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Nikola Motors pairs up with GM on electric trucks

Multibillion-dollar startup Nikola Motors initially refused to return a $4M loan from the Paycheck Protection Program, before quietly returning the funds in April.
Image: GM hosts Ivanka Trump in their training center in Warren, Michigan
General Motors CEO Mary Barra tours a company training center in Warren, Michigan, on Sept. 2.Rebecca Cook / Reuters

General Motors is teaming up with Nikola Motors, a Phoenix-based manufacturer that plans to start rolling out a mix of full-size pickups and heavy-duty trucks starting late next year.

As part of a deal that will give GM a $2 billion investment in the startup, the Detroit automaker will supply Nikola with the new Hydrotec fuel-cell technology and Ultium batteries it has developed and will also manufacture the Nikola Badger zero-emissions pickup truck set to come to market in 2021. Trevor Milton, founder and CEO of Nikola, estimated the deal will save his company at least $4 billion.

“You couldn’t dream of a better partnership than this,” Milton said Tuesday during a joint news conference with GM CEO Mary Barra. Shares in Nikola soared by more than 50 percent after the deal was announced.

Nikola, one of an assortment of startups hoping to take advantage of the industry's nascent switch from conventional gasoline and diesel-powered vehicles to zero emissions technologies, found itself under the microscope earlier this year when it turned out the company had received a $4 million loan from the Paycheck Protection Program. Commonly known as PPP, the emergency relief fund was supposed to be used by small businesses hurt by the coronavirus to help support their payrolls.

Despite the fact that Nikola had just gone public and had a market capitalization in the billions, Milton initially declined to return the funding, declaring that the company was “pre-revenue,” since its first product was still more than a year from production. “There’s a difference between a high valuation and having cash,” he said in an April CNBC interview.

Nikola, however, quietly returned the entire $4 million at the end of April, according to the Securities and Exchange Commission.

When the company was launched in 2014, it focused on using hydrogen fuel cells to power semitrucks. It now plans to offer customers various options, and has pushed into the more mainstream automotive market with the addition of a zero-emissions pickup, the Badger.

When Nikola formed a partnership with a so-called blank check, or SPAC company, and went public earlier this year, it cautioned that it didn’t have the resources to do everything on its own and would like to find a partner to help.

“This GM deal means they don’t have to build a plant, they don’t need to build a platform, they don’t need to build the batteries or fuel cells. They just hand over the body and interior design to GM and say 'You build this thing,'" said Sam Abuelsamid, principal automotive analyst at Navigant Research.

But Nikola isn’t the only one benefiting from the deal, Abuelsamid added. “For GM it gives them economies of scale and allows them to increase capacity utilization of both the assembly plant and battery plants. And it gives them a potentially big customer for their fuel cells.”

First developed nearly 150 years ago, fuel cells take oxygen from the air and hydrogen gas, combining them in a device called a stack. That creates a supply of electricity and water vapor. Fuel cells helped power the Apollo moon mission capsules and have numerous uses, including back-up energy for cellphone towers.

Two years ago, GM formed a joint venture with Honda to develop the Hydrotec system. The Japanese automaker plans to use the technology in future versions of its Clarion Fuel-Cell Vehicle. GM plans to market stationary systems and is working with the Pentagon on possible military applications. CEO Barra on Tuesday said the automaker is also “evaluating” its own possible vehicle applications.

Separately, GM has partnered with South Korea’s LG Chem to develop a new, high-performance line of batteries, the Ultium cells that are due to go into production at a new plant near Lordstown, Ohio. It will use those for “20 or more” battery-electric vehicles due out by 2023, the companies said. The Ultium cells are intended to deliver more power, charge more rapidly, and come down substantially in cost compared to the batteries the automaker uses today.

There has been a long-running debate between hydrogen and battery proponents, with Tesla CEO Elon Musk referring to the fuel cells as “fool cells.” But hydrogen vehicles can store enough fuel to deliver significantly more range than today’s batteries. That is, of course, if you can find the lightweight gas. Right now, there are fewer than 100 hydrogen pumps open to the public across the U.S., according to federal data.

Nikola has announced plans to set up its own refueling network across key routes its semitruck customers plan to serve. But, for now, sales of fuel-cell vehicles such as the Honda Clarion, the Toyota Mirai and the Hyundai Nexo, are being limited to regions where the gas is readily available.

CORRECTION (Sept. 9, 2020, 5:05 p.m. ET): A previous version of this article misstated how Nikola Motors handled a loan from the federal Paycheck Protection Program. It returned the entire $4 million loan in April, according to the Securities and Exchange Commission, after initially saying it would not.