Taiga wants to revolutionize the powersports industry with its all-electric vehicles – bringing an environmental sensibility to a sector historically hooked on loud revving engines.Christinne Muschi/The Globe and Mail
Canadian electric off-road vehicle maker Taiga Motors Corp. TAIG-T has won bankruptcy protection and will seek new investors to try to secure a rebirth after running out of money in its bid to scale up production.
The Montreal-based manufacturer of electric snowmobiles and personal watercraft said Wednesday that it has sought and obtained an order from the Quebec Superior Court shielding it from creditors under the Companies’ Creditors Arrangement Act. The court also granted Taiga an order authorizing the company to pursue a formal sale and investment solicitation process.
“The company has been actively reducing its cost structure and has been continuously seeking various alternatives to fund its operations,” Taiga said in a statement.
“However, following a review and after careful consideration of all available alternatives and in consultation with legal and financial advisors, the directors of the company unanimously determined that it was in its best interests to commence the CCAA proceedings.”
It’s not a surprise that Taiga sought credit protection. In filings accompanying a recent earnings report, the company’s auditors said there was a material uncertainty about its ability to continue as a going concern.
Still, it’s a significant setback for Taiga’s founder and chief executive, Samuel Bruneau, who launched the company with two McGill University engineering classmates in 2015. And it provides a cautionary tale for other manufacturing startups with outsized dreams that are struggling to make them work.
Led by Mr. Bruneau, Taiga wants to revolutionize the powersports industry with its all-electric vehicles – bringing an environmental sensibility to a sector historically hooked on loud revving engines. The company is one of Quebec’s homegrown hopefuls for the EV age, but it has struggled to scale up production, experiencing numerous challenges including what it has said was a failure by certain suppliers to deliver on contracts.
The crux of the problem is that they were unable to produce sufficient volumes to generate the required cash flows, said Louis Hébert, a professor of strategic management at the HEC Montréal business school. He added that the company has also seen significant leadership change since it went public in 2021. Last month, finance chief Eric Bussières would leave the manufacturer to pursue another opportunity.
“This is a company that had big ambitions. They wanted to be the Tesla of powersports,” Mr. Hébert said.
“But it’s not because you have a better product or better technology that you necessarily have the advantage. You also need a supply chain, capital, commercialization, a service network, a whole series of complementary elements … And it didn’t come together.”
Under the bankruptcy protection process, the Quebec court approved a deal that will see Taiga have access to up to $4.4-million in financing provided by Export Development Canada, or EDC, its biggest secured creditor. Taiga said it will draw down $1-million from that immediately to fund its working capital and implement a restructuring.
Deloitte has been appointed as monitor. The company said it anticipates the Toronto Stock Exchange will place Taiga under a delisting review.
Public money from both the Canadian and Quebec governments is at risk in the outcome of the CCAA process. EDC had, before Wednesday’s announcement, offered roughly $20-million in loans to Taiga – at least some of which had been drawn down – while Investment Quebec held an $18.3-million debenture in the company.
Potential buyers that could be interested in Taiga’s assets, in whole or in part, include established powersports manufacturers such as Yamaha Motor Co. and Polaris Inc. Quebec snowmobile maker BRP Inc. could also kick the tires but would not be as likely a buyer because it is developing electric models in-house to maximize profitability.
In April, Taiga lost half its market value after the company announced it would pause production indefinitely and temporary lay off about 70 workers in response to what it called a challenging “economic context” and unusually mild winter, which hurt sales of its snowmobiles.
National Bank analyst Cameron Doerksen had warned that the company would need to source significant new funds to sustain even scaled-down operations in the coming quarters and that there may be little equity value remaining for existing shareholders.
Taiga’s biggest shareholder as of May was Northern Private Capital, a Toronto-based investment firm led by John Risley and Andrew Lapham. Northern led a consortium in 2019 that bought MDA, Maxar Technologies Inc.’s Canadian space and defence unit for $1-billion.