Fisker Automotive, whose high-end electric cars caught the eye of Justin Bieber and other celebrities, has filed for bankruptcy protection.
The Californian company also announced it had entered an asset purchase agreement with Hybrid Tech Holdings.
"After having evaluated and pursued all other alternatives, we believe the sale to Hybrid and the related Chapter 11 process is the best alternative for maximising Fisker Automotive's value for the benefit of all stakeholders," said Marc Beilinson, Fisker's chief restructuring officer.
"We believe that the Fisker Automotive technology and product development capability will remain a guiding force in the evolution of the automotive industry under Hybrid's leadership."
Fisker was started in southern California in 2007 by former Aston Martin and BMW designer Henrik Fisker and his German business partner, Bernhard Koehler.
While it did not have the expected success with its pricey hybrid Karma sports car - which it billed as "a bold expression of uncompromised responsible luxury" - it did attract interest from stars such as Bieber, Leonardo DiCaprio and Ashton Kutcher.
Having struggled financially for some time, the company announced in April that it was laying off 75 per cent of its workforce.
The bankruptcy could become a political hot potato because the US Government had focused on Fisker to encourage the development of green energy, providing it with loans.
The Wall Street Journal quoted a Department of Energy representative as saying it had recovered US$53 million ($64.7 million) of the US$192 million Fisker owed the Government, leaving US$139 million unpaid.
Two Republican members of Congress - House energy and commerce committee chairman Fred Upton and oversight and investigations subcommittee head Tim Murphy - have already lashed out over the matter.
During last year's United States presidential election campaign, Republicans repeatedly highlighted the fate of solar energy firm Solyndra, which went bankrupt after getting a US$500 million government loan guarantee.