Published on September 8th, 2020 |
by Kyle Field
September 8th, 2020 by Kyle Field
Nikola Motor and General Motors are kicking off a new strategic partnership that will see General Motors doing the heavy lifting to bring the Nikola Badger to market.
In exchange for a $2 billion equity stake in Nikola and the right to nominate one director to the Nikola board, General Motors will engineer, validate, homologate, and manufacture the battery electric and fuel cell variants of the Nikola Badger truck. The new agreement will utilize GM’s Ultium battery and Hydrotec fuel cell, saving Nikola $4 billion in battery and powertrain costs over 10 years.
“General Motors is one of the top engineering and manufacturing companies in the world. You couldn’t dream of a better partnership than this,” Nikola Founder and Executive Chairman Trevor Milton said. “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”
The deal leans on General Motors’ deep bench, validating Nikola’s vehicles as a true production grade products ready for the mass market with a full manufacturing system behind them. Partnering with such a dominant player in the automotive space is a huge win for Nikola, adding immense credibility and capability to Nikola’s product lineup. Indeed, the GM partnership stretches beyond the Nikola Badger, with GM on the hook to play a key role in supporting production of the Nikola Tre, Nikola One, Nikola Two, and NZT.
“We are growing our presence in multiple high-volume EV segments while building scale to lower battery and fuel cell costs and increase profitability,” General Motors Chairman and CEO Mary Barra said. “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 new partnership fills a critical hole in the Nikola Motor fuel cell vehicle plan. General Motors has become the exclusive supplier of fuel cells for Nikola Motor outside Europe for its Class 7/8 trucks. The agreement makes Nikola’s vehicles the first in the world to utilize GM’s Hydrotec fuel cell in a production application.
In one fell swoop, today’s announcement elevates Nikola Motor to an entirely new level in the automotive space. Nikola will now be able to leverage its team of designers and technologists and GM’s quality, production capability, supply chain competency, and most importantly, credibility to deliver vehicles to customers. With the might of General Motors’ systems behind them, Nikola Motor has become a force to be reckoned with in the zero emission automotive space.
On the call announcing the partnership, Nikola Motor Founder and Executive Chairman Trevor Milton confirmed that the first deliveries of the Nikola Badger would be delayed from 2021 to late 2022 with the new partnership. The delay was due to complications arising as a result of the current global pandemic and the need to integrate Nikola and GM systems on the road to production.
Both companies see the new strategic partnership as a way to increase shareholder value over the life of the ten year agreement. Nikola Motor avoids the need to invest an estimated $4 billion in battery cell and powertrain development and manufacturing costs. GM performing the heavy lifting on the engineering and validation side is expected to save an additional $1 billion for Nikola.
GM CEO Mary Barra said the company sees the partnership with Nikola as a way to realize value from its existing investments in the Ultium battery and powertrain. On the hydrogen side of the equation, GM co-developed the Hydrotec fuel cell with Honda, but has never put it in a production vehicle. Signing on as the exclusive supplier of fuel cells for Nikola (excluding Europe) gives GM a clear path to realizing some returns on that investment.
For General Motors, the new partnership also provides a significant step up in manufacturing volume for both battery electric and hydrogen electric powertrain technologies. One of the primary hurdles for bringing zero emission vehicles to the masses is the ability to achieve the massive production quantities needed to bring the cost down to parity with combustion powertrain technologies. Barra said she was also open to similar partnerships with other automotive OEMs, establishing GM as a potentially global supplier of automotive zero emission technologies.
The Chevrolet Bolt might not have been the run away success the company hoped it would be, but GM does have big plans to become a leader in zero emission vehicles. Building the Nikola Badger for the Arizona-based startup gives GM a clear path to profitability in zero emission trucks as it looks towards production of its fully electric Hummer and Cadillaq LYRIQ vehicles. More importantly, it paves the path to a fully electric Chevy Silverado or similar electric truck for the company.
Barra also hinted that the new Nikola partnership opens the door for GM to explore the potential market for a GM Class 7/8 truck. Exploring the possibility with Nikola, under the Nikola brand, lets GM share the risk of the development of the new platform as it looks to the zero emission future of its own brands.
All told, General Motors expects to realize more than $4 billion in benefits from the new strategic partnership. $2 billion in Nikola stock right up front justifies the new partnership, in addition to the recurring revenue the company will realize from the contract manufacturing of the Badger, supply contracts for batteries and fuel cells, and EV credits retained over the life of the contract.
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