Nikola soars 35% after striking $2 billion manufacturing partnership with General Motors

Nikola

  • Nikola Corp. surged 35% in early trading on Tuesday after it inked a strategic partnership deal with General Motors to manufacture its Badger electric pickup truck.
  • General Motors will engineer and build all variants of the Badger, which is expected to enter production by year-end 2022.
  • General Motors will receive an 11% stake in Nikola Corp. worth $2 billion for the manufacturing services it provides to Nikola Corp.
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Nikola Corp. soared on Tuesday after announcing a strategic manufacturing partnership with General Motors worth at least $2 billion.

General Motors will engineer and build the Nikola Badger pickup truck for both its electric-vehicle battery version and its fuel-cell version.

Production of the Badger truck is expected to begin by year-end 2022. 

Under the terms of the deal, General Motors will receive $2 billion worth of Nikola stock, amounting to an 11% stake in the EV company. The 47.7 million shares General Motors receives will be exchanged at a price of $41.93 per share.

The deal looks to be a win-win for both companies. Nikola anticipates saving more than $4 billion in battery and powertrain costs over a 10-year period, in addition to saving more than $1 billion in engineering and validation costs.

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General Motors expects to realize more than $4 billion in benefits between the 11% Nikola stake, contract manufacturing services for the Badger, and supply contracts related to the batteries and fuel cells.

While General Motors will be responsible for the manufacturing of the Badger and other Nikola vehicles, Nikola will be responsible for the sales and marketing of the vehicle.

Wedbush analyst Daniel Ives said in a note published on Tuesday that the strategic partnership between Nikola and General Motors is a “game changing deal” that represents a “huge step forward” for Nikola.

“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,” Ives said.

Shares of Nikola soared as much as 35% to $47.95 in Tuesday trades, while shares of General Motors jumped as much as 7%.

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