GM’s Big Electric Truck Deal

General Motors formally teamed up with Nikola Motors, inking a deal yesterday to help the electric-truck startup to develop and manufacture new electric truck models, in exchange for an 11% stake in Nikola Corp, The Wall Street Journal reported.  Both company’s stock prices jumped after the announcement showing that investors are still sweet on big electric trucks.  Under the terms of the deal, “GM will provide electric batteries and fuel cells for Nikola’s trucks, including its future Badger pickup truck, which GM will manufacture at a still-undisclosed location. GM will receive $2 billion in stock and a seat on Nikola’s board,” The Journal reported.

Why This Matters:  When trucks go electric, Mother Earth smiles.  Trucks are a key part of the auto market for which there had not been much progress on fuel efficiency and carbon emissions until now.  And this deal also shows that the U.S. auto companies and investors are willing to make big bets on the marketability of this new technology. Hopefully, it’s a good bet. It’s just too bad that much of the push on green vehicles is caused by tougher tailpipe-emission standards in China and the European Union rather than here at home, but perhaps that will change soon.

EV Companies’ Value Sky High

Tesla has seen its stock price triple this year, during the pandemic no less.  Nikola, The Journal reports, “went public in June via a reverse merger. Investors quickly drove up its value, and Nikola even briefly passed Ford Motor Co. in market value.”  As we reported last month, Nikola is the company that just landed a contract to produce between 2500 and 5000 electric trash trucks, a deal worth about $2b. These trash trucks will be manufactured at Nikola’s U.S. factory, which is currently being built in Arizona Forbes reported. The fully electric vehicles will offer more than 150 miles of range and handle up to 1200 cans per charge and have zero emissions.

Both GM and Nikola Benefit

As Bloomberg opinion writer Brooke Sutherland put it, “The partnership will save the company an estimated $5 billion in manufacturing and engineering expenses; basically, it no longer needs to literally reinvent the wheel. But Nikola’s brand and buzz also provide valuable credibility for GM’s electric vehicle aspirations.”  And according to the experts, it is all about the packaging here.  GM was already planning to develop an electric Hummer, its signature big truck.  But now with a new “start up” partner they are in a strong position to give Musk’s highly-promoted Cybertruck a run for its money.  And that, writes Sutherland, “really is the genius of this deal.”

 

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