GM Investing $2 Billion Into EV Startup Nikola

Matt Posky
by Matt Posky
gm investing 2 billion into ev startup nikola

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]

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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): 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.

  • YellowDuck Thank goodness neither one had their feet up on the dash....
  • Zerofoo I learned a long time ago to never buy a heavily modified vehicle. Far too many people lack the necessary mechanical engineering skills to know when they've screwed something up.
  • Zerofoo I was part of this industry during my college years. We built many, many cars for "street pharmacists" that sounded like this.Excessive car audio systems are kind of like 800 HP engines. Completely unnecessary, but a hell of a lot of fun.
  • DedBull In it to win it!
  • Wolfwagen IIRC I remember reading somewhere that the Porsche Cayenne was supposed to have a small gasoline-powered block heater. There was a loop in the cooling system that ran to the heater and when the temperature got to a certain point (0°C)the vehicle's control unit would activate the heater. I dont know if this was a concept or if it ever made it into production.