Electric vehicle (EV) truck maker Nikola has filed for Chapter 11 bankruptcy protection, joining a growing list of EV startups struggling to survive amid slowing demand, financial losses, and funding challenges. The company announced on Wednesday, February 19, that it will pursue a sale of its assets while continuing limited support operations for its trucks and hydrogen fueling services until the end of March.
Years of Struggles Lead to Bankruptcy
Founded with ambitions to revolutionize the EV trucking industry, Nikola faced multiple setbacks, including cash-flow issues, weak market demand, and leadership changes. The company also endured allegations from short-sellers and legal troubles involving its founder, Trevor Milton. In 2023, battery fires forced Nikola to recall its battery-electric trucks and temporarily halt sales, further damaging its business prospects.
Stock Crashes, Market Value Plummets
Nikola’s stock nosedived 39% following the bankruptcy announcement, adding to a devastating 97% decline over the past year. At its peak in 2020, Nikola was valued at $30 billion—briefly surpassing Ford Motor Co.—but its market capitalization had fallen to under $100 million before the bankruptcy filing.
Production Woes and Heavy Losses
Despite efforts to scale its business, Nikola struggled to increase production. In the third quarter of the current US financial year, it built 83 trucks but posted a net loss of nearly $200 million. The previous quarter saw 77 trucks produced and a net loss of $134 million. The company had just $47 million in cash on hand at the time of its bankruptcy filing.
A Shifting EV Market
Nikola’s challenges reflect broader struggles in the EV industry. High interest rates, slowing consumer demand, and difficulties in securing funding have led several EV startups to bankruptcy. Even Tesla, the industry’s most prominent player, reported its first annual sales decline in 2024 despite offering incentives to boost demand.
Nikola initially focused on battery-powered semi-trucks but later shifted to hydrogen-powered electric trucks. However, the shift was not enough to overcome financial hurdles. CEO Steve Girsky acknowledged the company’s struggles, stating, “Despite our very best efforts, we have not been able to overcome these significant challenges.”
Legal Troubles and Founder’s Exit
The company’s downfall was accelerated by allegations that founder Trevor Milton misrepresented Nikola’s technology. A short-seller campaign exposed issues with the company’s debut truck, leading to Milton’s resignation and subsequent conviction on fraud charges.
Next Steps for Nikola
Nikola filed for bankruptcy protection in the US Bankruptcy Court for the District of Delaware and has requested approval to auction its assets. The company aims to maximize the value of its remaining operations while ensuring an orderly wind-down.
As the EV industry faces mounting economic pressures, Nikola’s downfall highlights the challenges of sustaining capital-intensive operations in a highly competitive and evolving market.
