Investigations, Stock Halts, Poor Reviews, and Price Cuts – ‘Ocean’ EV Manufacturer, Fisker, Struggling to Stay Afloat

The American electric vehicle (EV) company, Fisker, is currently grappling with a lot of trouble, with things getting worse each day. One of the big shocks to the company came in the form of a scathing review from a popular YouTuber who's known for his tech-focused content.

Back in February, Marques Brownlee, who's behind the MKBHD YouTube channel with 18.6 million subscribers, reviewed Fisker in a video titled, “This is the Worst Car I've Ever Reviewed” and a description that reads, “Do not buy this version of the Fisker Ocean.” 

So far, the video has garnered over 5 million views, creating quite a buzz on the Internet. It preceeded Fisker's stock plunging by 50%. Although Youtuber Brownlee liked the physical design of the vehicle, he found many issues, including those in its supposedly smooth driving mode. His critique particularly highlighted software-related issues, such as malfunctions with the car's key fob, the inability to monitor the car's solar roof output, and recurrent warning lights. Additionally, he also remarked on the unusualness of the infotainment software in his review. 

Brownlee also pointed out that previously, when he asked for a vehicle to review, Fisker kept on delaying, so he went to a third party, J&S Mitsubishi, to borrow the car. The automotive startup asked him to let the new update — which is described by the company as “not the holy grail of fixing Fisker” but still be able to “fix a lot of problems” and improve the car “markedly” be released before reviewing their vehicle.

However, the Youtuber went ahead with his review, saying:

“It's not really in my policy to wait on promised future software updates… I'm going to review the car that's out now that real buyers are actually living with.”

A few days later, the used car dealer posted a recorded phone call between J&S Mitsubishi and a Fisker employee that went viral on TikTok. In the video, the individual, who identified themselves as a senior field service engineer at Fisker, said, “Can I pull your fingernails out as part of an inquisition?” with a laugh and then asked about their customer who's “blowing up social media” and catching the attention of “all of senior management.”

In response to the controversy surrounding the review, Fisker communicated to the media that the company is constantly introducing new features to improve both driving performance and comfort. They also mentioned that the majority of the problems highlighted had been found in vehicles from early production runs.

Fisker Back in Troubled Waters 

The core of the problem, according to Brownlee, was that the design choices felt rather rushed out by a young company. Launched less than a decade ago in 2016 by Danish automotive designer Henrik Fisker, the company released the Fisker Ocean SUV in June 2023. The startup went public through a merger with a blank-check firm for a valuation of a whopping $2.9 billion.

This, however, was Fisker's second attempt after the previous Fisker Automotive, which was among the first EV startups in the country, filed for bankruptcy protection in 2013 due to poor sales.

The company finds itself in troubled waters once again. While Brownlee's review certainly played a part, Fisker's issuers are much bigger. Another problem that came knocking, yet again, was an investigation by the National Highway Traffic Safety Administration (NHTSA).

Last week, the US auto safety regulator said that it had opened a preliminary probe into the company's 2023 Ocean SUVs after 14 complaints were made to NHTSA's Office of Defects (ODI) regarding the vehicle's doors failing to open. Alarmingly, some reports even claimed that even the emergency override mechanism couldn't open the door.

Now, NHTSA will be conducting a preliminary evaluation (PE), which will examine the scope and severity of potential problems to assess their impact on safety. This, however, doesn't mean that the agency will take action. 

In fact, the regulator has already investigated the company for two previous incidents. This means there are now three open PEs against Fisker. 

One of the investigations is about unintended vehicle movement, including a complaint that alleges injury. Another concern is the sudden loss of the 2023 Ocean SUV's brakes on bumpy surfaces.

According to the company's internal documents, Fisker has not only struggled with quality problems but has also struggled to sell its Ocean SUV, underperforming its own sales goals.

Speaking on the matter, Fisker's Chief Executive Officer Henrik Fisker, who was also a Tesla consultant, in a statement:

“We are aware that the industry has entered a turbulent and unpredictable period. With that understanding and taking the lessons learned from 2023, we have put a plan in place to streamline the company as we prepare for another difficult year.”

Fisker's Problems Continue to Mount

The company's long line of issues involves its stocks being delisted from the New York Stock Exchange (NYSE). Last month, the largest stock exchange in the world by market cap made this decision, citing Fisker's failure to comply with listing norms. As a result, Fisker's shares now trade on the OTC (over-the-counter) market.

According to NYSE, it removed the California-based EV startup stock because of “abnormally low” price levels, which makes it “no longer suitable for listing.” This comes after a month of Fisker stocks trading under a dollar.

The company stocks (OTCMKTS: FSRN) have recorded a 94.9% decline in the past month, as it currently trades at $0.021. This is surprising, considering just six months ago, FSRN shares were trading above $6. This means Fisker has lost 99.66% of its value since then.

Back in Feb. 2021, Fisker shares were trading as high as $28, valuing the company at almost $8 billion, which has since fallen to a market cap of fewer than $50 mln.

The suspension of share trading and the subsequent delisting mean Fisker must immediately pay off its debts due in 2025, reveals a regulatory filing. The company also has to offer to buy back bonds that are currently due in 2026.

However, Fisker stated in its filing with the Securities and Exchange Commission (SEC) that it may not have “sufficient cash reserves or financing sources” to satisfy all the due amounts. The company said this “could have a material adverse effect on our business, results of operations and financial condition.” As such, it may not even be able to survive the year.

In the midst of these challenges, though temporarily, Fisker lost track of millions of dollars in customer payments. It was only months later that the company could track down most of these payments or, in cases where payment methods expired, request new ones.

No Reprieve for Fisker

Fisker was hoping to finally get some much-needed reprieve when it got into talks with a large automaker for potential investment, only for the deal to collapse as well. 

The automaker in question was reported to be Nissan, which was reportedly looking to invest as much as $400 mln in the startup. The Japanese automaker's interest was particularly piqued by the Alaska model announced by Fisker last year, boasting a range of 340 miles and a $45K price tag. 

This development puts Fisker's attempt at securing emergency funding in jeopardy. The company is reported to have only $121 million in cash reserves now.

This wasn't the first case of deals falling through, either. Previously, Fisker has announced plans to produce Pear, a small, affordable EV, for which the company was in discussion with Foxconn, the Taiwan-based electronics company that manufactures iPhones for Apple. But nothing came of that. 

As a result, the company announced massive price cuts. This involves as much as a 39% reduction in the price of Fisker's Extreme trim to $24,000. Meanwhile, the Ocean Ultra version received an almost 36% cut to $34,999. The entry-level version of its electric Ocean SUV model is now also priced at $24,999, a drop of 36%. 

The decision was an attempt to boost sales so that it could meet debt obligations. Fisker is also forced to look for options, including in- or out-of-court restructurings and capital market transactions. The company plans to secure as much as $150 mln in funding by selling convertible notes after missing an $8.4 mln interest payment last month.

In addition to all this, the startup has already laid off about 200 people (15% of its staff) and is pausing vehicle production for six weeks. 

Last year, the company produced 10,000 SUVs, but according to Fisker's earnings report, only half (4,929) of them were delivered to customers. The Fisker Ocean electric SUVs were produced by Magna Steyr, a contractor that also builds cars for the likes of Jaguar, BMW, and Mercedes. Opting for a third-party manufacturer was intended to reduce the company's risk by eliminating the need to invest in its own production facilities.

In 2024, so far, the startup has delivered about 1,300 vehicles, with the value of the inventory of completed vehicles being more than $200 million.

What Exactly is Going on in the EV Industry? 

So, as we saw, the automotive startup is currently under a huge pile of problems. By the looks of it, history may end up repeating itself for Fisker, with many arguing that it's a matter of when and not if the company will go down.

While Fisker is seeing a lot of problems, they aren't exclusive to just this EV startup. We have already seen the likes of Aptera and Detroit Automotive failing. 

For starters, inconsistency is common in early models, with Tesla and Rivian models also recording wide-ranging quality issues in their initial models. In fact, even now, Fisker isn't alone in these struggles. 

For example, Tesla recently had to cut down on its Chinese production due to slow growth. Even BYD, a publicly listed Chinese multinational manufacturing company, is slashing its prices to attract buyers, but this move is to extract buyers from its rivals, such as Volkswagen and Toyota.

Additionally, EV companies are currently facing intense competition. After all, the EV space is not limited to Tesla alone now. The competition includes Ford, Kia, Hyundai, and General Motors, all of which offer electric SUVs similar to the Ocean.

Fisker's troubles can be seen as a sign of the headwinds for not only up-and-coming EV manufacturers but also the entire EV industry. So, troubles are definitely present in this burgeoning sector. The question is just how long they will last. 

As for Fisker itself, the cash-strapped startup has been seeing one setback after another. While the company has been trying to spark interest by lowering the price of its vehicles, the market is looking shaky right now, so its fate remains to be seen.

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A Look at Prominent EV Industry Participants 

Now, let's take a look at Fisker's competitors, which are currently making a lot of progress:

#1. Tesla

Elon Musk's Tesla is a leading EV manufacturer that also manufactures and sells stationary battery energy storage devices. The company's line of electric vehicles includes Model S, Model 3, Model X, Model Y, Semi, and Cybertruck. 

Recently, Tesla announced the cancellation of a much-hyped project, referred to as Model 2, which aimed to produce affordable EVs to make them accessible to the masses. Instead, the company is shifting its focus and efforts to self-driving ‘Robotaxi.' 

In Jan., Tesla sold 71,447 of its China-made cars, a drop from Dec., which further fell to 60,365 in Feb., as per data from the China Passenger Car Association. The auto manufacturers are facing stiff competition from Chinese manufacturers, who cost less than Tesla's popular Model 3 sedan and Model Y SUV. 

With a market cap of $525.17 bln, the company shares are trading at $171.19, down 33.64% YTD. The company revenue (TTM) has been $96.7 bln while having an EPS (TTM) of 4.30 and P/E (TTM) of 38.35.

#2. Ford

The popular automobile company that sells commercial vehicles as well as luxury cars has also ventured into the EV sector, offering the 2023 Mustang Mach-E. The brand had the second-highest sales during the first quarter of this year, coming behind Tesla. 

According to Ford CEO Jim Farley:

“We are committed to scaling a profitable EV business, using capital wisely, and bringing to market the right gas, hybrid, and fully electric vehicles at the right time.” 

This week, the company announced that it is shifting its focus to hybrid options and, as a result, is delaying the production of a new large, all-electric SUV and pickup truck. However, automakers will continue to invest in EVs.

With a market cap of $53.07 bln, Ford shares are trading at $13.29, up 8.94% YTD. The company revenue (TTM) has been $176.19 bln, with an EPS (TTM) of 1.08 and P/E (TTM) of 12.31. Ford pays a dividend yield of 4.52%.

#3. Rivian

This Amazon-backed electric vehicle manufacturer recently presented its smaller and less expensive models, R2 and R3. Rivian plans to manufacture R2 SUVs in its current US factory, which will save the company over $2 billion.

Rivian produced 13,980 vehicles in 1Q24, a year-over-year increase of about 50% but lower than the 17,541 figures manufactured in the previous quarter as the company changed suppliers to cut costs and streamline operations. The delivery of 13,588 units meanwhile saw a mere 3% decline. 

With a market cap of $9.87 bln, the company shares are trading at $10.12, down 56.95% YTD. The company revenue (TTM) has been $4.43 bln, while its EPS (TTM) is -5.74 and P/E (TTM) is -1.76.

Conclusion

Although the electric vehicle (EV) market is currently experiencing a slowdown, it is projected to see continued future growth as cheaper models enter the market. The EV share of global vehicle sales, meanwhile, is expected to be about 20%. Moreover, the total value of the EV market is projected to grow from about $500 billion in 2023 to $1,579 billion by the end of this decade.

This growth is anticipated due to decreasing costs, advancements in battery technology, and rising global adoption. However, to supercharge the adoption of EVs and promote a cleaner environment, challenges such as supply chain constraints and a lack of widespread charging infrastructure must be addressed.

Click here for a list of the top 10 EV stocks to invest in.