- Fisker Inc. on Monday became the latest electric vehicle startup to file for Chapter 11 bankruptcy protection.
- The new filing comes after the company was unable to secure investment from major automakers to stay in business.
- Consumer adoption of EVs has been slower than expected, costs have risen and investor interest in EVs other than Tesla has dried up.
Fisker Inc. on Monday became the latest electric-vehicle startup to file for Chapter 11 bankruptcy protection, citing weak consumer demand, heavy cash burn and business and product problems.
To investors, the situation has been clear for some time, since Fisker announced a going concern assumption about its ability to survive as a company in February, leading to its charismatic founder and CEO, Henrik Fisker, disappearing from social media and public view.
This is the latest in a string of EV companies to collapse. Fisker joins other SPAC-backed companies that have filed for bankruptcy, including Proterra, Lordstown Motors and Electric Last Mile Solutions. Others, including Nikola and Faraday Future, remain in business but are trading below $1 a share amid operational challenges, missed targets and industry-wide headwinds.
It’s also a bit of deja vu, in that Henrik Fisker’s second car company — both branded with his last name — has filed for bankruptcy protection.
The new filing comes after the company failed to secure investment from major automakers to stay afloat. About four years ago, Fisker announced plans to go public through a reverse merger with a special acquisition company backed by Apollo. The deal gave Fisker more than $1 billion in cash.
Fisker, like many other companies at the time, was being buoyed by low interest rates and Wall Street’s bullish view of electric vehicles following the rise of U.S. electric car giant Tesla.
“They looked at Tesla’s success, but Tesla has been the exception rather than the rule,” said Sam Abuelsamid, principal research analyst at Guidehouse Insights.
But consumer adoption of EVs has been slower than expected, costs have risen and investor interest in non-Tesla EVs has waned. The company has also faced major problems with its operations and the launch of its first product, the Ocean SUV EV.
Software Focus
When Henrik Fisker went public in 2020 through a special acquisition company, he compared the company to U.S. EV leader Tesla and touted its production relationship with Canadian auto parts maker Magna as comparable to that of Apple and Foxconn.
The automaker, unlike most of its peers, outsourced production of the Fisker Ocean Crossover to a third-party manufacturer. The partnership with Magna was part of what Fisker called an “asset-light” strategy, allowing the company to conserve cash and focus on differentiating technologies like software.
Abuelsamid said there was nothing inherently wrong with such a strategy, but that the company’s management was incompetent, particularly Gita Gupta Fisker, the company’s chief financial and chief operating officer (and Henrik Fisker’s wife).
“This approach can work,” he said. “In Fisker’s case, the problem I underestimated was … senior management incompetence.”
The company is burning through cash and last month recalled thousands of Ocean SUVs in North America and Europe because of a vehicle software problem.
The company’s Chapter 11 bankruptcy filing says it owes millions of dollars to software and engineering companies including Adobe, SAP America, ManpowerGroup and Prelude Systems Inc. CNBC parent NBCUniversal is also listed as a major creditor.
“[The auto industry is] “It’s capital intensive. You’re trying to match production with consumer demand, and if something goes wrong with a vehicle, you have to allocate capital there,” said Stephanie Valdes Streety, director of industry insights at Cox Automotive. “And when automakers don’t have other sources of revenue, [internal combustion engines] It’s very hard to raise money.”
The company’s operating division, Fisker Group, estimates its assets at between $500 million and $1 billion and its liabilities at between $100 million and $500 million.
Fisker had $530 million worth of inventory at the end of last year, but of the more than 10,000 Ocean EVs it planned to build in 2023, it had only been able to sell 4,700.
Déjà vu
For car designer Henrik Fisker, renowned for creating the BMW Z8 and Aston Martin DB9, it’s deja vu.
The first company to bear his name, Fisker Automotive, filed for bankruptcy in 2013, shortly after he left the company. The company then sold its assets to China’s Wanxiang Group for $150 million.
For the founders, the second start-up was bound to work because they had learned from past mistakes at their previous company, which went bankrupt.
“I’m in a unique position in some ways to apply lessons learned because I’ve been there before, which is very rare, especially in the auto industry,” he said in 2017, a year after founding his new company.
But the similarities between the two failed companies are hard to ignore.
Both companies were heavily promoted, primarily due to Fisker’s claims that they would revolutionize the industry. Both companies were driven by “free” funding (first from the federal government, more recently from Wall Street) on the premise that “green” or electric vehicles were the future of the auto industry.
Both models faced serious quality issues that led to recalls: Fisker’s first Karma was recalled in 2011 for battery safety issues and fire hazards.
Both companies have changed direction and priorities multiple times.
The second-generation Fisker pivoted to a dealer-based distribution model in January after delivering less than half of the more than 10,000 vehicles it produced through a Tesla-like direct-to-consumer approach.
This time, there’s one key difference: The second Fisker went bankrupt, and investors, not U.S. taxpayers, suffered the consequences. Henrik Fisker’s first company grew with $529 million in federal loans (of which the government lost $139 million), but the second Fisker was funded by Wall Street’s bullish view on SPACs and EVs. The company’s shares were delisted in April.
A Fisker spokesman said in a statement early Tuesday morning that the company is “proud of our performance” but has decided that Chapter 11 bankruptcy protection is its best option.
“Like others in the electric vehicle industry, we are facing a variety of market and macroeconomic headwinds that are impacting our ability to operate efficiently,” a spokesperson said in a statement. “After considering all options for our business, we have determined that proceeding with an asset sale under Chapter 11 bankruptcy represents the most practical path forward for our company.”
