Electric vehicle startup Fisker (FSR +0.00%) had its fair share of challenges to overcome during 2023, and that might be putting it lightly. It slashed production estimates a number of times, had a disappointing third-quarter earnings report, and its chief accounting officer resigned.
That said, investors can rejoice that the company has made plans that could solve its biggest headache: deliveries.
What happened?
"We have not been able to follow through with deliveries fast enough," CEO Henrik Fisker said during the company's recent third-quarter earnings call. "People have paid and are waiting for their cars, and some of them are getting really annoyed."
For a young electric vehicle (EV) company just getting started and facing a cash crunch, having trouble connecting the dots between accelerating production and making deliveries to buyers is a big deal -- and bad news. Fortunately, Fisker recorded a 300% increase in deliveries from the third quarter to the fourth quarter, and that could improve even more after the company announced a new strategy for its delivery infrastructure.
OTC: FSR
Key Data Points
Welcome, new dealers
Fisker announced it's currently developing an innovative dealer partnership model in North America, and also shifting to a hybrid model in Europe that combines direct sales and dealer arrangements.
More specifically, Fisker plans to have roughly 100 dealer locations across Europe and North America, and expects to send its first Fisker Ocean SUVs to new dealers by the end of the first quarter. Management believes this will enable Fisker to expand its sales and deliveries at a faster pace while still hewing to its asset-light strategy.
The new dealer partnership plan is intended to benefit both sides of the transaction: Customers will get more convenient locations at which they can buy Fisker vehicles, and the dealer partners will get larger territories to market into, giving them pricing control with less competition.
Fisker has been in discussions with a number of dealers since late November, and the new sales strategy should combine with its test-drive network to boost sales and delivery infrastructure. Fisker delivered roughly 4,700 vehicles in 2023 and produced 10,142 Oceans, meaning there's plenty of room for it to grow simply by improving its delivery-to-production ratio. For comparison, rival EV maker Rivian's gap between production and deliveries was roughly 5% during the third quarter.
Is the stock finally a buy?
To put it bluntly, there's a lot of risk that comes with investing in Fisker. The company slashed its production estimates multiple times during 2023, admitting that part of the decision was to free up $300 million in working capital during a cash crunch. Fisker's net cash used in operating activities totaled $308.2 million during the third quarter, and its cash and cash equivalents checked in at $625.4 million at the end of that period.
That said, this could well prove to be rock bottom for the young EV company if it can build out its delivery infrastructure and begin generating higher revenues. There's little doubt that it will continue to book losses in the near term, and it's a speculative investment. As such, investors would be wise to limit their Fisker positions to a small percentage of their portfolio's value, and buy in only if they believe the third quarter was truly rock bottom for the EV maker.
