GM Investing $2 Billion Into EV Startup Nikola

Matt Posky
by Matt Posky

General Motors announced it will be taking an 11-percent stake in Nikola on Tuesday. It even said it would be actively helping the startup produce the hydrogen/battery-powered Badger pickup, sending the firm’s already-insane share price through the roof. Nikola shares were up 30 percent before the trading day even began, with the General seeing some positive changes in its own stock. Things only improved from there for both companies as news of the partnership continued to spread.

The deal is costing GM $2 billion and allots it one board member of its choosing in exchange for its manufacturing expertise.

“When we look at the opportunity to continue to leverage our technology — the Ultium battery platform system as well as the Hydrotec fuel cell technology — this is a wonderful validation of our technology, and then bringing our engineering and manufacturing expertise to the table,” GM CEO Mary Barra said in an interview on CNBC, adding that there would also be collaboration in regard to Nikola’s all-electric semi-trucks. “The teams have already begun discussions and there’s really good chemistry between the technical teams so we couldn’t be more excited about working with Nikola.”

Nikola founder and Executive Chairman Trevor Milton praised Detroit’s involvement. While tapping into GM’s manufacturing capabilities (and parts bin) will be a blessing for a company that’s vying to sell a physical product, Milton also noted that the EV startup will soon have direct access to GM’s hydrogen and Ultium battery technologies — both of which required billions in development funding to get where they are today.

“GM was very unique to us because they brought a lot more than just building the Badger,” Milton said. “It’s a perfect relationship. They’re one of the best purchasers, manufacturers, engineering houses in the entire planet.”

Since Nikola is currently more of a conceptual company than an established automaker, this really seems to work in its favor. It’s essentially lopping a fortune off its initial product development costs by bringing on a partner that’s already done the work. Meanwhile, GM gets a nice boost to its share price in an era where electric-vehicle startups seem to be wooing investors to a point that’s becoming downright ridiculous. We’ve not seen anything like this since suburban moms went ham on Beanie Babies in the 1990s.

From CNBC:

Analysts at Cowen said the deal is bigger than they anticipated an will allow Nikola to “leverage GM’s buying power for batteries and internal capabilities within fuel cells.”

“Additionally, the partnership represents a high-volume commercialization of GM’s Hydrotec fuel cells, which we believe is a positive leading indicator of continued adoption of fuel cell technology within heavy-duty transportation,” they wrote in a research note Tuesday.

Nikola began trading June 4 after a reverse merger with VectoIQ, which is a publicly traded special purpose acquisition company headed by former vice chairman of GM Stephen Girsky. The stock has taken off since its IPO despite the fact that Nikola, which was founded in 2015, doesn’t expect to generate revenue until 2021, and it shows the faith investors have in companies that promise vehicles of the future.

While there are loads of unanswered questions about how to make freight-focused EVs work without having to spend the entirety of their mass on energy storage, Nikola feels it is ready to lead the charge with a class-8 truck that’s totally reliant upon electricity next year. That model is supposed to be supported by other electric semis and their hydrogen-powered brethren by 2023.

Meanwhile, the Badger pickup is supposed to arrive in 2022. While the timing seems to suggest it could be assembled alongside the (Detroit) Hamtramck-based Hummer EV, we’ll have to wait for the companies to provide some sort of confirmation. For now, they’re only interested in praising the new partnership and getting investors hyped up.

[Image: Nikola]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • ToolGuy ToolGuy on Sep 09, 2020

    Here's a WSJ write-up (hit the little X in the top right corner of the "Continue reading" box and you should be able to read it): https://tinyurl.com/yxj46jxx Nikola to GM (paraphrasing): 'You're one of the best purchasers, manufacturers, engineering houses in the entire planet. Can you help us bring our new product to market as quickly and smoothly as you launched the new mid-engine Corvette?' GM to Nikola (paraphrasing): 'Yes we can.' [Still pondering this announcement. But first reaction is, GM has all this amazing future-tech (we are told), and "engineering and manufacturing expertise" which they bring "to the table" but strangely, never to the showroom floor. GM gets the bump from the announcement and can now slow-walk a potential competitor (easier to sabotage Nikola when you have a board seat at Nikola).]

  • Mopar4wd Mopar4wd on Sep 09, 2020

    This story is a little paraphrased. Nikola gave GM 11% (current value 2 billion)of their company and a seat on Nikola's board. Not the other way around as stated in the article. This is not a liability on GM's balance sheet it's income for providing tech and building vehicles.

  • Lynchenstein @EBFlex - All ICEs are zero-emission until you start them up. Except my mom's old 95 Accord, that used to emit oil onto the ground quite a lot.
  • Charles The UAW makes me the opposite of patriotic
  • El scotto Wranglers are like good work boots, you can't make them any better. Rugged four wheel drive vehicles which ironically make great urban vehicles. Wagoneers were like handbags desired by affluent women. They've gone out of vogue. I can a Belgian company selling Jeep and Ram Trucks to a Chinese company.
  • El scotto So now would be a good time to buy an EV as a commuter car?
  • ToolGuy $1 billion / 333.3 million = $3 per U.S. person ¶ And what do I get for my 3 bucks -- cleaner air and lower fuel prices? I might be ok with this 🙂🙂
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