No one really saw it coming. A year ago, Henrik Fisker was an admired auto industry veteran, but with a failed startup behind him. The 2013 Fisker Automotive bankruptcy sent Fisker back to his design roots for a while, but it did not discourage him from trying to build an automobile company again.
Fisker Inc., however, was primarily concept vehicles and Henrik’s one-man marketing machine until mid-2020. Up to that point, much of the electric vehicle narrative revolved around Tesla, with frantic efforts by traditional auto industry to reach CEO Elon Musk forming the main subplot.
Driving into history was a single, powerful, but poorly understood word: rupture. Big Auto, which traveled from Detroit to factories in Europe and Toyota City in Japan, was about to be replaced by a bunch of agile newbies who collectively proclaimed the long-awaited arrival of the electrification era.
Tesla had been in this for a long time, more than a decade and a half, and Wall Street loved its prospects. By the end of 2020, the California-based company had become the most valuable automaker in the world, by a wide margin, with a market capitalization that was approaching a trillion dollars.
Tesla is not really a disruptive innovator
Interruption? At first glance, perhaps, but Tesla was not really doing anything entirely different from what Ford and General Motors did for more than a century: designing and building cars that were assembled in factories that manufacturers owned and operated, and sold to audience. Tesla cars were powered solely by electricity, but on a basic level, they were not much of a departure from the norm of automobile manufacturing. They had four wheels, four doors, and Tesla had to spend on the predictably surprising levels of the global industry to produce them.
The end result was that Tesla succeeded in replacing more than 100 years of deep-seated internal combustion technology with electric power trains. Few thought this was possible, even for a large car manufacturer with tens of billions in the bank.
But it was not disturbing, at least not according to the scholar who proposed the so-called “disruptive innovation” theory.
“You could use a lot of features to describe Tesla,” Clayton Christensen told me in 2018.
“They are very creative. They understand that the tasks need to be done. Their technology is very good. But we would not consider Tesla as a rupture. They are trying to make better, better products. Our model is very, very clear on that topic. “
Christensen, who died in 2020, was a professor at Harvard Business School who, in 1997, wrote the most important and widely quoted book on the subject, “The innovator’s dilemma: when new technologies make big companies fail”.
The central concept is that established companies, like Detroit automakers, are interrupted by new competitors who initially offer a cheaper, lower-quality, but satisfactory product. Consumers vote with their dollars, disruptives improve their offers and, eventually, competitors are unable to keep up with innovations.
Why Fisker is disturbing
Tesla’s improvement approach contrasts with Fisker’s rethinking how an automotive brand brings its vehicles to market. Ultimately, Fisker is much closer to Christensen’s appropriate disruptive innovator, even if the company is not a perfect match.
“We don’t want to be a vertically integrated auto company,” Fisker told Insider last year. “We are not going to do our own manufacturing. It would be stupid for any EV startup to make an entirely new factory.”
Instead, Fisker teamed up with Canadian Magna International, the world’s largest contract manufacturer, to build a first vehicle, the Ocean SUV, due to start production in late 2022. Fisker also has an agreement with Taiwanese Foxconn, famous as the maker of Apple’s iPhone, to develop another vehicle, codenamed “Project PEAR”, which is in the 2023 timeline.
The approach contrasts with other startups, like Rivian and Nikola, who are committed to an old school factory footprint. The risk for these companies is that they have never built vehicles on a large scale before. As Tesla found, making cars is not easy; all of their vehicles endured what Musk called a “production hell”.
Fisker’s model has been tested, but never considered the only way forward. BMW and Jaguar Land Rover worked with Magna to deal with production bursts and assemble specialized vehicles. But Fisker is the first significant experience in a drastically “light on assets” electric car business model.
Something completely different
The asset-light approach has obviously been employed by major companies. Apple is essentially a design and software company, with almost 100% of its manufacturing outsourced to suppliers. In the automotive industry, brands like Aston Martin have partners such as Mercedes-Benz for engines, transmissions and infotainment systems.
But Fisker started from almost nothing but Henrik Fisker’s reputation and Instagram account. In 2020, the company’s plans were impressive enough to yield an IPO that raised $ 1 billion and coined a market capitalization of $ 3 billion, which has since increased to nearly $ 8 billion. If all goes as planned, the Ocean SUV should hit the streets in late 2022 and early 2023.
The ocean starts at $ 37,499, so it’s not a classic example of Christensen’s disruptive theory. He told me that very cheap, short-range electric city cars in China could be a better match.
But there is no doubt that Fisker is something completely different. And if the company can make its business model work, it will be the most disturbing thing the auto industry has ever seen.