e.GO Mobile applies for self-administered insolvency
The Aachen-based electric car manufacturer e.GO Mobile has filed an application for a protective shielding procedure with Aachen Local Court – a special form of insolvency in self-administration. The Chinese investor planning to join the German startup apparently could not participate as intended due to the effects of the Covid-19 pandemic.
The court has already granted the application and appointed Biner Bähr of White & Case as provisional administrator. In addition, Paul Fink from the law firm FRH that specialises in restructuring and insolvency law, is to join the board of directors as a general agent. Protective umbrella proceedings are a special form of insolvency in self-administration: the aim of the proceedings is to submit an insolvency plan. During the proceedings, the company retains the power of disposal as debtor and can continue to act on its own. This means that there are only grounds for insolvency, but the company is not yet insolvent.
“Our predominantly strategic investors have given us strong support up to this point and made it possible for us to be the only startup in Europe to bring an electric car into series production. Now they understandably have other priorities,” company founder and CEO Günther Schuh said in a public statement.
Schuh did not specify what these “other priorities” were. In January this year, the company announced that they were forming a joint venture with a Chinese manufacturer to handle large-scale production in China. It is most likely that this Chinese partner has not been able to follow through as planned due to the continuing resonance of the Covid-19 pandemic. In an interview published at the end of January, Schuh confirmed that the company had already gathered 310 million euros from investors. At the time, Schuh said that 105 million euros were needed to be able to stand “on its own two feet”. “We have secured over 50 million of this as equity from our Chinese partner,” said the e.GO CEO. “The contracts have been signed, the transfer of the money is in progress.”
Be that as it may, the above statements were made before the Corona crisis. It would now appear that, despite the signed contracts, the deal has not come through. This would mean that an important future project has withered, while difficulties in Germany have continued to hail.
Last year, for example, only 526 vehicles were produced instead of the announced 3,300. According to preliminary figures, a loss of around 50 million euros was incurred for 2019 – with just 20 million euros in sales. Already in October e.GO Mobile had to struggle with significant financial troubles. “Financing via the market” was not possible at that time. The company only escaped insolvency because shareholders brought in 100 million euros.
This saving injection of money has apparently now been omitted. Nevertheless, according to the public statement, Schuh continues to make big plans and wants to “grow strongly in 2021 and 2022” – the company also sticks to its forecast of a positive operating cash flow from the second half of 2020. “That’s why we want to keep all our employees on board and hope that our customers and suppliers will remain loyal to us during this self-management phase,” said Schuh.
The CEO described the insolvency in self-management as a “new challenge from outside” and pointed to numerous problems in the past, such as when Opel parts were no longer allowed to be used for e.GO vehicles after Opel was taken over by PSA, or when suppliers brought in new restrictive governance codes according to Dieselgate and unilaterally terminated existing supply contracts. Or just recently when the German government increased the environmental bonus, meaning that e.GO Mobile had to raise the price of the Life by 2,000 euros, which robbed them of their market advantage and significantly impeded their chances in the following financing rounds. The effects of the Corona crises was then just the last drop in the bucket.
At the same time, the four-seater e-vehicle e.GO Life has been in series production since spring 2019 and delivering to customers since autumn 2019. “That is why we want to keep all our employees on board and hope that our customers and suppliers will remain loyal to us during this self-managed phase,” says Prof. Günther Schuh. “We have already achieved 80% of what is actually impossible in Germany. And we are creative and tough: we are German engineers! We will also survive this crisis.” Schuh reiterated that the company is making “essential solutions for sustainable mobility of tomorrow.”
Including reporting by Sebastian Schaal, Germany
e.go-mobile.com (in German)