For the second time this year, EV startup Fisker has scaled back production plans, and now expects to roll out about half as many Ocean SUVs as it had planned at the beginning of the year. But that was fine with Wall Street, its stock price rising nearly 9% as the week came to a close. Headlight.News looks at what’s behind the cutback, and why it pleases investors.
Building an EV auto company isn’t easy. Just ask the many startups teetering on the edge of the abyss, like Lordstown Motors, Canoo and Faraday Future. Desperate to avoid the same fate — for the second time in his career — Henrik Fisker, the founder of his eponymous car company has ordered the automaker to make cuts aimed at preserving its dwindling stockpile of cash.
Most critically, the California-based Fisker will cut vehicle production to 10,000 for the full year. That’s the second time it’s trimmed its forecast which was originally targeting a number as high as 20,000 for all of 2023. A previous cutback aimed for a more modest 13,000 to 17,000 Ocean SUVs.
While that might seem to be another sign of trouble for a company that has had to make a series of zigs and zags since its founding, Wall Street was more than pleased with the news which immediately set the stock heading higher even before the market opened Friday, with shares trading as FSR rising by nearly 15 cents, to $1,725, a nearly 9% increase, as the week’s trading drew to a close.
When less is more
That said, Fisker is still only marginally above its 52-week low of $1.52 a share, and well behind the year-long high of $8.66.
While cutting production numbers might seem like a strange way to excite investors, the reason behind the move was what the market focused on. Fisker’s cash horde has been rapidly declining.
“Fisker has made a strategic decision to reduce December production to prioritize liquidity to unlock over $300 million of working capital,” the company said in a statement.
Still, an uncertain future
In its most recent quarter, the automaker said it lost $91 million and generated revenues of just $71.8 million.
It took longer to get the first Fisker Ocean off the line than expected. The target date of November 2022 was pushed into the New Year. Even then, the launch faced a variety of setbacks. And sales haven’t ramped up nearly as quickly as Fisker — both the company and the highly visible CEO — have projected.
On Thursday the CEO announced that only 123 of the electric SUVs have so far been delivered.
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“Our teams have worked hard to overcome some early delivery challenges and are now setting an impressive pace as we prepare to close out 2023,” said Fisker, whose prior company, Fisker Automotive, went bankrupt a dozen years ago.
“We may not have hit our original forecast,” said the CEO, “but taking current market conditions and negative sentiments around EV sales into account, I would say we are doing quite well, as we continue to accelerate sales and deliveries.”
Seeking new revenue opportunities
The automaker is looking for ways to enhance its revenue opportunities and that might involve taking a page out of the playbook written by rival Tesla. That would involve selling emissions credits to traditional automakers who need to offset penalties they might face while slowly ramping up their own EV production efforts.
Fisker has faced a number of financial headaches, of late. Complicating matters, it has lost two chief accounting officers. That forced it to delay filing of its quarterly earnings report with the Securities and Exchange Commission.