The financing games in the electric truck world continue. Today, Nikola, which enjoys exceptional hype around its heavy-duty EV semi trucks and commercial-grade aspirations, announced a partnership with GM. The deal will help Nikola actually turn their ideas into real, mass-produced vehicles that people can buy and drive. The EV startup now has a partner with a proven record of engineering and producing electric vehicles (See the Chevy Bolt and upcoming Hummer). In return the deal gives GM $2 billion in equity and a seat on Nikola’s board.
For its part, GM gets instant cred as a cool, EV player, and a boost in stock price. Indeed, GM’s stock price jumped almost 8 percent today, adding a cool $3.4 billion to its market cap. Then consider Nikola’s stock jump: 40 percent. That means GM’s initial $2 billion stake grew $800 million more valuable. Talk about an instant return on investment.
Meanwhile, Tesla‘s stock cratered, losing $81 BILLION off its market cap. If you think the stock market isn’t playing a role in the timing of these investments, consider this: Tesla’s value is still up nearly 295 percent this year. Any car company CFO would be fired for not trying to figure out a way to tap into this EV company frenzy and picking up billions in easy money.
GM to Nikola’s Rescue!
It’s easy to understand what Nikola gets out of this, a pathway to building a real product. They now have no need to find, buy or build a factory, set-up testing and quality control, source experienced engineers across the globe to assist with local and regional regulations and end-user needs, or set-up global supply chains — all the super hard stuff that makes starting a car or truck company from scratch so hard. Nikola claims the partnership will save it roughly $5 billion in development and supply costs over the next 10 years.
For GM, the benefits are a little harder to decipher. According to the company, the partnership comes with a built-in market for its Ultium batteries and Hyrdotec fuel-cell technology. GM also gets to build the Nikola Badger pick-up truck next year. Nikola plans to reveal the Badger for real this December, with production trucks rolling off the line at the end of 2022. (Yes, more than two years away.)
And yes, the Badger’s cool, but the bigger goal could be Nikola’s Class 7/8 commercial semi-trucks, which will now be built around and powered by GM batteries and fuel cells. Currently, Nikola has a contract to produce 2,500 EV garbage trucks for waste removal company, Republic. The contract goes a long way to validate Nikola, and it validates GM’s partnership ambitions as well.