General Motors Co (GM.N) and electric truck startup Nikola Corp NKLA.O will join forces to build electric pickup trucks and fuel cell commercial trucks to take on Tesla Inc (TSLA.O), in a deal that lifted shares in both companies on Tuesday, Trend reports citing Reuters.
As part of a multi-part, multibillion-dollar deal, GM received an 11% stake in Nikola, valued at about $2 billion. In return for the Nikola shares, GM will supply Nikola with batteries, a chassis architecture, fuel cell systems and a factory to build the startup’s proposed Nikola Badger pickup. GM will also supply fuel cell technology for Nikola’s planned Class 7 and 8 commercial trucks.
Shares of Nikola soared more than 35% to $48.73 after GM’s investment, giving GM a paper gain of more than $350 million on its investment. GM said it expects to realize a total of $4 billion in value from the deal, including $700 million for building the Badger at one of its factories, and the value of regulatory credits for a zero emission vehicle.
GM Chief Executive Mary Barra also said the Detroit company may supply other companies with its Ultium electric battery and hydrogen fuel cell technologies.
“We are certainly open to consider additional deals as it relates to both Ultium and the fuel cell Hydrotec technology,” she told reporters on a conference call.
The alliance with Nikola is the second major deal in a week for GM and highlights the pressures faced by the auto industry to share costs to meet demands for cleaner vehicles. Last week GM announced a North American alliance with Japan’s Honda Motor Co (7267.T).
The agreements also signal the urgency of Barra’s efforts to convince investors that GM can slash costs in its traditional, internal combustion business and develop a profitable, viable electric vehicle business.
Shares of GM, which have been stuck for months at levels below $33 a share, the price of the 2010, post-bankruptcy public offering, rose 6.1% in early trading.
GM will receive $2 billion in newly issued Nikola stock and will get the right to nominate one director to the electric truck maker’s board. It also will receive up to $700 million from Nikola for assembling the Badger.
GM’s first electric pickup truck, the GMC Hummer, is due in late 2021. GM will build the electric and fuel cell versions of the Nikola Badger truck and the companies expect production by the end of 2022.
Nikola will buy GM’s fuel cell systems for its Class 7 and Class 8 semi trucks. That deal runs for four years after start of production of those vehicles and is exclusive except for the European market.
The companies did not say where the Nikola pickup would be built by GM. Most of GM’s EVs will be built at its Detroit-Hamtramck plant.