Once seen as a formidable rival to Tesla in the electric vehicle sector, Nikola filed for Chapter 11 bankruptcy protection in the United States on February 19, 2025. The company, which promised to revolutionize transportation with its hydrogen fuel cell and battery-electric trucks, cited financial difficulties, declining demand, and past scandals as reasons for this decision. Nikola, which at one point boasted a market valuation exceeding $30 billion, now stands as a stark reminder of the brutal competition within the electric vehicle market.
The Rise of Nikola: Big Dreams and Investor Excitement
Founded in 2014 by Trevor Milton, Nikola aimed to transform the trucking industry with electric and hydrogen-powered vehicles. Named after the famed inventor Nikola Tesla, the company captured widespread attention and achieved a meteoric rise following its public debut in 2020. On its first trading days, its stock price surged over 100%, pushing its market cap above $30 billion—a figure that surpassed even Ford Motor Company at the time. Investors hailed Nikola as “Tesla’s trucking counterpart,” pinning high hopes on its potential to challenge Elon Musk’s dominance.
Nikola promised zero-emission trucking solutions with its battery-powered Nikola Tre trucks and hydrogen fuel cell models. Production of battery-electric trucks began in 2022, followed by hydrogen-powered trucks in 2023. The company also established a network of hydrogen fueling stations under its HYLA brand, connecting Northern and Southern California. According to CEO Steve Girsky, Nikola’s customers logged over 3.3 million miles with these trucks, while HYLA stations dispensed more than 330 metric tons of hydrogen. Yet, these achievements couldn’t secure the company’s financial footing.
Scandals and Loss of Trust
Nikola’s bright start was soon overshadowed by scandals. In 2020, allegations surfaced that founder Trevor Milton had misled investors about the company’s technology and products. A promotional video showcasing the Nikola One prototype suggested it was fully functional, but it was later revealed the truck was merely rolling downhill and not operational. This revelation severely damaged the company’s credibility. A report by short-seller Hindenburg Research accused Milton of deceiving investors, escalating the controversy.
Milton resigned in 2020 amid these claims and was convicted of fraud in 2022. In December 2023, he was sentenced to four years in prison for misrepresentations that cost the company billions. Nikola settled with the U.S. Securities and Exchange Commission (SEC) in 2021, paying a $125 million fine without admitting wrongdoing. However, this settlement and ongoing legal battles further strained its finances.
Financial Crisis and Bankruptcy Decision
In recent years, Nikola grappled with rapid cash burn, weak demand, and high interest rates. The broader electric vehicle industry faced financing challenges, hitting capital-intensive operations like Nikola hard. The company’s cash reserves dwindled from $464.7 million at the end of 2023 to $198.3 million by September 2024. At the time of the bankruptcy filing, only $47 million remained. A 2023 recall of all battery-electric trucks due to a battery pack defect added a $56 million burden.
CEO Steve Girsky stated in the bankruptcy announcement, “Like other companies in the electric vehicle industry, various market and macroeconomic factors have impacted our operational capabilities.” Nikola sought a buyer to stay afloat but failed. Consequently, it filed for bankruptcy in the U.S. Bankruptcy Court in Delaware to sell its assets and wind down operations in a controlled manner.
Asset Sale and Uncertain Future
Under Chapter 11, Nikola plans to auction its assets. With court approval, the company will be offered to buyers free of certain debts and obligations. Nikola intends to maintain limited service and support operations until the end of March 2025, continuing to assist existing truck owners. Beyond that, sustaining operations will require partners.
The company’s debts are estimated between $1 billion and $10 billion. The SEC, with a claim of approximately $80 million, is Nikola’s largest unsecured creditor. Sale proceeds will primarily go toward debt repayment, leaving uncertainty about payments to shareholders. Following the bankruptcy news, Nikola’s stock plunged 40%, effectively becoming a “penny stock.”
Warning Signs in the Electric Vehicle Market
Nikola’s bankruptcy reflects broader turbulence in the electric vehicle sector. Companies like Fisker, Proterra, and Lordstown Motors have similarly collapsed in recent years. High interest rates, softening demand, and inadequate charging infrastructure have made survival difficult. Even industry leader Tesla reported its first annual sales decline in 2024, delivering 1.79 million vehicles—a 1.1% drop.
Nikola’s downfall coincides with Donald Trump’s EV-skeptical policies. Expectations that his administration might cut EV incentives add further uncertainty to the sector, potentially complicating Nikola’s asset sale process.
Conclusion: What Remains of the Dream
Nikola, once launched with ambitions of rivaling Tesla, succumbed to scandals, mismanagement, and market conditions. Its story underscores both the potential and the perils of the electric vehicle industry. The fate of Nikola’s assets and technology will become clearer in the coming months.
