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.
Cathie Wood, the CEO of Ark Invest, said she sees growth potential in “disruptive innovation platforms” in China and that they are competing with similar ventures in the US now. Chinese tech stocks have been trending downwards recently as they face legal and regulatory pressure.
Speaking at a webinar in collaboration with Li Yimei, chief executive of China Asset Management this month, she discussed China’s commitment to innovation and said the country’s platforms have made huge progress in area such as DNA sequencing, energy storage, artificial intelligence, blockchain and robotics, especially relating to productivity, “which is good for the entire economy,” IgnitesAsia quoted Wood as saying.
Wood, through her ARK Invest exchange-traded fund, was one of the top performing asset managers of 2020, thanks in large part to her bets on disruptive technology.
She said many Chinese platforms are now close competitors to those in the US, after having caught up in recent years. “Competition in technology is a really good thing, in terms of moving the technology forward faster than otherwise would have been the case,” she said.
She said she was impressed with the government’s collaboration with the private sector, as she believes this will further the development of microchips and artificial intelligence.
Wood also said it reflected the government’s commitment to electric vehicles “I’m very impressed that China allows Tesla into the country without a local manufacturer. It is so determined to have electric vehicles proliferate throughout China,” she said.
Chinese tech shares have tumbled recently. The Hang Seng Tech index, which contains a number of big Chinese tech names such as Alibaba, Tencent, and FoxConn, is one of the worst performers from among the major indices this year, with a loss of almost 3%, versus a 1.5% gain in the tech-heavy Nasdaq 100.
Wood’s Ark Invest published a note this week saying “Chinese technology companies are caught in political crosscurrents”, referring to the developments that have been causing stocks to crash. Ark Invest believes they will only cause “short term turmoil” and said “policies might accelerate or hinder the pace of innovation for a time, but we believe self-preservation probably will bring policymakers back to both tables.”
Electric-car maker Fisker said it will work with Apple supplier Foxconn to produce more than 250,000 vehicles a year beginning in late 2023, sending its shares up 18%.
The deal, codenamed “Project PEAR” (Personal Electric Automotive Revolution), is looking at markets globally, including North America, Europe, China and India, Fisker said.
Foxconn, Apple’s main iPhone maker, has ramped up its interest in electric vehicles over the past year or so, announcing deals with Chinese electric-car maker Byton and automakers Zhejiang Geely Holding Group and Stellantis NV’s Fiat Chrysler unit.
Foxconn aims to provide components or services to 10% of the world’s EVs by 2025 to 2027, Chairman Liu Young-way said in October.
The Taiwan-based company’s approach poses a major threat to established automakers that technology companies such as Apple and other non-traditional players could use contract assemblers as a shortcut to competing in the vehicle market.
“A lot of auto suppliers and manufacturers are looking to get a piece of this explosive growth that’s ahead for the global electric Cecile market,” said CFRA Research analyst Garrett Nelson, who has a “buy” rating on Fisker.
Fisker Chief Executive Henrik Fisker told Reuters that Foxconn is more than just a contract manufacturer under this deal and is developing the vehicle with the startup. He expects the deal to be finalized in the second quarter and to last about seven years. Terms of the deal were not disclosed.
Fisker said the new vehicle would be “futuristic” and “something completely different,” as well as “affordable.” It will launch in the fourth quarter of 2023, and is one of the four vehicles Fisker previously said it would introduce by 2025, he said.
“We’re not just going to make another electric car,” Henrik Fisker said in an interview. “We want to introduce things that probably will almost feel a little scary to some people.”
Where the vehicle will be built by Foxconn has not been set, he said.
The EV sector has been booming, with Tesla still the market leader. On Tuesday, luxury electric-car maker Lucid Motors announced plans to go public by merging with a blank-check company.
The recent runup in valuations of several EV startups, including Nikola and Lordstown Motors, which have yet to produce saleable vehicles or meaningful revenue, has drawn comparisons to the dotcom bubble of 1999 to 2000, with analysts and investors expecting a near-term correction.
Fisker said in December that Canadian auto supplier Magna International Inc would initially manufacture its first vehicle, the Ocean SUV, in Europe. The production is on track to start in the fourth quarter of next year, said Henrik Fisker, who added that the Foxconn deal does not affect those plans.