Nikola's deal with GM shows off a new way to get electric vehicles to market — and it's completely different from how Tesla operates

• Tesla entered the public markets through a traditional IPO in 2010, then spent a decade struggling to build and sell vehicles.
• New startups such as Nikola and Fisker have moved faster, raising far more money through "blank-check" offerings and joining with established manufacturers to build vehicles.
• Nikola recently announced a partnership with GM, while Fisker intends to work with Magna, the biggest contract carmaker.

Tesla is the first successful new American car brand to come along in decades. But compared with how his younger rivals are operating, Elon Musk's game plan now looks thoroughly old-school.

The carmaker was founded 17 years ago during a period when electric vehicles were considered an incredibly risky undertaking. By 2010, Tesla had developed enough momentum to stage an initial public offering, raising about $260 million — a modest sum, given the hundreds of millions, even billions, that EV startups have recently pulled in.

Tesla then had to manufacture vehicles, sell them, and generate revenue (and, from time to time, profits). It trudged through many crises along the way. But in 2020, after an epic stock-market rally, it became the most valuable automaker.

Newer car companies have paid attention to the Tesla story and attempted to follow a less unpredictable path. Henrik Fisker, who established a rivalry with Tesla in the 2010s with Fisker Automotive before the operation went bankrupt in 2013, is back with a new brand, Fisker, and a rather different business model.

The SPAC's the thing

Fisker went public earlier this year via a special purpose acquisition company (SPAC) established by the private-equity firm Apollo Global Management. The transaction, effectively a merger, led to $3 billion valuation for Fisker, a listing on the New York Stock Exchange, and $1 billion in funding for Fisker to build its Ocean EV, which should enter production in 2022. (In a nutshell, a SPAC is a fund that's created specifically to buy a company. The SPAC's IPO ends up listing the target acquisition, avoiding the traditional IPO road show, in which investment bankers pitch a company to investors.)

Fisker later signed a memorandum of understanding to have the largest contract manufacturer, Magna International, build the vehicle. (Magna builds some cars for the likes of BMW and Jaguar Land Rover.)

Nikola has employed the same playbook, but with a twist. The electric-truck-focused startup also went public through a SPAC and in short order minted a $13 billion market cap. It has revealed a variety of vehicles, from a pickup truck to a semi, but hasn't come anywhere near producing anything.

But on Tuesday, Nikola revealed it formed a partnership with General Motors. The biggest US automaker by sales said it would act as a contract manufacturer for the Nikola Badger pickup and contribute fuel-cell powertrain technology to Nikola's heavy-freight truck. GM also took a $2 billion equity stake in Nikola, echoing investments it has made in the self-driving startup Cruise and the ride-hailing company Lyft.

GM will build the Badger using a new EV platform and its Ultium battery technology, which it revealed at the beginning of 2020. (GM didn't offer details on the plant that will get the vehicle, but production is slated for late 2022.)

"Avoiding building a factory saved us billions," Nikola founder Trevor Milton said on a conference call with the media after the news was announced. "That was a big fear of ours. But now bam, we're in production."

Nikola is proceeding with plans to build a factory for its semitruck.

GM CEO Mary Barra said "the industry is changing" and that creating a vehicle platform with Ultium was a huge opportunity the company fully intends to leverage. The company isn't just deploying Ultium with startups. Last week, it said it was exploring an expanded partnership with Honda.

The trade-off for Nikola and Fisker is that for at least some vehicles, they won't be vertically integrated for the technologies that automakers have traditionally wanted to own as much of as possible: powertrains. Tesla, for example, has a battery-manufacturing partnership with Panasonic but controls battery and powertrain design.

For the pickup, Milton sounded delighted to give that up. And Fisker, in several interviews with Business Insider after the company's listing was completed, has stressed that new automakers can't be preoccupied with manufacturing their own vehicles.

Making it easier and less expensive to produce cars

"Fisker Automotive encountered incredible difficulty," he said of its efforts to make its Karma in the early 2010s. "Tesla was honest about production hell, and they had a ton of money. It's really difficult to manufacture a car. So I wanted to question if that's the way it truly needs to be."

His realization has led Fisker to push for an asset-light business model, heralding it as a solution to the age-old challenge of the auto industry: burning through enormous amounts of cash to bring cars to market.

A pattern has emerged: Startups become established and showcase their designs, fundraise through SPACs, and sign up with more experienced and capable manufacturers to make those designs into real vehicles that consumers can buy.

This process much more closely resembles the way that Apple makes iPhones. In GM's case, Ultium is a sort of EV operating system, one that could be plugged into numerous brands, with Nikola and Honda being just two examples. Fisker has taken the approach even further, outsourcing manufacturing entirely and focusing on user experience.

"After 30 years in the car business, I stepped outside of myself," Fisker said. "I'd never seen Apple CEO Tim Cook walk down a manufacturing floor."