Fisker seeks bankruptcy court approval to sell electric vehicles at average of 14K USD each

The electric vehicle (EV) manufacturer and Tesla competitor, Fisker Inc., has petitioned the Delaware Bankruptcy Court to approve the sale of its remaining Ocean SUV inventory.

As part of Fisker’s Chapter 11 bankruptcy proceedings, the company seeks to offload its finished EVs to American Lease, a New York-based vehicle leasing company, for $46.25 million. This move involves 3,231 EVs being sold at an average price of $14,000 each—a significant reduction from their initial $70,000 retail price.

Impact on creditors and sale dynamics

This proposed sale underscores the sharp depreciation of the Ocean SUVs and highlights Fisker’s financial distress, as these vehicles previously fetched higher prices even during the company’s decline.

The motion for the sale has raised concerns among Fisker’s unsecured creditors, who collectively are owed approximately $1 billion. At a hearing on June 21st, these creditors expressed doubts about receiving any proceeds from the sale. Additionally, the full extent and value of Fisker’s remaining assets are yet to be clarified, with the company requesting more time to compile this information.

American Lease, which caters primarily to ride-hail drivers in the New York City area, has agreed to a sliding scale payment structure, paying $3,200 for previously-titled vehicles, $16,500 for those in good working order, and $2,500 for damaged vehicles. The company has also committed to addressing all open recalls before leasing the vehicles and agreed not to resell them for at least 12 months.

Urgency and legal proceedings

The urgency of the sale is palpable as Fisker’s lawyers push for expedited approval to fund essential business expenses and ensure an orderly liquidation by July 12th. At an emergency hearing on July 3rd, they emphasized the necessity of selling an initial batch of 200 vehicles to cover payroll and other immediate expenses.

The Chief Restructuring Officer, John DiDonato, noted that although the company currently has 179 employees, this number is expected to drop to around 138. Both CEO Henrik Fisker and co-founder Geeta Gupta-Fisker have reduced their salaries to $1 each to sustain the bankruptcy proceedings.

Linda Richenderfer, representing the U.S. Trustee’s office, voiced concerns about the swift pace of the proposed sale and the lack of legal representation for the committee of unsecured creditors.

Judge Thomas Horan, presiding over the case, also expressed frustration over the unclear financial obligations and upcoming payroll payments. Despite these challenges, the final approval of the sale is anticipated at a hearing scheduled for July 11th.

Market challenges and management decisions

Experts have noted that Fisker’s struggles were exacerbated by an oversaturated EV market and questionable management decisions. Many companies, attempting to emulate Tesla, fail to appreciate the nuances of Tesla’s early, unprofitable years in a less competitive market. Fisker’s delayed market entry and issues such as software glitches and subpar component quality eroded consumer confidence and hindered sales.

Moreover, the decision to appoint Geeta Gupta-Fisker as CFO raised concerns about internal governance, contributing to the company’s challenges in a declining EV market. The outcome of the upcoming hearing will be crucial in determining the next steps for this embattled EV manufacturer.