On Wednesday, Nikola, a electric vehicle manufacturer that once had a market value comparable to Ford Motor, filed for bankruptcy protection in a Wilmington court in Delaware, with plans to wind down its operations. This move has added Nikola to the list of bankruptcies among zero-emission vehicle developers.
Currently, there is a growing number of green car companies facing financial crises. Apart from Nikola, electric vehicle startups such as Fisker, Lordstown Motors, Canoo, and Proterra are also struggling, with some already bankrupt or on the brink of bankruptcy.
Nikola was once a symbol of the investment frenzy in green vehicles, but this enthusiasm has cooled off due to rising costs and policy changes by the second Trump administration, putting investment plans for zero-emission vehicles at risk. The company’s founder, Trevor Milton, has become a symbol of stock market bubbles.
In late 2020, Nikola became the target of a short-seller report, accusing Milton of exaggerating its business and technology. In 2022, Milton was charged with making false statements to investors, convicted of securities fraud, and sentenced to four years in prison. He is currently appealing the decision.
Steve Girsky, CEO of Nikola, attributed the company’s bankruptcy to external factors, stating, “Like other companies in the electric vehicle industry, we are facing various market and macroeconomic factors that have impacted our operational capabilities. Unfortunately, our best efforts have not been enough to overcome these significant challenges.”
The Arizona-based company stated that it had been working with financial and legal advisors for months seeking ways to sustain its operations and ultimately decided that a structured asset sale process would maximize asset value.
Approximately $47 million in cash held by Nikola has now entered Chapter 11 bankruptcy proceedings. The company stated it will not be able to provide certain services and operational support for its trucks on-site until the end of March. Girsky indicated in a sworn declaration to the bankruptcy court that Nikola had ceased manufacturing new trucks to conserve cash before filing for bankruptcy. According to documents submitted by Nikola, the company has lost $3.6 billion in investment capital since its inception.
Nikola offered battery electric trucks as a precursor to producing hydrogen-powered trucks. The company hoped these trucks would boost its presence in the truck market and enhance its manufacturing capabilities. However, it turned out to be a costly misstep for the company. In 2022, Nikola ultimately acquired its battery supplier to prevent supply disruptions. In August 2023, the company recalled about 200 battery-powered trucks as an external investigation found a defective component that could cause a truck at the Phoenix headquarters to catch fire.
Nikola warned that its shareholders may now face a complete loss on their investment. The company entered Chapter 11 bankruptcy proceedings owing $97.7 million in convertible notes and lease obligations, along with other trade debts that need to be paid before any returns to shareholders. Nikola’s stock price was trading around 50 cents on Wednesday. Girsky stated that the lawsuits involving Nikola have depleted the company’s cash, including an approximately $80 million owed to the Securities and Exchange Commission (SEC) under a 2021 securities fraud settlement agreement.
In December last year, the transition team of then-President Trump announced plans to significantly alter the Biden administration’s electric vehicle policies, focusing on preventing electric vehicles, components, and battery materials from China, and shifting the battery development direction towards national defense.
The transition team’s proposals include numerous measures aimed at encouraging domestic battery production in the United States largely for defense-related purposes. Other proposals aim to protect American automakers, including manufacturers of electric vehicles. The transition team’s plan reallocates funding currently used for building electric vehicle charging stations and making electric vehicles more affordable towards defense priorities, ensuring battery supply and key mineral sourcing are not reliant on China. This marks a stark contrast to the policies of the Biden administration, which aims to strike a balance between promoting domestic battery supply chains and rapid electric vehicle transformation.
The transition team also proposed imposing tariffs on all global battery materials to promote production in the United States; American allies can negotiate individually with the United States for exemptions.
(This article references reports from The Wall Street Journal and Reuters)