Executive Summary
Fisker Automotive was founded by Henrik Fisker and Bernhard Koehler, in California, USA to create environmentally conscious vehicles which are at the same time supreme examples of luxury, style and performance. Fisker Automotive was born in 2007 out of the vision of providing performance and style alternatives to vehicle enthusiasts who also are inclined towards being environment friendly. Fisker was one of the earliest of automobile manufacturers to have produced plug-in hybrid electric vehicles with its luxury sports sedan Fisker Karma. The Karma has been on available to retail customers since November 2011 and more such performance and style driven concepts of Fisker are in the pipeline. Fisker is a very young automotive company as compared to other automotive giants but had managed to carve out a niche market for itself which has since its vehicle Karma generated considerable interest among the motoring enthusiasts. In this case study we shall be studying the business model of Fisker Automotive and try to gauge its strengths and weaknesses. This will help us in identifying the reasons for its rapid growth and increasing investment and also estimate risks and potential shortcomings and failures.
History of Fisker Automotive
Fisker Automotive was founded by Henrik Fisker and Bernhard Koehler, who in 2007 entered into a joint venture with Quantum Technologies to produce plug-in hybrid electric vehicle which was also a high performance sports sedan named Karma. Henrik Fisker and Bernhard Koehler are both automotive designers. Both have a very old association and first met in Germany when both worked for BMW. Later they were together at Aston Martin where they were responsible for bringing to life the Aston Martin DB9 and the V8 Vantage. Their association turned into a partnership when both cofounded Fisker Coachbuild, a car design firm in California. The success of its two models Fisker Tramanto and Fisker Latigo CS motivated the duo to build a performance vehicle of their own from scratch.
The Fisker Automotive Inc. was founded in September 2007 with a joint venture with Quantum Technologies, a publically traded company. Quantum Technologies produces the Q-Drive, the drive train of the Fisker Karma. The project started with the initial funding of Italian businessman Gianfranco Pizzuto and Palo Alto investors. Since its first showing of Fisker Karma at the Detroit Motor Show, the company has secured major investments from Kleiner Perkins, A123 Systems and Qatar Holdings. The company also has a U.S Department of Energy grant to build 100,000 low cost high-volume vehicles annually (Szczesny, 2009).
The Motivation behind Fisker and the Niche it has Carved Out
The primary motive behind the launch of Fisker Automotive Inc. was to provide high performance but environmentally green alternative to sports car enthusiasts. With the rising popularity of being environmentally sustainable, there was no green vehicle available in the market which also rivalled the best of the sports cars in performance and styling. Fisker Automotive aims at redefining and reshape how the world thinks about cars (Fiskerautomotive.com, 2012) and revolutionise the automobile industry with providing environmentally sustainable alternatives without compromising on performance and styling.
As per the company website: “The Karma is the world’s first premium electric plug-in hybrid representing the company’s firm belief that environmentally conscious cars need not sacrifice passion, style, or performance” (Fiskerautomotive.com, 2012). Prior to the announcement of Fisker Karma, no other Plug-in Hybrid Electric Vehicle
(PHEV) existed either in production or as a concept which was also fast and aimed as a sports performance vehicle. The general perception among motor vehicle manufacturer community was that such vehicles are aimed at consumers who want greener alternatives which were cheap to buy and maintain with the added advantage of lower fuel consumption and running costs. The PHEV’s of that period were all slow and rather ugly looking as primary focus remained on mileage and little research and funding were diverted towards styling and performance of the vehicles. The void in the market was accurately identified by the founders of Fisker Automotive. With their years of experience in styling some of the most iconic cars in automobile history, the duo was able to design a vehicle which was both green and stylish, a feat achieved never before. The plug-in hybrid Fisker Karma, at the time of unveiling in the Detroit Motor Show, was one of the earliest PHEV sports cars having an electric motor and an internal combustion engine. The Fisker Automotive were first movers in as a PHEV as it consisted the properties of a conventional hybrid as well as that of a plug-in electric vehicle.
The Products
Fisker Karma
Fisker Automotives flagship model is its performance sports sedan Fisker Karma. The Karma is a sports sedan designed by Henrik Fisker himself. Priced at a hefty $96,000 the car boasts of specifications like:
Driving range of up to 50 miles on electric and up to 300 miles on gasoline
Full length solar roof for extended range
Top speed of 125 mph
Acceleration of 0-60 mph in 6.3 seconds
Regenerative braking system (Fisker, 2012)
Fisker Karma
The Karma was showcased on the Deteoit motor show in 2008 and was initially aimed at retail distribution by the fourth quarter of 2009. However, Fisker repeatedly missed its deadlines and the full production began in February 2011 and the retail deliveries started in November 2011 (Abuelsamid, 2010).
Fisker Atlantic
Fisker Surf
Apart from the Karma, the company has two more concept cars ready for production. They are the Fisker Atlantic and the Fisker Surf. The Fisker Atlantic is suspected to be priced between $50,000 and $60,000 and is a smaller but more affordable luxury coupe. Atlantic will be equipped with a 300 hp electric motor and be equally racy with 0-60 in 6.5 seconds (Yvkoff, 2012).
The Fisker Surf is built on the same platform of that of Karma. It is designed at carrying variable loads and combines performance and luxury with style, utility and economy.
The USP of Fisker
What makes Fisker different from the other car manufacturers is the philosophy behind the whole operations of the company. Henrik Fisker cites that due to the organization being relatively smaller than the larger automobile corporations, it scores over them on many aspects (Squatriglia, 2010). Henrik goes on to say that the reasons for the quick success of Fisker automotive in displaying the prototype of Karma sedan at Detroit motor Show in January 2008, within months of founding the company, were due to design process and lesser management issues.
Another of the advantages that the company has is in outsourcing a lot of components and encouraging the suppliers to be innovative in design and production along with the company itself. The whole outsourcing model also reduces costs and enables Fisker to retain a relatively smaller workforce and yet mass produce as many as 15,000 vehicles a year (Squatriglia, 2010). The Karma is also being built by Valmet Automotive in Finland and then shipped to the United States, further saving on production costs.
The Company and the Team
The company was founded by seasoned designers Henrik Fisker and Bernhard Koehler. Henrik Fisker is the Executive chairman of the company with Bernhard Koehler assuming the role of Chief Operating Officer (COO). Bernhard is also overlooking the “Project Nina” which includes the conversion of a General Motors factory in Delaware into a production facility for Fisker Atlantic to be launch in 2013 (FiskerAutomotive, 2012).
The CEO of Fisker Automotive Inc. is Tom LaSorda who has more than 30 years of experience in global automotive industry. LaSorda has held the highest positions in many companies including Chrysler motors, Fiat and GM. Richard Beattie is the chief commercial officer and responsible for the global sales, marketing and customer service at Fisker Automotive. He also comes from a long and rich experience in marketing roles in Jaguar, Ford and Mazda.
The company is in more than capable hands and is clear with the vision and goals of the organization.
Resources, Early Growth and Funding
The funding of Fisker has been in a huge scale, owing to the interest the concept vehicle had generated upon it’s unveiling. Fisker has raised close to $1.25 billion in equity, loans and grants (Fehrenbacher, 2011). Of the amount, $529 million are in the form of a U.S Department of Energy grant for developing a high volume vehicle at a low price. The Fisker have codenamed it “Project Nina” and shall produce its sedan Atlantic from the Delaware facility in United States.
The rest of the major funding comes from venture capitalist firm Kleiner Perkins Caufield & Byers, Qatar holdings, Palo Alto Investors and A123 systems which are also the suppliers of the batteries to the Karma sedan.
The project has been sufficiently funded. However, following the delay in rolling out of the first set of Karma sedans from its outsourced facility in Finland due to various issues, fears of failure of the project caught air and investors’ money was under the threat. The biggest cause for concern was the freezing of the $529 million DOE grant of which only $193 million were released.
Since the announcement of Karma sedan, the company has enjoyed a lot of publicity and limelight owing to the environmentally green approach it took towards its cars. This helped in raking in the investors and company got many advanced bookings for its sedan. The project was also helped by the promise of the car being environmentally friendly and fast and good looking at the same time. The range it offered with electric and combined mileage also placed it better than the plug-in electrics. However off late, the hybrid technology vehicles are not doing so well in U.S as average consumer doesn’t commonly like to buy the first generation of a technology (Fehrenbacher, 2011).
SWOT Analysis
Strengths
U.S Department of Energy grant of $529 million for “Project Nina”
Karma Sedan being environmentally sustainable appeals to the green sports car enthusiasts and the younger generation
Relatively rapid pace at which the first Karma sedans were rolled out
The relatively smaller employee strength and more reliance on outsourcing keeps the prices under control
Weakness
Suing of Fisker Automotive by Tesla Motors on accusations of stealing their technology
Laying off of 26 employees in the Delaware facility
Delay in production of Karma due to battery pack problems, regulatory issues and cash flow situation
Opportunities
Project Nina and introduction of Atlantic Sedan, a more affordable sedan aimed at mass market
Potential savings the car offers in terms of fuel consumption and better mileage
Threat
DOE loan to its rival company Tesla motors can spice up the competition in the luxury sports sedan market
The lesser known EV start-up yet modestly priced Coda can eat into the market share of its future model as it is expected to hit the markets sooner than the Atlantic
Competitive Analysis
The competition of Fisker Automotives is limited. There are only a handful of cars which can be called the direct competitors of Fisker Karma. When seeing it as an environmentally sustainable fast sedan, only competitor comes in the form of Tesla motors, with its Tesla Roadster. Tesla are however all electric vehicles and a direct competitor in the form of a Plug-in Hybrid Electric Vehicle does not existent.
The indirect competition Tesla faces is with the fast roadsters and sedans which run on internal combustion engines (ICE). The price at which those cars are offered is also lower than that of Fisker Karma, when compared with models with comparable specifications. Audi A8, Lexus, BMW ActiveHybrid 7 are all priced below $100,000 whereas the Fisker Karma is priced at about $108,000.
The external environment for car manufacturers in general is not favourable. With the world emerging out of recession, the sales in cars and automobiles has generally suffered. This has had a deteriorating effect on car manufacturers, big or small alike.
The political scenario surrounding the DOE loan has snowballed into a major controversy. Republican candidate for U.S President Elections in 2012, Mitt Romney had criticized the DOE for funding Fisker and claimed it to be a failed investment. Following which only $193 million of $529 million have been released and the rest has been frozen. This had also caused a disruption in the cash flow situation of the company.
The battery issues that emerged in the initial vehicles also led to losses to the company as they had to voluntarily recall the sedans and replace the faulty batteries due to which the mileage in its “stealth mode” was nowhere near the 50 miles that was promised and the overall mileage also suffered. A123 Systems, the battery supplier, however agreed to replace the faulty batteries at the cost of $55 million.
The Future of Fisker: Growth and Scaling Up or Secession and Exit Situation
Since the Fisker Automotive is relatively new and has rolled out its only vehicle quite recently, the jury is still out on its success and profitability. However, it is without doubt that in this brief period of time, Fisker has seen it all, the highs of generating massive interest in media and investor community, to the lows of initial problems of bootstrapping and product recall.
The future of Fisker is uncertain but it has to be said that the avenues of growth are still largely present. Celebrity associations like that of Justin Bieber and Leonardo diCaprio will only drive in more money for the company. The current company can also look to go public once it finds its feet among the giants in the industry.
The condition of secession and exit are however riddled with complications, controversies and other difficulties. If the company is unable to win the hearts of the public with its vehicle, and is declared bankrupt, venture capitalist majors like Kleiner Perkins will lose a lot of money. The project going bankrupt would also mean that another of DOE investments into environmentally friendly future technologies would fail like Solyndra (Fehrenbacher, 2011).
Conclusion
The Fisker Automotive since its initial promise has had a few setbacks along its way. These setbacks can be put down to the initial teething problems that one might associate with every major initiative of such magnitude. However, since the initial delays and recalls of the vehicle, the Fisker Automotive Inc. has been able to roll out the production vehicles through its retail chains at a rather healthy rate in the year 2012. The demand for such a vehicle which is fast yet environmentally friendly is on a constant rise, and with fewer alternatives readily available in the market, Fisker can in fact zoom ahead of the competition.
Works Cited
Abuelsamid, S. 2010. Report: Fisker Karma full production delayed to February 2011. [online] Available at: http://green.autoblog.com/2010/05/27/fisker-karma-full-production-delayed-to-february-2011/
Fehrenbacher, K. 2011. 10 things you should know about electric car maker Fisker. [online] Available at:http://gigaom.com/cleantech/10-things-you-should-know-about-electric-car-maker-fisker/
Fiskerautomotive. 2012. New isn’t easy. [online] Available at:
Fiskerautomotive. 2012. [online] Available at: http://media.fiskerautomotive.com/media/articles/doc/191_1_1.aspx
Squatriglia . 2010. Driven: How Henrik Fisker Aims to Floor the Auto Industry. [online] Accessed at: http://www.wired.com/magazine/2010/06/ff_qa_fisker_karma/
Szczesny J. 2009. Fisker CEO has plans for smaller electric car in 2010. The Oakland Press
Yvkoff, L. 2012. Fisker Atlantic plans, specs leaked. [online] Available at: http://reviews.cnet.com/8301-13746_7-57436811-48/fisker-atlantic-plans-specs-leaked/
