted plans to potentially make 75% of its fleet CNG by next year and GFL Environmental has signaled plans to increase its own share. Republic recently reported its fleet is 20% powered by natural gas, with new fueling stations and 158 vehicles purchased in 2019, but Vander Ark minimized CNG's future role.

"While CNG does offer some environmental advantages versus diesel, it's incremental, and if you look at the major global OEMs, all of their R&D on the engine side is on electrification. People are not putting money into CNG. I think that's a bridge technology that's served its purpose, but doesn't offer the zero emission future that electrification does," he said, echoing comments made to Waste Dive in 2017.

Kaye thinks CNG will still be a part of the equation for some companies, and expects electric investment trends will be gradual to avoid capital expenditures bubbles, but said the Nikola news "signals a view that the future of refuse trucks is electric."

Nikola recently reported an $86 million loss in its second quarter earnings call. During that report, the company said product development is on track to start production of the Nikola Tre in the fourth quarter of 2021. Initial units will be produced at a German facility, which will be capable of producing up to 10,000 units annually.