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Fisker: Why EV startup valuations are sky high and going higher

Is Fisker the next electric vehicle unicorn?

The California-based EV company unveiled a final prototype here this week of its first, widely-anticipated SUV, the Ocean, with production to begin in November 2022. If Fisker, run by EV pioneer Henrik Fisker, follows the pattern of U.S. EV startups, it should be a multi-billion dollar company in a year.

Sister EV startups Rivian and Lucid have seen their market values roar to dizzying heights in recent weeks after producing their first vehicles. With no revenue and one $70,000 pickup truck in its lineup, Irvine, California-based Rivian owns a market cap of $140 billion, more than General Motors. Lucid Motor’s $160k Air sedan rolled off the line last month and its market cap is now about $90 billion, more than Ford Motor Company.

“Wall Street (investors) think half of the global market will be EVs by 2030. Wall Street is betting that startup EVs automakers are going to make up most of that production,” CEO Fisker said in an interview in Los Angeles just hours before unveiling the Ocean on Wednesday. Battery-electric vehicles make up under 3% of U.S. sales.

Fisker’s prediction is self-interested, but consistent with current trends.

Despite facing competition from numerous legacy automakers in the EV space, Tesla — the first all-electric startup to enter the mainstream market in 2012 with its Model S sedan — still owns an 80% market share with a growing list of vehicles including the Model 3 sedan and Model Y and Model X SUVs. EV entries from household names like Chevy, Volvo, Audi, Porsche, BMW and Mercedes have barely dented Tesla’s juggernaut, which delivered 499,550 vehicles in 2020 — an increase of 36% over the previous year in the midst of a global pandemic.

Tesla’s market value soared over $1 trillion this month — more than the nine largest auto companies combined.

“Like other startups, we are building an EV company from the ground up,” said Fisker. “We are currently valued at $7 billion. The difference between us and Rivian and Lucid is that we won’t be in production for another year. If we hit our targets, I expect to see similar success.”

By contrast, Fisker said, legacy automakers will increasingly be stuck with costly gas-engine plant capacity while the market shifts to EVs. GM and Ford have announced aggressive moves to go all-electric in the next two decades.

Joe Phillippi of Autotrends Consulting, a veteran Wall Street analyst, is doubtful that EVs will make up half of global sales anytime soon. “I don’t see it, that’s 50 million units a year,” he said. “I worry this a bubble, but it’s a bubble that may last a long time. There’s a lot of money chasing these ideas.”

Fisker attributed investor confidence to a combination of government coercion and consumer acceptance.

Fisker’s home state of California, for example — the largest auto market in the world’s richest country — is mandating that all new car sales be zero-emission vehicles by 2035. The state has repeatedly had to adjust its goals over the last two decades, however, as consumers have been reluctant to adopt battery-powered vehicles.

China, the world’s biggest auto market, has mandated that all vehicles must be electrified — battery-powered, plug-in hybrid, or hybrid — by 2035. And the European Union has announced a ban on gas-powered cars by 2035.

“Europe is moving so fast. I expect that half of our sales will by in Europe,” said CEO Fisker. He said cities like London are banning diesel cars and Norway is moving to eliminate gas and diesel engines.

West Coast-based, Fisker is outsourcing its manufacturing to Magna in Europe. That strategy is in contrast to the “Big Three” electrics of Tesla, Rivian and Lucid, which run their own assembly operations stateside. Fisker said it’s important for startups to keep costs down and to deliver products on time — and Magna is a proven manufacturer, having produced the Mercedes G-class and Jaguar i-Pace. The Ocean EV is made on a heavily-modified, front-wheel-drive EV skateboard platform of Magna’s making.

Fisker said Magna’s Graz, Austria, plant also meets Fisker’s carbon neutrality goals by sourcing its electricity from hydroelectric power. Hydro-power also played a key role in Volkswagen’ location of its first U.S. EV plant in Tennessee.

While upper trims of the Ocean will cost over $70,000, Fisker is keen on keeping the starting price of his cars below $40,000.

“Magna’s base platform saved us a lot of time because we didn’t have to do basic design things,” he said. “But we still had the flexibility to change what we needed. It’s important because we’ve got to get our development time under 2 1/2 years.”

He is particularly bullish on his next, smaller SUV called the Peach. With a price target under the Ocean, Fisker said Peach will be outsourced to manufacturing partner Foxconn in Lordstown and will bring EVs to higher volume segments.

He suggested one reason for Rivian’s high market cap is its production of fleet vehicles to, for example, Amazon, which must meet sustainability targets. He expects vehicles like Ocean and Peach to do similar fleet business.

“But ultimately, retail buying will pick up as the cost of EVs continues to go down under $40,000,” he said.

He said 75% of customers ordering Ocean EVs are crossing over from gas-powered vehicles from makers such as Mercedes and BMW.

The Ocean boasts similar proportions to the hot-selling Tesla Model Y. The standard, front-wheel-drive Sport model offers 250-mile range, a 17-inch center tablet, panoramic sunroof and digital camera mirror.

It debuted Wednesday at the LA Auto Show.

This story was originally published November 19, 2021 3:15 AM.

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