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Summary:

About 16 miles down the turnpike in Delaware from the old General Motors where startup Fisker Automotive plans to build an upcoming plug-in hybrid vehicle, Elon Musk, CEO of rival Tesla Motors, yesterday told an audience at the University of Delaware (and more joining via Second […]

tesla-modelS-2About 16 miles down the turnpike in Delaware from the old General Motors where startup Fisker Automotive plans to build an upcoming plug-in hybrid vehicle, Elon Musk, CEO of rival Tesla Motors, yesterday told an audience at the University of Delaware (and more joining via Second Life) that he has “some reservations about the feasibility of Fisker’s approach.”

According to the Delaware News Journal, Musk said, “It’s very tough to create a car company,” noting particularly high hurdles for engineering an electric car, adding, “Fisker is very far from overcoming those.”

Musk’s comments come at an interesting time for the two startups, which have each secured multimillion-dollar conditional loans from the Department of Energy to help accelerate them toward a new phase: higher volume production of more affordable vehicles.

Founded in 2003, San Carlos, Calif.-based Tesla has enjoyed a lead over its Southern California rival, which wasn’t founded until 2007 (Tesla later brought, and lost in arbitration, a lawsuit against Fisker and its founders, alleging they had stolen design ideas and trade secrets).

But at this point, while Tesla has entered production and delivered more than 800 of its luxury electric Roadster, and Fisker has yet to bring its swanky plug-in hybrid Karma to market (it’s due out next year), neither one has proven long-term viability.

Fisker_Karma044Fisker and Tesla have mapped out different routes to producing large numbers of lower-cost vehicles, notably in their distribution strategies. Fisker is opting for a more conventional dealership model, while Tesla handles its own distribution (its showrooms are modeled after Apple stores). Darryl Siry, Tesla’s former marketing chief explained yesterday in an article for Wired’s Autopia, “In essence, Fisker is content with building a car company and partner with retailers while Tesla aspires to build a car company and build a global retail distribution company.” According to Siry, this makes Tesla’s business model more capital intensive and risky, but with potentially higher rewards.

Tesla announced in August that in the previous month, for the first time ever, it achieved “overall corporate profitability,” with $1 million in earnings on $20 million in revenue. But the company is working for (and investing in) much bigger game. Tesla aims to supply battery tech (beyond its deal with Daimler), sell an electric sedan priced for high end for the mass market, and eventually other models as well. Those cars would be displayed in brick and mortar stores and maintained via a mobile service fleet of “Tesla Rangers.”

Whether those investments will pay off remains to be seen. According to Siry, “For Tesla, it amounts to a more highly leveraged bet on its success – if it wins in the the marketplace, it will win big. If volumes are lower than anticipated, however, Tesla may find its bottom line under significant pressure from high overhead costs.”

Fisker Automotive founder Henrik Fisker, meanwhile, has said he expects his company become profitable by 2011. As Autoblog Green reports, the company claims it will be able to break even with just 5,000 sales, and it has already brought in more than 1,500 pre-orders without a marketing campaign. The key, Fisker said, is the company’s low overhead and its decision to outsource production (to Finland’s Valmet) of the Karma.

We’re getting closer to seeing more competition for actual buyers of plug-in vehicles — rather than for venture capital investment, DOE funds or merely buzz. As Musk said, it’s tough to create a car company.  He is probably right to have reservations about the feasibility of Fisker’s approach. Like Tesla, the company and its backers, which now include U.S. tax payers, are making very big bets that are far from guaranteed. They’re trying to reinvent the car business. Let’s hope they succeed.

Photos: Tesla Model S (top) and Fisker Karma (bottom), courtesy of Tesla Motors and Fisker Automotive

  1. I think Tesla are in now position to criticize Fisker as they are in the same boat. I would actually prefer Fisker to Tesla but the Model S is a really really good car.

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    1. Josie Garthwaite Friday, November 6, 2009

      I’m curious: why do you prefer Fisker, given your appreciation for the Model S?

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      1. Don’t know, comparing the Karma to the Roadster (perhaps a bad comparison) but the Karma is just fantastic. However I could never buy one, the Model S (a closer dream) ;)

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  2. waltinseattle Friday, November 6, 2009

    talk is still cheap is it not? and in this case, from the guy with the other dog in the fight….i’m sceptical of motives.

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    1. Obviously, Tesla has an agenda. There is some bad blood between the two companies, since Tesla sued Fisker (unsuccessfully) for stealing secrets from the Model S to develop the Karma (Fisker was originally the guy hired to design the Model S). But on the other hand, Tesla does a have point. They have gone through some rocky roads on the way to their current 800 cars, so they know first hand how tough the auto business is (they are a bit humbled now since originally they were cocky and said they would show teach Detroit some new lessons). Hopefully, Fisker launches their Karma soon, it is a fairly interesting car.

      On the article, Fisker actually had a commercial on the Academy Awards:

      I would call that marketing.

      I don’t recall Tesla ever having commercials. It seems so far Tesla has relied mostly on the buzz it got for being the first to market.

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      1. Josie Garthwaite Friday, November 6, 2009

        Yeah, I would call that marketing too. (Not to quibble, but the ad actually aired on the Los Angeles TV station KTLA during its pre-show programming.) Tesla’s show rooms are also a tool for promoting its cars and boosting the buzz it already has.

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  3. I’d call it ENVY. Tesla hasn’t announced anything more than a ‘powertrain’ assembly site for the Model S, which is code for battery pack assembly plant. Their contract with Mercedes is for just 1000 packs. There’s NO SIGN of a chassis assembly plant for the Model S OR any supplier network.

    The Model S was announced as an Aluminum chassis, very rare in the automotive world and a huge technical challenge to manufacture. Where is the tooling? Will it be sub contracted in pert or in whole and to whom?

    Fisker are WAY ahead of Musk in producing their own car (as opposed to having another manufacturer supply a modified version of there own design). The next thing we need to hear from Musk is a vehicle assembly plant announcement for a Tesla Model S expected to be delivered in only 24 months time.

    http://electric-vehicles-cars-bikes.blogspot.com/2009/10/who-will-manufacture-tesla-model-s.html

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  4. [...] [&#83ource: D&#101&#108awar&#101 On&#108&#105n&#101 via earth2tech] [...]

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  5. Confuseus say Sunday, November 8, 2009

    the fisker is nothing more than a chevy volt. The Tesla is a true electric vehicle and it out classes the fiskar

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  6. Pot has officially called kettle black. Both companies developing exotic solutions on impossible timelines. Products unaffordable to 95% of US households. Tesla is confused about what the identity of an EV is, wants to be equivalent to ICE in every way (good luck with that). Fisker’s powertrain is ridiculously heavy and brute-force crude (looks to have been conceived by a junior-high kid). Otherwise, this has been a great investment of $1B taxpayer debt.

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