Summary:
- Canoo Inc. filed for bankruptcy and ceased operations, joining other failed EV startups like Lordstown Motors and Fisker.
- Despite promising prototypes and high-profile clients, Canoo’s financial mismanagement led to losses of $488 million in 2022 and $303 million in 2023.
- The company’s inability to produce vehicles at scale, delivering only 22 vehicles in 2023, exacerbated its financial troubles.
- Canoo’s use of a SPAC to go public in 2020 provided quick funding but added public pressure, revealing flaws in its financial planning.
- The fallout raises doubts about the viability of small EV startups in an increasingly competitive market.
Canoo Inc., the electric vehicle startup with prominent clients like Walmart and NASA, has filed for bankruptcy on Friday and will “cease operations immediately.” Canoo joins the list of EV startups that failed recently under similar circumstances, such as Lordstown Motors and Fisker. These companies were essentially using up cash faster than they could secure new investments.
Formerly known as Evelozcity, Canoo, which entered the scene in 2017 as a disrupting EV startup, finally succumbed after seven years of promising prototypes, unable to secure additional sources of capital to relieve its severe financial strain. The company is liquidating its assets in a Chapter 7 proceeding in the Delaware Bankruptcy Court.
But what went wrong? Canoo was aiming to be a pioneering brand in the EV arena. Why, despite having what appeared to be an exciting lineup and offering futuristic designs and features that no other brand had, did Canoo fail to reach its potential?
Canoo’s Financial Mismanagement
Canoo’s financial troubles were no secret. And the last couple of years would set the company up for failure. First, in 2022, Canoo posted a staggering $488 million loss. 2023 wasn’t far behind. The company lost $303 million and another $118 million halfway through 2024. By the time Canoo filed for bankruptcy, the company had less than $50,000 in assets and liabilities exceeding $10 million.
This financial imbalance was the result of years of overspending and underperformance. A significant portion of its struggles can be traced to its inability to produce and sell vehicles at scale. Despite ambitious production goals and a state-of-the-art facility in Oklahoma, Canoo only delivered 22 vehicles in 2023, generating less than $1 million in revenue. This inability to monetize its innovative concepts put immense strain on its resources.
And to top it all off, Canoo’s spending on executive perks, such as a $1.7 million private jet for CEO Tony Aquila, raised eyebrows and further eroded investor confidence. Unfortunately, its misaligned priorities and operational inefficiency sealed Canoo’s fate.
The SPAC Factor: A Common Trap for EV Startups
Canoo’s road to becoming a publicly traded company via a SPAC in 2020 was very similar to how most EV startups have been doing it lately—mostly for the same reasons, too. Although the SPAC route gave Canoo an easy way to raise $600 million in its initial public offering, it also placed the company under immense public scrutiny and pressure for quick delivery.
Although SPACs provide quick access to capital, they often fail to provide their startups with solid foundations. Canoo shares similarities with other SPAC-backed startups such as Lordstown Motors and Electric Last Mile Solutions, who have also struggled to strike a balance between their ambitious plans and the financial discipline necessary to achieve them. Reliance upon external funding rather than solid revenue generation built precarious financial structures.
Looking back, Canoo’s SPAC merger reveals a theme that will become all too common: incredibly optimistic projections with little to no follow-through. The SPAC boom of the early 2020s has been more detrimental than beneficial for EV startups, as a wave of bankruptcies has swept the sector.
The Fallout
Canoo’s bankruptcy is a cautionary tale for the EV industry. This becomes particularly true for new entrants looking to carve out a niche in a market dominated by established automakers. Despite partnerships with Walmart, NASA, and the U.S. Postal Service, Canoo couldn’t overcome its financial and operational challenges.
The fallout raises questions about the viability of small EV startups in an industry that demands both scale and sustainability. It also highlights the need for realistic planning, disciplined spending, and a focus on execution rather than hype. Startups must also navigate the complexities of manufacturing, supply chain logistics, and consumer trust, all of which Canoo struggled to manage effectively.
Lessons for the EV Industry
As the EV industry continues to evolve, Canoo’s story serves as a reminder of the high stakes involved. For aspiring EV companies, the lessons are clear: bold ideas and innovative designs are not enough—long-term success requires strategic planning, financial discipline, and a commitment to delivering on promises.
