Electric bus maker Proterra Inc. recently made headlines when it filed for bankruptcy, despite having support from US President Joe Biden, contracts with numerous transit agencies, and a revenue of $309 million. The company’s bankruptcy filing revealed that even with a diversified business in the growing electric vehicle (EV) market and millions in government loans, it was unable to sustain profitability.
According to Pavel Molchanov, an equity research analyst at Raymond James & Associates, Proterra’s bankruptcy is not an isolated case and more bankruptcies, including some involving public companies, are expected in the EV industry. He emphasized that it’s only a matter of time before other companies face similar challenges.
Proterra, based in the Bay Area, is known for manufacturing zero-emission buses and expanded its operations to include battery systems, powertrain production, and charging infrastructure. The company’s founder, Ryan Popple, was regarded as a rising star in the EV industry. However, despite its accomplishments and a successful initial public offering in June 2021, Proterra couldn’t turn a profit in nearly 20 years of operation.
Proterra’s bankruptcy filing cited market and macroeconomic headwinds as the primary reasons for its financial struggles. Shane Levy, a spokesperson for the company, stated that several factors specific to the public transit industry had a significant impact on their ability to scale and profitably operate each business line simultaneously.
While the auto industry has invested billions in EV production, manufacturing commercial EVs profitably remains a major challenge for both established automakers and newer companies. David Tuttle, a research associate at the University of Texas at Austin’s Energy Institute, explained that although technology has advanced enough to reduce barriers to entry, there is a limited window of opportunity to achieve cash flow in this capital-intensive market.
Proterra’s revenue in 2022 reached $309.4 million, reflecting a 24% increase from the previous year. The company has delivered over 1,000 electric buses to public transit agencies since 2010. However, its financial struggles persisted, with negative gross profit in five out of the last six quarters.
Selling electric buses to transit agencies is a costly and time-consuming process, as customization requirements vary by agency, and funding is often available only in batches, leading to cash flow unpredictability. Additionally, rising inflation and supply chain constraints further complicate contract completion and production costs.
Proterra’s bankruptcy highlights the challenges faced by EV startups and early-stage companies, such as cash flow shortages and difficulty obtaining funding. Legacy automakers with greater financial backing can afford to invest in EV development, while smaller companies like Proterra struggle to stay afloat.
Despite the bankruptcy filing, Proterra remains committed to its business operations and plans to recapitalize its operations. The company believes it has ample opportunities to secure new capital, adjust its business strategy, and continue serving its customers.
Overall, Proterra’s bankruptcy filing serves as a cautionary tale for the EV industry. While market demand and government support for EV adoption are increasing, manufacturing EVs profitably at scale remains a significant challenge. The industry must navigate low volume and high investment needs, making it a bumpy ride for many companies.
