After Mercedes, a Phantom Menace Threatens Tesla Stock
As if Tesla Motors Inc (NASDAQ:TSLA) were not already struggling with a surge of new competition from the likes of Mercedes Benz or, at the mid-price level, General Motors Company (NYSE:GM), an old archrival is back from the dead.
Henrik Fisker, a former BMW and Aston Martin designer, who founded Fisker Automotive, Inc. is back with a new company, Fisker, Inc., and this time he carries more risk for Tesla stock.
Indeed, the phantom of Fisker Automotive, which went bankrupt in 2013, might prove more effective than the now-defunct company. One of the main reasons is that Henrik Fisker says his new cars will have better batteries than anything that Tesla can make now. The company plans to make a clean sweep of the past and start from scratch. Those who own Tesla stock might want to pay attention.
Henrik Fisker, who designed at least three cars made famous by James Bond (the convertibles BMW “Z3” and “Z8” and the Aston Martin “DB9”) stated it clearly. He’s going after Tesla with a new 100% luxury sedan, priced just about the same as a certain … Tesla “Model S.” Moreover, Fisker also plans a more middle-class-friendly electric vehicle, targeting the Tesla “Model 3.” That implies a price target below $35,000.
Fisker Has More Ambitious Targets than Even Tesla
Fisker, Inc. could revolutionize electric vehicles, says the founder, upsetting the very market that Tesla Motors did much to start. So long as this new industrial adventure runs better than the one that the designer launched in 2007, Tesla shareholders should take notice. Indeed, in the failed experiment, Fisker made the mistake of offering more of a hybrid than a full electric.
The original Fisker seduced the same Hollywood environmentalist types as Ashton Kutcher or Leonardo di Caprio (even Justin Bieber) that does Tesla. So Fisker has a point when he says he wants to challenge Tesla CEO Elon Musk’s cars. Still, it may not yet be time for Tesla owners to put their cars up for sale in the local newspaper.
Fisker has an excellent record as a designer. He has also proven his chops in being able to take risk. But he has been far less skilled than Elon Musk at milking the system of subsidies and incentives—courtesy of taxpayers—that have been keeping Tesla stock trading at over 30 times its book value. The old Fisker Automotive still has not paid some 60% of its debt to the U.S. federal government. The company filed for bankruptcy in 2013 before being bought by Chinese spare-parts manufacturer Wanxiang Group Corporation.
It’s all About the Batteries
Still, this time Mr. Fisker has a better strategy. Like Tesla, his new company intends to make its own batteries through a company known as Fisker Nanotech. This battery is rumored to feature graphene and offer a range of about 370 miles. That’s much more than a Tesla Model S can offer now. (Source: “Henrik Fisker launches new electric car company,” Reuters, October 4, 2016.)
Fisker, Inc. could also offer its state-of-the-art batteries—when and if they are made—to selected partners. If you got deja-vu after reading this roadmap, that’s because Tesla Motors has a rather similar one. It would appear as if Fisker, Inc. wants to emulate Tesla Motors. In this sense, given its success rate, Fisker might actually be more of a boost to TSLA stock than a detractor. It suggests that Tesla is on the right track with the mass-market electric car plan.
Tesla Beats Fisker, but the Real Threat Comes from Elsewhere
But if anything, the market should have informed Fisker already. It’s hugely expensive and risky to start a mass-market car company now. That train has left the station in the steam locomotive days, unless your company was incubated by heavily protectionist measures in South Korea like Hyundai Motor Co or Kia Motors Corporation were. That is even more so when century-old carmakers are still in the game, such as Daimler AG (FRA:DAI), Volkswagen AG (FRA:VOW) (VW), and—especially—General Motors (GM), which will launch a full electric $30,000 sedan just in time for Christmas.
Therefore, if the electric car contest were only between TSLA and Fisker, Tesla would trounce the upstart. But Fisker is not the source of Tesla stock’s threats. The very mainstream manufacturers that Elon Musk and Henrik Fisker wanted to challenge now represent the greatest menace.
Admittedly, Tesla was able to boost production and deliver more cars in the third quarter. Many TSLA investors had been waiting for this news. Tesla delivered 24,500 cars, some 40% higher than its best quarterly performance to date, and over 110% better year-over-year. But given the problems of the past, such a rate is the least expected in order to reach the targeted 500,000 deliveries by 2018. For that to happen, the company must continue to sell cars at breakneck pace.
Tesla may have the market almost all to itself now. Yet the challengers are coming from every direction, promising as capable a straight-line performance as Tesla vehicles, and better interior appointments. The big names such as GM or VW, or even Mercedes Benz, can also rely on massive global sales networks. The rise of competitors could put a major speed bump ahead of Tesla’s growth. It could certainly put a damper on Tesla stock.