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Fisker Bets On Outsourced Production With Electric Ocean SUV

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Henrik Fisker has had a rollercoaster career in the auto industry, with accolades for head-turning designs he created for BMW and Aston Martin to the swift collapse of his first automotive startup. But the CEO of Los Angeles-based Fisker Inc. is back with a buzzy new electric crossover and an unconventional plan to outsource its production.

The company showed off the production version of its battery-powered Ocean crossover at the Los Angeles Auto Show last week, starting at $37,499 for the base Sport version that goes 250 miles per charge. A top-of-the-range Extreme grade gets at least 350 miles per charge, accelerates from 0 to 60 miles per hour in just 3.6 seconds and will set buyers back $68,999. The stylish vehicle features extensive use of recycled materials and a large center display screen that can be positioned vertically or horizontally. But it’s Fisker’s reliance on auto engineering and manufacturing powerhouse Magna to build it that’s most distinctive attribute. 

Fisker says that even though Ocean sales don’t begin until November 2022, a year behind rival EV startups Rivian and Lucid, it can get to high-volume production faster. His goal is to produce up to 50,000 Oceans by 2023 and lift overall output to “several hundred thousand” vehicles in 2024. (He says may even be able to start deliveries before November.)

“A lot of startups, when they start producing maybe one car per day, will say, ‘we have now started production.’ In the case of Magna, that’s not the start of production. So you produce some vehicles, but they might even be sellable,” Fisker tells Forbes. November 2022 “may seem like a long time, however, when Magna starts production, we’re able to turn up that production probably much faster than any other EV startup. … That ramp-up is very difficult to do when you’re building a car for the first time versus working with an established car manufacturer.”

The company is part of the new wave of electric vehicle startups looking to take on industry leader Tesla and carve out their own share of the clean vehicle market that’s expected to grow exponentially through the end of the decade. Excitement over Rivian and Lucid was reflected in the rapid jump in the share price of each company last week, boosting their respective market capitalizations to $113.6 billion and $90.9 billion as of Nov. 19, ahead of industry giants General Motors and Ford, valued at $89.7 billion and $77.5 billion–even though each has only recently begun delivering small numbers of electric vehicles to customers.

Fisker, which doesn’t yet generate revenue, rose 5.9% on Friday and is valued at $6.3 billion. 

Fisker’s outsourcing of production, which includes working with electronics manufacturing giant Foxconn for its second model, is at odds not only with that of Rivian and Lucid, which are committing billions of dollars to their plants but also with Elon Musk’s strategy for Tesla. The massively wealthy entrepreneur (worth $296 billion as of Nov.19) fixates on building gargantuan, multibillion-dollar “gigafactories” and pushes to vertically integrate as much component production for Tesla vehicles as possible. Yet Fisker’s production experiment is what makes it a startup worth watching, according to Morgan Stanley analyst Adam Jonas. 

“Investors frequently ask us: ‘Why do you like (Fisker)? They are not vertically integrated,” Jonas said in a research note. “We’ll just boil it down to this: Fisker has been ‘chosen’ by big players (Magna, Foxconn) who likely want to show the world what they can do in EVs. We see the Nov ‘22 (start of production) as a Magna target as much as a Fisker target.”

Jonas, who has an Outperform rating on the company, said his research associate Evan Silverberg, who attended Fisker’s LA Auto Show presentation, describes the company as the “EV Sleeper Pick” among the new players in battery vehicles. 

“It’s not about me walking into a factory and showing it off and pounding my chest and saying, ‘look, I can also build the car.’ It’s about how fast can we get to half a million vehicles a year?”

Henrik Fisker

To Fisker’s point, new automakers typically struggle in the first year or so of production. Tesla nearly went bankrupt trying to build its first vehicle, the electric Roadster sports car, and later went through what Musk called “production hell” in 2017 as it struggled to achieve high-volume production of the Model 3 sedan. Both Rivian and Lucid intend to gradually boost output of their electric models through 2022. 

As Fisker sees it, the auto industry is overdue for new approaches to production. 

“I look at the car industry being probably the most ancient industry in the world that has never really changed over the last 100 years,” he says. “I looked at the tech industry and I’m sure, at one point, somebody said, ‘Nokia had all these factories. Why does Apple think it can suddenly make a phone without buttons and have it made by somebody else? That’s the model we took. We said, ‘you know what, there was a big disrupter in the tech industry. Why can’t we disrupt the car industry?’ So we took that model.”

“The consumer wants a high-quality vehicle. We want to build as many vehicles as we can as fast as possible,” he says. “It’s not about me walking into a factory and showing it off and pounding my chest and saying, ‘look, I can also build the car.’ It’s about how fast can we get to half a million vehicles a year?”