After sputtering around following its explosive debut, Spartan Energy Acquisition (NYSE:SPAQ), the “filler” name for what will eventually be Fisker Inc. via a special acquisition company, enjoyed a brilliant way to start the week. On Sep. 14, SPAQ stock shot up 14.6%, finally looking like the electric vehicle competitor the underlying company marketed it to be.
However, I can understand why many investors remain skeptical about Fisker. First, the enthusiasm toward EVs have reached a manic phase. Seemingly, everyone and their dog is forwarding an EV concept – with institutional backing to match.
As Tesla (NASDAQ:TSLA) fans will be quick to remind you, nobody can catch Elon Musk and company. They are too far ahead of the game.
Second, SPAQ stock carries baggage, both current and legacy related. As our own Larry Ramer noted, Fisker initially gained credibility regarding its talks with Volkswagen (OTCMKTS:VLKAF) for a shared EV platform. However, those talks could fall through, especially because Volkswagen is planning its own EV development.
Further, Fisker founder Henrik Fisker years ago attempted to make an EV company but failed. With that blight on his record, SPAQ stock seems even riskier than other EV startups.
Fundamentally, I agree with Ramer and other analysts who share his opinion. By no means is SPAQ stock a reliable investment. Certainly, you can lose big in this speculation.
But I do take issue on one of Ramer’s criticisms: little to no product differentiation. According to Ramer, while Henrik Fisker is a legendary auto designer, other companies will hire their own top-shelf designers. Thus, outside of pricing – which may only result in a limited impact – Fisker may have an identity crisis.
Differentiation Is Exactly What SPAQ Stock Brings
However, I couldn’t disagree more. Differentiation is exactly what Fisker is bringing to the table with its groundbreaking Ocean SUV.
You see, we humans are not that different. Rather than viewing SPAQ stock through the lens of technical differentiation, you must view the investment as a consumer. Think about it – when you buy a car, what motivated you to consider it as a purchase/lease option?
Yes, you can lie to yourself and talk about a car’s reliability or its connectivity features just like you lie to your significant other when you are caught gawking at another person because they “have a great personality.” Stop it. You’re only deep-diving the pros and cons of a vehicle because its exterior styling initially attracted you.
In other words, features don’t sell cars. Hype does. Sex and marketing also play a pivotal role. Otherwise, why would you buy an Apple (NASDAQ:AAPL) smartphone when so many other competitors provide equivalent or better features? Sure, Apple has a great ecosystem, but let’s get real – Apple has a powerful brand.
Of course, Tesla leads when it comes to EV branding. Surely, the Fisker brand will not be able to compete in this arena. Therefore, the company is approaching the space with its best weapon: design.
While I get the fact that Tesla hires excellent designers, this is a technology firm that’s building an EV. On the other hand, Fisker is an automotive company first, incorporating technology to complement the design element.
And let’s also not forget another fact supporting SPAQ stock: just because Tesla is in the lead today does not mean it will maintain that dominance. Look, people have different tastes. If they didn’t, Ford (NYSE:F) will be No.1 for all eternity.
Differentiation Is More Important the Higher You Go
If you recall from your history books, Henry Ford once quipped that, “Any customer can have a car painted any color that he wants so long as it is black.” Ford made the comment during the dawn of the assembly line and mass production, so it made sense.
It doesn’t make sense right now. Especially, it does not make sense in higher price brackets.
As you know, automotive manufacturers are not going to invest money differentiating their products for economy cars. These are for customers that could give two rips – I prefer using another word – about exterior styling. Thus, the extra money invested in differentiation would be wasted.
However, that’s not the case for those spending big money on their vehicles. Not only do they want top-notch features, they want to stand out. That’s why you’ll never see Ferrari (NYSE:RACE) build a boring car. Otherwise, the ghost of Enzo Ferrari will condemn the blasphemer to perdition.
In a similar vein, Fisker is forging through a difficult path, yes, but it’s the only path. I can imagine a Toyota (NYSE:TM) just bum-rushing Tesla with brute-force production attacks. Obviously, Fisker doesn’t have that capability. Instead, it must rely on its true asset of design inspiration.
Finally, just keep in mind that Tesla, no matter who it hires, won’t build universally attractive cars. As the already crowded combustion-engine market demonstrates, there’s more than enough room for several competitors. Fisker is doing what works for them and it may just pan out for SPAQ stock.
On the date of publication, Josh Enomoto held a long position in SPAQ and F.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.