Nikola (NKLA.O) has filed for Chapter 11 bankruptcy protection and announced plans to sell its assets, marking another setback in the electric vehicle (EV) industry. The company faces mounting financial challenges, including low demand, high operational costs, and insufficient funding, following years of leadership turnover, plummeting stock prices, and legal complications.
This bankruptcy filing highlights the ongoing struggles within the EV startup sector, particularly for companies that went public during the pandemic with ambitious goals. Competitors like Fisker, Proterra, and Lordstown Motors have similarly filed for bankruptcy, as rising interest rates and dwindling investor confidence dampened the capital needed for their capital-intensive ventures.
Nikola CEO Steve Girsky explained, “Like others in the electric vehicle industry, we have faced various market and macroeconomic factors that have hampered our ability to operate. Unfortunately, our best efforts have not been enough to overcome these significant hurdles.”
The company had previously pioneered in the hydrogen-powered semi-truck sector, but issues such as safety recalls and weak fleet operator interest have severely impacted its profitability. In addition, it lost money on every vehicle sold, despite ramping up production in 2024. Nikola now plans to liquidate its assets in a manner that maximizes value while ensuring an orderly shutdown.
The company reported a significant drop in stock value, with its market capitalization now under $50 million—an incredible decrease from its peak valuation of $27 billion in 2020. This decline is compounded by the company’s ongoing legal issues, including the fraud conviction of founder Trevor Milton in 2022, following allegations by short-sellers. Milton’s conviction continues to cast a shadow over the company, which is also dealing with liabilities in the range of $1 billion to $10 billion.
Legal experts, like Sarah Foss, head of legal at Debtwire, argue that Nikola’s downfall is indicative of broader trends within the EV sector: “The struggles Nikola faced, combined with intense competition, operational difficulties, and high costs in the EV industry, culminated in their current situation.”
The company’s legal troubles began soon after its public debut in 2020 via a merger with a special purpose acquisition company (SPAC). In addition to the fraud case against Milton, Nikola has faced ongoing lawsuits related to misstatements about its technology and products. The company had also been under investigation by the U.S. Securities and Exchange Commission (SEC) and the Department of Justice.
With $47 million in cash and liabilities that could exceed $10 billion, Nikola faces a tough road ahead in its Chapter 11 restructuring, making it unclear whether any significant recovery is possible in the near future.
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