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Nikola and General Motors Join Forces

A Partnership to Build Light-Duty Trucks

Yesterday, Nikola (NKLA), the electric heavy-duty truck maker, announced a partnership with General Motors (GM). Through this new agreement, GM will engineer and manufacture a light-duty truck from Nikola called the Badger, which will be aimed at individual consumers rather than companies. Production of these trucks is expected to begin by the end of 2022.

Additionally, GM will nominate one person to Nikola’s board of directors and will take an 11% stake in Nikola. This stake is worth about $2 billion.

The Impact on Shares of Nikola and GM

On news of the deal yesterday morning, GM stock rose 6.8% and Nikola stock was up 33%. This surge raised Nikola’s market capitalization by $5 billion, bringing it to about $19 billion. GM’s market value rose about $3 billion on the news.

Year-to-date, Nikola shares climbed by 245% as of Friday’s closing price. GM shares have fallen about 18% year-to-date.

A Win-Win Situation

Nikola and GM see the new partnership as a win-win. Nikola will gain supplier and manufacturing knowledge as well as engineering expertise from GM. It will also help with investor confidence for the EV maker.

GM gets to add another electric product to its offerings, and gains stake in a growing startup. This is not GM’s only move into the EV sphere. A micro electric vehicle developed by GM and partners recently became the most sold EV model in China, surpassing Tesla’s (TSLA) Model 3 sedans in the country.

As the EV industry booms, numerous companies are vying for dominance around the world. Investors will be eager to see if GM and Nikola’s new partnership will help them pull ahead.

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