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Nikola Motor, the once-promising electric vehicle (EV) manufacturer, has filed for Chapter 11 bankruptcy protection. The announcement comes months after the company warned it would likely run out of cash early this year. 

Nikola was once valued at $30 billion, surpassing the market capitalization of Ford Motor Co., but is now struggling to stay afloat with only $47 million in cash reserves.

Rise and Fall of Nikola Motor

Founded in a Utah basement, Nikola Motor initially gained recognition as an industry disruptor. 

The Arizona-based company was a Wall Street favorite before becoming embroiled in scandal. The downfall began with a 2020 report from short-selling firm Hindenburg Research, which accused Nikola of fraud.

The report led to an investigation by the Securities and Exchange Commission (SEC), unraveling a chain of events that resulted in the resignation and arrest of the company's founder and CEO, Trevor Milton.

Fraud Allegations and Founder’s Conviction

Trevor Milton stepped down amid fraud allegations, and Nikola’s stock price plummeted. Investors suffered heavy losses as reports questioned Milton’s claims that the company had already produced fully operational zero-emission 18-wheel trucks.

In December 2023, Milton was sentenced to four years in prison. He was convicted of making fraudulent claims about Nikola’s production capabilities.

Prosecutors labeled him a “con man” presenting evidence that a company video of a Nikola truck supposedly driving on a highway was, in reality, a prototype rolling downhill without power.

Nikola’s current CEO testified that Milton “was prone to exaggeration” when pitching the company’s technology to investors. Further investigations revealed that Milton falsely presented a General Motors truck as Nikola’s revolutionary vehicle.

Struggles in Business Operations

Nikola Motor has struggled to scale its business, particularly in EV truck production.

The company produced only 83 trucks in the third quarter of last year and recorded a net loss of nearly $200 million. In the second quarter, it produced 77 trucks but faced a net loss of $134 million.

With these financial losses mounting, Nikola filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. The company has also filed a motion seeking approval to conduct an auction of the business.

Plans for the Future

Despite the bankruptcy filing, Nikola Corp. intends to maintain limited service and support for its vehicles.

Pending court approval it will have limited operations, including fueling operations, through the end of March. However, the company acknowledged it will need additional funding to sustain operations at some point.

CEO Steve Girsky stated, “Like other companies in the electric vehicle industry, we have faced various market and macroeconomic factors that have impacted our ability to operate.”

He also mentioned that despite efforts to raise funds, reduce liabilities, and conserve cash, the measures have not been enough.

"The Board has determined that Chapter 11 represents the best possible path forward under the circumstances,” Girsky said.

Legal and Market Challenges

Nikola’s financial and legal woes are not its only challenges. The company previously paid $125 million in 2021 to settle a civil case with the SEC, though it did not admit any wrongdoing.

The overall EV market has also become increasingly difficult for manufacturers. Sales have slowed, and the industry faces uncertainty as President Donald Trump has vowed to eliminate what he calls President Joe Biden’s “electric vehicle mandate.”

Trump revoked Biden’s goal of having EVs comprise half of new vehicle sales by 2030. He may also seek to repeal the $7,500 tax credit for new EV purchases, introduced in the 2022 Inflation Reduction Act.

Stock Price Collapse

Once a high-flying stock, Nikola’s share price fell below $2 late last year and plummeted an additional 40% following its bankruptcy announcement.

The company’s future remains uncertain as it navigates the complexities of legal proceedings, financial struggles, and an evolving EV market.