Nikola and General Motors have announced a Strategic Partnership. This answers one of the long-standing questions about which of the top 5 automakers would be working with Nikola to make the Badger.
Prior to the deal’s announcement, Nikola’s main assets appeared to be vehicle design (including a number of patents), some battery tech and the hydrogen powertrain (motors, inverters etc) to be used across their products, as well as the manufacturing and distribution of hydrogen refuelling centers.
Where Nikola was lacking was in their capacity to produce and test vehicles at scale, as well as establishing the necessary supply chains to make them a reality.
To understand this deal better, we need to break down what benefits can be realised by both companies.
What’s in it for GM?
- General Motors receives 11% ownership of Nikola and the right to nominate one director.
- General Motors to receive $2 billion equity stake in Nikola in exchange for certain in-kind contributions.
- General Motors expects to receive in excess of $4 billion of benefits between the equity value of the shares, contract manufacturing of the Badger, supply contracts for batteries and fuel cells, and EV credits retained over the life of the contract.
- General Motors to be exclusive supplier of fuel cells globally (outside of Europe) to Nikola for Class 7/8 trucks, providing validation and scale in a multi-billion dollar total addressable market
What’s in it for Nikola?
- GM will engineer, validate, homologate and build the Nikola Badger for both the battery electric vehicle and fuel cell electric vehicle variants as part of the in-kind services.
- Nikola gets to save an estimated $4 billion+ in battery and powertrain costs over 10 years and over $1 billion in engineering and validation costs.
- Increased likelihood that Badger will enter production by year-end 2022.
So there are real benefits to each business, however these don’t come without consequence. GM is clearly buying into Nikola as a result of a deficit in their portfolio. Nikola certainly promotes themselves as being a modern, innovative player in the auto industry and legacy automakers like GM have had to spend up, to catch up.
When it comes to Nikola, they’ve lacked a lot of credibility and commitments to deliver products were definitely problematic. By aligning with a brand millions of people across the world buy vehicles from definitely helps Nikola.
The most confusing thing around this deal is certainly the complexity around technology. Nikola, through founder Trevor Milton, has long promoted that it’s their talents in the battery and hydrogen space, yet this deal means Nikle products will be powered by GM technology.
Twitter user Cyber_Matt asked Milton if this means they’ll be using GM’s Ultium platform, to which Trevor replied, Yes.
For those not familiar, GM’s Ultium-platform includes 400-volt battery packs and up to 200kW fast-charging capability, while the truck platform will have 800-volt battery packs and 350 kW fast-charging capability.
GM plan on creating more than 20 nameplates on this platform by 2023, across their 4 brands, Chevy, Cadillac, GMC, and Buick. It’s easy to see NIkola being added as a 5th portfolio, but does mean Nikola vehicles will face competition from other GM products.
GM also has an agreement with LG Chem for battery supply, so it’s likely that’s their source of batteries, rather than anything proprietary from Nikola.
On reflection, the deal does seem pretty confusing, but will offer some benefits in both directions. Another complexity is the European market which is excluded from this agreement and Nikola will now have a complex job of ensuring there’s no IP crossover between US and European partners.
Probably my biggest issue with the deal is the challenges that lie ahead for GM and their EV platform. There seems to be an automatic assumption that because company X is great at building ICE cars (and trucks), they’re automatically going to be great at making EVs and Hydrogen fuel vehicles.
This shift that the market is going through is a complete redesign of how everything works in a vehicle, from the powertrain to the infotainment, software, security, connectivity and more. While cars still ship with 4 wheels, underneath it’s vastly different that what their expertise has been.
There’s obviously really smart people at both companies that are likely capable of achieving their production goals, but it won’t be easy and likely subject to delays.
The full press release is available below.
Nikola Corporation (NASDAQ: NKLA) and General Motors Co. (NYSE: GM) today announced a strategic partnership that begins with the Nikola Badger and carries cost reductions through Nikola’s programs, including: Nikola Badger, Nikola Tre, Nikola One, Nikola Two and NZT. As part of the agreement, Nikola will utilize General Motors’ Ultium battery system and Hydrotec fuel cell technology, representing a key commercialization milestone for General Motors.
Nikola will exchange $2 billion in newly issued common stock for the in-kind services and access to General Motors’ global safety-tested and validated parts and components. General Motors will be subject to a staged lock-up provision beginning in one year and ending in June 2025. General Motors will engineer, homologate, validate and manufacture the Nikola Badger battery electric and fuel cell versions.
“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. “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. Nikola immediately gets decades of supplier and manufacturing knowledge, validated and tested production-ready EV propulsion, world-class engineering and investor confidence. Most importantly, General Motors has a vested interest to see Nikola succeed. We made three promises to our stakeholders and have now fulfilled two out of three promises ahead of schedule. What an exciting announcement.”
“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 General Motors Chairman and 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. In addition, applying General Motors’ electrified technology solutions to the heavy-duty class of commercial vehicles is another important step in fulfilling our vision of a zero-emissions future.”
The agreement with Nikola extends General Motors’ utilization of its fuel cell technology to the Class 7/8 semi-truck market and represents a high-volume commercialization of its leading Hydrotec fuel cell system and complements the company’s battery-electric propulsion. Fuel cells will become increasingly important to the semi-truck market because they are more efficient than gas or diesel. General Motors sees additional growth opportunities in multiple transportation, stationary and mobile-power end markets.
General Motors’ battery development work is ongoing. Its Ultium battery technology roadmap includes silicon anodes and lithium metal anodes, which will improve vehicle range, affordability, and reduced dependence on rare and costly metals. It is already demonstrating automotive-grade durability and significantly higher energy density.
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, 2020 and 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. In celebration of this announcement, $100 Badger pre-order reservations are now available at nikolamotor.com/reserve/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, 2020.
