Money Car manufacturing startup Tomcar Australia collapses, citing “hostile investors” and high costs

15:47  08 february  2018
15:47  08 february  2018 Source:   Smart Company

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Australian car manufacturing startup Tomcar has entered voluntary administration, citing high manufacturing costs and “ hostile investors ” as the reason for shutting its doors. The administrators told StartupSmartS that high manufacturing costs , low sales volumes, and a

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Tomcar© Provided by Private Media Operations Pty Ltd. Tomcar Car manufacturing startup Tomcar Australia has entered voluntary administration, citing high manufacturing costs and “hostile investors” as the reason for shutting its doors.

Launched in 2005, the company was founded by brothers David and Michael Brim, who spent seven years in development before releasing their first product in 2012. The company made 100 of its premium off road, all-terrain cars in its first run, which sold out almost immediately after first launch

Since then the company had seemingly been going from strength to strength, with Fairfax reporting in June last year business was “on the up” and working on a $100,000 feasibility study with the CSIRO to turn its cars electric. The CSIRO also invested $50,000 in the startup in April last year as part of its Kick-Start program.

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David Brim told Fairfax he and his brother had funded the business to the tune of $15 million over its lifetime, having given “very small” amounts of shares away, and back in 2013, he told StartupSmart the business was “strong and profitable”.

However, the business was placed into voluntary administration yesterday, with Christopher Baskerville and Malcolm Howell from Jirsch Sutherland appointed as administrators of Tomcar Australia Pty Ltd. The business has stopped trading and the first meeting of creditors is scheduled to be held on February 15.

The administrators told StartupSmartS that high manufacturing costs, low sales volumes, and a “situation with an investor that led to legal proceedings, resulting in legal costs”, have contributed to the voluntary administration.

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Melbourne-based startup Tomcar Australia and our nation’s first new mass production car manufacturer in 30 years, has unveiled their specialist mining vehicle, the TM5MR, at this week’s International “Gone are the days of burley SUVs and the high costs of maintaining such vehicles.

The administrators are currently determining whether the business can be sold, and say there will be a creditors meeting in due course.

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The administrators have confirmed the turnover for Tomcar in the 2016-17 financial year was $4.65 million, despite previous reports that the company’s turnover was “just under $10 million”. Tomcar had five employees.

In a statement provided to StartupSmart, David Brim described what he called a “devastating turn of events for Tomcar Australia”.

“We had such high hopes for Australian niche vehicle manufacturing. We have had to close our doors because of a group of hostile investors tried to take over the company from us, while ever increasing manufacturing costs have put untold strain on the cash flow of the business,” he said

“We recently had an overseas investor about to come on board but at the last minute they backed out, leaving us with escalating legal fees and product costs, which simply pushed us over the edge.”

“We want to thank everyone who supported our dream over the years and helped us along the way. It has been an incredible journey. We’ve tried our very best, but we couldn’t quite get there.”

Potential ASX listing didn’t proceed

In February last year, small delisted Australian mining company UXA Resources announced it was entering a binding Memorandum of Understanding with Tomcar to progress the company into an ASX listing via a merger. It also stated it had invested $1 million into Tomcar as part of the agreement.

“Joining with UXA gives us access to financial markets, corporate expertise and their mining sector knowledge, which dovetails perfectly with our aspirations and forecast growth paths for our emissions free EV vehicle, that has already received significant interest amongst mining organisations,” Brim said at the time.

However, the ASX listing never went ahead, and no further information on the partnership is available. A Supreme Court of Victoria hearing list for November 16 last year lists a case between Tomcar and UXA Resources in the Commercial Court.

StartupSmart contacted UXA for comment and was told the deal between the two companies is “in abeyance”.

StartupSmart also contacted CSIRO for information on the state of its investment in Tomcar but did not receive a response prior to publication.

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