Arushi AgarwalOn Tuesday, GM (General Motors Co) and Nikola decided to strike a deal for building electric pickup trucks and fuel cell commercial trucks. They plan on giving tough competition to Tesla Inc. This deal also raised the shares of both the companies.
In this multibillion-dollar deal, GM will receive a stake of 11% in Nikola which will be valued at $2 billion. Nikola will be receiving a chassis architecture, batteries, fuel cell systems, and a factory. The purpose of this factory will be to build the electric pickup truck, Nikola Badger. For Nikola’s Class 7 and 8 commercial tractor-trailers, GM will also be supplying fuel cell technology.
After the announcement of this deal, Nikola’s shares raised by over 48% and GM gained over $500 million. GM also expects to receive an amount of $4 billion from the deal which will include $700 million spent on building the Nikola Badger in the factories and regulatory credits for a zero-emission vehicle.
Mary Barra, the Chief Executive of GM added, “We are certainly open to considering additional deals as it relates to both Ultium and the fuel cell Hydrotec technology.”
Just last week, GM also made a deal with the Honda Motor Co and initiated a North American alliance with Japan. Hence, the deal with Nikola marks a second major deal by GM in a week’s time. This shines some light on the pressures that the players of the auto-industry have to deal with in order to meet the increasing demands of cleaner vehicles.
In the past, GM has maintained an image of a business that is traditional and makes vehicles that use internal combustion. However, the deals in the past few weeks show that the company wants to now change their image. They want to be considered someone who provides clean electric vehicles that are also profitable.
GM’s shares had been stuck at $33/share for months. However, after the most recent deal, they rose by 10% in a day.
As part of the deal, GM will get to appoint a director to the board of Nikola and receive stocks worth $2 billion.
The production of Nikola Badgers is expected towards the end of 2022. Meanwhile, by the end of 2021, GM will be rolling out GMC Hummer, their first electric pickup truck.
Nikola said that through this deal, they will probably be saving around $4 billion in battery and powertrain costs and $1 billion in engineering and validation costs.