EV maker Fisker files for bankruptcy amid cash burn and production challenges

Fisker, the U.S. electric vehicle (EV) maker filed for bankruptcy protection late on Monday, seeking to sell its assets and restructure its debt after facing rapid cash burn while attempting to deliver its “Ocean” SUVs in the United States and Europe.

The company, founded by automotive designer Henrik Fisker, joins a growing list of EV startups, such as Proterra, Lordstown, and Electric Last Mile Solutions, that have gone bankrupt in the past two years due to depleting cash reserves, fundraising difficulties, and production challenges exacerbated by global supply chain issues.

Challenges faced by Fisker and the EV industry

Fisker had previously flagged doubts about its ability to continue operations in February. By March, the company’s attempts to secure an investment from a major automaker, which Reuters identified as Japanese automaker Nissan, had failed, forcing Fisker to scale back its operations.

Despite producing over 10,000 vehicles in 2023, the company delivered only about 4,700, far short of its forecast.

Additionally, Fisker’s vehicles are under investigation by U.S. regulators for several incidents, including a recent probe by the U.S. auto safety regulator.

Statement from Fisker

“Like other companies in the electric vehicle industry, we have faced various market and macroeconomic headwinds that have impacted our ability to operate efficiently,” Fisker said in a statement early on Tuesday.

“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.”

Fisker is also in advanced talks with financial stakeholders for debtor-in-possession financing, though details have not been disclosed.

Assets, liabilities, and creditors

The company’s operating unit, Fisker Group Inc., filed for Chapter 11 bankruptcy in Delaware, listing estimated assets of $500 million to $1 billion and liabilities of $100 million to $500 million.

The court filing indicates that Fisker has between 200 and 999 creditors.

Attempts to secure investment and operational cuts

After failing to secure funds from Nissan, Fisker began exploring various options, including in- or out-of-court restructurings and capital markets transactions. The company paused manufacturing and investments in future projects until it could secure an auto partnership.

Fisker also announced it would reduce its workforce by about 15% as part of its restructuring efforts.

Under scrutiny and market impact

Fisker’s cars are currently under regulatory investigation for certain incidents, adding to the company’s challenges.

The U.S. auto safety regulator initiated a probe last month, further complicating Fisker’s efforts to stabilize its operations and finances.

Impact on other EV makers and the industry

The struggles faced by Fisker and other EV startups highlight the broader challenges within the industry.

Depleting cash reserves, difficulties in fundraising, and production hurdles due to supply chain issues have affected several companies.

The market has seen increased scrutiny and regulatory challenges, which have further strained the operational capabilities of these companies.

Path forward and potential recovery

As Fisker navigates the bankruptcy process, its future remains uncertain. The company’s decision to seek Chapter 11 protection and sell its assets may provide a path for recovery, but much will depend on the outcomes of ongoing negotiations with financial stakeholders and potential buyers.

The EV industry continues to evolve, and Fisker’s experience underscores the importance of financial stability, robust supply chain management, and regulatory compliance for emerging companies in this space.

Fisker’s bankruptcy filing marks a significant moment for the EV industry, reflecting the broader challenges and uncertainties faced by many startups.

The company’s efforts to restructure and find a viable path forward will be closely watched by industry analysts, investors, and competitors.

As the EV market continues to grow, the lessons learned from Fisker’s experience will be critical for other companies navigating similar challenges.

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