Fresh off an $85 million round, Henrik Fisker is in New York showing off his sumptuous plug-in hybrid, the Karma S. We were able to speak with him about the company, its plans and the problems of auto companies generally.
He says that his company was able to raise its most recent round at a higher valuation, and Fisker had two term sheets offered, which is very impressive in this economy. He also said that if the DOE gave Fisker a loan tomorrow, it would have a low cost car ready in the next 29 months.
The company’s already sold over 1,000 Karmas. If you put a deposit down today, you’ll get yours next July. The first Karmas will roll off the production line and into people’s garages at the end of this year.
What’s the goal for Fisker?
We want to be a significant player in the auto industry. That’s not determined by the volume of cars you make, but can you make a profit, can you build a brand can you avoid supply and demand problems. Look at Porsche which sells 35,000 cars annually, they’re buying Volkswagon, who makes 100,000 cars.
Why are so many auto companies struggling?
We need a new business model. We’ve developed one that develops the cars faster and at a lower cost. In this environment we were able to get investment, we raised a round [of $85 million.] We had two term sheets available, we were able to get a higher valuation in this round. It shows we have an interesting business model.
What makes your business model different?
Ahh, well I don’t really want to say, since our competitors could see that, but, we got a team together, we decided to develop the car completely differently. Our process looks at the 5,000 different parts in the car and prioritizes the parts. We look at the process to see where we can cut costs and time. Most car companies spend 9-12 months on design process, we spend just four weeks.
What’s the advantage to having it be your company, in terms of speeding that process?
Ha! Once investors come in, it’s hardly your company anymore! They leave you a little slice of equity, but no, just kidding. One of the big failures for the big auto companies is that even the CEO, and the top management, often don’t understand design and manufacturing. As a CEO, you have to make decisions, you need to have knowledge. My experience in the industry helps, but you also need an amazing team, and a brand new process. We have both.
You had this car designed, with a prototype last year. Why isn’t available for consumers?
The car is the most regulated thing in the world. It’s more complicated to make a car than it is to send a rocket to space.
Even if a car is done, then it has to do thousands of crash tests and then more months of tests. It takes at least 9 months to get through all that, some of it’s government, some self imposed. It’s not like a computer that you can have freeze up and take in.
The car is the most abused product in the world. It’s got 5,000 parts and each has to be validated.
Is your car profitable?
At a European auto show, I had someone from a German car company come up to me and say, the Karma should cost $125,000, not $87,900, but our development process lets us lower the costs. I guarantee it’s profitable.
That’s going to set the stage for a future lower cost car. People ask, why aren’t they making a $25,000 car? Well, eventually, we will. If we get a DOE loan, a low cost car will come with in 29 months.
Why is it so expensive now?
Remember, Fisker is the first to order 15,000 parts for these cars. The suppliers need to ramp up production, so these cars have higher costs at first. The next cars will be cheaper, because we will use many parts we use for the Karma.
Do you need the DOE money?
We can start the lower cost car project in a few years if we don’t get the loan. The DOE is not do or die for us. But you have to ask, is the American government interested in being a leader in plug-in hybrids?
The American car industry hasn’t led anything in 25 years. People think hybrid, they think Prius. We want them to think plug-in hybrid, think America. We only have 6 months to decide if we want to be innovative leaders. If not, then Japan or Europe will become the leaders. You watch, Toyota will come out with a car that has a plug, and it’s electric range will only be 6 miles, but suddenly they get all the credit for being the leader.
What threat does China pose? Could they pass us, Europe and Japan?
China will eventually be an important player, we can’t afford to fall asleep. Remember, America is built around cars. We have the most consumption of cars anywhere in the world, but we only have three car companies in the same city. How inbred is that? How do you get innovation?
We need creative people, the market is big enough for the U.S. to support more companies.
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