By Mike Colias
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 9, 2020).
General Motors Co.'s shares jumped after the auto maker said it
would help an electric-truck startup develop and manufacture new
models, the latest example of investor infatuation with electric
vehicles.
In exchange for its services, GM said it would receive an 11%
stake in Nikola Corp., a would-be rival in the market for
electrified pickups.
Shares of both companies surged. Nikola rose 41% to $50.05 on
Tuesday. GM shares finished up 8%, at $32.28.
The deal marks the latest tie-up between traditional auto makers
and upstarts trying to break into the car business, and showcases
GM's strategy of providing its electric-vehicle technology to
others.
Under 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 agreement is part of GM's strategy to monetize its
electric-vehicle technology by supplying battery cells and other
components to outside companies, which will generate revenue and
help drive down costs, GM has said.
"This does validate our technology," GM Chief Executive Mary
Barra told reporters on a conference call.
Wall Street has shown increasing enthusiasm about electric
vehicles and the auto industry is moving quickly to add more
plug-in models to meet tougher environmental regulations globally
on tailpipe emissions.
GM has more than a dozen electric-vehicle models of its own in
the works, including large pickup trucks that one day could compete
with Nikola's Badger.
Overall, the Detroit auto maker is spending about $20 billion on
electric and driverless-vehicle technology through mid-decade,
including construction of a massive battery-cell factory in Ohio,
being built with joint-venture partner LG Chem.
GM and other traditional auto makers have been largely left out
of the recent investment binge on electrics, despite having
technology and manufacturing scale that pure-electric rivals would
struggle to match.
GM's stock price, while having recovered from this spring, when
it closed factories due to Covid-19 concerns, was still down 18%
over the past year at Tuesday's close and trades just below its $33
IPO price from a decade ago.
By contrast, Tesla Inc., the market leader in battery-powered
cars, has seen its stock more than triple this year, although the
shares sank 21% Tuesday after it failed to gain entry into the
S&P 500 index.
Several startups have drawn private money or had their
valuations soar after going public. Among them is Nikola, which
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. Since then, the stock has pared most of those gains
and closed Friday up 13.3% from its price at the close of the
merger.
Rampant investor interest in the electric-vehicle market is
reminiscent of activity around driverless cars a few years ago.
That enthusiasm has cooled over the past two years as companies
struggle to refine the technology and build business models around
it.
GM's electric-vehicle strategy takes it in the direction of
becoming more like an automotive supplier -- and they generally
trade at higher price-to-earnings multiples, analyst Joseph Spak
said in an investor note Tuesday. This spring, Honda Motor Co. said
it would develop two electric vehicles using GM's technology. The
two also are working together on fuel cells.
"GM is showing they can be a supplier of key technologies," Mr.
Spak wrote. The downside, he said, is that GM is potentially
helping to set up a future rival in the highly profitable truck
market.
Nikola will be responsible for Badger sales and marketing and
will retain the Nikola Badger brand. The Badger will be unveiled in
December, and production is expected to start in late 2022, the
company said.
The partnership with Nikola also will lead to the first broad
commercial use of GM's hydrogen fuel-cell technology, which has
been in the works for a few decades. Fuel cells mix oxygen with
hydrogen from an onboard storage tank to create electrical
power.
Nikola Executive Chairman Trevor Milton said that having GM
build its Badger pickup will save the startup the huge investment
of buying or building a factory, for example.
Helping drive investor interest in green vehicles are tougher
tailpipe-emission standards in China and the European Union, which
are prodding auto makers to add more fuel-efficient vehicles,
including fully electric vehicles.
Advances in battery technology also have helped whittle down the
high cost of electric vehicles, leading to more offerings from car
companies and startups, although they remain more expensive than
gas-powered cars.
The GM-Nikola pact is the latest example of startups and
traditional car companies leaning on each other for technology and
manufacturing help.
Ford Motor Co. last year agreed to invest $500 million in
Michigan-based electric-truck maker Rivian Automotive. Ford in
April said it scrapped plans for an electric SUV based on Rivian's
technology but still is working on a future model.
Fisker Inc., a startup led by well-known Danish car designer
Henrik Fisker, plans to outsource key parts like batteries and
motors, and have others build the cars, competing instead on
styling and brand cachet.
That outsourcing model contrasts with Tesla's vertically
integrated approach. The Palo Alto, Calif., company makes its own
battery cells and builds its own cars, including at a new factory
in China. Tesla has another one under construction in Germany.
GM's deal with Nikola also gives the Detroit auto maker exposure
to the long-haul trucking market, an area in which it doesn't now
compete and one that Nikola is targeting with plans to build its
own truck and develop fuel-cell infrastructure.
"That's a wide-open growth opportunity for us," Ms. Barra
said.
Mr. Milton has said he has high hopes for the Badger, a planned
pickup truck powered by both a lithium-ion battery and a hydrogen
fuel cell that GM will engineer and manufacture under the new
deal.
"My goal is to take the throne from the Ford F-150," Mr. Milton
said in June. The F-150 pickup has been the top-selling model in
the U.S. for many years.
--Michael Dabaie and Ben Foldy contributed to this article.
Corrections & Amplifications Fisker Inc. is a startup led by
Danish car designer Henrik Fisker. An earlier version of this
article incorrectly referred to the company as Fisker Automotive.
(Corrected on Sept. 8)
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
September 09, 2020 02:47 ET (06:47 GMT)
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