The electric vehicle manufacturer Nikola has filed for bankruptcy and will be closing all its factories. This news comes after the company declared bankruptcy under Chapter 11, just months after warning that it would likely run out of funds earlier this year.
## Will maintain “limited operations” and pay its employees while carrying an auction and sale process
The automotive industry is facing significant challenges, with some companies planning to withdraw from certain markets. However, Nikola’s situation is more extreme, with the company opting for complete bankruptcy. To ensure a smooth transition, Nikola will maintain limited operations, including paying its employees, while it undergoes an auction and sale process. The company has about $47 million in cash available to finance its activities during this period.
Nikola plans to provide limited service and support for its trucks currently in use, including certain hydrogen supply operations, until March 2025. As the company advances in the sales process, it cannot guarantee that its shareholders will receive any payment or distribution on account of their shares after the sale.
## What happened to Nikola? This is the story of this bankruptcy
Nikola was once a successful startup and a rising star on Wall Street before being embroiled in a scandal. The company’s founder, Trevor Milton, was convicted in 2022 for deceiving investors about the company’s technology. During his trial, prosecutors revealed that a video of a Nikola truck prototype appearing to drive on a desert road was actually a mockup that had been rolled down a hill.
The controversy surrounding the company was immense, with Nikola’s value reaching around $30 billion in 2020, surpassing Ford Motor Co.’s market capitalization. However, after Milton’s conviction, the company’s actions collapsed, and it struggled to expand its business, which focused mainly on electric trucks. In the third quarter, Nikola produced 83 trucks but recorded a net loss of almost $200 million.
## The company made efforts to capture funds, reduce liabilities and preserve box, but it was not enough
Nikola’s bankruptcy was not entirely unexpected, as the company had been warning in its audited financial reports over the past two years that there were substantial doubts about its ability to continue as a going concern. The company has faced personal and industry-wide challenges, including a more competitive environment for electric vehicle manufacturers as sales slow down.
President Donald Trump has promised to eliminate the “electric vehicle mandate” established by President Joe Biden, which aimed to make electric vehicles represent half of new car sales by 2030. This move could potentially revoke a tax credit of $7,500 for new electric vehicle purchases approved by Congress as part of the Inflation Reduction Act of 2022. Nikola requested protection from the United States bankruptcy court for the District of Delaware and presented a motion seeking approval to carry out an auction and sale of its business.