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Does It Matter If Electric Car Maker Fisker Fails?

Tesla and new fuel-economy standards have already jump-started battery-powered vehicles.
April 4, 2012

Last night, Fisker Automotive, maker of the luxury Karma electric vehicle, unveiled its new car, the Atlantic, which was previously known as Project Nina. The car, which is expected to cost about half as much as the Karma—or around $50,000—is meant to make the company a mass-market automaker.

But there are strong doubts about whether the company will bring the car to market and, if it does, whether the car will be built in the United States as originally intended. The company had been counting on a U.S. Department of Energy loan to build a factory for manufacturing the car, but those funds were frozen after Fisker failed to meet milestones specified by the terms of the loan.

In addition to losing access to the approximately $300 million it had yet to draw from its DOE loan, the company has had a number of other setbacks recently. Those include the failure of the Karma that Consumer Reports was testing, which turned out to be the result of a bad battery pack from A123 Systems. A123 Systems is now replacing the battery packs in about 700 Karma sedans.

Fisker’s new CEO, Tom LaSorda, told reporters last night that the company is planning to go forward with production of the new car even without the DOE funds, although it may build the car outside of the United States. The company recently closed a nearly $400 million round of private financing, bringing the total investment to over $1 billion. He said the company is looking for more private investment, possibly in the form of a strategic partnership.

Fisker is also negotiating with DOE to have the terms of the loan changed, but that could be difficult given the pressure DOE is under after it changed the terms of a loan to Solyndra, which later went out of business and became a political lightning rod.

If Fisker fails to bring in the additional financing it needs, and it folds, does that matter? Fisker’s announcement last night drew heavy press attention, generating nearly 200 articles (including this one). And that raises the question of why so many people seem to care about the fate of this small, though heavily funded, company.

At one point, its success might have helped determine whether electric vehicles would catch on. But no longer. When Fisker was founded in 2007, the only well-known electric-car maker was Tesla, whose Roadster may have helped inspire GM to produce its electric Volt. But now every major automaker is selling, or has plans to sell, an electric vehicle. Fisker aimed to sell its car before GM brought the Volt to market, but GM beat it, and has now sold more than 11,500 Volts, compared to about 700 Fisker Karmas, which went on sale a year after the Volt. GM’s news yesterday of record monthly Volt sales probably matters more to electric vehicles than Fisker’s announcement last night.

If Fisker fails, it won’t doom electric vehicles. But it would mean that the world would have fewer extremely cool-looking cars.

If, on the other hand, Fisker succeeds, maybe it will convince automakers like GM that people actually want fast electric cars (the Karma does 0 to 60 in 6.3 seconds), rather than the dialed-down versions they’re selling now. Then again, Tesla, whose cars are even faster, might do a better job making that argument.

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