FISKER - A Death Machine?

Burning Billions for the Environment Week#10

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This post is now available for FREE. FSR 0.00%↑ is filing for bankruptcy.

The Electric Vehicle (EV) markers were burning billions of dollars to make our world “green.”

Fisker is no exception. We recommended Fisker as a short to our clients in 2021 when the stock was at $25, and we are recommending a cover today. Like other failing EVs, Fisker has similar problems—cash burn and scalability issues. One critical challenge with Fisker is its founder, Henry Fisker.

Henry Fisker couldn’t run a business even if his life depended on it.

This week, we will focus on Fisker, how it all started, and how it is a threat to consumer’s life.

Fisker has an Henrik Fisker problem. Henrik Fisker designs great cars but has not been adept at running the business. His previous failures are well documented. Henrik Fisker designs great cars. He has not been as adept at managing his previous companies.

How did it start?

Fisker has been around since 2007.

Fisker started its days off as an upmarket coachbuilder in 2007. It created visual reinterpretations of the R230 Mercedes-Benz SL and E63 BMW 6 Series, namely the Fisker Tramonto¹ and Latigo CS. Fisker created these at a time when coachbuilding was not a significant trend in the automotive world, making these two products relatively unknown.

Fisker planned to build 150 of these cars each, but it only got around to making two Latigos and 13 Tramontos, primarily due to the global recession that occurred in 2008. Soon after, Tesla commissioned the firm to design the first-ever Tesla Model S, followed by the lesser-known Artega GT EV sports car.²

Fisker introduced Fisker Karma in 2008 - Fisker’s first electric car. Fisker said it would launch the model with an $80,000 starting price and a 15,000-unit production run.

Quantum Technologies developed the Q Drive hybrid powertrain, which includes a Ford Ecotec turbocharged 2.0-liter four-cylinder gasoline engine. This powertrain pairs with a duo of electric motors that draw energy from a compact 20.1 kWh lithium-ion battery pack. The Karma is a series hybrid PHEV, meaning the ICE sends power to the battery pack, rather than directly to the wheels. Fisker delivered an impressive 2,000 Karma units throughout the North American and European regions before the model was put to rest in 2014.

But there was a problem.

FIRST BANKRUPTCY:

Fisker filed for bankruptcy in 2014. Fisker could not sustain long-term operations and had to declare bankruptcy in 2014. Fisker's official battery supplier, A123 Systems, went bankrupt just two years prior to this. Hendrik Fisker made the tough but logical decision to sell all the company's assets to China's Wanxiang conglomerate, which also acquired A123 Systems.

2020 - NOW

Fisker is on its way to its second bankruptcy.

On October 29, 2020, Fisker announced it completed the reverse merger (SPAC) with Spartan Energy Acquisition Corp.

On October 30, 2020, Fisker became a publicly listed company at $9 per share and moved as high as $10.66, a gain of 19%, before closing at $10.14 per share, up nearly 13%. Fisker's had planned its first product, the Ocean, an electric SUV expected to begin production in late 2022.

This is Henrik Fisker's second attempt at running an EV maker. An early rival to Musk's Tesla (who hired Fisker as a consultant for the car that became the Model S–and unsuccessfully sued him for breach of contract), Fisker Automotive was equal parts shooting star and cautionary tale. The Orange County, California-based company won early support from influential backers, including V.C. powerhouse Kleiner Perkins, adoring press attention for the looks of its dramatic Karma plug-in hybrid car and even a $529 million low-cost federal loan in 2009 to build future electric models. But success wasn't in the cards. The $100,000-plus car suffered a string of setbacks, including faulty battery packs, technical glitches and even a hurricane that trashed an entire shipment of luxury cars. The company went bankrupt in 2013, and its assets were purchased by China's Wanxiang Group, which changed the name to Karma Automotive and continues to sell Fisker's elegant plug-in hybrid as the Revero.³

STRATEGY

Fisker (FSR) started to target a lower-end market. FSR had a better U.S. marketing plan than Canoo or Faraday. Fisker had set up showrooms in major metropolitan areas. They also created a service platform with Pivet, a Cox Automotive brand.

The Fiskers described the new venture as a "digital car company" that's outsourcing production instead of building its own factories to hold down costs. Fisker bought most of its core components–including the batteries and electric motors–from outside suppliers. Parts maker Magna, which also builds vehicles under contract for BMW, Daimler, Jaguar Land Rover and Toyota, formed an alliance with Fisker to build the Ocean at its Graz, Austria, plant. As part of the deal, Magna also acquired a 6% stake in Fisker.

Affordability is a key selling point. The stylish Ocean unveiled at CES in Las Vegas a few years ago, won't try to appeal to consumers just on its looks and its heavy use of recycled materials. The five-seater had a base price of just $37,499 (before federal and state incentives that could knock about $10,000 off the purchase price). Though roomier than Tesla's Model Y crossover, its base price is cheaper by more than $12,000. Nearly 10,000 people had paid $250 each to reserve one. The range is targeted to be about 250 miles per charge.

Fisker has trademarks in 20 countries.⁴ The company would use the Volkswagon MEB platform to construct the ocean. This skateboard can also be used to make multiple vehicles on the same platform.

Image:⁵

Here are the problems with Fisker

1. Consumers started to share their horrendous experiences with the car online, leading to mass cancellations of its orders.

2. FSR has reliability issues, mainly with software. Fisker Ocean owners have reported over 100 incidents of sudden power loss, with issues extending to braking problems, glitchy key fobs, and hoods flying open. The National Highway Traffic Safety Administration is investigating the braking issues, which Fisker claims have been resolved through software updates.

3. Despite these challenges, Fisker delivered around 4,900 Oceans in 2023 but faces customer lawsuits and growing complaints about vehicle quality.⁶

4. A consumer who bought Fisker had this to say, “The Ugly side of the Fisker is its software. The physical vehicle and its construction is flawless. The result of lots of simulations, prototypes, wind tunnels, test drives, track tests, and more. It’s a mystery to me how the software can be so incomplete. Not even the key fob works properly.

   The vision isn’t to use the key fob (the car only comes with one). The vision is to use the smartphone as a digital key - but that software isn’t working yet. The fob's issues are just salt in the wound. I’m not hung up on the fob. This is a minor issue - I’m hung up on how such a minor issue isn’t working six months after deliveries started. The lack of features is a minor irritant. The more significant issue is the bugs. The software is not exactly reliable. I’ve had to reboot my car a few times on the side of the road. Each software update is more about bug fixes than the delivery of new features.”

5. Another customer chimed, “I just canceled my order. Given the issues they have, I cancelled the reservation. I’m not sure if this company will remain solvent to pay my deposit back.. with the way it's going. I better get my money out now before Henrik goes belly up and takes it all.”

6. “It's all the uncertainties. They could give you complete clarity but they refused. Always smokes and mirrors with Henrik. Continuous lies. I won't list any more of the many he has said. I doubt if company will be solvent as there used only cheap quality parts so far and ready made off the shelve stuff. Even the keyfob is a rip off of the Arcfox alpha!”

7. A few weeks later, a customer’s Ocean encountered a similar battery error while driving on the 405 freeway in Los Angeles. Their car came to a stop in the passing lane, partially blocking traffic, according to the documents. The customer eventually got the car moving again, but told the company they were “literally shivering” driving home. “I COULD HAVE EASILY LOST MY LIFE,” they wrote, according to the customer service logs.⁷

8. A customer said their car died in the desert on the way to Las Vegas.

9. At least 6 consumers have filed lawsuits in California saying the company violated the terms of their warranty by not repairing problems in a timely manner

Final Thoughts

FSR is on its way to its second bankruptcy. Based on our research and understanding of the inept FSR management, Nissan shouldn’t waste time saving FSR.

Fisker’s “asset-light” approach to EVs meant the Company didn’t have to build a factory. The company supposedly makes a profit on each sale, yet Fisker is struggling with cash. Henrik underestimated the cost and complexity of ramping up sales and deliveries. Fisker has given up on direct-to-consumer sales. The company is actively recruiting dealers. Dealers are not exactly the best part of the car industry, nor were they a part of Fisker’s plan for his company.

Last month, Fisker said it hopes to sell its unsold inventory of some 5,000 cars to dealers in the first quarter to pad its cash balance.

We have been working on dealership shorts and speaking with dealers nationwide - we know this for a fact: no dealers in their right mind want to deal with EVs.

FSR is DEAD and DONE.

1. https://www.hagerty.com/media/buying-and-selling/2006-fisker-tramonto-2000s-coachbuilding-at-its-most-polarizing/

2. https://www.hotcars.com/things-we-love-about-the-artega-gt/

3. https://www.topspeed.com/fisker-history/

4. SEC filings

5. https://www.sec.gov/Archives/edgar/data/1720990/000121390020017291/ea124083ex99-3_spartanenergy.htm

6. https://techcrunch.com/2024/02/09/fisker-ocean-braking-power-loss-problems-investigation/

7. https://techcrunch.com/2024/02/09/fisker-ocean-braking-power-loss-problems-investigation/