Arizona-based EV maker Nikola files for bankruptcy: Here's what to know

PHOENIX - After officials with electric vehicle maker Nikola said they would likely run out of cash early this year, the company filed for Chapter 11 bankruptcy.

Here's what to know about the company, its history, and why it decided to file for bankruptcy.

What is Nikola?

In previously-released statements, the company describes itself as 'an integrated truck and energy company' that is based in Phoenix, with a factory in Coolidge.

The company was making electric semi trucks, which is something unique to the industry.

This isn't the first time the company has been under the spotlight, as the company's founder was convicted of fraud just over a year ago.

The backstory:

According to an Associated Press report on Nikola's bankruptcy proceedings, Trevor Milton was sentenced to four years in prison in December 2023, after he was convicted of exaggerating claims about his company’s production of zero-emission 18-wheel trucks, leading to sizable losses for investors.

Prosecutors said Milton falsely claimed to have built its own revolutionary truck that was actually a General Motors product with Nikola’s logo stamped onto it. Called as a government witness, Nikola’s CEO testified that Milton "was prone to exaggeration" when pitching his venture to investors.

Milton ultimately resigned in 2020 amid reports of fraud. The company paid $125 million in 2021 to settle a civil case against it by the SEC. Nikola didn’t admit any wrongdoing.

In 2023, multiple Nikola vehicles caught fire at the company's Phoenix facility.

Why is Nikola declaring bankruptcy?

Per the company's webpage on its bankruptcy proceedings, officials said the company, like others in the electric vehicle industry, "faced various market and macroeconomic factors that have impacted our ability to operate."

"We have taken numerous actions in recent months to raise capital, reduce liabilities, strengthen our balance sheet and preserve cash to sustain operations. Unfortunately, these efforts were not sufficient to overcome the current challenges," a portion of the page read.

Dig deeper:

The AP noted that Nikola has had difficulty scaling its business. In the third quarter, it produced 83 trucks but recorded a net loss of almost $200 million. It produced 77 trucks in the second quarter, with a net loss of nearly $134 million.

The company also had to contend with a more perilous environment for EV makers as sales slow.

In a separate article released on Nov. 26, the AP reported that concerns about range, charging infrastructure and higher prices have become sore points among both EV enthusiasts and skeptics in the U.S., as well as Europe. The article also notes that pure EVs accounted for 8% of overall U.S. vehicle sales in October 2024.

Local perspective:

One automobile expert weighed in on Nikola's bankruptcy, saying the issue was demand.

"I feel like this was almost an inevitability," said Karl Brauer with ISeeCars.com. "There just doesn’t seem to be a lot of good use for electric power trains in long-distance, large truck hauling."

Brauer also believes that lean times are ahead for the entire EV industry.

"The environment for electric vehicles, especially in the U.S., isn’t going to be better over the next couple years. It’s gonna be worse. There’s gonna be less government promoting these brands in these companies," said Brauer.

What is Chapter 11?

Per the government website for United States Courts, Chapter 11 refers to a section of the Bankruptcy Code that provides for a reorganization.

Big picture view:

According to the website, Chapter 11 is typically used to reorganize a business. Usually, the debtor, or the person who owes a debt, remains ‘in possession,' meaning the debtor has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money.

"A plan of reorganization is proposed, creditors whose rights are affected may vote on the plan, and the plan may be confirmed by the court if it gets the required votes and satisfies certain legal requirements," read a portion of the website.

By the numbers:

According to the American Bankruptcy Institute, there were 680 commercial Chapter 11 filings in November 2024, which was down 22% from the 865 that was reported in November 2023. ABI's website, however, does note that the numbers from November 2023 were "influenced by the large number of related filings in the WeWork case."

Are there other EV companies are in Arizona?

Besides Nikola, other EV companies have operated, or continue to operate, in Arizona.

During Nikola's launch party in 2022, then-Governor Doug Ducey spoke about the other EV companies that were in Arizona at the time.

"Nikola joins companies such as Lucid, ElectraMeccanica, Atlas Vehicles, and Zero Electric Vehicles to earn the moniker ‘Made in Arizona,’" Former Gov. Ducey said at the time.

Since that launch party, Zero Electric Vehicles has liquidated its assets, while ElectraMeccanica's offices in Mesa is now empty. Meanwhile, Atlas became NXU, and is looking to merge with a California bioplastic company.

As for Lucid, it is still making EVs. They just posted their best quarter, and have a new SUV model.

What happens now that Nikola has filed for bankruptcy?

Per the company's website, it is still too early to provide a firm timeline on the Chapter 11 process.

However, company officials did write that the company had filed a motion "seeking authorization to pursue an auction and sale process under Section 363 of the U.S. Bankruptcy Code."

If the company is indeed sold, officials noted that proceeds from the sale will follow the bankruptcy priority roles, with creditors and other claimants being paid first, and shareholders being paid with whatever funds are left.

What they're saying:

"Shareholders will not receive a payout if the sale proceeds are insufficient to cover all debt obligations," a portion of the website reads.

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