Lilium was once a promising 'air taxi' startup worth billions. Now it's on the brink of insolvency

German aerospace startup Lilium faces insolvency if it doesn't raise emergency funding from the state government for the southeastern state of Bavaria.

Insolvency would mark a dramatic fall for a startup once touted as Europe's best chance at building the 21st-century equivalent of "cars" that can fly.

Lilium is one of a series of firms trying to build "eVTOLs," or electric vertical take-off and landing, vehicles.

Popularly known as flying cars or air taxis, these vehicles are being developed by startups in the United States, Europe and Asia.

Today, however, Lilium is in trouble. The company is desperately trying to raise taxpayer funds in Germany. And so far, it's been unsuccessful.

Lilium has been negotiating an emergency capital injection with both Germany's federal government and the Bavarian state government.

The firm had requested 50 million euros ($54 million) of loans from the federal government. However, its request was rejected by German lawmakers.

In a regulatory filing released last week, Lilium said it had "received indication that the budget committee of the parliament of the Federal Republic of Germany will not approve a €50 million guarantee of a contemplated €100 million convertible loan."

The proposed state aid would have been issued by KfW, the German state-owned development bank.

Lilium is "continuing discussions with the Free State of Bavaria with respect to a guarantee of at least €50 million," Lilium added in its filing.

A Lilium spokesperson told CNBC the company doesn't plan to comment further beyond the statement outlined in its 6K filing.

In response to Germany's decision to deny Lilium state aid, Hubert Aiwanger, Bavaria's economy minister, criticized the move, saying it was "regrettable" that the