The bull versus bear argument on Nikola (NASDAQ:NKLA) stock elevated to new heights in September, after the electric and fuel-cell vehicle maker inked a massive manufacturing and technology partnership with General Motors (NYSE:GM).
Bulls lauded the deal as a huge validation of Nikola’s vision and goals from one of the biggest automakers in the world, and believe it brings Nikola one step closer to actually turning into the Tesla (NASDAQ:TSLA) of trucks.
Bears pointed out that the deal notably lacked any Nikola technology or IP — implying that Nikola’s underlying tech may not be that good — and continue to believe the company is built on little more than hot-air (see this Hindenburg Research report for a recap of the bear thesis).
At first, Wall Street sided with the bulls. Nikola stock popped as much as 45% on news of the deal.
Then, Wall Street sided with the bears, and Nikola stock proceeded to essentially give back all of those gains in two days.
Who should you side with? Is NKLA stock a clean energy winner that will follow in TSLA’s footsteps? Or is it an all-hype, no-substance stock?
Prior to the GM deal, the company may have been the latter. But thanks to GM, Nikola now has a really good shot of becoming the Tesla of trucks, and NKLA stock does look like a long-term winner.
No Technology at Nikola?
For years, Nikola has been pumping its own battery technology, claiming that it is among the best in the world.
Yet, in this wide sweeping GM-Nikola partnership, none of Nikola’s technology is mentioned. GM will be providing the batteries and the fuel cells.
Bears say this is because Nikola’s underlying tech isn’t any good, and that previous claims of breakthrough batteries were just hot air. It increasingly appears that they may be right — although it is far more likely that GM’s battery and fuel-cell tech is just better than Nikola’s tech, so both companies jointly agreed to use GM’s tech as opposed to Nikola’s tech.
Still, the fact that Nikola doesn’t have better tech than GM isn’t validation of the bear thesis on NKLA stock.
After all, there’s a reason that GM decided to partner with Nikola, and that’s because Nikola has the brand, the renderings, the order book, the buzz, etc.
Technical guys don’t believe in intangible stuff like that. They’re all about the specs. But all that intangible stuff matters, because while technology makes cars, it doesn’t sell them. Branding, marketing, aesthetic and buzz sells cars.
And, to their credit, Nikola management has done a great job on those fronts. At this point, Nikola is probably second to only Tesla in terms of brand awareness and recognition in the clean-air vehicle space, while their vehicles are very futuristic looking and appealing.
To that extent, all Nikola needs to become a disruptive force like Tesla is attain superior underlying battery technology and robust manufacturing capability.
The company scored exactly that with its GM partnership.
Doesn’t Really Matter Anymore
In the big picture, what the GM partnership does is pair Nikola’s strong brand, cool renderings, next-gen auto designs and bold vision, with GM’s strong underlying battery / fuel-cell technology and unmatched manufacturing capability.
The result is a portfolio of next-gen, Nikola-branded personal and commercial trucks ready to disrupt the global trucking industry.
Once the Badger pickup truck hits roads in 2022, it will look super sleek, have a great battery and likely retail at a great price because GM will pump out a lot of them given its manufacturing capability. Cool looking car? Great performance? Low price?
Certainly sounds like a truck which could easily disrupt the personal trucking industry one day.
Lather, rinse, repeat for the Class 7/8 trucks. Nikola will actually make these trucks themselves. But the fuel cell will be provided by GM. So, again, you’ll have a sleek looking truck with great performance — a combination which gives these trucks a good opportunity to be a Tesla-like disruptive force in commercial trucking.
All in all, then, the GM partnership is a “win” for Nikola and NKLA stock.
Sure, it does underscore that Nikola’s tech isn’t as great as management has hyped it up to be. But does that really matter anymore? The tech is now being provided by GM, and it’s good tech. Plus, thanks to its equity stake, GM now has a vested interest in seeing Nikola succeed.
So, in essence, the GM partnership brings Nikola one big step closer to disrupting the global trucking industry — and NKLA stock, now more than ever, looks like a long-term winner.
Bottom Line on NKLA Stock
Nikola doesn’t have the world’s best battery or fuel-cell tech.
The partnership with GM provides Nikola with great technology and robust manufacturing capability. Nikola will pair those features with its strong brand and next-gen auto designs to bring to market a best-in-breed electric pick-up truck and best-in-breed fuel-cell commercial truck.
Those trucks will, together, disrupt the personal and commercial trucking industries globally. As they do, NKLA stock will go from battleground stock today, to big-time winner in 5+ years.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been rated one of the world’s top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm.