Proterra, the largest electric bus manufacturer in the United States, has filed for bankruptcy under Chapter 11. The company, founded in 2004, was one of the biggest EV manufacturers and stood as a contender against Chinese rival BYD. It had strategic plans to penetrate the emerging electric bus markets in North America and Europe. Despite its huge potential, Proterra faced several financial challenges, leading to this dramatic turn of events.
Proterra initially gained traction in the electric bus industry, selling over 1,300 buses to transit agencies across the U.S. and Canada. Additionally, it supplied drivetrains and batteries to various bus and transit manufacturers, further solidifying its position.
The company secured substantial venture capital investments, raising approximately $682 million from prominent investors like Daimler, Generation Investment Management, and GM Ventures. These funds were intended to support Proterra’s ambitious goal of producing electric buses that could make a significant impact on North American transit.
Public Listing and Struggles
In 2021, Proterra entered the public market through a reverse merger with a special-purpose acquisition company (SPAC), a popular route for many electric vehicle-related companies. The merger provided Proterra with $640 million in funding and valued the company at $1.6 billion.
Following this milestone, Proterra revealed plans to expand its manufacturing facility in South Carolina, capitalizing on federal electric vehicle funding from legislation like the Bipartisan Infrastructure Law and the Inflation Reduction Act.
Despite its revenue-generating operations, Proterra faced challenges turning a profit from its core electric bus manufacturing, drivetrain, battery, and EV charger businesses. Notably, its cost of goods sold exceeded its revenue, indicating financial struggles. This is a challenge not unique to Proterra, as even major players like Ford have reported significant losses from their electric vehicle operations.
Financial Woes and Chapter 11 Bankruptcy
Proterra’s financial troubles were exacerbated by its net loss of $244 million in the first quarter of 2023, a stark increase from the previous year’s $51 million loss. As a result, the company’s share price plummeted, falling from its post-SPAC high of $26.38 to below $2 and, subsequently, below $1.
The company found itself in a precarious situation, grappling with the dilemma of filing for bankruptcy to undergo restructuring or pursuing a challenging and potentially dilutive capital raise.
Ultimately, Proterra chose to file for Chapter 11 bankruptcy protection. This decision was driven by the company’s need to address its cash-burning operations and secure its future viability. The bankruptcy process will involve working with the bankruptcy court and creditors to restructure its financial position, potentially through a recapitalization or sale that ensures ongoing operations and commitments like employee salaries, benefits, and vendor payments.
Proterra’s bankruptcy comes at a time when the electric bus market in North America is gradually expanding. While China has established itself as a dominant player, accounting for 80% of global electric bus sales in 2022, North American and European markets have only seen limited adoption. Proterra’s struggle poses a challenge for the North American transition away from fossil fuel-powered buses, as it was a key player in driving this growth.
Other EV firms that have undergone bankruptcy
Lordstown Motors, a company with ambitions to manufacture electric pickup trucks, initiated Chapter 11 bankruptcy protection proceedings on June 14, 2023. The company grappled with an array of financial and operational obstacles, including a cash shortfall, production setbacks, regulatory investigations, and leadership turnover.
Faraday Future, an enterprise that aspired to introduce a high-end electric SUV, entered Chapter 11 bankruptcy protection on October 14, 2022. The company encountered various challenges, including a legal dispute with its major investor, an unsuccessful initial public offering (IPO), and a lack of financial support.
