The electric vehicle (EV) industry, already grappling with significant challenges, is bracing for tougher times following the U.S. election. A shift in the political landscape, coupled with economic headwinds, is threatening the survival of several young companies in the EV and battery manufacturing sectors.
Rising Bankruptcies and Financial Struggles
The sector has seen notable collapses this year, with high-profile names like electric SUV maker Fisker and bus manufacturer Arrival filing for bankruptcy. Last week, Swedish-based battery maker Northvolt became the latest casualty after BMW canceled a crucial order, prompting the company to file for Chapter 11.
According to a Wall Street Journal analysis, at least a dozen EV and battery startups are at risk of running out of cash by next summer. Among the 36 operational companies reviewed, 75% are losing money, and 13 are projected to exhaust their funds within months.
Even relatively stable players like Rivian Automotive and Lucid Group are feeling the heat. Both companies have seen their stock prices drop by over 40% this year. Although Rivian recently secured conditional approval for a $6.6 billion government loan to expand production, concerns about its rising costs and the deal's precarious timeline persist.
Political Shifts Amplify Challenges
The election of Donald Trump for a second term is expected to exacerbate the struggles of the EV industry. His administration has pledged to eliminate the $7,500 tax credit for electric vehicles, a key driver of demand. Additionally, Biden-era funding initiatives supporting EV and battery projects could face cuts, raising fears of stalling innovation.
Proposed tariffs on vehicles and parts from countries like Mexico, Canada, and China threaten to further increase costs, potentially crippling the already strained supply chain. “It’s a whole ecosystem that is collapsing,” said Ted Brandt, CEO of clean-energy investment bank Marathon Capital.
Collapsing Ecosystem and Supply Chain Struggles
Cooling consumer demand, rising operational costs, and persistent supply chain disruptions have hindered the sector’s growth. Many EV startups relied heavily on the momentum of Tesla’s success and entered public markets through reverse-merger SPAC deals. However, these deals have often left investors bearing the brunt of financial risks.
Established automakers like Ford and General Motors are also scaling back or delaying investments in EV production as sales fall short of expectations. Analysts warn that reduced U.S. investment could widen China’s lead in clean-energy technologies, with companies like BYD and CATL already dominating the market.
“If they continue that, then we’ve just given up on a major economic driver of the next 50 years," said Aniket Shah, global head of sustainability at Jefferies Group.
High-Profile Failures and Faltering Startups
Northvolt’s fall has sent shockwaves through the industry. Once valued at $15 billion, the company’s ambitious plans to produce low-carbon batteries unraveled after BMW canceled a key order. With mounting losses, Northvolt filed for bankruptcy, and its CEO, Peter Carlsson, has since stepped down.
Other startups are also under immense pressure. Li-Cycle Holdings, which aims to recycle batteries into usable materials, received a $475 million government loan for a plant in Rochester, N.Y. However, rising costs have stalled construction, and the company has only enough cash to sustain operations for six months. Li-Cycle’s shares have plummeted by over 97% since its public debut.
Electric van and truck maker Canoo has similarly struggled, laying off a quarter of its workforce to conserve funds. Despite a $113 million incentive package from Oklahoma, the company’s ambitious revenue goals remain unmet. “It feels like being punched in the face every morning,” said CEO Tony Aquila.
Investor Caution and Uncertain Future
Some startups, like Thunder Power Holdings, are still pursuing SPAC deals. However, their performance has been dismal, with shares falling 97% since listing. Industry experts note that many management teams underestimate the challenges of scaling EV operations.
“A lot of these management teams go into it thinking they’re the next Tesla, but that proves to be more the exception than the rule," said Brian Dobson, managing director at Clear Street.
As the industry faces mounting obstacles, the path forward for EV startups remains uncertain. Without significant support and innovation, the vision of a sustainable automotive future could falter.
EV Industry on the Brink: What’s Next?
EV startups face turbulence as bankruptcies rise and funding dries up. With political shifts threatening subsidies and demand cooling, even big names like Rivian and Northvolt struggle. A collapsing ecosystem puts the future of clean energy at risk.