Much-admired car designer Henrik Fisker's talking a good game about Fisker (FSRN -32.51%), his new electric vehicle company, and its upcoming all-electric SUV, the Fisker Ocean. But investors are still waiting for some substance to go with Fisker's style. Until we get some crucial and still-unclear information about four big questions, anyone considering Fisker shares might have good reason to hit the brakes.
1. How many potential buyers has Fisker lined up?
Fisker's designed a bevy of beautiful vehicles, including the concept car that became the early 2000s BMW Z8 roadster, the Aston Martin V8 Vantage, and his namesake electric sports car, the Fisker Karma. That track record has enticed potential buyers to fork over $250 just to hold a place in line to buy a sleek, enticing Fisker Ocean.
But how many potential buyers are there? Fisker Automotive hasn't released actual numbers of Ocean reservations. On June 8, Fisker told investors that his goal by end of this year is to have 25,000 reservations, or $925 million in potential sales. By the end of next year, Fisker said he hopes to have at least 50,000 reservations. "That means we should be sold out for the year 2023," he said. If all goes according to plan, that's about $2 billion in sales.
Image Source: Fisker.
In its first-quarter earnings report, the company said that as of May 17, it has received over 16,000 retail reservations, putting Fisker roughly halfway toward his year-end goal.
Fisker also told investors that his company has 266,000 individual shareholders, which he said "shows the potential we might have in growing our reservations ... If every shareholder makes a reservation of the Fisker Ocean, we would do extremely well and you yourself would do extremely well."
That's a stretch. If every single one of those investors bought the Ocean at its $37,000 base price, Fisker would register $9.8 billion in sales. Its market cap is currently less than $5 billion.
2. Will the car's real-world debut help or hurt its chances?
Fisker will showcase the Ocean at the LA Auto Show in November. The buzz from that, plus test drives resulting in firm commitments, will tell us where the company might be going. But anyone hoping for an Ocean of their own will need a lot of patience.
Henrik Fisker said the Ocean is on target for its Nov. 17, 2022 release date. But most depositors won't get theirs until some point in 2023. That's a long time to wait, especially with more rival EV options entering the market.
The company's future depends heavily on the test drives that Fisker will roll out. There's no official date set for those drives to begin. In the FAQs on its web site, Fisker says they'll be available to some reservation holders starting in "late 2021," depending on location. But the company's investor relations department recently said that test drives won't begin until 2022.
Henrik Fisker's stocked his car with the kind of climate-friendly features beloved by sustainability-focused investors – but he'd better hope that this entertainment system on wheels -- seriously, look up the Fisker's karaoke option -- also proves to be a pleasure to drive.
Investors should watch to see whether those drives keep people on the waiting list interested, or prompt them to ask for their money back.
3. Will Fisker's big lease experiment pay off?
Fisker's also offering a groundbreaking flexible lease program. Like traditional lease vehicles, buyers put down $3,000 and, depending on the model of Ocean, pay around $380 a month. In return, they'll face no mileage or term limits and no maintenance costs.
"You can lease our vehicle and you can give it back anytime," Henrik Fisker told investors. "But when you give this vehicle back with us after six months or three years or five years ... we send it back out (to the leasing market)."
People who are used to leasing with the option to buy might not like this wrinkle -- but Fisker does. "Over a potentially 12-to-15-year lifetime of this vehicle, we will keep sending it out to lease, so that really means we are recycling the same vehicle," he said. "After five years of leasing, this car is fully paid for, and then we're just leasing it out. It is just a money-making machine for Fisker," he said.
However, Fisker's assuming that a traditional lease buyer isn't going to care about paying full price to lease a five-year-old car with 80,000 miles on it -- even one that looks super cool and has room for an eight-foot surfboard (if you buy the California package ).
According to the company's investor relations department, older Fisker cars will lease at a lower price point, which could be interesting down the road for those with a lower budget who want to try a battery-powered SUV. First, we'll have to see whether people take to this new lease model.
4. Will Fisker's past come back to haunt him?
This is Henrik Fisker’s second big dive into the mass auto market. The first ended with China's Wanxiang Motors buying out Fisker Automotive in a bankruptcy deal in 2013.
Back then, Henrik Fisker totally misread the market for the Karma, a $103,000 hybrid sports car, the Karma . His first attempt was mostly funded by private equity and a $528 million loan from the Department of Energy that the government never fully dispersed, because Fisker Automotive missed production targets.
The new Fisker Inc. is all about the Ocean, which the company's aiming at the mass market. Spartan Energy Acquisition Corp (NYSE: SPAQ) helped the new company go public via a SPAC last year. As of October 2020, Fisker, Inc. has also raised $1 billion, as Henrik Fisker happily reiterated in June .
Assuming … better karma for Henrik, investors should watch to see whether Fisker Ocean test drives turn into more reservations. If those orders – and their deliveries -- disappoint, Fisker Inc. will run out of power before an Ocean ever hits the road.
