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Fisker Stock Should Swell With the Ocean, but a Sea Change Looms

Fisker (NYSE:FSR) is an EV company applying what it calls an “asset-light” strategy. Whether it will do more to make FSR stock a worthwhile buy may depend on its execution. 

The Fisker logo hangs on display at the November 2011 International Auto Show.
Source: Eric Broder Van Dyke / Shutterstock.com

Part of this strategy includes outsourcing manufacturing of its Fisker Ocean, which the company touts as the world’s greenest car. Magna International (NYSE:MGA) will manufacture the Ocean in Europe. Fisker will not incur the cost associated with building its own manufacturing facilities, unlike other asset-heavy competitors.

The company isn’t arbitrarily trying to keep its costs down but rather working on ways to lighten the cost burden on its future customers.

A Closer Look at FSR Stock

Fisker announced that the Ocean, due in Q4 2022, will cost $37,499. The company chose that number so that the cost will fall below $30k with federal tax incentives. 

That price is relatively low and is comparable with Tesla’s (NASDAQ:TSLA) Model 3. Fisker is aimed at the cheaper end of the EV spectrum to be sure. 

Fisker recently announced plans for its second vehicle. Details are beginning to trickle in and it’s clear that Fisker is establishing itself as a low-cost EV option. 

Fisker’s Second Vehicle

Back at the end of February, Fisker released details for its second planned vehicle, announcing that it had signed a memorandum of understanding with Taiwan’s Foxconn to take on the assembly responsibilities.

Foxconn is set to produce 250,000 Fisker vehicles per year and aims to begin production in Q4 2023. Foxconn also has an assembly plant in Wisconsin. Thus, it looks very possible that Fisker’s second EV will be American-made.

If that is the case, Fisker will be looking to highlight and market the “Made in America” aspect of the vehicle, but other than those few details we were left with many questions. As weeks passed, more details emerged. 

The car is aimed at a very low-cost segment within EVs and will compete with Tesla’s $25,000 model. 

Fisker says the Project PEAR (Personal Electric Automotive Revolution) should cost less than $30k. With federal tax incentives, it should then be under $22,500.  

Fisker is carving out a niche for itself as a design and customer service EV company with low-cost vehicles. For the strategy to work, Fisker’s manufacturing partners have to produce quality vehicles.  

Manufacturing Partners

Magna International’s track record speaks for itself.

“Magna has a unique position in the industry with its market-leading innovative solutions combined with vehicle assembly capabilities that have produced more than 3.7 million vehicles from 30 different models,” company president Frank Klein said.

It’s safe enough to assume that Magna knows what it’s doing with a track record like that. Fisker’s Ocean EVs seem like they should fare well from a quality perspective since Magna is the manufacturer.

The Foxconn Fisker vehicle sits on much shakier ground. That’s because the Wisconsin plant from which Foxconn will likely produce the PEAR has a long history of issues. Foxconn has made many promises for projects at the Wisconsin plant. 

When the deal was announced, Wisconsin Assembly Minority Leader Gordon Hintz was immediately skeptical.

Citing failed plans for coffee kiosks and ventilators from the plant he bluntly stated: “Time after time you have a company that seems to be trying to buy time in a state that has been waiting almost four years for something to be true, and they string people along by announcing the next best thing, but I don’t know how anyone can believe them at this point.”

The Bottom Line on FSR Stock

Fisker’s Ocean looks to be on solid ground. Investors have to give the company credit for putting together a strategy that looks like it will result in a quality Ocean EV.

The PEAR is scheduled for at least a year later but the potential issues are evident. The price point is attractive, but let’s assume the Ocean is met with positive reception. What then happens if the PEAR rolls off of Foxconn’s factory and is simply not on par with the Ocean? 

Fisker needs to address this issue because it isn’t insignificant.

On the one hand, FSR stock’s low price makes it attractive right now. The Ocean makes sense. Last week I said now looks like a good time to pick up FSR stock. I still believe that’s true because the Ocean is driving future prospects. But keep the PEAR/Foxconn issues in mind.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.


Article printed from InvestorPlace Media, https://investorplace.com/2021/04/fisker-stock-should-swell-with-the-ocean-but-a-sea-change-looms/.

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