Nikola, Fisker, and 16 Other Electric Car Startups Staring at a Cash Crunch Ahead of 2024

Several electric vehicle (EV) startups, including prominent names like Nikola and Fisker, are on the brink of a financial crisis. Five out of the 43 EV and battery startups that went public between 2020 and 2022 have already gone bankrupt or been acquired. Surprisingly, 18, including Nikola and Fisker, anticipate running out of money by the end of the coming year.

These startups are facing issues with manufacturing, causing delays in producing and selling their electric vehicles. Higher interest rates are also making it more expensive for these companies to borrow money. While the demand for electric vehicles is increasing, some makers have produced very few units for sale. Overseas production is causing delays in reaching the US market.

Struggles of Electric Vehicle Startups Going Public Through SPACs

Most of these struggling companies went public through Special Purpose Acquisition Companies (SPACs). Unlike traditional initial public offerings (IPOs), SPACs let companies make bold promises to investors, potentially contributing to these startups’ challenges.

Unfortunately, this trend has taken a toll, as seen in the recent bankruptcy filings of three notable companies. This includes Lordstown Motors, Proterra, and Electric Last Mile Solutions. Additionally, the aftermath has seen battery maker Romeo Power and charging firm Volta being sold at a fraction of their initial valuations. 

Impact on Investors

The decline in stock prices has affected major investors, including BlackRock, Fidelity Investments, and Koch Industries. These companies had invested hundreds of millions in EV startups. Attracted by the ambitious promises of the startups, individual investors are also facing financial setbacks.

While some companies are conserving cash, others are attempting to raise more funds by returning to the stock market or negotiating deals with their original investors. In contrast, established players like Tesla are thriving in the EV market by overcoming early production hurdles and generating income to fund operations.

These struggling companies raise questions about the future of the EV industry. Some experts suggest that facing challenges and undergoing a period of consolidation is not uncommon for a booming industry. Despite the hurdles, certain companies like Rivian Automotive and Lucid Group have enough cash to continue operations beyond 2024, although struggles to increase sales are impacting their stock prices.

As the automotive industry evolves, these electric car startups’ fate will significantly influence sustainable transportation’s future.