Recently, it seems like General Motors was ready to go all-in by partnering with Nikola to provide parts for their electric vehicles. Now it looks as if GM could be considering backing out of the deal.
Will General Motors partner with Nikola?
According to AutoBlog, General Motors and Nikola have not finalized their deal to build electric pickup trucks and hydrogen fuel cell semi-trucks together. Now they will continue discussing aspects of the agreement.
GM Spokeswoman, Juli Huston-Rough, shared that Nikola’s transaction has not been closed and that they are continuing discussions. They will provide further updates when they are appropriate or required.
When the deal was first announced, Nikola expected it to close before September 30th, but either side can terminate the agreement if it isn’t finalized by December 3rd. GM’s plans to receive an 11% stake in Nikola, which is worth about $2 billion, with payments of up to $700 million to start building the Nikola Badger EV pickup truck.
In return, General Motors agrees to supply Nikola with electric batteries, a chassis architecture, and a factory to build the Badger. Nikola would also gain GM’s fuel cell system for Nikola’s planned heavy-duty trucks.
GM would also keep 80% of the EV regulatory credits generated by the Nikola Badger and the right to buy the rest at market rates. This would help GM offset sales of their gasoline-powered vehicles.
Problems surrounding the GM and Nikola deal
Houston-Rough and a Nikola spokeswoman both declined to comment when asked if terms of the deal are still being negotiated. Shares of Nikola were down 7.1% while GM stock was off by 1.5% in midday trading at the time of these interviews.
Plus, short-seller Hindenburg Research released a scathing report on September 10th called Nikola, a fraud. That’s a red flag. The report also suggests that Trevor Milton, the Executive Chairman at the time, made false claims about Nikola’s proprietary technology.
Milton, who owns 25% of Nikola then resigned on September 21st. He claimed to not want to be a distraction and was replaced by board member and former GM Vice Chairman, Steve Girsky. His firm, VectolQ, took Nikola public earlier in the year with a reverse merger.
Hindenburg stated that Milton’s resignation was only the beginning of Nikola’s unraveling and warned General Motors to evaluate the possible damage to its brand carefully. However, GM said it would stand by the deal as it makes strategic sense by giving them scale to cut costs.
What’s new with the Nikola Badger?
The event to debut the Nikola Badger pickup truck was recently canceled. The event was planned to occur in Arizona in December but was called off due to Coronavirus (COVID-19) restrictions on large in-person gatherings at venues.
Nikola World, which is the name of the event, has plans to be rescheduled, and tickets will be held or refunded based on the holders’ preference. The truck is also set to go on sale in February and has already begun to take reservations even though a prototype version hasn’t been shown yet. Also, production should start in 2022.