Nikola shares pop as much as 53% after General Motors takes 11% stake in electric truck maker

Key Points
  • GM is getting a $2 billion stake in Nikola and the right to nominate one board member in exchange for in-kind services.
  • Under the partnership, GM will produce the electric truck maker's marquee hydrogen fuel cell electric pickup truck the Badger by the end of 2022.
Nikola chairman, GM CEO on partnership to build Nikola's electric pickup truck

Shares of Nikola surged Tuesday after General Motors announced it's taking an 11% stake in the electric truck maker and will produce its marquee hydrogen fuel cell electric pickup truck the Badger by the end of 2022.

Shortly before the opening bell, Nikola shares were up 30% and GM's were 6% higher. Nikola shares had popped by as much as 53% while GM's jumped as much as 9.1% in the premarket trading.

GM is getting a $2 billion stake in Nikola and the right to nominate one board member in exchange for in-kind services. Phoenix-based Nikola specializes in building zero-emission semi trucks using battery or hydrogen fuel cell technology, but it recently introduced its Badger pickup truck for consumers. This will also make GM the exclusive supplier of Nikola's fuel cells globally, except Europe, for its class 7/8 trucks.

"When we look at the opportunity to continue to leverage our technology — the Ultium battery platform system as well as the Hydrotec fuel cell technology — this is a wonderful validation of our technology, and then bringing our engineering and manufacturing expertise to the table," GM CEO Mary Barra said in an interview on CNBC's "Squawk Box."

Barra emphasized the potential benefits for GM, which has seen pressure from Wall Street to spin off its electric vehicle business. It will extend beyond the Badger pickup truck to include Nikola's semi trucks, too "so this is a huge growth opportunity for us," she said.

Nikola Motor Company Badger pickup truck
Source: Nikola Motor Company

Appearing alongside Barra on "Squawk Box," Nikola founder and Executive Chairman Trevor Milton said the partnership gives Nikola more than just a manufacturer. Nikola will also have access to GM's validated parts as well as its Ultium battery technology and a multibillion dollar fuel-cell program.

"GM was very unique to us because they brought a lot more than just building the Badger," Milton said. "It's a perfect relationship. They're one of the best purchasers, manufacturers, engineering houses in the entire planet."

While the most logical location to build that plant would be GM's Hamtramck plant in Detroit where the Hummer EV will be built, Mary Barra was coy about giving a specific location for building the Badger. 

"The teams have already begun discussions and there's really good chemistry between the technical teams so we couldn't be more excited about working with Nikola," Barra told CNBC.

For Nikola the deal is smart for two reasons. First, since its Badger pickup will be built at a GM plant, it doesn't have to commit billions of dollars setting up a manufacturing plant. Second, Nikola and GM will save up to $4 billion in electric vehicle costs through this partnership, and Nikola will be able to tap GM's deep expertise in EV technology and vehicle manufacturing. 

Milton sees partnering with GM as a smart move to get the Badger pickup truck to market quickly.

"GM so good," Milton told CNBC.  "They're going to be building our trucks out of their plant and that was the idea, to save Nikola billions of dollars while still being able to grow with someone that doesn't that doesn't conflict with our DNA."

Analysts at Cowen said the deal is bigger than they anticipated an will allow Nikola to "leverage GM's buying power for batteries and internal capabilities within fuel cells." 

"Additionally, the partnership represents a high-volume commercialization of GM's Hydrotec fuel cells, which we believe is a positive leading indicator of continued adoption of fuel cell technology within heavy-duty transportation," they wrote in a research note Tuesday. 

Nikola began trading June 4 after a reverse merger with VectoIQ, which is a publicly traded special purpose acquisition company headed by former vice chairman of GM Stephen Girsky. The stock has taken off since its IPO despite the fact that Nikola, which was founded in 2015, doesn't expect to generate revenue until 2021, and it shows the faith investors have in companies that promise vehicles of the future.

Investors have been waiting for this deal after Milton said the company would need to partner with an established manufacturer to build its Badger pickup.

Fuel-cell technology combines hydrogen stored in a tank with oxygen from the air to produce electricity, with water vapor as the byproduct. It's been around for decades, and while there are machines such as fork lifts that use the technology, it has yet to become mainstream due to cost, among other things.

Nikola plans to roll out the Nikola Tre class 8 battery-electric vehicle in 2021, followed by Nikola Two class 8 fuel-cell electric semi in 2023. Class 8 vehicles are typically the heaviest of heavy duty semi trucks. 

—CNBC's Mike Wayland, Phil LeBeau Kevin Stankiewicz contributed to this article. 

Full interview with Nikola chairman Trevor Milton and GM CEO Mary Barra on partnership