Fans who believed that Fisker Automotive posed a verifiable threat to the operations, sales, and strategy of their beloved Tesla Motors (NASDAQ:TSLA) were likely relieved when the maker of the Karma plug-in hybrid went south in a rather spectacular fashion, but the story doesn’t end there. The remains of Fisker were picked up by a Chinese firm led by billionaire Lu Guanqiu, who has promised to resume production of the vehicle and, more recently, pledged whatever means necessary to do battle with the world’s most eminent electric car maker, though he didn’t name names.
Wanxiang Group Corp., which bought Fisker, is planning to resume production in the United States and ultimately in China. In his first real sit-down interview since winning the bid for the company in February, Lu didn’t beat around the bush for his aspirations to take on Tesla.
“I’ll put every cent that Wanxiang earns into making electric vehicles,” he told Bloomberg at Wanxiang’s headquarters in Hangzhou. “I’ll burn as much cash as it takes to succeed, or until Wanxiang goes bust.” Wanxiang has the unique advantage of buying the shell of an automaker that comes along with all the developmental research completed or well underway.
“Fisker brings a unique edge and owning the company no doubt benefits Wanxiang in terms of gaining access to technologies that would otherwise take them years to develop,” Harry Chen, an automotive analyst with Guotai Junan Securities, told the news service. “To succeed it ultimately has to start production in China and manufacturing in U.S. is just a stepping stone.”
The Karma, which runs a healthy $103,000, was made in Finland prior to Fisker’s bankruptcy late last year. And while it costs roughly the same as a well-quipped high-end Tesla Model S, there’s the undeniable fact that it still consumes gasoline and still has an array of technical flaws that need ironing out.
Wanxiang was able to scoop up Fisker — and its various bits of intellectual property — for $149.2 million. Building on the Karma, the company will work on more plug-in hybrids later on, though no schedule or timelines have been provided. “The road is still very long,” Lu said to Bloomberg. “We want to concentrate for now on manufacturing in the U.S. If I don’t succeed, my son will continue with it. If he doesn’t make it, my grandson will.”
Such determination could end up posing long-term problems for Tesla, and it’s important to remember that even though the Model S and the Karma are not direct rivals — by nature of their EV and plug-in hybrid platforms — the two are still competing in a close-knit space. Generally, each Karma sold would represent a buyer who chose not to buy a Model S, and vice versa, for whatever their reasons. It’s also more unlikely — though not implausible — that someone would own both.
There’s room for both in the industry, though. Mercedes-Benz didn’t fizzle out because BMW came along, and generally, competition is a good thing for the market overall, particularly for the consumer. And given that the plug-in industry is still in its infantile stages, there’s plenty of growth to be had by each company.
Lu told Bloomberg that he chose to focus on electric vehicles because Wanxiang had no edge in the crowded field of conventional automobiles. Wanxiang has invested 5 billion yuan to develop electric vehicles since 1999, once suspending production after realizing its model wasn’t reliable enough to compete, according to Lu.
Another issue that could arise is Fisker’s demand for electric vehicle engineers. Given Lu’s willingness to spend whatever is necessary, the gifted engineers and employees who have helped build Tesla into what it is today may be lured away from sunny California on the promise of better pay from a billionaire and his firm willing to pull out all the financial stops to ensure Fisker succeeds.
That’s not to say that Tesla isn’t spending quality money on its talent, but a bidding war for intelligence could spell trouble for the Fremont, California-based automaker, which is currently investing huge amounts of capital in new facilities, a battery factory, superchargers, new vehicles, and more.
“Tesla is already competing in arguably one of the most brutally competitive global industries,” Simon Sproule, a Tesla spokesman, told Bloomberg. “The only truth in our industry is that the best product combined with the best customer care will earn the right to stay in business.”