GM walks away from stake in Nikola after EV maker is accused of ‘intricate fraud’

December 1, 2020

General Motors has backed away from taking an initial stake in the Phoenix-based electric vehicle (EV) company Nikola—which, as a result, announced on November 30 that it would scuttle one of its marquee vehicles, an electric- and hydrogen-powered pickup that was to be called the Badger, The Chicago Tribune reports.

GM intends to be a major player in the EV market, pledging on its website:  “GM is on its way to an all-electric future, with a commitment to 30 new global electric vehicles by 2025 …. GM is positioned to design, engineer, and produce EVs for every style and price point, and we are rapidly building a competitive advantage in batteries, software, vehicle integration, manufacturing and customer experience.”

However, the decision to step away from the deal came after Nikola founder and Chairman Trevor Milton resigned abruptly from the company in September amid accusations of “intricate fraud” and “an Ocean of Lies” by Hindenburg Research. At that time, Nikola denied the allegations and called them “misleading.”

According to the Tribune’s report, Hindenburg said Nikola’s success amount to a hoax—including a video showing a truck rolling downhill to give the impression it was cruising on a highway, and stenciling the words “hydrogen electric” on the side of a vehicle that was actually powered by natural gas.

At that point, the seeds of distrust had been sown at GM. Indeed, the deal appeared to be in jeopardy as early as late September—when the Detroit-based major U.S. automaker evinced ambiguity about whether the $2 billion partnership would close as scheduled, saying that the deal had not closed and discussions with Nikola were continuing.

For its part, Nikola on Monday, November 30, released updated terms between the companies for a supply agreement related to GM’s fuel-cell system , replacing an agreement signed in September. That deal would have given GM an 11% stake in Nikola.

The early agreement would also have allowed Nikola to use GM’s new battery electric truck underpinnings for the Badger, and its fuel cell and battery technology as well. That is no longer part of the agreement, essentially gutting Nikola’s plans for the Badger. Nikola said Monday that it will begin refunding deposits made by customers who wanted first dibs on that pickup.

GM still will be part of a global supply agreement that would integrate GM’s Hydrotec fuel-cell system into Nikola’s commercial semi-trucks.

Nikola said Monday that its work on heavy trucks will continue. “Heavy trucks remain our core business and we are 100% focused on hitting our development milestones to bring clean hydrogen and battery-electric commercial trucks to market,” said Nikola.

The Securities and Exchange Commission and the Justice Department are reportedly investigating Hindenburg’s allegations. GM has said it did proper due diligence before entering the partnership.

Research contact: @chicagotribune

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