Yahoo Finance General Motors takes $2bn stake in Tesla rival Nikola
General Motors is acquiring an 11pc stake in Tesla rival Nikola, worth about $2bn (£1.5bn), and will team up with the company to make a pick-up truck.
Shares of Nikola soared more than 30pc to $46.30 in pre-market trading after GM's investment, which will help the company take on the likes of Tesla and Ford.
The companies will jointly build the Nikola Badger truck and expect production by the end of 2022.
The truck will compete with Tesla's Cybertruck, as well as electric pickups planned by startup Rivian, Ford Motor and GM itself.
Nikola claims the Badger will have a range of 600 miles, compared with Cybertruck's claimed range of more than 500 miles. The Cybertruck and other electric pickups have not launched yet.
Founded in 2014, Nikola became one of the world's most valuable car manufacturers when it went public in June despite never having sold any vehicles.
The business saw its value rocket to make it worth more than Fiat Chrysler and Ford, despite the business not expecting to see any revenue until next year.
Nikola plans to install a network of hydrogen charging stations across the UK, Europe and the US. Trevor Milton, the company's executive chairman, told The Telegraph earlier this year that the business plans to install 50 charging stations across Europe.
The company's cars will work by combining the hydrogen gas with oxygen to run electric motors. Some critics have claimed that hydrogen-powered cars are more expensive than battery-powered vehicles such as those sold by Tesla.
The alliance with Nikola is the second major deal in a week for GM and highlights the pressures faced by the auto industry to share costs to meet demands for cleaner vehicles. Last week it announced a tie-up with Japan's Honda to develop new internal combustion models.
The agreements also signal the urgency of chief executive Mary Barra's efforts to convince investors that GM can slash costs in its traditional, internal combustion business and develop a profitable, viable electric vehicle business to compete with Tesla.
Shares of GM, which have been stuck for months at levels below $33 a share, the price of the 2010, post-bankruptcy public offering, rose about 6pc in premarket trading.
General Motors will receive $2bn in newly issued Nikola stock and will get a right to nominate one director to the electric truck maker's board.
It expects to receive benefits in excess of $4bn between equity value of shares, contract manufacturing of the Badger, among other perks as part of the agreement.
The companies expect to save $4bn in battery and powertrain costs over 10 years and over $1bn in engineering and validation costs.
