Danish car designer Henrik Fisker is getting back in the electric-vehicle race, this time in pursuit of his old adversary Elon Musk. The question is: Can he catch his rival this time?
Roughly a decade ago the man who made a name for himself designing sports cars for Aston Martin and BMW was neck and neck alongside Tesla in a battle to capture the public’s imagination for high-end electrified luxury cars. His first futuristic-looking plug-in models sold for more than $100,000 each, and celebrities like Leonardo DiCaprio, Justin Bieber and former U.S. Vice President Al Gore drove them.
But Fisker Automotive went bust in 2013 after a troubled launch of a first model and an abortive attempt to retool an existing factory. The failed upstart was ultimately auctioned off to Chinese investors, allowing Tesla to pull ahead and become the world’s most valuable car company today.
Now Mr. Fisker, 56, is ready for another go. His Los Angeles auto maker Fisker Inc. has new financial backers and designs on going public later this year. It hopes to release the Ocean, a battery-powered SUV made with recycled materials, in 2022.
Mr. Fisker’s startup isn’t looking to emulate Tesla’s business model. Instead, he intends to challenge nearly every aspect of how vehicles are built and sold today—and learn from his own mistakes. In contrast to Tesla—which like other auto makers built its own plants and developed many of its own technologies in-house—Fisker intends to use core parts like batteries and motors developed by other companies, contract out the building of the vehicles and outsource parts and service. Customers can obtain the cars using a subscription-like lease that can be terminated at any time.
Fisker Inc. hopes to release the Ocean, a battery-powered SUV made with recycled materials, in 2022.
Photo: Andrej Sokolow/Zuma PressWithin two years of starting production, he predicts $10.6 billion in revenue and companywide margins of 19% before interest, taxes, depreciation and amortization.
“I’ve taken a lot of lessons from Fisker Automotive,” Mr. Fisker said. “I’ve also learned to sort of de-risk riskier decisions.”
Mr. Fisker will need to succeed where others—including himself—-have failed. Mr. Fisker’s unorthodox business model faces plenty of challenges, from potential pitfalls in its outsourcing strategy to an uneven industry record with Netflix-like car subscriptions.
“I admire Henrik’s ambition, in terms of trying to do something completely different, but it’s going to be a tall order,” said Tim Urquhart, principal automotive analyst at IHS Markit Ltd.
A Gold Rush
Mr. Fisker’s latest venture benefits from a new wave of investor enthusiasm for electric-vehicles, spurred in part by Tesla’s skyrocketing valuation and Wall Street’s hunt for the next promising bet that will upend the traditional car business. Tesla shares have more than tripled in 2020, and the auto maker’s market value now exceeds that of Toyota Motor Corp., General Motors Co. and Ford Motor Co. combined.
That is helping to lift valuations for other electric-transportation startups, including those who have yet to produce their first vehicle, analysts say.
Nikola Corp., an electric truck company pointedly branded with inventor Nikola Tesla’s first name, briefly surpassed Ford in market capitalization in its first week of listing publicly in June. Shares in Li Auto Inc., a lesser-known Chinese plug-in car maker gained 43% last Thursday, its first day of trading publicly in the U.S.
“This is a gold rush,” said IHS Markit’s Mr. Urquhart. “Investors are just looking at Tesla at the moment and everyone is trying to sort of piggyback.”
Fisker Inc. announced a merger last month with an acquisition company backed by private equity giant Apollo Global Management Inc. The deal, which provides Fisker about $1 billion in new funding and values it at $2.9 billion, would take the company public later this year.
California Dreaming
Mr. Fisker has long known what he wanted to do: design automobiles. As a boy in Denmark, he said he doodled cars in his school notebooks and wrote Volvo Cars AB asking for a job, volunteering to sweep floors and clean toilets. The company declined his offer, but recommended he attend the ArtCenter College of Design if he was serious about designing cars.
Mr. Fisker began his career at BMW in Munich, where he designed the exterior of the curvy Z8 roadster that James Bond drove in 1999’s ‘The World is Not Enough.’
Photo: Adam Amengual for The Wall Street JournalAfter graduating from the school’s Swiss campus, Mr. Fisker began his career at BMW in Munich, where he designed the exterior of the curvy Z8 roadster James Bond drove in 1999’s “The World Is Not Enough.” He left BMW for Aston Martin, and the Vantage he designed there became one of its bestselling models.
Craving a new challenge, he moved to California with a plan to build and design custom sports cars. He met with two California entrepreneurs also launching a car company—Tesla’s then-Chief Executive Martin Eberhard and then-Tesla board Chairman Mr. Musk—and in 2007 was hired to consult on the company’s designs.
Mr. Fisker also met an entrepreneur developing military vehicles that could sneak behind enemy lines under electric power before using gas to escape. Mr. Fisker figured the technology could work in a sports car, and began envisioning the Fisker Karma, a luxury plug-in hybrid that he wanted to build.
After Mr. Fisker showed the Karma publicly, Tesla alleged Fisker stole intellectual property and sued. An arbitrator found in favor of Mr. Fisker. Tesla did not immediately comment.
Wheels Fall Off
Thus began a rivalry between the two companies for the future of electric vehicles. In 2009, Fisker Automotive and Tesla received hundreds of millions in loan guarantees from the U.S. Department of Energy. Each purchased old GM factories and began retrofitting them to make electric cars.
At the time, it wasn’t clear which company had the lead. The $100,000 Karma, assembled in Finland by another company, made it to market before Tesla’s Model S.
Then the wheels fell off. The government stopped disbursing Fisker’s loans in 2011. The Karma had quality issues with some of its new technology, several former Fisker executives said, and two major recalls were issued. Production in Finland stopped and never restarted. Flooding during superstorm Sandy destroyed an entire shipment of more than 300 Karmas waiting for import into the U.S. at the port of Newark, N.J.
The company’s strategy ultimately suffered because of partnerships with companies that were too dependent on one another, said David Anderson, who led early investments in Fisker Automotive and sat on the company’s board until 2010. He also took delivery of the company’s seventh vehicle (he wanted #007) and still drives it.
Mr. Fisker’s first attempt to create an electric-car company ended in disappointment. He resigned from Fisker Automotive in 2013 and the firm filed for bankruptcy later that year. It was purchased by Chinese investors at auction for around $150 million in 2014. Here Mr. Fisker discusses that company during a 2011 television interview.
Photo: Simon Dawson/Bloomberg NewsProblems or cash issues affected the entire supply chain, Mr. Anderson said. A recall from battery supplier A123 Systems Inc. slowed Fisker’s production, which helped push the battery company into bankruptcy.
“It was like one drowning guy trying to save another,” Mr. Anderson said.
Amid disagreements with his board, Mr. Fisker said he felt he lost control of the company bearing his name. He resigned in March 2013. Fisker Automotive defaulted later that year and was purchased by Chinese investors at auction for around $150 million in 2014—a fraction of the more than $1.2 billion it had originally raised.
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A New Track
Mr. Fisker said he took nothing from Fisker Automotive when he left and had lost nearly everything. He moved from his house into an apartment, and spent one night sleeping in his Karma. He took design jobs, like designing a line of megayachts bearing his name with Italian boatmaker Azimut Benetti SpA. In 2016, he started Fisker Inc. with his wife Geeta. He still controlled the Fisker brand.
Tesla’s record under Mr. Musk, 49, proves there is a viable market for electric vehicles, he said, opening opportunities for new companies. “I have a lot of respect for him,” Mr. Fisker said.
In starting again, Mr. Fisker said he learned many lessons from his past failure. Seek public markets for financing. Avoid the capital drain of manufacturing. Don’t try to build everything on his own.
“The last thing an EV startup should be looking to do is build its own factory,” Mr. Fisker said. “I think it’s a really dumb idea, quite frankly.”
Fisker 2.0 will provide the design inside and out, the software brains of the vehicles and a proprietary ownership app—all elements increasingly important to drivers—and integrate the components, he said. But it will rely on other companies for many critical parts, manufacturing and service. That could expose Mr. Fisker to some of the problems he experienced with his last venture, but he said there are now many more suppliers now geared toward the production of electric vehicles.
Inside the Fisker offices, where renderings of the Ocean are displayed.
Photo: Adam Amengual for The Wall Street JournalWith the arrangements, the company expects to turn a profit on the first vehicles it makes, Mr. Fisker said. Fisker has told investors it expects to earn per-vehicle gross margins of as much as 30% on higher-trim versions of the Ocean that cost as much as $70,000.
If Fisker as a company is able to hit its overall targets of around 20% margins before interest, taxes, depreciation and amortization that would exceed the same ratio earned in recent years by traditional automakers like GM, Volkswagen AG and Toyota Motor Corp.
Analysts say there are risks in the partnership approach, and the double-digit margin targets are ambitious, particularly for a startup.
Mark Wakefield, a director at consulting firm AlixPartners LLP, said using other auto makers’ essential parts “just doesn’t have the greatest history in the auto industry.” Companies, he added, either relinquish control over engineering details or pay partners a premium to manage them.
“Every time a drop of sweat comes out their brow, it’s another bill,” he said.
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Mr. Fisker also wants to experiment with another approach to how consumers obtain their car. Fisker wants drivers to be able to lease the base-level Ocean for $379 a month and a $3,000 initial fee. Unlike a conventional lease, the lessee can terminate at any point, when Fisker will lease the vehicle again for a lower price.
Other companies have tried subscription-based services, typically with higher-end cars, but found little success.
Mr. Fisker said he sees the flexible lease model fitting into a generational shift where vehicle components become increasingly commoditized as brands differentiate themselves more on design, software and user experiences.
“A young person today’s first drive independent of their parents is most likely not in their parents’ five-speed manual car but rather the back seat of an Uber,” he said. “They’re used to getting mobility at their fingertips with no commitment.”
Why will the result be different this time? Several people involved with Fisker Automotive say Mr. Fisker in the past had been reluctant to make decisions undercutting his aesthetic vision for a car, but he now is more mature and willing to compromise on critical engineering and production decisions. Some Fisker Automotive veterans are backing his new venture.
“He’s a very proud man,” said Mr. Anderson, who has purchased shares in the Apollo-backed company expected to merge with Fisker. “He wants to show that last time around there may have been issues and I think he knows some of those were his own.”
He is aware of the risks as Fisker looks to larger potential partners like VW for help. “There’s an old joke about the mouse mating with the elephant,” Mr. Anderson said. “The mouse loves it right up until the elephant sits on him.”
Talks between VW and Fisker to license technology have taken longer than expected, according to a filing from Fisker last week. A VW company spokesman said the company is in discussions with potential partners for its technology but it is too early to provide any details.
Mr. Fisker said the company is also in talks with others, resolved to never again rely on one supplier.
“Just starting a car company a second time is already a big risk,” he said.
One lesson Mr. Fisker says he learned from his first attempt is not to build everything on his own. ‘The last thing an EV startup should be looking to do is build its own factory,’ he says. ‘I think it’s a really dumb idea, quite frankly.’
Photo: Adam Amengual for The Wall Street JournalWrite to Ben Foldy at Ben.Foldy@wsj.com
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