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Cash-strapped EV startups hit the brakes on their journey to success.

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EV Startups Are Finally Running Out Of Cash


December 19, 2023 at 11:19am ET

  • A new study has found that many EV startups are running out of cash, indicating that the bubble may have burst for these companies that were once predicted to have huge financial success.
  • The growth of EV demand has not been as explosive as predicted, and market leaders like Tesla have been cutting prices, putting pressure on smaller startups struggling to get production started.
  • The Wall Street Journal analyzed 43 publicly traded EV startups and found that 18 of them were on track to run out of cash by the end of next year if they did not raise additional capital or cut costs. 5 of those companies had already filed for bankruptcy.
  • Proposed U.S. regulations, like the CARS Act, could force automakers to drop internal combustion engine platforms sooner than expected. This has alarmed automakers who fear that they don’t have the necessary capital to fund a quick transition to EVs.
  • Trevor Milton, the founder of Nikola, has been sentenced to four years in prison for securities and wire fraud. He falsely claimed the progress of the startup’s electric semi-truck, leading to a surge in Nikola’s stock.
  • With EV adoption in the U.S. facing challenges, the article raises the question of whether hybrids should be considered as a stop-gap measure before full battery-electric EVs become more viable.

EV Startups Are Running Out Of Cash

A new study conducted by The Wall Street Journal has found that many EV startups are running out of cash. These companies were once predicted to have huge financial success, but the growth of EV demand has not been as explosive as expected. Market leaders like Tesla have been cutting prices, putting pressure on smaller startups struggling to get production started. The Wall Street Journal analyzed 43 publicly traded EV startups and found that 18 of them were on track to run out of cash by the end of next year if they did not raise additional capital or cut costs. 5 of those companies had already filed for bankruptcy.

Proposed Regulations Impacting ICE Platforms

Proposed U.S. regulations, like the CARS Act, could force automakers to drop internal combustion engine platforms sooner than expected. These regulations call for a 56% reduction in vehicle emissions by 2032, potentially shifting 67% of new car sales to battery-electric options. Automakers are concerned that they don’t have the necessary capital to fund a quick transition to EVs, and failure to meet the proposed targets could result in large fines. The Alliance for Automotive Innovation, an industry trade group representing at least 15 automakers, has warned that the industry is not ready for such a rapid change.

Nikola Founder Sentenced to Prison

Trevor Milton, the founder of Nikola, has been sentenced to four years in prison for securities and wire fraud. Milton falsely claimed the progress of the startup’s electric semi-truck, leading to a surge in Nikola’s stock. Prosecutors alleged that he lied about “nearly all aspects of [Nikola Motor’s] business”. Milton’s prison sentence is meant to serve as both a punishment and an example to deter future executives from committing similar crimes.

Should Hybrids Be Considered?

With the challenges facing EV adoption in the U.S., there is a question of whether hybrids should be considered as a stop-gap measure before full battery-electric EVs become more viable. Hybrid sales are soaring outside of the U.S., and they are expected to make up the majority of Japan’s auto sales in 2024. Hybrids are more affordable, require smaller batteries, and still provide significant benefits to the environment. This raises the question of whether the U.S. should focus on hybrids to help fleets align to emissions standards.