File for bankruptcy under Chapter 11 protection, electric truck manufacturer Nikola.
Nikola announced on Wednesday that they've filed for Chapter 11 bankruptcy protection and will pursue a sale of most assets, battling persistent cash burn and funding difficulties in recent quarters. Their journey has been tumultuous, featuring numerous leadership changes, erratic sales, and a plummeting share price.
Companies like Fisker, Proterra, and Lordstown Motors, which entered the public sphere during the pandemic with promises to revolutionize the electric vehicle (EV) sector, have also encountered bankruptcy. Funding droughts stemming from high-interest rates and flagging demand have crippled capital-intensive EV operations.
Determined to maximize value, Nikola will initiate an asset sale process and continue limited operations, including field truck operations and certain hydrogen fueling operations until March 2023. Their declared assets range between $500 million and $1 billion, while liabilities fall between $1 billion and $10 billion, according to the bankruptcy filing.
Founded over a decade ago and going public in 2020, Nikola has experienced significant challenges. In October 2022, its co-founder Trevor Milton was convicted in a New York jury trial on fraud and wire fraud charges. Prosecutors accused Milton of falsely advertising various aspects of the business, including electric and hydrogen-powered trucks, mirrorless recordings of truck demonstrations, and even the operational capabilities of the Nikola One, a prototype hydrogen-powered semi-truck.
Milton was convicted and sentenced to four years in prison in 2023 for deceiving investors about the company's technology. Since then, industry veteran Stephen Girsky, a former Morgan Stanley analyst and General Motors executive, took over as CEO.
Nikola ramped up production of hydrogen-powered trucks in 2024 but faced ongoing funding difficulties, with every vehicle sold resulting in losses in the hundreds of thousands. Fleet operators have been hesitant to invest in charging stations and switch to electric trucks due to financial constraints.
The EV industry has witnessed the challenges of these companies, emphasizing the need for financial planning, capital management, and strategic partnerships to navigate the volatile market.
Despite facing similar challenges, Fisker and Lordstown Motors, like Nikola, have struggled with business sustainability. Prolonged bankruptcy proceedings and dwindling investor confidence have affected their motor vehicle operations.
The bankruptcy filing revealed that Fisker, too, grappled with significant financial burdens, recording assets between $100 million and $500 million, and liabilities surpassing $1 billion.
The motor industry's turmoil has prompted a reexamination of business models, with companies recognizing the importance of securing funding and strategically managing finances to avoid bankruptcy and drive growth.
