Lilium faces funding crisis with potential loss of government loan
Lilium, the German electric vertical take-off and landing (eVTOL) manufacturer, is currently at risk of losing out on a $109 million loan guarantee from German federal and state governments.
While German publication Der Spiegel reported that discussions over the loan guarantee may be off the table, Lilium has responded by reiterating that government support remains a viable option.
With more than 650 founders and investors rallying behind the company, Lilium asserts that the loan represents a strategic investment in Germany’s burgeoning electric aviation sector rather than a simple bailout.
According to Der Spiegel, the company, which faces financial difficulties and requires additional capital to continue its operations, has been in discussions with the German government for over a year to secure state support.
Lilium, however, clarified that these negotiations involve a fixed-rate loan of approximately $109 million.
“Lilium is to receive a fixed-rate loan of €100 million as a signal to our investors that Germany supports the entry into electric aviation. It’s not about saving a crisis-ridden company with grants,” explained Lilium CEO Klaus Roewe.
He further noted that the loan, if granted, would be fully repayable and beneficial to KfW, Germany’s state-owned development bank.
Roewe also highlighted that state support for aviation is a common practice globally, arguing that the loan represents a “very modest investment” in developing Germany’s capabilities in electric aviation.
Furthermore, he expressed concern that allowing Lilium’s technology to relocate abroad would be a missed opportunity for Germany, particularly given the world-class expertise of German engineers in this field.
“Do we now want to let the electrification of aviation migrate abroad if the world’s best technology for this has been developed by German engineers? Shouldn’t even pragmatism win over ideology here?” he questioned.
Financial challenges ahead
Lilium’s financial position remains challenging. The company spent $102 million in the first quarter of 2024, with its cash burn for the first half of the year expected to reach between $200 million and $211 million.
At the end of May, Lilium raised an additional $124 million through a capital raise.
Additionally, it began due diligence procedures in collaboration with the German Federal and Bavarian State governments, both of which would guarantee approximately $109 million loan.
The company anticipated the due diligence would take six to eight weeks.
However, questions about the loan’s feasibility have emerged. In October 2024, the Bundestag’s budget committee reportedly rejected the funding proposal, putting the federal government’s guarantee in jeopardy.
Bavarian support, which hinges on federal backing, may also be uncertain, indicating a potential “make or break” moment for Lilium as it faces mounting liquidity issues.
Moreover, in a recent US regulatory filing, Lilium disclosed it expects significant ongoing expenses as it pursues key milestones, such as type certification and the development of a production facility.
As the advanced air mobility (AAM) industry navigates a challenging funding landscape, the urgency for sustained investment has become increasingly apparent.
A recent report by management consulting firm McKinsey & Company highlights that the decline in venture capital is hitting the urban air mobility (UAM) sector particularly hard, with many eVTOL manufacturers struggling to secure the additional capital necessary to bridge the gap to commercialisation.