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GM takes a $2 billion stake in Nikola to make electric pickup trucks

By Jamie L. LaReau, Detroit Free Press
Published: September 8, 2020, 10:30am

DETROIT — General Motors is taking a stake in electric vehicle maker Nikola Corp. in a deal that will eventually deliver $4 billion in benefits to GM as it commercializes its EV technology.

The partnership will ultimately reduce costs for each company as GM pursues its all-electric vehicle strategy.

In the deal, announced Tuesday, Nikola will exchange $2 billion in newly issued stock for services and access to GM’s parts and components. Nikola has yet to make any of the heavy duty hydrogen fuel cell trucks it is developing. GM also has the right to nominate one board director at Nikola.

GM will “engineer, homologate, validate and manufacture the Nikola Badger battery electric and fuel cell versions,” the companies said in a statement. The Badger is a heavy-duty fuel-cell electric pickup expected to go into production by the end of 2022.

“This strategic partnership with Nikola, an industry leading disrupter, continues the broader deployment of General Motors’ all-new Ultium battery and Hydrotec fuel cell systems,” said GM CEO Mary Barra. “We are growing our presence in multiple high-volume EV segments while building scale to lower battery and fuel cell costs and increase profitability.”

Barra said using GM’s electrified technology in the heavy-duty class of commercial vehicles is an important step in fulfilling its vision of an all-electric future.

GM on the move

This news comes five days after GM said it had a deal with Honda to share vehicle platforms and technology in North America starting next year. The two have signed a nonbinding memorandum of understanding to establish a North American automotive alliance.

GM has said it envisions an “all electric” future though it currently sells just one EV in the United States: the Chevrolet Bolt, built in its Orion Assembly plant in Lake Orion. But GM is spending $3 billion a year to develop more than 20 electric models that it will launch by 2023. Those include the Cadillac Lyriq SUV and a GMC Hummer pickup, both to debut late next year. GM is retooling its Detroit-Hamtramck Plant to assemble the electric cars.

“In terms of the big picture, GM is on the move, putting together strategic alliances last week with Honda and now with Nikola to build a company that can better meet the demands of today while investing in the future,” said Michelle Krebs, executive analyst for Autotrader. “GM has invested heavily in its new battery technology, which can proliferate through Honda and Nikola. High volumes promise to bring down the costs, one of the keys in gaining wider consumer acceptance.”

This move also sets Nikola up to better compete with Tesla and Rivian and it allows GM a foothold in the space given Ford Motor Co.’s alliance with Rivian. Tesla will have the Cyber Truck electric pickup. Rivian is developing the R1T pickup, which goes into production in 2021.

Ford and Rivian recently put plans to jointly develop a Lincoln-brand EV on hold, though they remain partners.

‘Vested interest’

GM’s partnership with Nikola will start with work on the electric pickup, the Nikola Badger, but carry through with other EVs such as Nikola Tre, Nikola One and Nikola Two electric semi-trucks as well as the NZT, a personal watercraft vehicle.

GM will be subject to a staged lock-up provision beginning in one year and ending in June 2025. That means at the one-year anniversary of the deal, GM can begin to sell up to 33% of its shares. At the second anniversary another 33% of shares are eligible to be sold and then after June 30, 2025, GM can sell its remaining 34% of shares.

“This does not mean we will sell all eligible shares at each date; it means those shares are eligible to be sold at our discretion,” said David Barnas, GM spokesman.

Nikola will use GM’s proprietary Ultium battery system and Hydrotec fuel cell technology, the systems that propel GM’s EVs, in the Badger and other vehicles. This is a key commercialization milestone for GM.

“Nikola is one of the most innovative companies in the world. General Motors is one of the top engineering and manufacturing companies in the world. You couldn’t dream of a better partnership than this,” said Nikola Founder and Executive Chairman Trevor Milton.

Milton said Nikola not only gets access to GM’s “production-ready” technology, but also its supplier network and manufacturing experience.

“Most importantly, General Motors has a vested interest to see Nikola succeed,” Milton said.

The Badger reveal

GM will also use its fuel cell technology on the commercial semi-truck market, where fuel cells will become increasingly important because they are more efficient than gas or diesel. GM said it sees additional growth opportunities in multiple transportation, stationary and mobile-power end markets.

Nikola will be responsible for the sales and marketing for the Badger and will retain the Nikola Badger brand.

The Badger was first announced on Feb. 10. It will make its public debut Dec. 3-5, at Nikola World 2020 in Arizona.

Badger production is expected to start in late 2022 at a location to be announced at a later date. Nikola said $100 Badger pre-order reservations are now available at nikolamotor.com/badger.

Nikola remains an independent company.

The investment is subject to customary antitrust regulatory approval and closing conditions. The parties anticipate closing the transaction prior to Sept. 30.

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