Will Fisker Become an EV Leader?

Electric vehicle start-up Fisker (FSRN -11.88%) is Henrik Fisker's second attempt at an EV company, and the acclaimed vehicle designer has certainly produced some attractive cars in the past. In this Fool Live video clip, recorded on Nov. 22, Fool.com contributor John Rosevear discusses Fisker's history and future potential in the EV space. 

John Rosevear: Fisker is Henrik Fisker's second attempt at a start-up. His first one, he started building a hybrid vehicle called the Karma. There were fires, there were issues. The company went bust in like 2013. There have been various efforts to revive it. Since then he has not been involved in any of that. Who he is? He is a designer. He's an acclaimed designer. Henrik Fisker, he designed several of the beautiful Aston Martin's from the last decade. The V8 Vantage and the DB9 are both credited to him.

Fisker today, the company, $6.3 billion market cap. This is a pre-revenue start-up, and what makes them interesting is this is what they call an asset-light business model. If you know anything about the auto business. If you're setting up an auto factory, that's $1 billion or more you've got to spend from scratch before you ship a single vehicle. Fisker is bypassing that by doing contract manufacturing and bypassing the need to have a dealer network by doing direct sales. This is what has made them interesting as an investment.

Their first model, they showed it last week the production version, the Ocean SUV. It's a handsome, the five passenger SUV, not too huge. Starts at $37,500. You can option it way up to almost $70,000, and production starts in a year, and it will be built by Magna International, which is a giant global auto industry supplier Canadian under contract.

That's a pros and cons thing. On the one hand, Fisker doesn't have to build a factory. On the other hand, they lose some margin because they're paying someone else to build the car. The next model is a less expensive one, more affordable called the Pear. As we can see, sub-$30,000 price tag. It's going to be built by Foxconn, the iPhone builder, likely at the Lordstown, Ohio factory they just bought from Lordstown Motors (RIDE) or in the process of building.

The hope is that's the volume model and that they hope to sell 250,000 a year out of U.S. production, and then if demand justifies, they'll build other plants maybe in Europe, maybe in China, and so on to do that. That's the master plan. What you have to ask with Fisker is, OK, that's interesting. The ocean is very good looking, how many are they really going to sell once there are similar vehicles available from Hyundai, from Ford (F 0.37%), from Volkswagen (VWAGY -0.17%), from General Motors (GM -0.29%), etc, on and on? This to me is the question, stop share, hang on. Okay, I'm back.

This to me is the big question with Fisker, and with a lot of these companies really, some of them are valued, like sales are going to go up this could be indefinitely, and I think with Fisker, as with Rivian (RIVN -2.15%), a lot of people are discounting the legacy automakers coming in here with EVs and so forth. I rank Fisker in the middle of the pack. They've been smart. Henrik Fisker learned from his past mistakes, and he's got some really good business people around him. They're being careful with money. The car looks good. They have a fair amount of interest and some preorders.

A market cap of just over $6 billion it might be worth a flyer, but again, it's high-risk. Then on the other hand, what is it worth if they're selling half a million vehicles a year in five years, 10 years? Certainly more than $6 billion, but the devil there will be in the details as well around margins and so forth. Because I don't know with the contract manufacturing model what margins they'll be able to get once legacy players who own their own factories are into the game. It's a mixed bag for me.