Fisker soars 17% after reaching deal with Foxconn for development of an electric vehicle

Fisker Ocean
Production on Fisker’s Ocean SUV is slated to start in 2022.

  • Fisker shares revved up 17% on Friday after the company and Foxconn finalized agreements to develop a “breakthrough” electric vehicle.
  • Production of the vehicle is expected to begin in 2023 in the US.
  • Fisker is aiming to begin production on its Ocean SUV in Europe in 2022.
  • See more stories on Insider’s business page.

Shares of Fisker sharply jumped Friday after the company finalized a deal to jointly develop and manufacture electric vehicles with Foxconn, the manufacturer of Apple iPhones.

Financial terms of the agreements were not disclosed. The companies will invest in a program named Project PEAR, or Personal Electric Automotive Revolution, that’s aimed at creating a “new breakthrough electric vehicle,” they said in a statement issued late Thursday. The vehicle will have a starting price of less than $30,000 before incentives and be sold under the Fisker brand.

Shares of Fisker popped up 17% to $11.65. The stock this year had turned lower for a loss of about 32%.

The vehicle will be sold in markets including North America, Europe, China, and India, and manufacturing is slated to begin in the US in 2023. Fisker is preparing to begin production on its first vehicle, the Ocean SUV, in Europe in the fourth quarter of 2022.

Fisker and Taiwan-based Foxconn, also known as Hon Hai Precision Industry Co, said they are considering “several” manufacturing locations and are studying other factory sites for future manufacturing. Each company will take proceeds upon the program’s successful delivery.

“At under $30,000 with stunning design and innovation, we are rethinking the car, both in terms of proportions, design, interior functionality and connected user experience,” said Henrik Fisker, Fisker’s CEO, in the joint statement.

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A 2017 lawsuit shows how electric car startup Lordstown paid outside workers to gin up 10,000 pre-orders per year

Vice President Mike Pence at the Unveiling of the Lordstown Endurance_June 25, 2020
Vice President Mike Pence at the unveiling of the Lordstown Endurance.

  • A 2017 lawsuit shows how Lordstown Motors banked some pre-orders for its upcoming pickup truck.
  • The case reveals the company paid outside workers to generate up to 10,000 pre-orders per year.
  • Experts warn pre-orders and reservations are flawed measures of a startup’s potential.
  • See more stories on Insider’s business page.

Electric vehicle startup Lordstown Motors has been paying salespeople to secure pre-orders of its battery-powered truck prototype for at least five years – a practice that is outside the bounds of most startups without a sellable product – a little-noticed lawsuit from 2017 reveals.

In the suit, a former employee accused Workhorse Group, which Lordstown spun out of in 2019, of failing to pay him commissions he earned by logging over 8,000 pre-orders for the Endurance pickup truck now being offered by Lordstown. A recent report by Hindenburg Research noted the suit, but Insider is the first outlet to report its details and its implications both for Lordstown and the host of startups racing to meet growing demand for EVs.

Commissioning pre-orders is not illegal, but it should raise a major red flag for investors, said Gartner analyst Michael Ramsey.

While Lordstown’s practice appears unique in the EV startup world, experts warn that no matter how they’re collected, pre-orders and reservations aren’t great tools for predicting which young automakers will prosper. Because they’re typically non-binding, they don’t necessarily indicate what level of demand a vehicle will generate when it enters production. A startup’s success is better determined by its technology and talent than by a metric that hinges more on interest than intent.

Lordstown’s pre-order list ‘obviously does not indicate real demand’

Even with the electric vehicle market starting to grow, deep-pocketed investors are crucial to any startup. It takes billions of dollars to launch an automaker. The industry’s history is littered with failures, and most of today’s startups will likely flounder before their products hit the market, according to risk consulting firm Guidehouse.

To attract capital, many fledgling automakers use pre-order figures as a proxy for the demand their future vehicles will command. Tesla in particular has a long history of doing this. The problem is that these orders represent a consumer’s interest in actually buying the vehicle once it reaches the market – not their commitment to do so.

The fact that Lordstown paid commissions for bringing in these orders further undermines the figures’ credibility, Ramsey said. “It obviously does not indicate real demand,” he told Insider.

Lordstown Motors has been commissioning pre-orders for years

The idea for Lordstown Motors originated at Workhorse Group. In 2019, Workhorse CEO Steve Burns left the startup. He bought the patent for its electric pickup, along with thousands of pre-orders for it, and made it the basis for a new company, Lordstown.

Workhorse Truck
Workhorse Truck

Today, Lordstown boasts more than 100,000 pre-orders for the pickup. That’s impressive when compared to those for similar EV startups like Lucid Motors and Fisker, which have about 8,000 and 14,000 pre-orders, respectively.

In March, short-selling firm Hindenburg Research became the first to report on the questionability of Lordstown’s pre-orders, calling them “largely fictitious” and an attempt to “mislead” investors. The company’s stock fell 16% the day after the report was released and continued to slide.

At the time, Burns responded that the company has been transparent with the status of its orders. He also reiterated Lordstown’s plans to release the electric pickup truck in September.

Pre-orders were heavily incentivized

The 2017 lawsuit was filed against Workhorse by its former director of fleet sales, Jeffrey Esfeld. When he was hired in 2016, Esfeld said, he was tasked with securing up to 10,000 pre-orders per year. In just over a year, he logged more than 8,000 pre-orders, according to the court document. That number alone would account for over 8% of Lordstown’s current pre-orders to date. A Lordstown spokesperson would not confirm whether signatures gathered by Workhorse Group in 2016 are part of that total. (Esfeld declined a request for comment from Insider.)

Esfeld received a commission of roughly $30 per vehicle for each signed pre-order, according to the suit, on top of his $100,000 base salary. He would also receive a commission of 0.14% of the vehicle’s sale price for pre-orders that officially became sales. He was one of several employees that worked specifically on obtaining pre-orders for the truck.

During his time at the company, Esfeld was paid commissions for 3,050 vehicle pre-orders, from companies including Duke Energy and American Electric Power. (The case also notes Esfeld had been working to win over Amazon, which ultimately agreed to buy 100,000 electric delivery vans from Lordstown rival Rivian.) But, he alleged, after laying him off in 2017, Workhorse failed to pay him $440,707 he had earned in commissions, representing about 5,000 pre-orders, including from Ryder, one of Lordstown’s biggest pre-order signees to date. (He ultimately won the suit, and Workhorse paid him an agreed upon amount of $87,000 in damages and $32,245.02 in attorneys’ fees and costs.)

Steve Burns Workhorse
Steve Burns at Workhorse Group

The practice continued at Lordstown. In 2020, the startup hired consulting group Climb2Glory to commission orders, according to Hindenburg Research. On a page that was deleted after the short-seller’s report was released, Climb2Glory referenced how it helped Lordstown generate pre-orders.

Workhorse Group, Lordstown Motors, and Climb2Glory did not respond to requests for comment from Insider.

A questionable spin on a questionable practice

The Workhorse and Lordstown policy of paying commissions for pre-orders appears rare. “This is the first time I’ve heard of a start-up in that space doing anything like that,” Pitchbook analyst Asad Hussain told Insider. Comparable electric car startups, including Rivian, Lucid Motors, Fisker, and Nikola, do not pay commissions for pre-orders or contract workers to secure them, Insider found.

In recent automotive history, Elon Musk set the standard of using pre-orders to preview sales figures. “Tesla’s reservations taught the industry that this is a way to develop credibility with investors,” Ramsey said. But while it once charged $50,000 to pre-order a Roadster, it now asks a mere $100 from someone who wants a Cybertruck. That’s comparable to (usually refundable) reservation fees charged by the likes of Fisker ($250) and Lucid Motors ($300).

That lesson isn’t necessarily a good one, Ramsey said. “Investors need to think long and hard about the viability of the pre-orders that any of these startups are touting.”

Hussain told Insider that investors need to focus more on technology and execution, rather than “propaganda.” He thinks the Wall Street trend of using special-purpose acquisition companies to go public has put a lot of companies, like Lordstown Motors, in a position they’re not mature enough for yet.

Endurance electric pickup truck by Lordstown Motors
Steve Burns with Lordstown’s Endurance.

“The ability for early stage startups to go to market, even without revenue, creates a double-edged sword,” Hussain told Insider. “It allows everyday people to gain access to disruptive technologies like electric cars, but it also puts new companies and investors in a precarious position – how can they prove there will be demand for their product, without revenue? That’s where pre-orders can get tricky.”

For Lordstown, reliance on pre-orders has put it in the crosshairs of notorious short-seller Hindenburg Research. Just last fall, the same group released a damning report on Nikola that caused the company’s stock to plummet and its CEO Trevor Milton to step down. Currently, Lordstown is under investigation by the Securities and Exchange Commission for its pre-order practices. Its stock is trading at around $9, down from a high of $30 in February.

“A lot of these companies tout non-binding pre-orders or reservations,” Hussain said. “But, if you’re actually paying for them [the pre-orders] it does bring up some questions and it is not characteristic of the space.”

“The key question mark for many of these startups is: Can you actually get your factories up and running? Can you actually manufacture those vehicles?”

Mark Matousek contributed reporting.

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Fisker and Lordstown Motors slide as Goldman Sachs downgrades the stocks on electric-vehicle industry competition

Fisker Ocean
The Fisker Ocean.

  • Fisker and Lordstown Motors fell Thursday after Goldman Sachs cut its stock ratings for both companies.
  • The firm lowered Fisker to a sell rating from neutral, and Lordstown was reduced to neutral from buy.
  • Goldman expects General Motors, Ford, Apple and others to escalate competition in the electric-vehicle industry.
  • See more stories on Insider’s business page.

Shares of Fisker and Lordstown Motors dropped Thursday after Goldman Sachs downgraded the ratings of both electric-vehicle makers. The firm cited increasing competition and concerns about product timing.

Fisker was cut to sell from a neutral rating, and its 12-month price target was lowered to $10 from $15. Lordstown was cut to a neutral rating from buy, and while its target was cut to $10 from $21.

Fisker dropped as much as 12%, while Lordstown lost 5% at intraday lows.

Goldman said the downgrades come as multiple companies including General Motors, Ford and Volkswagen plan to accelerate their transition toward EVs as they seek to completely exist the internal combustion engine market.

Meanwhile, the firm noted that several big tech companies such as Apple, Xiaomi and Baidu are considering a larger role in the auto market with a branded product, or through a collaboration with an original-equipment manufacturer.

“Established EV OEMs such as Tesla are also scaling quickly,” said Goldman Sachs equity research analysts led by Mark Delaney. “Several of these companies are committing billions of R&D dollars to both powertrain technology and software.”

For Fisker specifically, Goldman said while it appreciates the steps it’s taking to try to differentiate its upcoming products “we are incrementally concerned about what we believe is the company’s late time to market … as competition increases.” Fisker is preparing to enter the EV industry in the fourth quarter of 2022 with its Ocean SUV.

The bank pointed out that Fisker has announced a plan for a “unique follow-on vehicle” with Apple supplier Foxconn that could enter the market around the fourth quarter of 2023. However, “by the time this vehicle may be ramping, the competitive landscape could be even more challenging (including the potential for new big tech entrants via partnerships).”

On Lordstown, Goldman said it’s “now more cautious on the ramp for the Endurance truck,” after the vehicle ran out of battery after about 40 miles during an off-road race in Baja California, last week. That “suggests to us that there could be more development work to do on the powertrain than we had expected,” said Goldman.

“This factor, coupled with the global auto supply chain challenges that are making it difficult to obtain parts, could increase the probability that the company’s market entry will be delayed and/or could occur at a more measured pace than we had expected,” said the bank, adding that Lordstown is aiming to start vehicle production in September.

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Fisker could jump another 116% due to rising reservations and an EV boom, BofA says

Fisker Ocean
The Fisker Ocean.

Fisker is “standing out even with plenty of fish in the ocean of new EV automakers,” Bank of America says.

In a note to clients on Tuesday, Bank of America initiated coverage on shares of Fisker with a “buy” rating and a $31 price target.

The price target implies a potential ~116% rise from Tuesday’s intraday high of $14.45 per share.

Analysts led by John Murphy, CFA, said they believe rising reservations and a boom for the EV industry as a whole will help boost Fisker moving forward.

“Our Buy rating on Fisker is predicated on our view that the company is a beneficiary of, although still one of many participants within, the automotive industry evolution towards electrification,” Murphy wrote.

Murphy’s team said their latest estimates for Fisker’s Ocean SUV reservations hit more than 14,000 recently and that they expect production for the vehicle to start by the end of 2022.

Fisker will follow its new, all-electric SUV with three more EV models through 2025.

The Ocean SUV is expected to have a range of between 250 and 300 miles, accelerate to 60 mph in 2.9 secs (in its quickest version), and start at $37,499.

Fisker also offers lease-like subscription plans which are expected to cost $379 per month for 30,000 miles each year, including maintenance and service.

The Bank of America team highlighted the Fisker-Flexible Platform Adaptive Design (FF-PAD) in their note to clients on Tuesday as well. The FF-PAD is a proprietary design that allows Fisker to utilize third-party EV platforms and outsource its manufacturing to the likes of Foxconn and Magna.

Murphy and his team said the flexible leading program and FF-PAD design method of Fisker are “compelling,” but the firm’s business model may be “overly complicated.”

The Bank of America analysts also noted Fisker faces some serious competition in the now-crowded EV industry, and that Autotech entrants are “riskier investments than auto incumbents.”

Fisker went public in October 2020 through a reverse merger with a special purpose acquisition company (SPAC) called Spartan Energy.

Shares of the EV maker have slumped more than 50% over the past six months amid competition in the now-crowded industry.

Despite its recent slump, Fisker holds five “buy” ratings, three “neutral” ratings, and just one “sell” rating from analysts.

The firm’s stock traded up 3.60% as of 1:14 p.m. ET on Tuesday.

Fisker chart 2
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Fisker soars 26% after it partners with Foxconn to develop and manufacture a new electric vehicle

Fisker Ocean
The Fisker Ocean.

  • Fisker Inc. soared 26% on Wednesday after it said it will collaborate with Foxconn to develop and manufacture electric vehicles.
  • Fisker and Foxconn will develop Fisker’s second vehicle, which it expects to start production in the fourth quarter of 2023.
  • Foxconn is expected to manufacture the vehicle at annual volumes of more than 250,000.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Fisker Inc. soared as much as 26% on Wednesday after it said it entered a memorandum of understanding with Foxconn to jointly develop and manufacture an electric vehicle.

The vehicle will be Fisker’s second EV model, after its Ocean electric SUV, which is expected to be launched next year and is being manufactured in partnership with Magna.

Foxconn is best known as the Chinese manufacturer of Apple’s iPhone, and is the world’s largest electronics manufacturer.

The proposed collaboration is targeting an annual production rate of 250,000 electric vehicles, with the start of production expected in the fourth quarter of 2023. The vehicles being built by Foxconn will be sold in North America, Europe, China and India, according to Fisker. 

Fisker is staying true to its go-to-market strategy, which is comprised of designing electric vehicles, but outsourcing all of the production to contract manufacturers rather than build the vehicle itself.

“The collaboration between our firms means that it will only take 24 months to produce the next Fisker vehicle – from research and development to production, reducing half of the traditional time required to bring a new vehicle to market,” said Foxconn chairman Young-way Liu.

Both Fisker and Foxconn expect to sign a formal partnership in the second quarter. 

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Fisker soars 20% after it partners with Foxconn to develop and manufacture a new electric vehicle

Fisker Ocean
The Fisker Ocean.

  • Fisker Inc. soared 20% on Wednesday after it said it will collaborate with Foxconn to develop and manufacture electric vehicles.
  • Fisker and Foxconn will develop Fisker’s second vehicle, which it expects to start production in the fourth quarter of 2023.
  • Foxconn is expected to manufacture the vehicle at annual volumes of more than 250,000.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Fisker Inc. soared 20% on Wednesday after it said it entered a memorandum of understanding with Foxconn to jointly develop and manufacture an electric vehicle.

The vehicle will be Fisker’s second EV model, after its Ocean electric SUV, which is expected to be launched next year and is being manufactured in partnership with Magna.

Foxconn is best known as the Chinese manufacturer of Apple’s iPhone, and is the world’s largest electronics manufacturer.

The proposed collaboration is targeting an annual production rate of 250,000 electric vehicles, with the start of production expected in the fourth quarter of 2023. The vehicles being built by Foxconn will be sold in North America, Europe, China and India, according to Fisker. 

Fisker is staying true to its go-to-market strategy, which is comprised of designing electric vehicles, but outsourcing all of the production to contract manufacturers rather than build the vehicle itself.

“The collaboration between our firms means that it will only take 24 months to produce the next Fisker vehicle – from research and development to production, reducing half of the traditional time required to bring a new vehicle to market,” said Foxconn chairman Young-way Liu.

Both Fisker and Foxconn expect to sign a formal partnership in the second quarter. 

Read the original article on Business Insider