EV Maker Fisker Files For Bankruptcy As Problems Grow In The Industry

Almost all industries witness highs and lows, including the automotive industry, particularly that of electric vehicles (EVs).

Over the last few years, the EV market has seen ups and downs, as the world steps up its interest in electric cars, buses, trucks, bikes and more. At the same time, the market has flooded with a wide range of companies providing EVs.

The leads to some startups and companies facing issues with sales and revenues. Unfortunately, sometimes these issues lead to such companies facing dire consequences, which includes Fisker Inc., a manufacturer of electric vehicles, which shared some disheartening news.

So, what did Fisker say? Let’s explore!
 

What Did Fisker Announce?

 

• As per a press release published on June 18, 2024, on its website, EV automaker Fisker revealed that Fisker Group Inc., the operating subsidiary of Fisker Inc., had filed for Chapter 11 bankruptcy protection, on June 17, 2024.

• Chapter 11 bankruptcy means that a company may continue business operations, while restructuring its operations and finances, with the intent of proposing a reorganization plan, which can come from the debtor or creditors.

• As per the release, “It is in advanced discussions with financial stakeholders regarding debtor-in-possession financing and the sale of its assets.”

• Following the filing, the company announced another filing for additional Fisker US entities, including Fisker Inc. and other subsidiaries, under the Chapter 11 protection, on June 19, 2024.

• The company’s plan is to sell off its assets, with discussions ongoing, which is estimated to include assets of $500 million to $1 billion and liabilities of $100 million to $500 million.

• This includes owing millions to software and engineering companies such as Adobe, SAP America, Manpower Group, Prelude Systems, NBCUniversal and others.

• In February 2024, the company had even raised “going concern” doubts about its ability to continue as a company, which even led to CEO Henrik Fisker’s disappearance from social media.

• The company failed to attract investors at the time, which included collapsed talks with Nissan.

• This adds to the woes faced by his first company, named Fisker Automotive, which also filed for bankruptcy in 2013, shortly after he left the company. The company had then sold its assets for $150 million to China’s Wanxiang Group.

 

What Factors Led To Fisker’s Woes?

 

• In 2020, the company had gone public following a merger with a blank-check firm, which increased its valuation to $2.9 billion and handed it over $1 billion in cash.

• Fisker’s plan included outsourcing the manufacturing of its cars, as it intended to reduce production cost and time in an “asset-light” strategy.

• However, the company’s electric SUV, Ocean, was plagued by various problems, including issues related to its software, hardware, braking, gear shifting into park, door opening failures and more, which extended to regulatory investigations.

• Fisker failed to deliver more than 5,000 vehicles of its over 10,000 produced vehicles in 2023, which consisted of 15 dealerships in the US and 12 partners in Europe.

• It even dropped its prices from $38,999 to $24,999, along with closing various departments to reduce costs.

• The company also issued a recall on June 12, 2024, to address software problems with over-the-air updates.

• As per Garrett Nelson, VP and Equity Analyst at CFRA Research, said, “Fisker has been on life support for months now, so today's announcement doesn't come as a surprise. It wasn't the first EV upstart to declare bankruptcy and we don't think it'll be the last.”

 

What Did Fisker Say?

 

• A spokesperson for Fisker said, “Fisker has made incredible progress since our founding, bringing the Ocean SUV to market twice as fast as expected in the auto industry and making good on our promises to deliver the most sustainable vehicle in the world.”

• [Contd.] “We are proud of our achievements, and we have put thousands of Fisker Ocean SUVs in customers' hands in both North America and Europe.”

• [Contd.] “But like other companies in the electric vehicle industry, we have faced various market and macroeconomic headwinds that have impacted our ability to operate efficiently.”

• [Contd.] “After evaluating all options for our business, we determined that proceeding with a sale of our assets under Chapter 11 is the most viable path forward for the company.”

 

Which Other EV Automakers Have Faced Similar Problems?

 

• In addition to Fisker, other promising EV manufacturers have also seen the brunt of dwindling sales and bankruptcy filings.

• This includes Proterra, a leading electric bus-maker, which filed for Chapter 11 bankruptcy protection in August 2023. Fortunately, the company found buyers for its manufacturing, battery and electric-drivetrain businesses, in the form of Volvo Battery Solutions, a subsidiary of Volvo.

• Paradoxically, its problems surfaced at a time when the market for e-buses grew by 66% in the US.

• Ahead of this, Lordstown Motors Corp, which had also filed for Chapter 11 bankruptcy protection, emerged successfully from its reorganization plan with a revamped name of Nu Ride Inc.

• Commercial EV startup Arrival, which also went bankrupt owing up to $1.5 billion (£ 1.2 billion) in unpaid taxes, wages, suppliers and more, managed to sell its assets to struggling EV startup Canoo.

Do you think the struggling EV companies will be able to revive themselves? Do you think high-flying automakers need to be weary of these examples?

Let us know in the comments below!