Explainer: Electric snowmobile maker Taiga seeks creditor protection

Article content

Article content

Taiga in its application said its debtors had outstanding liabilities, on a consolidated basis, of approximately $93.2 million.

Company co-founder and chief executive Samuel Bruneau last November told analysts that the company’s products — an electric snowmobile and an electric watercraft similar to a Jet Ski — were “well-loved” by consumers and industry reviewers. The company had made strong inroads in California, Texas and Florida, the three most prominent boating and EV adoption hubs, he said.

The plan was to invest more in sales and marketing to draw early adopters of electrified equipment and corporate customers, such as resorts, that would buy fleets of their vehicles. As sales volume increased, it expected costs per unit to decline.

Bruneau described the company as much as a powersport company as a tech company, with the largest crew of engineers in its segment, and said it was on a mission to “revolutionize” the industry.

“Being a purely EV company has its benefits for Taiga’s brand awareness,” Bruneau said back then. “Our electric-only brand matters when our customers search for more sustainable options and select our products.”

Article content

Climate snafu

If climate change and the energy transition gave Taiga its raison d’être, they have also proven to be part of its undoing. In April, the company said “an unusually mild winter” caused softer-than-expected snowmobile sales.

With the economy beginning to show signs of a slowdown, the company said it paused production and reduced its workforce by 70 people. It also added that it would cease to provide any forward-looking guidance.

In May, the company reported first-quarter revenue of $5.08 million, which amounted to quarter-over-quarter growth of 194 per cent. It sold 129 watercraft and 78 snowmobiles, for a total of 207 vehicles in the quarter.

But that was undercut by an overall gross loss of $3.67 million.

Luke Hanna, an analyst at Canaccord Genuity Group Inc., said in a note that the gross loss reflected “costs of production that exceeded the realized selling price for units during the quarter.”

According to Taiga’s website, its Nomad snowmobile starts at $21,999, and its watercraft models range from between $25,499 and $33,999.

Bruneau has acknowledged his model snowmobiles cost more upfront, but said lower fuel and maintenance costs bring the total cost of ownership below the industry average.

Article content

In June, chief financial officer Eric Bussieres departed to pursue an opportunity outside the powersports industry.

What now?

The company said it will need to go back to Quebec Superior Court “shortly.” The company indicated it will need to make additional drawdowns on the $4.4 million loan from EDC, which would require court approval.

After that, it’s not clear what comes next, though the company has indicated it is looking for either investors or a formal sale. Deloitte Restructuring Inc. will monitor its restructuring efforts under the CCAA.

Electric snowmobiles are catching on, and stalwarts of the industry, including Bombardier Recreational Products Inc. with its Ski-Doo brand, are beginning to offer electric options capable of “travelling short distances” and priced comparably to Taiga’s offerings.

Meanwhile, people in Nunavut spent this winter testing Taiga’s model under the extreme conditions of the Arctic, where the temperature can drop well below zero for extended periods of time, so battery life and range may drop accordingly. Initial reports suggested that the 100-kilometre range may drop by half under such conditions.

Article content

Last November, at the company’s last earnings call, Bruneau said Taiga was honing its products and approach to manufacturing to find efficiencies. It was also looking to sell its products in Europe, the Middle East and South America, in addition to North America.

The company had already invested heavily in technology and planned to release a number of updates to its model this year, including over-the-air updates to improve charging capabilities and advance its sixth-generation powertrain, he said.

That head start in the electrification of powersports may be worth something as the rest of the industry looks to catch up if Taiga can successfully navigate through bankruptcy protection proceedings.

“Given the significant capital needed to develop and grow its business, Taiga has incurred significant losses since its inception in 2015, and, in fact, Taiga has never reached profitability,” the company said in its application. “Absent any investment in its business, it expects to continue to incur operating and net losses and to use significant cash in its operations for the foreseeable future.”

• Email: gfriedman@postmedia.com

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.

Article content