Download now: Cannabis Cash

Fisker Karma Cost Taxpayers

The Next Solyndra

Written by Jeff Siegel
Posted April 3, 2013

They'll call it the next Solyndra.

Mark my words, that's exactly how it's going to go down.

Fisker Automotive, the electric car manufacturer known for its high-end “Fisker Karma,” is set to make an installment on a $529 million DOE loan in just a few weeks.

And leading up to that installment, you're going to hear a lot of rumors that the company will be unable to deliver. Now, I don't know if that's going to happen or not. What I do know is that right now, the company is actively seeking partners because, as company spokesman Roger Ormisher said, “Without a partner, it would be difficult for Fisker to survive.”

Ormisher spoke those words just a couple of months ago. And where is Fisker now?

Well, a couple of weeks ago, Henrik Fisker, the company's founder, announced he was leaving. This news came out around the same time the company was looking to land bids from a couple of Chinese automakers, Dongfeng Motor Group and Zhejiang Geely Holding Group.

According to Green Car Reports, Geely was the highest bidder, but bailed on the potential deal over concerns regarding the company's loan obligations to the government.

Fast-forward to March 27, and we get news that Fisker put its workforce on furlough in an effort to save cash. Interestingly, the company has not produced a single car since July.

Fortunately, Fisker has only drawn down $192 million of the original $529 million government loan. The remainder was actually suspended due to production delays.

That being said, I will be very surprised if taxpayers get even part of that $192 million back...

Tesla vs. Fisker

If the proverbial poop does hit the fan with Fisker Automotive, criticisms of the loan guarantee should be expected. And rightly so. After all, the Fisker Karma cost taxpayers nearly $200 million.

However, the downfall of Fisker should not — and does not — represent the entire electric car sector, despite how some media whores may end up spinning it.

Truth is regardless of how the Fisker fiasco plays out, the electric vehicle sector as a whole is actually quite healthy, particularly for those companies that continue to lead the automotive sector out of decades of complacency and failure...

Look at Tesla Motors (NASDAQ: TSLA), for instance. What was once regarded as little more than high-priced hopes and dreams for mega-rich Silicon Valley investors has transformed into one of the most aggressive and successful electric car manufacturers on the planet.

The cars that Tesla has churned out have received overwhelming praise from consumers, analysts, and investors. In fact, just last week the company announced it landed a major deal to supply Mercedes-Benz with lithium-ion battery packs, electric motors, on-board charging systems, and other electronics. All will be integrated into Mercedes' new electric car, the B-class Electric, expected to hit showrooms early next year.

Of course, Tesla's own electric offering, the Model S, continues to sell extremely well. The company is now producing an average of 500 units per week, and just a couple of weeks ago registered its 3,000th Model S in California. Tesla also has a backlog in excess of 10,000 units (based on those who have put down deposits to get one), and the company continues to expand its supercharger networks in California and along the Northeast corridor.

~~solar_2~~

Only the Strong Will Survive

Now certainly, not everyone can afford a $52,000 vehicle. This is what the Model S will run for the basic version, which will give you 160 miles on a single charge. A higher-end, more expensive Model S can run you as much as $73,000 and deliver 300 miles on a single charge. 

teslamodels2

Tesla Model S

But Tesla claims that in three to four years, it will have a smaller vehicle that'll run you about $30,000. I'd love to see that vehicle a little sooner, but the company says it must first get its new seven-passenger SUV crossover out the door first.

Either way, what Tesla has accomplished over the past five or six years is truly astonishing.

And I have no doubt the company will continue to break new ground and become a highly-profitable venture over the next few years.

Now I'm not saying everyone's going to rush out and buy Teslas. I'm not even saying everyone's going to run out and buy electric cars...

But mark my words: By the end of this decade, electric cars will own about 1.5% to 2% of the total new vehicle market.

That may not sound like much, but realistically we're looking at nearly 290,000 electric car sales per year. Compare that to last year's total electric vehicle sales, which clocked in 52,835. My friends, that's some serious growth potential.

The question is, which companies will lead the charge?

Despite the manufacturing muscle of the majors, I remain convinced that Tesla will continue to have a larger and larger role to play in the development of electric cars. This is definitely not a company I would bet against.

As for Fisker? Well, let's just say that last Thursday we learned the company had hired law firm Kirkland & Ellis as advisors on a potential bankruptcy filing.

Has another one bitten the dust? We shall soon see.

But in this environment, one thing is certain: Only the exceptionally strong can survive.

And with Tesla getting this far in less than ten years — well, perhaps Tesla is the Anderson Silva of the automotive world.

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

Jeff Siegel Signature

Jeff Siegel

follow basic@JeffSiegel on Twitter

Jeff is the founder and managing editor of Green Chip Stocks, a private investment community that capitalizes on opportunities in alternative energy, organic food markets, legal cannabis, and socially responsible investing. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.

Hydrogen Fuel Cells: The Downfall of Tesla?