For decades, Henrik Fisker has been a household name among automobile enthusiasts and Venture capitalists alike. He got his start as a car designer for BMW and Aston Martin where he designed the popular Vantage sports car. In 2005, he quit to start his own company called Fisker Coach Build. This Venture was a complete flop and shut down in 2007 after building fewer than 15 vehicles.

but this setback wasn't enough to derail his Ambitions The same year his first company failed, he started a new company called Fisker Automotive which manufactured a plug-in hybrid vehicle called the Fisker Karma Fisker Automotive was a complete disaster. It went bankrupt in 2013 after delivering just 2 000 Vehicles it burned 1.4 billion dollars of investor Capital including 140 million dollars from the U.S Department of Energy again Henrik was undeterred by his previous failures and in 2016 he created yet another automobile company called Fisker Inc Fisker Inc merged with Us back in 2020, raising 1B million dollars at a three billion dollar valuation. Fisker Projected that they had produced 8 000 cars in 2022 and 51 000 cars in 2023. They ended up producing 56 cars in 2022 and decreased their guidance to just 23 000 in 2023, less than half of their original Target having missed their production targets Fiskars Share price has declined by more than 40 percent in December of last year.

There were also the subject to a short selling report which accused the company of misleading investors and being in a desperate liquidity situation. In this video, we'll take a deep dive into Fisker and see whether it can live up to the hype or if it'll end in Failure like its two predecessors. In 2021, we posted a video about the history of Fisker which goes over the first two iterations of the company which you can find Linked In The description below. Long story short, Henrik Fisker was good at designing a cool looking car with premium specifications, but he wasn't an expert at manufacturing.

A lot of his design ideas were later found to be impractical and had to be changed. These design changes often happened at the last minute after they had already bought Parts rendering many of these parts useless. Despite the one hundred thousand dollar starting price of The Karma, the company's disorganized manufacturing processes caused them to lose 35 000 on each car sold. They burned through more than a billion dollars of investor money, including a 140 million dollar loan from the US Department of Energy before declaring bankruptcy in 2013.

Between the companies founding in 2007 in bankruptcy, they delivered a grand total of Just 2 000 cars in 2016. Just three years after Fisker Automotive's bankruptcy, Henrik founded a new car company called Fisker Inc Of course, it would be a big ask for any investor to fund his new Venture after his previous Venture failed so spectacularly. But Henrik had Promises of some new game-changing technologies which could make the new Fisker far more successful. Specifically, Henrik Fister claimed that his company had developed a revolutionary, solid-stated Battery Technology which could charge an EV with a 500 mile range in just one minute.

We'll be also showing our new battery technology that I talked to you Stuart about last time and this time I actually brought it with me which is solid state Battery Technology Which this allows you to charge in one minute and get more than 700 miles. If you want into a vehicle, hold on a second. I've got to repeat that. you just held up a new battery system and you're telling me that a one minute charge gets you a 500 mile range with that brand new technology.

Have I got that right? And by the way, when Am I going to see this? When Am I going to see this? When can I buy into this? Well, we're looking to get this on the market. Uh, already in the end of this year in consumer products in cars is probably after 2020 because we still need to set up obviously a large supply chain. Talk to Uh battery makers to help us get this into a high volume production, which is not an easy feat. So it's got to be sometime before we get into a car.

But we are going to set up our own pilot production line already this year for some smaller batteries in the consumer products. So Henry you are telling me that this the the Breakthrough is there. We're now in a position or some point in the very near future to recharge very quickly and get a long range for the car. With that, that's what you're telling me.

That's what I'm telling you. this battery is here. That's why we brought it I sold my Sciences We got to bring it CS show it not just talk about it. If this were really true, Fisker would probably be worth one trillion dollars.

Of course it wasn't A few years later Fisker abandoned their supposedly game changing battery technology Henrik Fisker told The Verge quote. but we eventually came to the conclusion I think it was probably end of 2019 beginning of 20. I Forget exactly that solid state batteries are still very, very far out. they're not around the corner.

I Think Personally, they're at least seven years out if not more in terms of any sort of high volume format unglow. With the solid state battery having been a complete flop, the company no longer had any revolutionary technology to lean on. Instead, they differentiated themselves with an asset light business model. Mass-producing vehicles is an incredibly difficult task.

And more importantly, Henrik Visger has no expertise in this field. So instead of building the cars themselves, they hired a contract manufacturer called Magna which will build Fiskars cars at their existing facility in Austria Magna has been building cars on behalf of other brands for decades. They've built well over a million cars for the likes of Mercedes Jaguar, BMW and Toyota. With their expertise, they should have no problem building the Fisker oceans.

But the real question is how much will it cost? The base Fisker Ocean SUV has a starting price of thirty seven thousand dollars. This makes it the fourth cheapest electric SUV available in the US. It also has Superior range compared to any electric SUV that is cheaper. so it appears to be one of the best value for money options available.

but can Fisker really make it profit at these prices? Fisker Published a heavily redacted version of their contract with Magna Importantly, the price they paid Magna is redacted as they claim that this information is confidential. The relative lack of disclosure around the Magna contract has opened up Fisker 2 attacks from short sellers. In December of 2022, a short-selling research firm called Fuzzy Panda published a short report on Fisker. After talking to former Fisker and Magna employees, they believed that Fiskar is contractually required to maintain 800 million dollars in their bank account to cover the expected production costs of the vehicles.

If Fisker's cash levels fall below this level, Magna will have the right to stop production. Fuzzy Panda further alleged that Fisker does not own all the intellectual property for the ocean and 80 of its parts are based on a Chinese electric vehicle model Magna previously worked on Fisker Almost immediately responded saying that they do not have a bank guarantee with Magna and Fisker owns the intellectual property for the Fisker ocean platform. The ocean platform does not have 80 carryover parts from any other platform. Subsequent events appear to vindicate.

Fisker As of June 30th, 2023, Fisker only had 467 million dollars of cashing equivalence on their balance sheet. Even if you include restricted cash, they had only 531 million dollars, which is well below the 800. Million Dollar Bank Guarantee that fuzzy Panda alleged yet Magna has not stopped production Fisker Originally planned to produce 51 000 cars in 2023, due to supply chain issues, They have revised this down to just 23 000. But how much will these cars cost to produce and how many will they be able to sell? Fisker pays for the raw materials, parts, and machine tools at the Magna Factory as well as labor costs and markup.

so Magna can make it profit. The company first started delivering vehicles to customers in the second quarter of 2023. They bragged that they achieved an 18 gross margin on these sales. However, they only delivered 11 vehicles in the quarter and this may not be representative of what their gross margins will be.

In future periods, they recognize 665 thousand dollars of Automotive costs of goods sold, which represents sixty thousand dollars per vehicle at their 18.5 vehicle margins. This means that they sold the cars for 73 000 each. This is a lot more than the 37 seven thousand dollar base price of the Fisker Ocean Sport. This is because the first five thousand cars they produce are limited edition Fisker Ocean Ones which cost sixty nine thousand dollars.

Presumably delivery and other small fees bring the revenue up to 73 000 per car. The Ocean One appears to be something of a marketing gimmick. On the touchscreen display and steering wheel, it has the words Ocean One, which serves as proof that you were one of the first five thousand Fisker customers. If you look at the specifications, it is identical to the Fisker Ocean Extreme, which is the most expensive trim and also sells for sixty nine thousand dollars.

Generally more expensive cars have higher gross margins. They have an 18 and a half percent gross margin on the most expensive car. The cheapest car is 45 cheaper and likely has a much lower gross margin. In 2025, they plan to launch the Fisker pair, which will be even cheaper at thirty thousand dollars.

The eighteen and a half percent gross margins they achieved in the second quarter will almost certainly not be sustainable, as these were their most expensive cars. Let's assume they can make a 10 gross margin going forward and the average selling price is fifty thousand dollars. That's five thousand dollars of gross profit per car. At this rate, they would have to sell seventeen thousand cars per quarter or 68 000 cars per year.

To break even, their goal at the current Magnet facility is to ramp up production to 300 cars per working day or roughly 75 000 cars per year. This would likely get them to a slight profit, but that's assuming that people will be willing to buy the cars. Fisker has over 60 000 reservations for the ocean, but these reservations only require a 250 refundable deposit. It's unclear how well they will convert into sales, For example, Lucid Motors also accumulated tens of thousands of reservations before they launched their vehicle, but a huge proportion of them canceled and their sales massively missed expectations.

Fisker Will likely have an easier time converting their reservations into sales as their cards are much cheaper. but again, we don't know if Fisker can even make a profit by selling its thirty seven thousand dollar base Ocean Sport of Henrik Fisker's Three Automobile Avengers Fisker Coach Build Fisker Automotive and Fisker Inc the current one Fisker Inc does appear to be the most successful, but whether it can achieve sustainable profitability remains to be seen. All right guys, that wraps it up for this video. what do you think about Fisker Let us know in the comments section below.

Also, don't forget to check out our second Channel broken business models where we discuss unusual or otherwise suspect businesses that may be unviable as always. Thank you so much for watching and we'll see you in the next one! Wall Street Millennial Signing out.