General Motors and Nikola Corp. have signed a non-binding Memorandum of Understanding that sharply scales back the plans originally announced in September.
As part of the new agreement, GM will provide the Phoenix-based company with hydrogen fuel-cell technology to power Nikola planned heavy-duty trucks. The deal abandons a plan to have GM produce Nikola Badger pickup trucks, however, and the Detroit automaker will no longer get a $2 billion equity stake in the startup.
“Heavy trucks remain our core business and we are 100 percent focused on hitting our development milestones to bring clean hydrogen and battery-electric commercial trucks to market,” Nikola CEO Mark Russell said in a statement released Monday morning. The deal, he added, will “leverage the resources, strengths and talent of both companies.”
Nikola and GM originally outlined a much broader partnership. GM would not only have provided its ally with both battery and hydrogen fuel-cell technology, but also assemble the new Nikola Badger pickup using the same underlying platform as the all-electric GMC Hummer truck. The Badger was to be offered with a choice of either an all-electric drivetrain or a hybrid battery-hydrogen system.
In turn, GM was to take $2 billion in equity, at the time about 11 percent of its value.
But two days after the tentative deal was announced on Sept. 8, things began to collapse. Short-seller Hindenburg Research released a study claiming Nikola’s business was based on “intricate fraud built on dozens of lies” perpetrated by the company’s founder and chairman, Trevor Milton. That quickly triggered a probe by the Securities and Exchange Commission and led to Milton’s resignation on Sept. 21.
The company has denied all accusations.
The two companies missed an original target date for formalizing their agreement and faced a firm deadline of Dec. 3. But the situation quickly grew worse, with Nikola earlier this month revealing it was facing a federal grand jury subpoena, along with Milton.
The announcement, along with indications of rapidly mounting legal bills, hammered Nikola’s stock price, which peaked earlier this year at $93.99 a share, closed last Friday at $27.93. The announcement of the scaled-back deal with GM set it sliding again on Monday.
While the new agreement could mean the Nikola Badger pickup is all but dead, Nikola could choose to find another partner willing to work on a version of the truck. For now, it is refunding the deposits of potential Badger buyers.
For now, GM and Nikola will focus on the core hydrogen technology that will power Nikola’s Class 7 and Class 8 semis.
“This supply agreement recognizes our leading fuel cell technology expertise and development,” said Doug Parks, GM executive vice president of product development and purchasing. “Providing our Hydrotec fuel cell systems to the heavy-duty class of commercial vehicles is an important part of our growth strategy and reinforces our commitment toward an all-electric, zero-emissions future.”
Nikola expects to begin field-testing its hydrogen trucks by the end of next year, with prototypes slated to enter production by the first half of 2022. The company is setting up a factory near Phoenix that will eventually put them into mass production.
As the long-haul freight industry comes under increasing pressure to reduce emissions, hydrogen fuel-cell technology is seen as one of the more attractive ways to power heavy-duty trucks. While battery-electric alternatives — such as Tesla’s Semi — are in development, they can offer only relatively limited range before stopping to recharge. Fuel-cell models, such as the planned Nikola One, are expected to offer at least 1,000 miles per tankful and then can refill in minutes.
The challenge is a lack of a hydrogen distribution network — but Nikola has plans to set up fueling stations of its own along key long-haul routes.