This week, luxury electric vehicle (EV) start-up Fisker filed for bankruptcy protection after struggling with various financial, production and supply chain challenges.

The latest development occurred after the start-up issued a prior going concern warning amid continued financial challenges.

Background

In prior Supply Chain Matters commentaries, we have highlighted ongoing production and supply chain challenges related to high profile EV start-ups Rivian Automotive, Lucid and Fisker.

Our commentaries and perspectives were that niche market segment start-up players would be able to financially sustain themselves if industry demand levels for respective products were robust, that market pricing remained stable, and that supporting supply chain and production strategies were well managed. Instead, the EV industry segment remains challenged, and so is this industry’s supply networks.

In 2020, Fisker went public as an asset-light company under a special-purpose acquisition company (SPAC) arrangement. This auto designer’s original plan was a direct to consumer vehicle distribution and delivery model, similar to that of Tesla.

Being asset light, vehicle production was planned to be outsourced. In February of 2021, Supply Chain Matters highlighted a memorandum of understanding with global contract manufacturing provider Foxconn Technology for volume production. At the time, reports had indicated that this MOU agreement included the capacity to produce upwards of 250,000 vehicles annually. Foxconn subsequently backed out of that agreement. This Stat-up’s first model was subsequently outsourced to industry contract manufacturing services provider Magna Steyr utilizing a production facility located in Austria.

Fisker’s Financial Performance and Prior Warning

In conjunction with the reporting of 2023 financial performance, California based Fisker announced that the company would lay off upwards of 15 percent of existing staffing, amid cash and ongoing business and supply chain related challenges.

The company additionally issued a formal going concern warning, in essence declaring that the company’s ability to continue operating as a business over the next twelve months was dependent on critical milestones including an added cash infusion. The company reported a cash balance of slightly over $325 million at the end of 2023.

The company’s CEO had acknowledged that the EV industry was transitioning within a rather turbulent market demand period. Shipping new vehicles from Austria to the U.S. market also came with logistical challenges, hence the stated need for a U.S. based dealer network.

 

Reportedly upwards of 10,000 vehicles were produced in 2023 vs. a stated target of 13,000 vehicles. It is believed that only 4,900 vehicles have been delivered to customers, the remaining in finished vehicle inventory and valued at half a billion dollars in tied-up capital.

Bankruptcy Receivership

According to a published report by The Wall Street Journal (Paid subscription), The company, which raised over $1 billion from investors to launch its operations, burned through almost all its cash reserves and defaulted on a debt agreement with a key investor.” This report further indicates that the California based company’s problems were rooted in stumbles within the organization, most prominently in its finance and accounting ranks. This report further indicates that the company’s cash reserves had fallen to around $50 million, and that employee layoffs of remaining employees and suspensions of warehouse services would occur at the end of this month.

Within bankruptcy receivership, there are obvious implications for company suppliers and supply chain related services providers. The company’s filing lists $500 million to $1 billion in assets with listed liabilities in the range of $100 million to $500 million. Interesting enough Google and Adobe are noted as largest outstanding creditors.

The company’s filing does not currently include any Debtor-In-Possession financing  which can imply that without such financing, the company can only operate with existing cash resources. There are, of course, questions as to whether another industry provider would have interest in the intellectual property, vehicle designs of the company, or acquisition of remaining assets.

There are outstanding questions relative to will this company be able to continue production operations. For existing Fisker Ocean vehicle owners, there are questions relative to whether over-the-air vehicle updates or vehicle service repair needs can be accommodated. Industry publication Motor Trend has published a specific report advising existing vehicle owners to anticipate during this period that includes the resale value of existing on road vehicles.

Added Thoughts

If Fisker’s efforts under bankruptcy protection for added liquidity are not successful, it would represent a further casualty of high-flying and innovative start-ups that were seeking to disrupt the industry with differing business, supply chain and production ramp-up strategies. It would further represent the second time Founder Henrik Fisker had brought a company to bankruptcy. Brands such as EV parcel van producer Arrival and EV auto designer Lordstown Motors have already succumbed to bankruptcy or liquidation.

 

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