(Reuters) – General Motors Co (GM.N) said on Tuesday it was acquiring an 11% stake in U.S. electric truck maker Nikola Corp NKLA.O, worth about $2 billion, and will team up with the company to make a pick-up truck.
Shares of Nikola soared more than 30% to $46.30 in pre-market trading after GM’s investment, which will help the company take on the likes of Tesla (TSLA.O) and Ford (F.N).
The companies will jointly build the Nikola Badger truck and expect production by the end of 2022. The truck will compete with Tesla Inc’s (TSLA.O) Cybertruck, as well as electric pickups planned by startup Rivian, Ford Motor Co (F.N) and GM itself.
Nikola claims the Badger will have a range of 600 miles, compared with Cycbertruck’s claimed range of more than 500 miles. The Cybertruck and other electric pickups have not launched yet.
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 Motor Co (7267.T) to develop new internal combustion models.
The agreements also signal the urgency of CEO 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 6% in premarket trading.
General Motors will receive $2 billion 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 $4 billion between equity value of shares, contract manufacturing of the Badger, among other perks as part of the agreement.
The companies expect to save $4 billion in battery and powertrain costs over 10 years and over $1 billion in engineering and validation costs.