- Electric truck startup Nikola was once worth more than Ford, but has now filed for bankruptcy.
- The truck maker faced a high-profile fraud scandal and eventually ran out of money.
- Nikola is the latest once-buzzy EV startup to collapse.
Another would-be Tesla rival has filed for bankruptcy, in the latest sign of how difficult it is to make money off EVs.
Electric and hydrogen truck maker Nikola filed for Chapter 11 bankruptcy protection and said it would sell its assets on Wednesday amid a cash crunch.
The buzzy EV startup rode a wave of enthusiasm for electric transportation when it went public in 2020 and, at one point, was worth in excess of $30 billion — more than Ford at that time.
Nikola struck a major deal with General Motors but was engulfed in crisis after founder Trevor Milton was accused of misleading investors about Nikola’s business and technology.
In 2020, short-seller Hindenburg Research revealed a substantial short position in Nikola, and published a scathing 15,000-word report, saying it believed the EV maker was “an intricate fraud built on dozens of lies.”
"We have never seen this level of deception at a public company, especially of this size," Hindenburg's report said.
It detailed a litany of allegations, including the claim the company faked a publicity video showing a prototype of its electric truck driving along a road by having the truck roll down a hill rather than move under its own steam.
Milton resigned and was later sentenced to four years in jail, and Nikola was fined $125 million by the SEC in 2021.
Nikola had recovered somewhat since then, striking a deal to sell 100 trucks to a California logistics company last year and announcing in January that its updated battery-electric trucks had driven one million miles.
However, the startup recalled its entire fleet of big rigs in 2023 after several battery fires, and ultimately failed to commercialize its technology.
Nikola lost more than $200 million in the third quarter of 2024, and in October, the company said it only had enough cash to last until the first quarter of this year.
"The transition EVs has been slower than all manufacturers anticipated, and when it comes to commercial vehicles, that's a really tough segment to break into," Sam Fiorani, an industry analyst at AutoForecast Solutions, told Business Insider.
Fiorani said heavy-duty trucks and semis of the kind Nikola was building have highly specific needs, including quick refueling and long ranges, making them a difficult product to bring to market.
EV startups run out of charge
As electric vehicle sales growth has slowed over the past year, Nikola is only the latest once-promising EV startup to run out of money.
Fisker, once worth as much as $8 billion, filed for bankruptcy last June after its Ocean SUV was plagued by production delays and repeated software problems.
Canoo, an electric van company that also went public in 2020 in a special-purpose acquisition company (SPAC) listing, went the same way last month despite high-profile deals with NASA, Walmart, and the US Postal Service.
"Every investor 10 years ago was looking for the next Tesla. Venture capitalists were jumping into any EV startup and expecting them to pay off in five or 10 years, " said Fiorani.
Fiorani added that the arrival of higher interest rates had shut off that supply of easy money.
"Keeping these companies financed takes more than just wishful thinking that someday they'll make money," Fiorani said.
Their failures show just how difficult — and expensive — it is to build a viable electric vehicle business from scratch, with companies forced to spend enormous sums to build up production.
Only Tesla, which nearly went bankrupt multiple times over a period founder Elon Musk described as "production hell," has been able to become profitable through selling EVs.
And Musk's company now has the advantage of scale, with Tesla responsible for around nearly half of electric vehicle sales in the US.
'Valley of death'
Even legacy automakers have struggled to make money on EVs. Ford lost $5 billion on its EV business last year, and the Detroit carmaker told investors it is likely to lose another $5 billion this year.
Other surviving electric vehicle startups remain mired in what has been termed the EV "valley of death."
Rivian went public in 2021 at a valuation of $86 billion, but it lost around $39,000 on every vehicle it sold last quarter. As it burns through cash, it has sought funding from Volkswagen and the federal government.
Losses at Lucid Motors widened to nearly $1 billion in the third quarter, and it has relied on funding injections from its largest shareholder, Saudi Arabia's Public Investment Fund.
"It's a measure of how hard it is to make money and turn a successful business out of an automotive company, EV or otherwise," said Fiorani.
"In North America, we've seen one successful vehicle startup since World War II. Tesla is the only one that has turned a profit."