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General Motors acquires 11% stake in electric truck maker Nikola

General Motors

General Motors said on Tuesday that it is acquiring an 11% stake in US electric truck maker Nikola Corp, worth about $ 2 billion, and will team up with the company to make a pick-up truck.

Nikola’s Shares rose more than 30% to $ 46.30 in pre-market trading after GM’s investment, helping the company take on the likes of Tesla and Ford.

The companies will jointly build the Nikola Badger truck and expect production by the end of 2022. The truck will compete with Tesla Inc’s Cybertruck, as well as the electric pickup trucks planned by Rivian, Ford Motor Co and GM itself.

Nicola claims the Badger will have a range of 600 miles, compared to the Cycbertruck’s range of more than 500 miles. The Cybertruck and other electric pickups have not launched yet.

The alliance with Nikola is the second-largest deal in a week for General Motors and highlights the pressure the auto industry faces to share costs to meet demands for cleaner vehicles. Last week, it announced a partnership with Honda Motor Co. of Japan to develop new internal combustion models.

General Motors
General Motors

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The agreements also indicate the urgency of CEO Mary Barra’s efforts to convince investors that GM can cut costs in its traditional internal combustion business and develop a profitable and viable electric vehicle business to compete with Tesla.

Shares of GM, which had been stuck for months at levels below $ 33 a share, the 2010 post-bankruptcy public offering price, rose about 6% in premarket trading.

General Motors will receive $ 2 billion in newly launched Nikola stock and will have the right to nominate a director to the Board of Electric Truck Manufacturers.

He expects to receive benefits of more than $ 4 billion in capital and contract manufacturing for Badger, among other benefits as part of the deal.

The companies expect to save $ 4 billion in battery and powertrain costs over 10 years and more than $ 1 billion in engineering and validation costs.

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