Shares of General Motors (GM) and Nikola Corp. (NKLA) surged in pre-market trading on Tuesday, after General Motors said it will take a $2 billion stake in the U.S. electric truck maker.
General Motors will receive an 11 percent ownership of Nikola as well as the right to nominate one director, the companies said in a statement.
As per the deal, General Motors will manufacture Nikola Badger, a fully-electric and hydrogen fuel cell electric pickup truck. It will also be an exclusive supplier of fuel cells globally–outside of Europe– to Nikola for Class 7/8 trucks.
Electric vehicles can run on either rechargeable batteries or fuel cells that convert hydrogen into electricity.
As per the agreement terms, Nikola will utilize General Motors’ Ultium battery system and Hydrotec fuel cell technology.
Nikola will be responsible for the sales and marketing of the Badger and will retain the Nikola Badger brand. Badger production is expected to start in late 2022 at a location to be announced at a later date.
Under the agreement, Nikola anticipates saving more than $4 billion in battery and powertrain costs over 10 years and over $1 billion in engineering and validation costs.
General Motors expects to receive more than $4 billion of benefits between the equity value of the shares, contract manufacturing of the Badger, supply contracts for batteries and fuel cells, and EV credits retained over the life of the contract.
Nikola said it remains an independent company. The companies anticipate closing the transaction before end of this month.
In pre-market trade, GM was trading at $31.75 up $1.74 or 5.80 percent. NKLA was trading at $44.96 up $9.41 or 26.47 percent.
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