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An Electric Car Bankruptcy

Jeff Siegel

Written By Jeff Siegel

Posted February 19, 2014

This has got to be one of the worst deals ever…

Last week, China-based Wanxiang Group won the auction to pick up the now-bankrupt electric car maker Fisker Automotive.

I used the term “won” loosely. Quite frankly, this was not a winning arrangement for Wanxiang, China’s largest auto parts company.

The total bid came to $149.2 million, or about six times more than what Fisker originally sought.

To refresh your memory, Fisker was an electric car startup that raised more than $1 billion to build a plug-in electric car known as the Karma (as well as future models). It fell flat after a series of technical mishaps and the complete destruction of 320 vehicles (or $30 million worth of product) during Hurricane Sandy.

Today, the company claims $500 million in assets and about $1 billion in debt. But that didn’t seem to bother Wanxiang, which, according to reports, could be looking to breathe new life into the Fisker brand. Bloomberg reported:

With the assets, the Chinese buyer could revive the Fisker brand in the world’s biggest auto market, which is struggling to reduce some of the globe’s worst air pollution. It would also provide an entry point to selling cars in the U.S.

Attention Car Collectors!

Although I never wished for anything but success for Fisker, I also didn’t expect much.

The truth is, the Karma was initially built to serve the wealthy — a luxury plug-in hybrid vehicle with all the bells and whistles you find in today’s high-end luxury models.

A small number of celebrities and wealthy eccentrics took to it, but its performance couldn’t match comparable luxury cars, and on the electric drive technology side, it couldn’t touch Tesla (NASDAQ: TSLA).

Yes, the curves and lines made it a beautiful piece of machinery. A lot of thought and time went into designing this thing. However, it wasn’t enough.

You see, rich people don’t care about gas prices, and eco-friendly types want results. The Karma’s 30 miles in all-electric mode simply couldn’t compare with Tesla’s more than 200 miles in all-electric mode.

Just on what Fisker had to offer this very competitive market, I wasn’t surprised when it went under. Although I am surprised to learn someone thought it was worth $149.2 million.

I’m just not sure what an auto parts supplier knows about selling electric cars. Moreover, I suspect that while demand for electric cars is certain to grow in China, in the choice between a Fisker and a Tesla, the Tesla is going to come out ahead based on its technological superiority and price.

As far as having an in to the U.S. market? Well, most folks in this country know the Fisker Karma turned out to be a bit of a dud. Even if the company could start cranking out those cars again, by the time it actually got them to market, Tesla and other major automakers would be so far ahead of the curve that it wouldn’t even matter.

Quite frankly, the only value I see in a Fisker Karma today is for those who collect cars. I’m sure it’ll be worth a pretty penny someday.

Time to Move On

I don’t write these words to be overly critical of Fisker. Just like any start-up, management and investors took on an enormous amount of risk. It just comes with the territory. The truth is, very few of these start-ups ever become profitable. Although when they do, everyone wants a piece of the action.

Tesla is the perfect example.

When the company first went public, it felt the sting of a thousand misinformed critics who almost seemed like they wanted the company to fail. Boy, were they in for a rude awakening.

Yesterday, Tesla hit a new record high of $205.72. Folks, you could’ve picked up shares of this thing for $20 a pop less than four years ago.

Of course, Tesla is the exception to the rule.

For the most part, big ideas like these take decades to come to fruition. And along the way, you’ll find the corpses of early innovations and an enormous amount of private capital disintegrating in start-up graveyards.

The good news, however, is that if you play it right, you can always come out on the winning end — staking your claim to the precious few start-up opportunities that turn regular folks into multi-millionaires.

While the Tesla story is a great one, the big money’s already been made. Certainly, we exploited this opportunity early and made a fortune. But now we’re moving on to our next one. And this time, it’s not electric cars, but super advanced, multi-functioning robots.

If you’re a regular reader of these pages, you’ve certainly read quite a bit about the booming robot bull market. I’m telling you, we’ve been crushing it on robot technology.

No matter how you slice it, early investors are getting insanely wealthy on the robot revolution that is now underway. There’s no reason you shouldn’t be getting a piece of this action, too.

To a new way of life and a new generation of wealth…

Jeff Siegel Signature

Jeff Siegel

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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.

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