The Nikola Badger hydrogen-powered utility vehicle will be built by General Motors (GM) in a deal announced on Tuesday (US time) that will see the American auto giant take an 11% stake in the hydrogen vehicle startup.
Nikola’s shares shot up 40.79% on Tuesday following the announcement to close at $US50.05 ($A69.35), bringing the company’s value by market cap to almost $US19 billion ($A26.34 billion), as news of the deal dampened skepticism of the startup’s hydrogen fuel cell objectives.
In June Nikola hit a peak of $US93.99 ($A130.24) that saw it eclipse the market cap value Ford, and analysts say that the deal with GM represents a “major strategic bet” for both companies.
“There have been many skeptics around Nikola and its founder Trevor Milton’s ambitions over the coming years, which now get thrown out the window with stalwart GM making a major strategic bet on Nikola for the next decade on the EV and fuel cell front,” Wedbush analysts Dan Ives was quoted as saying by Marketwatch.
The deal is also a smart move by Nikola CEO and founder Trevor Milton, according to EV industry watchers.
With the $US2 billion ($A2.7 billion) equity stake that forms the deal issued “in-kind”, it will see Nikola essentially “prepay” for services from GM, including engineering, validating, homologating and building the Badger on Nikola’s behalf.
Nikola says the deal will save it as much as $US4 billion ($A5.54 billion) in development costs over the next 10 years, plus another $SU1 billion ($A1.39 billion) on engineering and validation costs. All marketing, sales, service and maintenance will be conducted by Nikola.
These cost savings will follow through from the Badger electric ute (or pickup in the US) to Nikola’s other fuel cell vehicle programs: Nikola Tre, Nikola One, Nikola Two and NZT.
In return, it is expected that GM will see more than $US4 billion ($A5.54 billion) back in benefits, based on the equity shareholding, and the supply contract for making the Badger as well as supplying Ultium batteries and Hydrotec fuel cell technology.
Notably, it will also see GM able to claim US electric vehicle tax credits again.
GM is no longer eligible for EV tax credits, which begin at $US7,500 ($A10,392) for car makers for the first 200,000 EVs sold before a phase out of the credit is triggered. It became ineligible for any more EV tax credits in April after its last $US1,875 credits phased out after the first quarter of 2020, three months after Tesla.
But under the new deal with Nikola, GM will not only be able to claim environmental credits to bring it line with US vehicle emissions regulations (and meaning it will buy less of these from Tesla), it will also be able to “double-dip” with EV tax credits for selling the Badger.
The deal also means that the Badger will essentially be a GM electric vehicle with a Nikola body bolted in top, but this has not stopped Milton, known for his bluster on Twitter, waxing lyrical.
In a statement on the deal, Milton said, “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.”
Milton notes that the deal with GM will give Nikola access to decades of auto engineering experience, as well as cementing its position in the eyes of investors.
“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,” he said.
“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.”
For GM, the deal means it will associate with one of the EV world’s more boisterous startups.
“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 chair and CEO Mary Barra in a statement to the press.
“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 deal will also see GM gain exclusive battery and fuel cell supplier rights to Nikola’s hydrogen fuel cell semi trucks, as well as the right to choose a board member starting from Nikola’s 2021 AGM.
All fuel cell and manufacturing contracts under the deal are on a cost-plus basis, which means GM is guaranteed a profit, less its initial $US2 billion investment (which may fluctuate), even if Nikola loses money.
Whether Nikola ultimately profitable for GM however may depend on other market meanderings however.
While the Nikola Badger is set for a public debut at Nikola World 2020 in Arizona, in December, it is not expected to go into production until late 2022, by which time other EV players such as Rivian’s R1T electric ute and the Tesla Cybertruck may have attracted a fair portion of the premium electric utility vehicle market, without the need for expensive hydrogen refuelling infrastructure.
Nikola has also taken an order to supply 2,500 garbage trucks using the Tre fuel cell powertrain to Republic Services tarting from 2023.
Bridie Schmidt is associate editor for The Driven, sister site of Renew Economy. She has been writing about electric vehicles since 2018, and has a keen interest in the role that zero-emissions transport has to play in sustainability. She has participated in podcasts such as Download This Show with Marc Fennell and Shirtloads of Science with Karl Kruszelnicki and is co-organiser of the Northern Rivers Electric Vehicle Forum. Bridie also owns a Tesla Model Y and has it available for hire on evee.com.au.