New Delhi:- Proterra, a company that develops battery systems for buses and other heavy-duty electric vehicles, filed for bankruptcy earlier this week, the latest in a series of failures in the electric vehicle sector.
While it is possible to draw some parallels between Proterra and other failing or defunct electric vehicle companies, the company faces specific obstacles that have dragged the company down the aisle. financial hardship.
The bankruptcy filing came as a surprise to many. After all, Proterra is an established company - certainly not an upstart before earnings - and the darling of the electric vehicle industry. It was founded in 2004 as an electric bus company, an area that seems open and well positioned for growth. He's raised millions of dollars from top backers like Daimler and struck deals with multiple cities. (As of August 2023, the company has delivered more than 1,000 electric transport buses, including 199 new transport buses and 14 used buses by 2022.)
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In 2015, Proterra diversified its operations and decided to develop its own battery and powertrain technology. It eventually became a company with three businesses.
The battery system is called Powered, the Transit unit, and the charging infrastructure company is called Energy. Complete software services mixed. The company's Battery Systems business unit has helped it expand beyond buses and trucks, off-road equipment used in construction and mining, and even class 8 trailers. Since then, it has installed more than 100 megawatts of heavy-duty electric vehicle charging infrastructure to support fleets of commercial vehicles across North America.
Things are going well enough for it to go public in 2021 through a merger with a special-purpose acquisition company, in a $1.6 billion deal.
So how did Proterra file for Chapter 11 bankruptcy protection?
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Tightening capital markets has not helped. Proterra burned through capital trying to expand its three businesses simultaneously. And then there are the specific issues related to companies trying to profit from sales to cities, and specifically to transit agencies.
Deals with shipping agencies, which rely on federal and state funding, are slow to complete and on tight budgets, which can mean lowering product prices to win bids. It doesn't help profits.
In addition to this pressure, Proterra does not recognize revenue until the delivery of these buses. Inflation has picked up in the meantime, further denting its margins. Contracts are typically signed 12 to 18 months before buses are manufactured, Proterra said in a filing with the U.S. Bankruptcy Code in Delaware County. “Contracts signed in 2021 turned out to be priced lower than when final production costs were realized in 2022,” the company notes.
Make the situation even worse? The supply chain constraints, caused such significant delays that Proterra ended up paying a penalty to the contract supplier TPI Composites. Proterra said in the filing that it could renegotiate the TPI contract to mitigate the penalties to some extent, but still face liability for not agreeing to the agreed minimum. of 'bus'. Proterra and TPI were also fined for late delivery of buses to their customers.
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In addition to all these challenges, one of the biggest – and that existed long before economic conditions changed – is the unique needs of shipping agency customers. Each transit agency has different requirements for their buses, which means that each bus contract can have very different manufacturing requirements than the previous one.
“These transit agencies require highly customized buses to match the other buses in their respective fleets,” Proterra wrote in the filing. "As a result, the manufacturing process requires a lot of customization, which makes it difficult to scale the business and requires a lot of working capital."
Proterra still intends to continue operating as a business. His hope - outlined when he voluntarily filed for Chapter 11 protection - is that the move will "strengthen his financial position" through refinancing or selling operations.
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“The reorganization is aimed at maximizing the value of each independent business,” Proterra spokesperson Shane Levy told TechCrunch, noting that it is ongoing and the final outcome is still unclear.
The company said it would continue operating and asked the bankruptcy court to use existing capital to pay employees and compensate suppliers and vendors.
In the meantime, Proterra has canceled its earnings call scheduled for August. The company said Moelis & Company LLC is acting as Proterra's investment banker, FTI Consulting as financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison LLP as legal advisor.
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Proterra the EV heavy duty vehicle maker has got up from the board after filling for the bankruptcy but still intends to be in for the competition waiting for them to be placed.