German eVTOL company Lilium has announced that its two main subsidiaries are filing for insolvency after a week of financial uncertainty.
Shares dropped by more than 60% after subsidiaries Lilium GmBH and Lilium eAircraft GmBH said they are over-indebted and unable to pay their debts in the coming days.
The announcement comes days after the aerospace company was denied a state-backed loan of €100 million from the German federal government.
Florian Druckenthaner, a Spokesperson for the German Federal Ministry for Digital and Transport, told Zag Daily: “The Federal Ministry for Digital and Transport has advocated for a state-guaranteed loan to Lilium together with the Free State of Bavaria in order to retain technology leadership in German hands. We have noted with regret that there has been no parliamentary majority for this.
“We continue to believe in the potential of this technology and are currently working on concrete measures to further expand Germany’s position in the field of drones and air taxis.”
A source from Lilium told Zag that the company was given reassurance by the German government that it would receive federal support if the Bavarian government shared a burden of the loan guarantee.
Lilium had therefore focused its efforts on receiving approval from the Bavarian government and secured a €50 million commitment under the condition that federal backing was also secured. However, members of the German Green Party refused to go along with the proposal at the last minute, due to negative perceptions of air taxis and the belief that eVTOLs will only serve members of the upper class.
The source said that Lilium had built the immediate financing of the company on the €100 million proposal from the federal government, which led to the company’s subsequent financial difficulties.
Lilium Shareholder Dr Vivek Arunachalam, a Senior Investment Consultant at GBP International, told Zag Daily that tech firms are in need of a free flow of capital as they grow larger and governments must step in to avoid losing innovation.
“The German Government should encourage disruptive technologies like Lilium’s, just like other countries encourage the technologies of Lilium’s competitors,” Vivek said. “Joby Aviation, Xpeng, and Archer Aviation are competitors that arguably haven’t made the same progress that Lilium has, but still they get the necessary support from their respective governments.”
However, Vivek added: “It has to be noted that Lilium is answerable to its shareholder and investors and cannot sit behind the excuse that the German Government refused the €100 million loan and thus the firm went bankrupt. The €100 million can only increase the fuel supply but not be the only reason for exhaustion. And so Lilium cannot hide behind the only excuse that the German Government failed to provide the funding.”
Lilium attributes a drop in investor confidence to a lack of government funding for electric flying in Germany, whereas competitors in the US, UK, France, Brazil and China are receiving loans and grants keeping market confidence high.
The company is expected to begin self-administration proceedings next week with goals of restructuring and finding new investors. For the time being, employee contracts will remain unchanged and the company is encouraging its staff to keep working towards its milestones.
