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Henrik Fisker’s first car company flamed out. He’s sure this one will work

Like Ford, Fisker thinks he sees a hole in today’s market for a practical, affordable electric vehicle.

“The opportunity I see here is to come out with a high-volume, reasonably priced, good looking, real [electric] SUV, because I think there’s a real miss in the market in that segment,” he said.

Fisker, who also worked as a designer for BMW and Aston Martin before founding his first company, Fisker Automotive, says he has learned a lot from his past experiences.

And he thinks his strategy is even better than that of his old nemesis, Elon Musk. This time around, he’s not going after luxury car buyers — even though that’s what most other electric vehicle startups, including Tesla, have done. And his new company won’t build the vehicles itself either. Instead, he will outsource production in order to save on costs and, most importantly, frustration.

An electric SUV for the masses

Fisker’s last car company made a stylish but impractical and costly plugin hybrid car called the Karma. With its long hood, the $102,000 Karma was nearly as long as a full-sized Cadillac, but it had the interior dimensions of a compact car. Occupants sat low in the cabin next to a battery pack running down the center where it impinged on elbow space.

In a 2012 review, Consumer Reports trounced the car. “The Karma ranks as our lowest-rated luxury sedan,” the consumer advocacy group wrote, citing numerous quality and reliability issues besides its other limitations.

Fisker doesn’t blame the Karma’s design for his first company’s failure, instead he blames plain bad luck and problems with parts suppliers. Hurricane Sandy didn’t help either, when it wiped out a large number of Karmas that had been sitting, waiting to be delivered, at a port in New Jersey.

Fisker Automotive eventually went bankrupt.

This time, though, he’s going with a completely different type of vehicle. The first model from Fisker Inc. will be a fully electric SUV called the Ocean. It will go into production in late 2022, with a starting price of $37,500, which is somewhat lower than most electric SUVs currently on the market.

Fisker's first vehicle will be the Ocean, a relatively affordable electric SUV.
It’s a space that’s now starting to fill up, though, with entries like the Volkswagen ID.4 and Chevrolet Bolt EUV. Fisker argues his vehicle will still stand out, though, with it’s more functional, flat-sided body shape and elegant design. The others, he argues, look like hatchback cars, not real SUVs.

Where the Karma sacrificed comfort and practicality for style, the Ocean, a roomy looking five-seat SUV with fairly traditional SUV proportions, clearly doesn’t.

“I think those who were familiar with Fisker and [the Karma] know I can design a luxury car. I’ve designed other luxury cars for Aston Martin and BMW so I didn’t feel that I need to prove that again to anybody,” he said.

Fisker also thinks it’s smart business to aim for the heart of the vehicle market right away.

Outsourcing production

Fisker watched Tesla struggle with both quality problems and with building its own factories. That’s one reason Fisker Inc. won’t be manufacturing the Ocean itself. Magna International (MGA), which makes cars for Toyota, BMW, Mercedes-Benz and others, will build the Ocean SUV instead.

“I really kind of came up with our business model idea by looking at the Apple-Foxconn model, where Apple doesn’t even manufacture their own phones,” said Fisker.

It’s not the first time Fisker has had the idea. The Karma was also assembled by an outside company but it was a much smaller one, Valmet Automotive of Finland. Also Valmet, unlike Magna, did not have a stake in Fisker’s business, Fisker pointed out.

Fisker also teamed up with Magna to create the underlying engineering — called a platform, in auto industry jargon — for the Ocean. That platform, originally created by Magna but modified by Fisker to suit its particular needs, will also be used for future Fisker, Inc. models, Fisker said.

This strategy could theoretically give Fisker the benefits of platform sharing enjoyed by much larger competitors like General Motors or Volkswagen. These companies make multiple models and sell them under different brands based on a single platform. It will also result in better quality since Magna has extensive experience building high-quality products, he said.

Outsourcing its manufacturing could work well for Fisker, at least for the time being, said Brett Smith, director of technology with the Center for Automotive Research.

“It’s always been part of the business and it comes and it goes, the pendulum swings back and forth,” he said. “Right now is that point in time where it’s wide open because the technology is changing so rapidly and so fully.”

As the market for electric vehicles matures though, larger, more established automakers may need all that manufacturing capacity for themselves, Smith said. Eventually, those bigger automakers could start competing with Fisker for resources like outsourced manufacturing lines.

Selling directly to the customer

Henrik Fisker touts the Ocean's traditional SUV shape as more practical than other more rounded electric crossovers.

Fisker has also rethought the way his company’s vehicles will be sold. Instead of relying on franchised dealers, as automakers traditionally do, Fisker will sell its vehicles directly to customers.

It’s a business model that got Tesla into several legal battles with traditional auto dealers. But Fisker feels Tesla has now largely cleared the way for his company to do the same.

He’s mostly right about that, said Ivan Drury, senior manager of insights at the automotive website Edmunds.com. In many cases, state laws protect franchised auto dealers from any competition to their business model. But other startup EV makers have also said they plan to sell directly to consumers and Drury credits Tesla with making that possible.

“This, I think, really is reliant on the fact that Tesla had that ability to change some of the laws or to argue that the laws should be walked around,” he said.

Fisker is also planning to offer flexible leases that will allow customers to return the cars whenever they like rather than having a fixed end date. That’s something other automakers have tried but, with the notable exception of Volvo’s “Care by Volvo” program, the concept hasn’t broadly taken off.

There are some advantages to having independent dealers, though, Drury said. Similarly to vehicle manufacturing, auto sales require experience, training and logistics and Fisker is taking on a lot by in-sourcing a part of the business that’s usually outsourced.

“It’s going to be a tough two years because we’re going to wait for this vehicle to come out and we’re going to be scrutinized,” said Fisker. “And there’s not much we can do to prove people wrong until we bring out the car.”


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