GM joins the stock market’s electric-vehicle party

You wouldn’t know it from its share price, but General Motors has done everything it can to please Wall Street in recent years. Its latest offering: a deal with stock-market sensation Nikola.

The transaction announced by the companies on Tuesday morning, which involves no transfer of money, is elegantly structured to meet strategic objectives on both sides. GM gets an 11% stake in a potential industry disrupter and the promise of higher manufacturing volumes for its new all-electric battery platform, Ultium. Nikola gets to piggyback off GM’s engineering, supply-chain and assembly assets for the rollout of its electric pickup truck, the Badger.

Given the production problems Tesla has experienced in its quest to reinvent the car, Nikola’s decision to stick to design and contract out manufacturing seems smart. Investors, who were disappointed that Nikola had no news to report alongside second-quarter earnings last month, sent the shares up 41% Tuesday despite the prospect of a roughly 13% dilution of existing shareholders. GM stock, which should now benefit mechanically from Nikola’s success, rose 7.9%.

Nikola’s primary focus isn’t battery-powered consumer vehicles suited to GM’s Ultium platform but big rigs equipped with a hydrogen tank and fuel cell. Here, too, GM can help: It will supply Nikola’s commercial trucks, which will be made at a new factory in Arizona, with fuel cells developed in partnership with Honda. These fuel cells can also go into the Badger, which Nikola is offering in both battery and fuel-cell electric combinations.

Remarkably, given the limited track record of fuel-cell vehicles, Badger preorders have been split roughly 50:50 between the two power types, according to Chief Executive Officer Trevor Milton. GM CEO Mary Barra was noncommittal about the prospects for an in-house fuel-cell vehicle, preferring to talk about commercial applications for a technology it has worked on since the 1960s. The prospect of finally monetizing its fuel-cell investments without actually committing to a car is a bonus for GM. Similarly, Daimler sold the fuel-cell assets it developed over decades for Mercedes-Benz into a joint venture with Swedish truck maker Volvo in April.

GM signed a similar deal with its longtime partner Honda only last week. The two companies said they are exploring sharing production assets in North America, but the market paid little attention. The difference here is that GM is getting a stake in an electric-vehicle startup in the midst of a stock-market tech frenzy. Some Wall Street analysts think GM could split Ultium off into a separately listed business, but the notion seems fanciful. Nikola gives Ms. Barra an alternative answer of sorts.

Still, it is doubtful that Tuesday’s jump marks the start of a new era for GM’s stock, which is now trading just below the level of its 2010 initial public offering. The incumbent industry’s fundamental problem, which the U.S. leader can’t escape, is that the transition to electric vehicles involves heavy investment to replace profitable products with cleaner but less profitable ones. This deal, like that with Honda, could help a bit by spreading the investments over a broader base of sales. Meanwhile, the Nikola stake, with a starting value of $2 billion, is for now a small part of GM’s total valuation.

This Wall Street crowd-pleaser may end up like previous ones from GM: with analysts gushing, long-term investors shrugging.

Write to Stephen Wilmot at stephen.wilmot@wsj.com