GM’s $2B stake in Nikola shakes up truck market

Source: By Miranda Willson, E&E News reporter • Posted: Wednesday, September 9, 2020

General Motors Co. said yesterday it will invest $2 billion in Nikola Corp., giving the Detroit auto giant an 11% stake in an electric truck startup that’s vying for a head-to-head battle with Tesla Inc. and other heavy-duty electric vehicle makers.

GM will help Nikola engineer and manufacture its hydrogen fuel cell-powered and battery-powered trucks, including Nikola’s Badger truck. GM will also supply the 6-year-old company, based in Phoenix, with GM’s own hydrogen fuel cell technology as part of the deal.

While Nikola will retain the Badger brand, GM will receive a $2 billion equity stake in the company and the ability to nominate a director to the company’s board. All told, GM stands to gain more than $4 billion in benefits from the deal, the companies said.

Nikola will get access to GM’s supplier and manufacturing knowledge, engineering experience, and investor confidence, Nikola founder and Executive Chairman Trevor Milton said in a statement. In addition, the company expects to save over $4 billion in battery and powertrain costs over the course of 10 years and $1 billion or more in engineering and validation costs from the partnership.

“By joining together, we get access to their validated parts for all of our programs, General Motors’ Ultium battery technology and a multi-billion dollar fuel-cell program ready for production,” Milton said.

The partnership sets up GM to be the only U.S.-based supplier of fuel cells for Nikola Class 7 and 8 heavy-duty commercial trucks, according to the companies. The legacy automaker announced in March that it was developing its own EV battery, the Ultium, and first tested a hydrogen-powered fuel cell vehicle in 1966.

“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,” GM Chairman and CEO Mary Barra said in a statement. “We are growing our presence in multiple high-volume EV segments while building scale to lower battery and fuel cell costs and increase profitability.”

GM anticipates that fuel cells will become increasingly important for the semitruck market, said David Barnas, a spokesperson for GM. Compared with battery-powered electric vehicles, fuel cell vehicles weigh less and can charge more rapidly, among other benefits.

“Hydrogen fuel cell systems represent a quickly evolving electrification technology, which uniquely address needs from high energy consumption applications and larger vehicles,” Barnas said in an email.

The Nikola Badger will begin production in late 2022 at a location that has not yet been announced, the companies said. It will be among the first pickup trucks powered by EV batteries or hydrogen fuel cells to enter the market.

The partnership comes less than a week after GM announced it had signed a nonbinding memorandum of understanding with Honda Motor Co. to collaborate on various efforts and “accelerate innovation and more effectively deploy resources in advanced and next generation technologies,” GM said. Honda and GM are also working together to build new EV models for Honda and have a joint venture to advance fuel cell technologies, Fuel Cell System Manufacturing LLC.

By joining forces, GM, Nikola and Honda may be able to commercialize hydrogen fuel cell-powered vehicles faster than any of the companies could on their own, said Michelle Krebs, executive analyst at Cox Automotive.

“It’s becoming clear that no single company has enough resources to go at it alone toward a future that is electrified, connected and autonomous,” Krebs said. “Like the Honda alliance that was announced last week, GM’s arrangement with Nikola will help proliferate GM’s new Ultium battery systems.”

Other legacy automakers such as Jeep have also announced plans to make alternative-fuel trucks, and Tesla is developing its own pickup model called the Cybertruck. The demand for these products, however, remains unknown.

“Nobody knows if there’s even a market for EV pickup trucks, how big it is or who those buyers are, because there are no EV pickup trucks,” Krebs said.

Nonetheless, yesterday’s announcement sent Nikola stocks soaring, from just over $35 per share Friday to more than $50 per share yesterday. GM stocks also went up from about $30 to more than $32 a share.

“As far as the two companies go, I think this is a big benefit to both,” said Sam Abuelsamid, principal analyst at Guidehouse Insights.