Fisker Says It’s Targeting An Overlooked EV Feature: Affordability

Six months before Fisker Inc. starts delivering its first electric SUVs, CEO Henrik Fisker says the company plans to target a big segment of the auto market that most manufacturers have so far avoided: vehicles priced around $30,000 that appeal to younger people.

Los Angeles-based Fisker said this week that production of battery-powered Ocean crossovers by manufacturing partner Magna starts on Nov. 17 in Graz, Austria, with shipments to customers starting soon afterward. The vehicle’s relatively low base price of $37,499, before a $7,500 U.S. tax credit, puts it below rival EVs such as Tesla’s top-selling Model Y, which starts at $62,990, Ford’s Mustang Mach-E, priced from $43,895, and even Hyundai’s new Ioniq 5 that starts at $39,950. New EV startups Rivian and Lucid are also selling products at the high end of the market, with Rivian’s R1T pickup starting at $67,500 and the Lucid Air priced from $77,400.

The average new electric vehicle currently sells for $65,111, while Tesla’s average transaction price is $65,471, says Michelle Krebs, executive analyst for Cox Automotive. By comparison, the industry average transaction price for all new vehicles is about $20,000 less at $46,526, according to Cox data. Higher prices for EVs mean less market share, particularly as inflation grinds on in the U.S.

“That’s the problem right now. People are frustrated. Tell me five cool cars for $80,000 to $100,000, you can easily say it in EVs. But tell me five cool EVs under $40,000 and that’s the problem,” Fisker tells Forbes. “I think that this is a huge opportunity for us.”

The company said in its quarterly results call on Wednesday it has 45,000 reservations for the Ocean and expects up to 75,000 by the end of the year. Many of those are for a highly optimized Launch edition that’s priced around $70,000, but it also has orders for base-price versions, Fisker says. The company’s second model, the electric PEAR that’s scheduled? to be built by Foxconn in Ohio starting in 2024, is to be an even more affordable option priced from about $29,000.

“Tell me five cool cars for $80,000 to $100,000, you can easily say it in EVs. But tell me five cool EVs under $40,000 and that’s the problem.”

Electric vehicle demand is picking up across the U.S., particularly in California where battery-powered models were 16% of new vehicle sales in the first quarter of 2022. Nationwide EV sales doubled in the first quarter from a year ago, according to PwC, but still account for less than 10% of total sales. Supply chain challenges, particularly for computer chips, and the surging cost of commodity metals including lithium, cobalt, nickel and other materials needed to make lithium-ion batteries for EVs, also make it difficult for manufacturers to hold prices down and make money selling them. For the time being, however, that’s less of a concern than it might seem.

“Affordability isn’t a problem for EV buyers because today’s EV buyers are the richest in terms of demographics. They typically have household income over $150,000,” says Krebs. “For the wider expansion of EVs price is a problem.”

In fact it was the top concern in a recent consumer study by Cox looking at obstacles to broader EV adoption, followed by driving range and charging infrastructure.

Tesla’s Elon Musk had promised his company would shake up the industry with its Model 3, claiming the car would have a base price of $35,000 when it came to market in 2017. Although technically it was possible to order the base version of the car for a limited period from company stores, Tesla never confirmed whether it actually sold any of the electric sedans at that price. Musk later admitted the carmaker couldn’t make a profit on a $35,000 Model 3. Currently, the cheapest version of that car is $46,990 before taxes and registration fees and with no options. (Tesla no longer qualifies for $7,500 tax credits.) Musk has said the company will someday make a $25,000 EV, though Tesla hasn’t announced firm plans for it.

Fisker says it’s made some design decisions with the Ocean and PEAR that will help hold prices down when production starts, including using a steel body rather than aluminum, and plastic fenders. The latter are also cheaper to repair, which holds down insurance costs, Fisker says. The Ocean also doesn’t have a “frunk,” a front trunk that’s common on many electric vehicles, which saves on material costs, he said. The PEAR, which Fisker hasn’t shown yet, is going much further in terms of design decisions to make it affordable.

“With the PEAR we are taking an even more radical strategy. We now are looking at reducing complexity and parts in the actual vehicles, looking together with Foxconn, we’re looking at how do we manufacture the car faster and with fewer parts,” he said. “There is no clear sight on this side of 2025 to a ton of affordable vehicles. It’s really just a few. This is our opportunity.”

PEAR’s target market is young consumers who’ve shown little interest in car ownership.

“I see a generation of buyers that in their 20s still hasn’t bought a car, but they’re getting to the point in their life where they want one. They grew up with iPhones and ride-hailing and now they want a car, but what they really want is a super-connected mobility device that’s cool,” Fisker said. “They’re less interested in how many stitches there are in the seats. They don’t care what the brand of the brakes is.”

The company also plans at least two other vehicles that will be derived from the PEAR platform in the next few years, hoping to get up to 1 million sales a year from all three models.

Low-priced EVs aren’t the only thing that Fisker, who’s styled luxury vehicles for BMW and Aston Martin, is working on. This week the company showed off its Ronin concept, a high-end “four-door convertible” that will offer up to 600 miles of driving range per charge. The three-motor, all-wheel-drive vehicle would accelerate from 0 to 60 miles per hour in six seconds and likely cost $150,000 or more, Fisker says.

“This vehicle has a unique space within Fisker in the sense of it’s really the technology testing platform,” he said in the May 4 conference call.

“The idea with this vehicle is it truly will replace the luxury gasoline Grand Tourers out there. Ultimately, the way we have positioned the Ronin, it will be able to both compete against all the luxury electric sedans, all the luxury gasoline sedans and all the luxury sports coupes and all the luxury convertibles in the market segment from $100,000.”