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US EV start up, Fisker, has filed for bankruptcy protection after rapidly depleting its cash reserves trying to deliver its “Ocean” SUV to the US and Europe. It is now seeking to sell its assets and restructure its debt. Once valued at over USD7 billion the company’s share price steadily declined from 2022 until it was delisted from the NYSE this year in April. Fisker is just one of many EV startups that has tried and failed to break into the EV market in recent years.
Bankruptcy
According to the company’s bankruptcy filling it estimated it has assets ranging from USD500 million to USD1 billion, and liabilities between USD100 million and USD500 million. The filing also notes that the company has approximately 200-999 creditors.
Why did it fail?
Fisker’s total revenue for 2023 was USD272.9 million, whilst its operating loss for the year was approximately USD760 million. By the end of 2023, Fisker’s cash, cash equivalents and restricted cash totalled USD396 million. To continue operating it needed cash, however, talks to get funding from a large automaker, reported as Nissan, fell through in March. Subsequently, it paused operations and future developments until it could secure a partnership, but nothing came into fruition.
An unsustainable business model
In 2023, the company produced over 10,000 vehicles, falling short of its target, and delivered just over 4,900 units. Production was outsourced to a manufacturer in Austria, an unusual choice given that three-quarters of its sales were in North America. This decision likely contributed to its unsustainable operating loss.
Rho’s Evaluation, EV startups a dying breed?
Fisker joins the growing list of EV startups that have folded in recent years, including Proterra, Lordstown Motors, Electric Last Mile Solutions, Volta Trucks, and most recently Arrival, which filed for bankruptcy in February 2024 after producing few vehicles. These companies have struggled to operate in an increasingly uncertain economic environment, battling high interest rates, increased production costs due to persistent inflation, and difficulties in raising funds.
However, the challenges are not limited to startups. More established players such as Rivian and Lucid are also facing difficulties, with their share prices falling after missing revenue targets and stagnant sales growth.
The struggle of smaller EV companies is not confined to Europe and North America; it is also prevalent in China. Over the past year, six Chinese EV startups have exited the market after their businesses proved untenable.
Non-pure EV players, or legacy OEMs, have also faced challenges in their EV ventures. However, these companies benefit from being able to offset EV losses with profits from their ICE business.
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