GM to create electric vehicle, supply batteries for Nikola

General Motors announced its second major electric vehicle partnership in less than a week on Tuesday, this time around a $2 billion deal with startup Nikola.

GM will need an 11% ownership stake in the Phoenix company and can engineer and build Nikola’s Badger hydrogen fuel cell and electric pickup. The Badger is expected to be in production by the end of 2022.

GM also will help with cost reductions for Nikola's other vehicles including heavy trucks, and the business will use GM's battery system and hydrogen fuel technology.

In trade for the 10-year deal, GM will get $2 billion worth of Nikola's newly issued common stock that will can be found in three increments through 2025.

News of the offer sent shares of both companies surging despite a broader-market downturn. Nikola shares were up almost 38% in trading late Tuesday, while GM advanced about 8%.

The move sets up GM for a new revenue stream and perhaps a change in its business model, essentially learning to be a parts supplier to others for electric vehicle frames, batteries, controls and components.

GM has been under pressure from Wall Street to quicker monetize its electric vehicle technology, and industry analysts have suggested spinning off its EV unit as another company.

Barra said on a conference call that GM includes a “platform that others can use that's going to give us scale and help us drive efficiency.” She said the electric vehicle platform and batteries are attractive to other companies, that is a huge chance for GM.

“We will leverage that and really seize the ability that we have to grow,” she said.

However, she wouldn't touch upon whether GM is in talks with others.

Nikola will be in charge of the sales and marketing of the Badger, nonetheless it will be built on GM's new battery electric truck underpinnings and use GM fuel cell and battery technology. GM will supply batteries for other Nikola vehicles including heavy trucks.

GM has its own battery electric truck, a GMC Hummer, because of continue sale a year ahead of the Badger.

The deal may be the second major partnership announced by GM this month as it lines up companies to share in the costs of developing electric and autonomous vehicle technology. On Thursday GM said it could join with Japanese automaker Honda to talk about the costs of building vehicles powered by batteries and internal combustion engines.

GM expects to get more than $4 billion in advantages from the manage the stock as well as from contracting to manufacture the Badger. GM will get supply contracts for batteries and fuel cells and electric vehicle regulatory credits that works extremely well by GM to comply with fuel economy and pollution standards, or sold to other companies.

Nikola founder and Executive Chairman Trevor Milton said the agreement relieves his company of the trouble of building another factory to help make the Badger, which is a little bigger than a Chevrolet Silverado. Nikola, however, will keep building a U.S. factory in Coolidge, Arizona, to create heavy trucks.

Nikola Corp., which hasn’t made a profit yet and lost $86.6 million in the next quarter, expects to save lots of over $4 billion in battery and powertrain costs over a decade.

Wedbush analyst Daniel Ives, in an email to investors Tuesday, wrote that the offer is huge step of progress for Nikola, giving the business credibility with Badger production and its hydrogen fuel cell and semi truck ambitions.

“There were many skeptics around Nikola and its own founder Trevor Milton's ambitions over the coming years, which now get trashed the window with stalwart GM making a significant strategic bet on Nikola,” he wrote.

Nikola, founded in 2015, became a public company in June after a merger with VectoIQ, a publicly traded special-purpose acquisition company.

When it went public, Nikola added former GM Vice Chairman Stephen Girsky, CEO of VectoIQ, to its board of directors.

Barra said that Girsky made initial introductions to greatly help start the deal.