On Monday, the founder of electric truck company Nikola was sentenced to four years in prison for fraud. The New York Times conducted an "audit" of electric vehicle startups; The publication believes that the high-profile case of Trevor Milton highlighted the problems that plague startups developing electric vehicles.

Milton was accused of inflating Nikola's stock price by making "extravagant claims" about his startup and falsifying its achievements. Nikola is not the only startup that has attracted hundreds of millions of dollars in investment without making a profit or producing the stated number of electric vehicles.

Investors have poured money heavily into startups such as Canoo, Lordstown Motors and Lucid Motors in recent years. New electric vehicle manufacturers were seen as future competitors to Ford Motor and General Motors. Electric cars were supposed to be easier to manufacture. Rolling out thousands of electric vehicles and meeting safety standards has proven to be far more complex and expensive than many startup executives and their supporters expected.

Many electric vehicle startups have gone public after merging with a “Special-purpose acquisition company” (SPAC), which allows them to keep most of their information private and avoid the regulatory scrutiny that comes with typical IPOs. placement of shares. Investors who bought these shares suffered huge losses. For example, Nikola shares have lost 99% of their value since 2020. The startup is still running its business, but warned investors in November that it could run out of money within the next 12 months. Only one group of investors profited: short sellers, who made money by betting that the stock price would fall.

The first to report that Trevor Milton's allegations were untrue was Hindenburg Research, an investment firm that specializes in uncovering corporate malfeasance. In addition to Nikola, Hindenburg Research has identified similar discrepancies at other electric vehicle startups.

Last year, Hindenburg Research accused Mullen Automotive of importing Chinese electric vehicles and passing them off as its own. In addition, Mullen Automotive has exaggerated its achievements, claiming that it is close to offering advanced solid-state batteries. Mullen shares, which were worth more than $3,600 at their 2020 peak, recently traded at 13 cents.

Another target of Hindenburg Research was Lordstown, a potential manufacturer of electric trucks. Lordstown CEO Steve Burns resigned after Hindenburg Research accused him of "exaggerating" the number of orders for pickup trucks. The company filed for bankruptcy in June 2023.

The list of startups that failed to live up to expectations goes on. Over the ten years of its activity, Faraday Future has delivered nine ultra-luxury electric vehicles. In 2021, the company misled investors by claiming it had 14,000 orders, which turned out to be “unpaid expressions of interest.” In September, Faraday Future announced that it was under investigation by the Securities and Exchange Commission and the US Department of Justice.

Canoo previously announced $750 million in orders for its electric vans from Walmart and other customers. The company said it was increasing production at its Oklahoma plant, but declined to say when mass deliveries of vehicles would begin. In November, Canoo admitted to investors that it had "substantial doubt" that it would survive. At the same time, Canoo raised $380 million to finance its “expansion.”

Investors have become skeptical even of companies that have managed to produce thousands of cars. Shares of Fisker, which has shipped about 3,000 electric vehicles, are down 95% from their 2021 high. Shares of Lucid, which said it will produce at least 8,000 electric sedans this year, fell 93%. Shares of Rivian, the maker of electric pickup trucks and sport utility vehicles that many analysts see as the startup with the best chance of survival, fell 80%.

Trevor Milton denied his guilt in court and stated that he was “a quarter Cherokee” and was being persecuted for ethnic reasons. But in mid-2020, he sold part of his Nikola shares for $100 million. Nikola investors lost more than $660 million.


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