Nikola is taking a page from the Tesla Motors’ playbook by buying up suppliers and advancing their “vertical integration.”
Last week, Nikola Corporation, the commercial manufacturer of all-electric class 8 heavy-duty trucks, signed an agreement to acquire battery pack supplier Romeo Power, Inc. The deal will see Nikola take over Romeo’s battery manufacturing facility in Southern California and gain control over a key part of its supply chain by engineering its own EV packs in-house.
Strategic Investment: Nikola’s Acquisition of Romeo Power for $144 Million
Nikola was already Romeo Power’s largest single battery customer, but Nikola will still acquire all of the outstanding shares of Romeo common stock (NYSE: RMO), at an equity value of roughly $144 million. The truck company has also agreed to provide Romeo Power with $35 million in interim funding to facilitate continued operations through the official closing date.
Unlocking Synergies: How Romeo Acquisition Powers Nikola’s EV Advancements and Cost Savings
The company believes that gaining control over Romeo’s technology and manufacturing process can help accelerate its EV development. At the same time, it’s believed that this move will save Nikola up to $350 million by 2026 and reduce non-cell related battery pack costs by 30% to 40% by the end of 2023.
“Romeo has been a valued supplier to Nikola, and we are excited to further leverage their technological capabilities as the landscape for vehicle electrification grows more sophisticated. With control over the essential battery pack technologies and manufacturing process, we believe we will be able to accelerate the development of our electrification platform and better serve our customers,” said Mark Russell, Nikola’s Chief Executive Officer. “Given our strong relationship with Romeo and ongoing collaboration, we are confident in our ability to successfully integrate and deliver the many expected strategic and financial benefits of this acquisition. We look forward to creating a zero-emissions future together.”
It’s good news for struggling Romeo Power, who have always seemed like positive, ambitious people with some unique tech – and good news for Nikola, too, who continue to beat market expectations by delivering all-electric Tre semi trucks to their customers.