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HomeMarketMaking EVs Is Hard. Fisker CEO Explains Why.

Making EVs Is Hard. Fisker CEO Explains Why.

The Ocean is EV start-up Fisker’s first vehicle. Production has started and shipments to customers should begin in early 2023.

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Patrick T. Fallon/AFP via Getty Images

Investors started out 2022 believing there was room for electric vehicle start-ups to disrupt the traditional industry. That view is fading. Now investors believe that building a car is much harder than they ever imagined.

Most electric vehicle start-ups are trading for a small fraction of what they were at the start of the year. For U.S. start-ups, only
Rivian Automotive
(RIVN),
Lucid
(LCID) and
Fisker
(FSR) still have market capitalizations above $1 billion.

At the start of 2022, those three stocks were valued at a combined $165 billion. Shares are now worth $46 billion combined as Rivian stock has shed about $66 billion and
Lucid
stock has lost about $50 billion.
Fisker
is the relative winner, shedding about $2.5 billion.

The market is down. That’s part of the reason for the fall. But another big reason for the slide in shares of Rivian and Lucid is the struggle both have had ramping up production.

Wall Street started out the year believing that Rivian would deliver about 40,000 all-electric trucks. Rivian now expects to produce about 25,000 this year. And at the start of the year, analysts projected Lucid would ship 20,000 units in 2022. Lucid’s guidance in February called for 12,000 to 14,000 vehicles. Lucid cut guidance in August to 6,000 to 7,000 units.

Making cars is hard. “If you think about it…there is at least 1,000 fairly big parts in a car,”
Fisker
CEO Henrik Fisker tells Barron’s. “If three parts are a millimeter wrong you can’t open the door.” Automotive tolerances are very demanding.

The challenges making EVs is why Fisker selected
Magna International
(MGA) to build its first: an SUV called Ocean. Magna is a huge auto parts player and has been building cars for global auto makers since the late 1990s in its Steyr division.

“At Magna, we have a model for the vehicle that was milled out of a solid block of aluminum,” says Fisker. “It’s an $800,000 zero tolerance measuring device” for checking incoming parts. That’s one example of what Magna has learned about building cars.

Fisker has other examples. Cars are built using a lot of robots from the likes of
ABB
(
ABB
) and
Fanuc
(6594. Japan). Those robots have to be programed, and it takes six to nine months to program them to make sure everything is just so.

If manufacturers don’t get everything exactly right it means a car that should take 20 hours to assemble can take 100 hours, says Fisker. That’s a disaster for productivity and for profit margins.

Labor shouldn’t be underestimated, either. Startups are “hiring people that used to be
Uber
drivers or whatever,” says the CEO. “They are going to be as good as the guys at Magna who have done it for 25 years? Maybe one day, but not off the bat.”

Fisker didn’t want the company he founded that shares his name to go through those growing pains. That’s why he isn’t building a manufacturing plant and letting other, more experienced builders, do the heavy lifting.

Having no manufacturing capacity is one reason that Fisker is only worth a fraction of what Rivian and Lucid are. But its also the reason the stock has held up better. The first Fisker Ocean rolled off the assembly line at Magna on Nov. 17, in line with expectations. Being on time is a rare feat for EV start-ups.

Fisker expects to build and ship 42,000 Ocean SUVs in 2022. That’s the next test for the company and the stock. When production is ramped up, then investors will have to decide how much profit is in a vehicle that is built by someone else.

Fisker brought an Ocean SUV with him to New York. Company officials rang the opening bell at the New York Stock Exchange, and the car was parked outside the building.

It’s an attractive midsized SUV that is designed to cost as little as $40,000.

The Ocean generated a lot of buzz from passersby and onlookers. Free coffee, breakfast wraps, and a DJ blaring Dua Lipa certainly helped. Fisker has a flare for marketing.

Fisker stock is down 0.1% in midday trading. The
S&P 500
and
Dow Jones Industrial Average
are up about 1% and 0.9%, respectively.

Write to Al Root at allen.root@dowjones.com

Credit: marketwatch.com

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