Wanxiang will be allowed to bid for Fisker after a US bankruptcy court judge ruled in favour of allowing it to participate in a competitive bid.

Wanxiang filed documents with a court in Delaware last week saying that it will produce second generation Fisker cars at the Delaware Boxwood site if it is allowed to purchase the company.

Reports also suggest that it is prepared to up its bid by US$10m.

The firm was in the process of being sold to Hong Kong businessman Richard Li before a last-minute effort by Wanxiang to reopen the sale process.

US bankruptcy judge Kevin Gross said on Friday that competitive bidding between a company affiliated with Li and a unit of auto parts maker Wanxiang Group of China was the best way forward and to secure the best price for Fisker's assets.

He scheduled a hearing for 2 pm EST today (Monday) to decide how to proceed with an auction.

Fisker Automotive and Fisker Automotive Holdings (collectively, Fisker Automotive) ssued the following statement:

"With the court's decision to limit Hybrid Tech credit bid rights, Fisker will now be able to move forward with a competitive auction process," stated Marc Beilinson, Fisker Automotive's chief restructuring officer. "Our goal is to secure the greatest recovery for all stakeholders involved."

Richard Li's company, Hybrid Tech Holdings, said in a statement it was "deeply disappointed" with the court ruling. "Despite the court's decision, Hybrid will participate in the auction, as we still feel Hybrid represents the most competitive and viable bid for Fisker's future," it said.