Electric vehicle manufacturer Fisker Inc (OTCPK: FSRN), once a market darling, filed for bankruptcy on Monday. What does Fisker's bankruptcy mean for an EV market facing mixed signals?
What Happened: Put simply, Fisker bled money. The Manhattan Beach, California-based company had significant cash flow and manufacturing problems. It never came close to profitability as high costs eclipsed low consumer demand.
In March, it was reported that more than 40,000 Fisker customers canceled their vehicle pre-orders, a significant portion of its backlog.
In April, the National Highway Traffic Safety Administration (NHTSA) initiated a preliminary regulatory probe into the Ocean vehicles after receiving complaints that the vehicles' doors did not open properly.
On June 13, the company announced that it would recall 18,000 Ocean SUV vehicles over software and safety compliance issues. The Ocean SUV was the only Fisker vehicle in production.
At its peak in 2021, Fisker reached a market capitalization of nearly $8 billion. The company is now worth almost zero.
Remaining Players: The most obvious EV pure plays include Tesla Inc (NASDAQ:TSLA), Rivian Automotive Inc (NASDAQ:RIVN) and Lucid Group Inc (NASDAQ:LCID). Tesla is profitable, albeit trading at a PE of 47; Rivian and Lucid have distressed balance sheets and could face bankruptcy. Arrival SA and Lordstown Motors were recent victims of bankruptcy.
Among the foreign manufacturers still in the market are Li Auto Inc (NASDAQ:LI), Nio Inc (NYSE:NIO), VinFast Auto Ltd (NASDAQ:VFS) and BYD Company's (OTC:BYDDY) auto division.
Industry Implications: Investors have been increasingly pessimistic about the EV industry, as share prices of major EV companies have fallen sharply in recent years. American consumers seem reluctant to drive electric vehicles, and several other obstacles have delayed the electric transformation.
The Big Three automakers — Ford Motor Co (NYSE:F), General Motors Co (NYSE:GM) and Stellantis NV (NYSE:STLA) — have all spent billions in developing electric fleets. Although they have faced similar issues to the EV pure plays, their underlying businesses are profitable given their existing gas-powered vehicles.
Although the market has soured on many electric vehicle players, some experts, including Deepwater Asset Management managing partner Gene Munster, remain optimistic.
"The Fisker story is one of a failed company, not of a failed industry," Munster posted on X.
"I expect EV demand will be flat-ish this year versus 2023, in large part due to a pull-forward in demand from 2019 to 2023, and in small part due to the higher costs of EVs," Munster continued.
"In 2025, I expect the trend to reverse and the broader EV market to gain share once again. The reason is that the invisible hand of the free market will increasingly recognize that EVs are a more efficient way of moving around."
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