General Motors is retracting its plan to acquire a share in electric vehicle manufacturer Nikola Corp., effectively dissolving an agreement that encountered difficulties shortly after its initial announcement two months prior.

Nikola’s stock price experienced a significant decline, dropping almost 25% on Monday.

Instead, GM has established a preliminary, nonbinding agreement to provide Nikola with its Hydrotec fuel cell technology. This supply arrangement supersedes the earlier announcement from September 8, 2020, regarding GM’s intention to take an 11% ownership position in Nikola and collaborate on the production of a fuel cell-powered pickup truck slated for completion by the end of 2022. The original investment had an estimated value of $2 billion.

GM will no longer be responsible for manufacturing the Badger pickup truck for Nikola, thereby concluding that particular project. Nikola has stated its intention to concentrate on developing zero-emission commercial trucks and will be refunding customer deposits received for the Badger. As of September 30, the company held $6.9 million in customer deposits for the Badger, as detailed in its most recent quarterly report submitted to the U.S. Securities and Exchange Commission.

Rumors regarding GM’s potential withdrawal from the deal circulated extensively almost immediately after the initial announcement. Shortly after GM publicized the investment, Hindenburg Research, a well-known investment firm specializing in short selling, leveled accusations of fraudulent activity against Nikola. The U.S. Securities and Exchange Commission initiated an investigation, and within a fortnight, Nikola’s founder, Trevor Milton, resigned from his position as executive chairman.

Stephen Girsky, a former General Motors leader who previously served on the company’s board and facilitated the introduction between Nikola and GM, assumed the role of executive chairman.

Nikola continues to face challenges, as indicated by GM’s phrasing in its recent announcement. GM characterizes the nonbinding MoU as a “prospective agreement.” Should it proceed, GM will adapt its Hydrotec fuel cell system to meet specifications jointly determined by both organizations. The anticipated arrangement is expected to operate on a “cost plus” basis, meaning Nikola will cover the initial capital investment for production capacity. The companies are also exploring a potential supply agreement for GM’s Ultium battery system to power Nikola’s Class 7 and Class 8 trucks.

Doug Parks, GM’s executive vice president overseeing global product development, purchasing, and supply chain, emphasized that supplying Hydrotec fuel cell systems for heavy-duty commercial vehicles is a crucial component of GM’s expansion strategy and underscores the company’s dedication to an entirely electric, zero-emissions future.

GM’s Hydrotec fuel cell system will undergo engineering at its technical centers in Pontiac and Warren, Michigan, and will be produced at its battery assembly plant in Brownstown Charter Township, according to the company.