Bumpy ride: A Proterra electric bus next to solar panels at a bus maintenance facility in Los Angeles. The company has been unable to turn a profit in 20 years of operations. — Reuters
Los Angeles: Electric bus maker Proterra Inc had support from US President Joe Biden, contracts with 135 transit agencies and US$309mil in revenue.
But despite that, it couldn’t turn a profit after nearly 20 years and filed for bankruptcy last week. In doing so, it revealed that a diversified business in the growing EV market and millions in government loans weren’t enough to keep it afloat.
“Rest assured, there will be more bankruptcies – including some public companies – in the EV industry,” said Pavel Molchanov, an equity research analyst at the wealth management firm Raymond James & Associates. “It’s only a matter of time.”
The Bay Area-based zero-emission bus manufacturer is one of the highest-profile EV company casualties in recent years. Proterra cited “market and macroeconomic headwinds” as the catalysts for its Chapter 11 bankruptcy filing, where it listed assets and liabilities of at least US$500mil each.
“There’s a confluence of factors that brought us to this point,” said company spokesperson Shane Levy. “Some that are specific to the public transit industry that have impacted our ability to profitably scale each of our business lines simultaneously.”
The auto industry has deployed billions towards EV production, while across the globe, governments have set increasingly strict emissions limits and mandates to accelerate the transition to EVs. But manufacturing commercial EVs profitably remains a huge challenge for legacy automakers and younger companies alike.
“For vehicle electrification, the technology has gotten good enough to radically reduce the barriers to entry – it opened the floodgates,” said David Tuttle, a research associate at the University of Texas at Austin’s Energy Institute.
“But there’s a certain finite window that you have to get the right formula and eventually get to cash flow because this is a high intensity, high capex type of market to build big vehicles.”
Proterra launched in 2004 as an electric bus maker before expanding into battery systems and powertrain production, as well as charging infrastructure. Founder Ryan Popple, who served as chief executive officer from 2014 to 2020, was hailed as a rising star in the EV industry before leaving the company. He died in 2021.
The company went public in June 2021 after merging with a special-purpose acquisition company. Its value stood at US$1.6bil when the deal closed.
Proterra has delivered more than 1,000 electric buses to public transit agencies in places like Los Angeles and San Francisco since 2010. In 2022, it generated US$309.4mil in revenue, up 24% from the year prior, according to company filings.
The company was awarded a US$10mil loan from the Paycheck Protection Programme in 2020 that was forgiven in May 2022, according to a filing.
Biden, who attended a virtual tour of a company facility in 2021, praised Proterra as a leader in the EV sector amid plans to electrify the United States’ fleet of transit and school buses.
“I have overwhelming confidence in American enterprise,” he said during the tour. “We can do anything if we put our mind to it.”
But profit never came. In the first half of this year, Proterra generated about US$165mil in revenue and had US$180mil in outstanding debt, according to its most recent quarterly earnings statement.
As of June, the company’s accumulated deficit was US$1.4bil. Bankruptcy now gives Proterra protection from creditors while it plans how to repay them.
The company’s stock has plummeted 90% since the Aug 7 announcement, and its shares have fallen from more than US$15 to less than US$2 since it went public.
Despite the setback, Proterra said it’s pushing ahead with business as usual while it works to recapitalise its operations. The company said it has ample opportunity to secure new capital, rework its business strategy and continue to serve its customers.
“We have customers, there’s demand, there’s opportunity,” Levy said. “We believe the Chapter 11 reorganisation process presents the opportunity for the company and its product lines to deliver value into the future.”
Despite increased market demand and government support for EV adoption, selling buses to transit agencies is costly and contracts can take years to complete. That’s because bus customisation needs vary by transit agency.
Plus, municipalities tend to buy buses in batches when funding is available, creating unpredictability that makes it harder to manage a consistent cash flow, according to Nikolas Soulopoulos, head of commercial transport research at BloombergNEF. — Bloomberg
