Fisker-Foxconn EV Partnership Progressing Rapidly, CEO Says

Fisker's Increased Financial Outlook for 2022

Fisker, the U.S.-based electric vehicle manufacturer, anticipates operating expenses to fall within the range of $490 million to $530 million for the current year.

This represents a modest increase compared to the company’s prior projections, which estimated expenses between $450 million and $510 million.

Drivers of Increased Expenses

The revised outlook is primarily attributed to heightened investment in R&D, specifically concerning prototype development for the Ocean SUV.

Testing and validation of advanced technologies, alongside increased hiring and the expanding collaboration with Foxconn, are also contributing factors.

The second-quarter earnings report highlighted substantial R&D expenditure in 2021, focused on the testing and validation of advanced driver assistance systems, powertrain components, and the user interface.

Strategic Shift Towards Internal Validation

According to Geeta Gupta Fisker, Co-founder, CFO, and COO, the company has strategically prioritized the development of internal testing and validation capabilities.

This decision aims to reduce reliance on external third-party services.

Increased spending also reflects investments in virtual validation software tools, as well as both virtual and physical testing procedures.

These enhancements are necessary to meet the increasingly stringent safety standards set by Euro NCAP and IIHS.

Foxconn Partnership Progressing Rapidly

CEO Henrik Fisker stated that the partnership with Foxconn is advancing at a pace exceeding expectations.

He emphasized the unique nature of the collaboration, noting that both companies are actively investing in the program, rather than a simple manufacturing agreement.

Vehicle Programs and Production Timelines

Fisker currently has two electric vehicle programs underway.

The Fisker Ocean SUV will be assembled by Magna Steyr in Europe, with production scheduled to commence in November 2022.

Deliveries are expected to begin in Europe and the United States by the end of 2022.

The company aims to achieve a production capacity exceeding 5,000 vehicles per month throughout 2023.

Deliveries to customers in China are also planned for 2023.

Co-Development with Foxconn: Project PEAR

In May, Fisker entered into an agreement with Foxconn to jointly develop and manufacture a new electric vehicle, known as Project PEAR (Personal Electric Automotive Revolution).

The design phase progressed swiftly, and the companies are now concentrating on the engineering and technical aspects.

This includes the development of a patent for an innovative trunk opening mechanism and other technological advancements.

Early prototypes are anticipated to be available by the end of the current year.

Targeting the Urban Lifestyle

The new EV, developed in collaboration with Foxconn, will be specifically designed for urban environments.

Henrik Fisker explained that catering to all demographics is impractical, and a focused approach targeting urban dwellers was chosen.

Production and Sales Strategy for Project PEAR

The Project PEAR vehicle will be marketed under the Fisker brand in North America, Europe, China, and India.

Pre-production is slated to begin in the U.S. by the end of 2023, with full-scale production ramping up in the following year.

The final U.S. manufacturing location remains undecided, pending a decision by Foxconn.

Fisker expressed a preference for a state that permits direct sales to consumers, a practice currently prohibited in Wisconsin, despite a recent visit to Foxconn’s Wisconsin facility.

The ability to sell directly to customers will be a crucial factor in the location selection process.

Fisker's Second Quarter Earnings Overview

The following details summarize Fisker’s financial performance for the second quarter. It’s crucial to note that direct year-over-year comparisons are currently unavailable, as the company was not yet a public entity during the same period last year. Furthermore, Fisker is presently operating largely before generating substantial revenue, having recorded $27,000 in sales from merchandise.

During the quarter, Fisker announced revenue totaling $27,000, representing a 22% increase compared to the preceding quarter. The company experienced a net loss of $46.2 million, equating to $0.16 per share. This contrasts with a net loss of $176.8 million reported in the first quarter.

Understanding the Loss Reduction

The significant reduction in net loss can be attributed to adjustments in the Securities and Exchange Commission’s (SEC) handling of non-cash items. These changes resulted in a $138 million warrant liability recorded in the first quarter. With the retirement of these public warrants, the company anticipates no further impact on future earnings reports.

Operational losses amounted to $53.1 million in the second quarter, an increase from the $33 million loss reported in the first quarter.

Cash Position and Strategy

Despite the operational losses, Fisker has effectively maintained its cash reserves through an “asset-light” business model. This strategy involves outsourcing manufacturing rather than investing in building its own facilities. As of June 30th, the company held $962 million in cash and cash equivalents.

This figure represents a slight decrease from the $985.1 million held at the end of the first quarter.