It was the 58-year-old Girsky who brought the company to the attention of GM CEO Mary Barra, according to people familiar with the matter. Barra has defended the partnership as properly vetted. She told investors at a conference on Sept. 14 she had “a very capable team that has done appropriate diligence.”
The allegations by the short seller, Hindenburg Research, weren’t the first time questions have been raised about Nikola’s claims. In June, Bloomberg reported Nikola’s founder and chairman, Trevor Milton, had exaggerated the capabilities of the company’s debut truck called Nikola One -- a vehicle that was never produced and brought to market. The company has denied making misleading statements.
The controversy surrounding Nikola and reports the U.S. Securities and Exchange Commission and Department of Justice are examining allegations against the company have put a cloud over the GM deal and threaten to leave the Detroit-based automaker with a black eye. Its decision to link up with the startup comes as it feels pressure from investors to speed up its electrification.
The no-cash deal gave GM an 11 percent stake in a hot venture that had become a Wall Street darling and provided Nikola an immediate credibility boost -- and access to hydrogen-fuel-cell technology and electric-vehicle batteries developed by GM.
‘Systems integrator’
Critics and defenders of the deal alike agree on one thing: Nikola is not so much a technology innovator as it is an integrator of off-the-shelf hardware. Even before GM came aboard, Nikola planned to use hydrogen-fuel-cell powertrains supplied by Germany’s Robert Bosch in trucks assembled by a venture with Italian semi maker Iveco, which is owned by CNH Industrial. But the startup’s model is still untested as it has yet to produce a single commercially available vehicle.
“Most of the important technology is not coming from Nikola,” said Sam Abuelsamid, a a transportation analyst at research firm Guidehouse Insights. “Their role is to put it all together. Until they can execute, their market value is ridiculous.”
It took electric-car market leader Tesla Inc. a decade to reach six-year-old Nikola’s current valuation of $12.4 billion.
While it has shared in the limelight enjoyed by Elon Musk’s company and run by a similarly social-media-savvy entrepreneur, Nikola is very different from its larger market-cap rival. The Palo Alto-based electric-vehicle leader developed the intellectual property for its battery pack in-house and manufactures all its own vehicles.
“That’s the beauty of it. We are a systems integrator. We are not trying to compete on the IP of the truck,” said Nikola board member and investor Jeffrey Ubben. “What we have here is a prototype-and-design company.”
Nikola has raised money mostly based on Milton’s sales pitches and an ambitious vision to become a dominant player in alternate-fuel trucks. More recently, it’s been able to parlay its new status as a public company -- and Girsky’s connections -- to woo GM and gain access to technology it needs to deliver on its many promises to investors.
Chief among those is its Badger electric truck, which Nikola has vowed to start producing in 2022. That’s after GM starts selling its first battery-powered truck, which will put a new spin on the formerly gas-guzzling Hummer brand.
Derring do
GM will provide the core chassis to underpin the Badger and its assembly-line know-how. But the automaker plans some 20 new electric vehicles of its own over the next three years, which prompts some industry observers to wonder what Nikola brings to the party. The startups’s value comes from its ability to integrate the technology of the company’s diverse network of partners, including Bosch and Iveco, according to Girsky.
“We saw a bunch of partners with deep expertise in the space,” he said in the August Autoline webcast. “And there was some tech embedded in here that was interesting to us and our advisers.”
Nikola does have some of its own technology, such as its eAxle that connects fuel-cell and electric systems to drive wheels. Milton told Bloomberg TV on Sept. 8 that his company also supplies “software, infotainment and the capability of over-the-air updates” for the vehicles.
But the main thing Nikola provides to GM is a dash of derring-do. Nikola has been willing to move faster and take more risks than an established automaker like GM with its layers of management, prudent compliance regimens and conservative corporate culture.
Cybertruck envy
Iveco, Bosch and GM had no plan to bring a fuel-cell-powered pickup to market before Nikola arrived on the scene. Fuel cells are seen by established automakers and suppliers as a better alternative for big Class 7 and 8 rigs because they use hydrogen to create electricity on board the vehicle. But Nikola plans to offer a $90,000 fuel-cell version of the Badger after its debut as a $60,000 battery-electric model -- despite not having any proof a market exists for those types of vehicles.
Even though Nikola planned to put mostly Bosch technology into its truck, Milton has talked up his company’s fuel cell prowess.
“We have the most advanced fuel cell and truck on the planet,” Milton said on July 7 during a video appearance that featured a fuel-cell semi truck prototype he filmed on his cell phone. “Look at that thing. And that’s the technology that’s going in the Badger.”
Milton said in February he’d been “working on this pickup program for years,” but others contest that notion. Nikola’s CEO, Mark Russell, told investors on an August earnings call the company had no plans a year ago to make a pickup. But what had been “just a conceptual exercise” began to gel into a product when buzz grew about Tesla’s Cybertruck, which Musk showed off in November.
“We didn’t intend to do anything with it until we saw the Cybertruck,” Russell said.
As late as March, Nikola told investors it didn’t expect to draw up plans for the Badger unless it could find an established automaker to manufacture it. But by June, it began taking deposits of as much as $5,000 for the pickup -- without a prototype to show.
Limited downside
Early conversations between GM and Nikola, which began in late February before Girksy had announced the reverse merger, were preliminary and didn’t result in a deal. But Nikola’s effort to find a partner to build the Badger added momentum to consideration of a possible partnership. Milton said in June that he was talking to multiple autoakers about outsourcing production of the pickup.
Meanwhile, GM moved ahead with its own electrification plans, showing off the Ultium battery in March and boasting it would power a family of vehicles ranging in size and purpose from small crossovers to big Hummer and Chevrolet trucks. GM has begun retooling a plant in Detroit to make the battery packs and common “skateboard” chassis.
For GM, assembling the Badger would help it max out its factories and scale up its electric-vehicle supply chain more quickly. And a fuel-cell partnership would give GM a way to generate revenue from a technology it had co-developed with Honda Motor Co. but had no firm plan for deploying in vehicles.
GM moved ahead after concluding there was no financial downside to a deal. The automaker gets licensing fees for its technology and for building the Badger -- and reimbursement for any up-front costs. The free equity in Nikola is an added sweetener that the automaker hopes won’t turn sour.
