No one really saw this one coming. A year ago, Henrik Fisker was an admired veteran in the automotive industry, but with a failed start behind him. Fisker Automotive’s 2013 bankruptcy sent Fisker back to his origins in the design for an enchantment, but that did not discourage him from getting another blow to build a car business.
Fisker Inc. was, however, until mid-2020 mainly concept vehicles and Henrik’s one-man marketing machine. Up to that point, much of the story of electric vehicles revolved around Tesla, with the insane efforts of the traditional automotive industry to catch up with CEO Elon Musk.
Driving to the story was a single, powerful, yet wrong word: disruption. Big Auto, which ranges from Detroit to the factories from Europe to Toyota City in Japan, was about to be relocated by a bunch of nimble newcomers who collectively proclaim the long-awaited arrival of the era of electrification.
Tesla was the longest, more than a decade and a half, and Wall Street admired its prospects. By the end of 2020, the California company had become the most valuable automaker in the world, with a wide margin, with a market capitalization of one trillion dollars.
Tesla is not really a disruptive innovator
Disruption? At first glance, perhaps, but Tesla did not really do something completely different from what Ford and General Motors had for more than a century: design and engineering put together in factories owned and operated by the car manufacturers, and to the publicly sold. . Tesla’s cars are powered exclusively by electricity, but at a basic level it was not a big departure from the norm for car manufacturing. They had four wheels, four doors, and Tesla had to spend on the predictably staggering levels of the world industry to manufacture them.
At its core, Tesla has succeeded in replacing more than 100 years of deeply ingrained combustion technology with electric propulsion tracks. Few thought it was possible, even for a large car company with tens of millions in the bank.
But it was not disruptive, at least not according to the scholar who came up with the much-cited theory of ‘disruption innovation’.
“You can use a lot of features to describe Tesla,” Clayton Christensen told me in 2018.
“They are very creative. They understand work that needs to be done. Their technology is very good. But we will not consider Tesla disruptive. They are trying to make good products better. Our model is very, very clear on this subject. . “
Christensen, who died in 2020, was a professor at Harvard Business School, who in 1997 wrote the most important and cited book on the subject: “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail.”
The core concept is that established businesses, such as the Detroit automakers, are disrupted by new entrants who initially offer a cheaper, yet satisfactory product. Consumers agree with their dollars, the disruptors improve their supply, and ultimately the incumbents cannot catch up with the innovations.
Why Fisker is Disruptive
Tesla’s improvement approach contrasts with Fisker’s rethinking of how a car brand gets its vehicles on the market. Ultimately, Fisker is much closer to Christensen’s downright disruptive innovator, even if the company does not fit perfectly.
“We do not want to be a vertically integrated automotive company,” Fisker told Insider last year. “We are not going to do our own manufacturing. It would be stupid for any EV startup to make a brand new factory.”
Instead, Fisker teamed up with Magna International, the world’s largest contract maker, to build a first vehicle, the Ocean SUV, to begin production by the end of 2022. Fisker also has an agreement with Foxconn of Taiwan, known as an Apple iPhone manufacturer, to develop another vehicle, called “Project PEAR”, which is on a 2023 timeline.
The approach contrasts with other start-ups, such as Rivian and Nikola, which are dedicated to an old-school factory footprint. The risk for these companies is that they have never built scaled vehicles before. As Tesla has discovered, manufacturing is anything but easy; his vehicles endured everything Musk called ‘production hell’.
Fisker’s model has been tested, but is never the only way to take it forward. BMW and Jaguar Land Rover worked with Magna to deal with production floods and assemble specialized vehicles. But Fisker is the first major experiment in a drastic ‘assets-light’ business model for electric cars.
Something completely different
The approach to asset light has obviously been used by major companies. Apple is essentially a design and software industry, with almost 100% of the manufacturing outsourced to suppliers. In the automotive industry, brands like Aston Martin rely on partners like Mercedes-Benz for engines, transmissions and information systems.
But Fisker started almost nothing but Henrik Fisker’s reputation and Instagram account. By 2020, the company’s plans were impressive enough to yield a stock market that raised $ 1 billion and sank a market capitalization of $ 3 billion, which has since risen to nearly $ 8 billion. If all goes according to plan, the Ocean SUV would have to hit the streets in late 2022 and early 2023.
The Ocean starts at $ 37,499, so this is not an example of Christensen’s disruptive theory. He told me that very cheap, short distance, electric city cars in China can be a better match.
But there is no doubt that Fisker is something completely different. And if the company can make its business model work, it’s the most disruptive thing the automotive industry has ever seen.