BOSTON, MA – February 21, 2013 – Immediately on the heels of A123 Systems’ financial expatriation to China, Fisker Automotive, and their $192 million of U.S. federal government loan guarantees, looks headed in the same direction, says Lux Research.
Fisker, the maker of the $107,000 Fisker Karma, a luxury plug-in hybrid electric vehicle (PHEV), has failed to thrive:
• It has sold only a few thousand Karmas, and built none during the past six months.
• A natural disaster destroyed 338 Fisker Karmas before they could be delivered, and their insurer denied coverage.
• The recent sale of its battery supplier, none other than A123 Systems, left Fisker without batteries.
The upshot
The carmaker is unable to pay its bills, owing $21.5 million to the state of Delaware along with the aforementioned $192 million under the loan guarantee.
Sitting in the wings
Two Chinese automotive companies, Geely and Dongfeng Motor, are reported to have bids between $200 million and $350 million for a majority stake in Fisker. Of the two prospective acquirers, Geely has more experience with international acquisitions having bought Volvo and their PHEV platform from Ford in 2010.
In contrast, Dongfeng lacks technology, making Fisker a strategic entry point into PHEVs with plug-in hybrid controlling as well as power train systems applicable to the latter's massive commercial vehicle business. With both high profit margins and a robust government background, $350 million is a bet they can readily make.
In reality, would Geely or Dongfeng acquire ownership of leading technology for their hundreds of millions? “They would not gain engines and electric motors, as those are supplied by GM and Jing-Jin Electric,” noted Cosmin Laslau, Lux Research Mobile Energy Analyst. “They would also not gain much production expertise, as Valmet Automotive makes the actual cars, and they would not gain much in batteries either, as those were from A123 systems,” Laslau continued.
So, it is not the worst result for the U.S. technology leadership parochialists, but portend of higher quality and quantity of acquisitions to come. “Growing wisdom inside China is that there is value in picking up the pieces left behind in the U.S. by the combination of government and venture capital largesse,” according to Zhuo Zhang, Lux Research China Analyst. “With the ability to manufacture efficiently, fund consistently and drive adoption of emerging technologies unencumbered by U.S. partisan paralysis, China could extract gold from U.S. investment garbage. Geely or Dongfeng may benefit most from the Fisker brand domestically. More specifically, additional provincial and municipal government support can come from the resulting luster,” concluded Zhang.
In the big picture, Chinese companies will continue to develop truly indigenous innovations as part of the 12th Five Year Plan, but the clock is ticking too fast on China’s demographic dividend and needs for energy, environment, and infrastructure for this to play out organically. Failing automotive, energy, environment, and biotechnology, U.S. entities are at the front of the acquisition queue to address the need.
Coverage of Fiskar and the Chinese implications are covered under the Lux Research Mobile Energy Intelligence and the Lux Research China Innovation Intelligence services.
About Lux Research
Lux Research provides strategic advice and ongoing intelligence for emerging technologies. Leaders in business, finance and government rely on us to help them make informed strategic decisions. Through our unique research approach focused on primary research and our extensive global network, we deliver insight, connections and competitive advantage to our clients. Visit www.luxresearchinc.com for more information.
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