Patrick T. by Getty Images. Fallon / Bloomberg
GM CEO Mary Barra indicated on Monday that the company is in agreement with Nicola’s deal to produce badger pickup trucks.
“The company has worked with many different partners and we are a very capable team that has worked with due diligence,” Bara said during a conference with RBC Capital Markets on Monday.
G.M. There are recent rumors with Nicola that despite recent revelations the startup is misleading people about the capabilities of its first truck, the Nicola One. At its 2016 unveiling, founder Trevor Milton claimed that Nicola One “works perfectly.” But on Monday, Nicola admitted that the company never had a working prototype of the truck. The company admitted that a 2018 promotional video showed the truck turning down a shallow hill, not running under its own power.
So why hasn’t GM Nicola backed out of the deal? It poses very little risk to GM. G.M. Don’t invest a single penny in Nicola; Instead, all the money will flow the other way.
“For GM, there’s really no harm in this deal,” said Sam Abulsamid, an auto industry analyst at Guidehouse. “It’s all over.”
The terms of the deal are extremely friendly for GM
Under the deal, Nikola will pay GM up to 700 700 million to build production capacity for Nicola’s badger truck. Nicola then went to G.M. Will produce vehicles based on paying more costs.
The battery-electric version of the badger will be based on GM’s Ultimate battery platform, which GM will likely sell to Nik at a profit. The hydrogen version of the badger will not only be based on GM’s Hydrotech Fuel Cell technology, but will also be the exclusive supplier of hydrogen fuel cells for a period of four years to GM, Nicola’s Semi Trucks (outside Europe).
These are the technologies that GM is planning to develop anyway, so the deal gives GM the opportunity to do it partly at the expense of another company. Even if Nikola leaves the business in a year or two, GM will gain valuable knowledge and experience – and will be able to use the facilities funded by Nikola to build his own pickup truck.
AbulSamid predicts that GM will build badgers in Detroit with GM’s own electric vehicles such as the electric Hummer and Chevy electric pickup truck. More volume will increase the economy of the GM scale.
“The more vehicles you can build and sell, the lower the fixed costs associated with each unit.”
On top of direct payments to produce badgers, Nikola is also giving GM a billion 2 billion stock. The agreement requires GM to keep the stock for at least one year after the deal closes. GM will be able to sell one-third of the stock after one year, another third after two years, and a final third at the end of the deal – probably by the end of 2025.
On top That, G.M. Badger trucks retain 80% of the most expensive electric vehicle regulatory credits.
At the same time, the deal is designed to reduce the risks to GM’s reputation. Badger will be branded as a Nicola product, not a GM product. Nicola Will be responsible For sale and service of badger truck as well as warranty. So if customers have a problem with the truck or Nikola fails to deliver the truck, people can contact the GM. No, Nicola will complain.
The deal boosts Nicola’s reputation
Nicola also got some benefits from the deal – although the nature of those benefits depends on how hard you are about Nicola’s motivation.
“Until the announcement last week, the badger was a complete steam mess,” Abulsamide told me. Nikola does not have the capacity to house a pickup truck. And as Tesla has learned, it takes years and billions of dollars to build the production capacity of a consumer vehicle. The GM partnership gives Nicola a shortcut to bring his truck to market.
GM Deal gives Nicola the experience of selling real pickup trucks to real customers. Maybe using Nicola Badger’s experience can help him build his own trucks on the road. Or maybe the Nicola brand would be so lucrative that Nicola could turn a profit by selling trucks manufactured by others indefinitely.
A more cynical interpretation is that Trevor Milton just wanted to be able to say that he has a deal with GM. Milton has made himself a paper billionaire by assuring investors that Nikola is on his way to becoming the next Tesla. Just able to Say They have a deal with GM that is likely to give Nicola credibility with less savvy investors, even if Dico’s terms are not massively hostile to Nicola.
It is not uncommon for for-profit companies to outsource manufacturing to others – for example, look at Apple’s outsourced iPhone manufacturing. But Apple’s generous profit margins stem from the fact that the iPhone is largely built on chips and software software invented by Apple Play itself.
Nicola, by contrast, pays GM to build large-scale trucks based on GM technology. It is difficult to make big profits by reselling products designed and manufactured by other companies. But the thousands of merchants of Robinhood’s day wouldn’t realize it.
