Lion Electric faces financial crisis as investor backing dwindles

In late November 2024, Lion Electric, a Quebec-based electric school bus manufacturer, is desperately seeking investor support to meet looming credit agreement deadlines. The company faces pressures that could potentially lead to restructuring under bankruptcy protection if new funds cannot be raised or renegotiated with existing lenders. Lion has recently received some relief on minimum liquidity covenants from Finalta Capital Inc. and the Caisse de dépôt et placement du Québec, but it also warned of compliance issues with its credit terms if further funds are not secured. This situation is exacerbated by ongoing supply chain disruptions and governmental delays that have hindered vehicle deliveries throughout the year. Historically, Lion Electric has benefited from substantial support from both the Quebec and Canadian governments, totaling over $190 million. In July 2024, Quebec’s investment arm offered a loan of up to $5 million, part of a broader commitment by the provincial government that has helped the company scale its operations. Despite raising this support, the company has struggled financially, with its stock plummeting from a peak price of $24.21 in June 2021 to just 26 cents on the Toronto Stock Exchange. Investors have been alarmed by the company's lack of profitability since its public offering, which was done through a merger with a special purpose acquisition company. Lion's operational issues have included workforce reductions, with the company cutting more than half of its staff since 2023 in an effort to curb cash outflow. The manufacturer has also taken actions like leasing out excess factory space at a new facility in Joliet, Illinois, to manage costs better. Its focus has been primarily on the school bus market—one of the fastest-growing segments for electric vehicles—supported by public funding. However, delays in government subsidy disbursement have directly impacted the number of buses Lion has been able to deliver, particularly concerning the timing of the U.S. Environmental Protection Agency’s clean-bus program and Canada’s Zero Emission Transit Fund. The situation for Lion Electric is reflective of broader challenges in Quebec’s electric vehicle industry, facing additional strains with other manufacturers also dealing with financial instability. The electric powersports vehicle maker, Taiga Motors Corp., similarly filed for creditor protection earlier in June before being acquired by British entrepreneur Stewart Wilkinson. As Lion Electric races against time to arrange necessary funds, there is a sense of urgency as both provincial and federal support mechanisms alongside private sector investment become crucial for the company's survival amid its worsening financial predicament.