Proterra bankruptcy drags down Volta but both companies live on under new ownership

The bankruptcies of Proterra and Volta Trucks highlighted the obstacles encountered by electric vehicle manufacturers still in their infancy.

Nevertheless, despite these setbacks, continued interest and investment in the industry, as evidenced by acquisitions, demonstrates a promising electric future.

How these events unfolded, starting with Proterra:

On August 7, 2023, Proterra, an American manufacturer with three specialised divisions in EV powertrains, battery electric buses, and charging infrastructure, made the voluntary decision to file for protection under Chapter 11 of the U.S. Bankruptcy Code. The objective was to enhance its financial position by exploring alternatives like recapitalisation or a sale as a going concern.

“The foundation we have built has set the stage for decarbonisation across the commercial vehicle industry as a whole, and we recognise the great potential in all of our product offerings to enable this important transformation,” said Proterra CEO Gareth Joyce.

“This is why we are taking action to separate each product line through the Chapter 11 reorganisation process to maximise their independent potential.”

During this period, the company intended to operate as usual, using existing capital to fund operations, including paying employees and compensating vendors and suppliers in accordance with Chapter 11 rules.

So what caused Proterra’s bankruptcy?

Proterra’s financial difficulties were attributed to factors such as the tightening capital market, which posed challenges in securing the necessary funding. Selling to transit agencies heavily reliant on federal funding required Proterra to make price reductions in order to secure bids, which in turn further impacted profit margins.

Additionally, inflation between the signing of contracts and the manufacturing of buses added pressure to Proterra’s financial situation, while supply chain constraints led to penalties for delayed bus deliveries.

The complexity of meeting the diverse requirements of transit agencies compounded their challenges, making it harder for Proterra to scale their business.

Ironically, Proterra faced these challenges just as the e-bus market in the US was booming, with a 66% increase in 2022. Additionally, the Biden administration’s 2021 infrastructure law allocated A$8.2 billion to transit agencies for financing the very vehicles that Proterra supported.

What was Volta Trucks, and what caused its bankruptcy?

On October 17, 2023, Volta Trucks, a company with registered offices in Sweden and the UK and renowned for designing the 16-tonne Volta Zero, the world’s first purpose-built, all-electric commercial vehicle for city-centre deliveries, filed for bankruptcy.

This decision was directly prompted by the collapse of its intended battery supplier, Proterra, which had a significant impact on Volta Trucks’ production forecasts. Without a reliable battery supplier, the company faced challenges in attracting investors and securing the additional capital it required to start production.

Prior to these challenges, Volta Trucks had made significant progress, having successfully carried out pilot programs in five European countries. It was just 30 days away from commencing production at its Austrian factory.

Volta Trucks had also successfully secured approximately A$773 million in investments and held a bank of pre-orders for more than 5000 vehicles valued at around A$2.45 billion. This gave the company a remarkable pipeline value of A$6.9 billion, which served as a testament to the high market demand for its trucks.

What happened to Volta after bankruptcy?

In spite of the bankruptcy, Volta Trucks received continued demand as well as enquiries from numerous potential investors interested in acquiring the company. Eventually, on December 1st, 2023, Luxor Capital Group, a US hedge fund based in New York that had previously invested in Volta Trucks, stepped in and purchased the UK business assets for an undisclosed amount.

The deal, facilitated by administrators Alvarez & Marsal, involved the sale of Volta Trucks to a newly founded entity called Volta Commercial Vehicles Ltd.

This acquisition is expected to provide stability and support for the electric truck maker to overcome the obstacles it faced in production and fundraising; however, it was unclear how many of the approximately Volta Trucks 800 employees would retained under the new ownership.

What happened to Proterra after bankruptcy?

On November 10, 2023, Volvo Group (of which Chinese electric vehicle manufacturer Geely is the second-largest shareholder) issued a press release that stated: “Proterra Inc. and Proterra Operating Company Inc. are in a voluntary Chapter 11 bankruptcy process in the US. Volvo Group has been selected as the winning bidder in an auction for the business and assets of the Proterra Powered business,” for which it paid A$313 million.

It is worth noting that in 2021, Proterra made its public debut through a SPAC merger, aiming to enhance its access to investor funds. During this time, the company’s valuation stood at A$2.4 billion. However, prior to the Chapter 11 bankruptcy announcement, at the last trading session, Proterra’s market value had declined to A$539 million.

The acquisition of Proterra’s business line by Volvo Battery Solutions LLC was finally approved by the bankruptcy court on November 29, 2023, and as a result, Volvo will now acquire Proterra’s battery development centre in California and assembly factory in South Carolina.

Volvo’s expertise in trucks, buses, construction equipment, and power solutions for marine and industrial applications makes the acquisition of Proterra look like a logical choice.

What about Proterra’s Transit and Energy business lines?

On November 13, 2023, Proterra announced the sale of its Transit business line to Phoenix Motorcars for A$14.9 million. This includes Proterra’s electric transit bus manufacturing business.  Additionally, a group of private funds controlled by Cowen Equity, a financial backer of Proterra, acquired Proterra’s Energy business line, which includes fleet charging infrastructure and energy management solutions. The financial terms of this acquisition were not disclosed.

“We are pleased to have reached this important milestone in our Chapter 11 process and look forward to working with Volvo, Phoenix, and CSI to close our pending transactions in the coming weeks,” said Gareth Joyce, Proterra CEO.

The impact on Proterra’s three business lines as well as Volta’s future currently remain undisclosed by their new acquirers, which face a combination of challenges and opportunities ahead.