Albert Einstein once said: “Make everything as simple as possible, but no simpler.” Pundits always pursue the former, but often fail to uphold the latter.
Such has been the case recently in regards to the prospects for electric vehicles. Will electric vehicles be commercially successful or won’t they? As often happens, there is superficial evidence supporting both sides of the argument.
On one hand, you have Tesla Motors (NASDAQ: TSLA). Tesla recently announced that it had achieved its first quarterly profit, on the back of better-than-forecasted sales of its new Model S sedan.
On the other hand, you have Fisker Automotive. At the same time that Tesla was releasing good news, Fisker was making waves with its drastic downsizing, laying off 75% of its workforce. Fisker’s main model, the Karma, is probably unfortunately named, as the company is certainly beset with misfortune these days.
Fisker’s bad news made more headlines than Tesla’s good news, in part because Fisker has received financial support from the U.S. government, and was thus being lambasted by some as the “next Solyndra”. (In part, also, because bad news seems to get more attention than good news.)
So, why is Tesla doing fairly well while Fisker is definitely not? This comparison between the two makes a strong case that Tesla simply has a better all-around product at a more attractive price than Fisker.
Moreover, it is said by many observers that Tesla has pursued a different fundamental approach to business than Fisker. Fisker started by designing a wholly-new electric vehicle that looks cool — and the Karma is by all accounts beautiful — but only much later turned to considering how to actually manufacture it. As a result, the costs and complexity of the car ballooned. It’s a big challenge to source and manage thousands of parts from many vendors. (It didn’t help Fisker when their main battery supplier, A123 Systems, had performance issues with their products and then went belly-up.)
In contrast, Tesla focused solely on developing an electric vehicle drivetrain, including the battery packs, and then outsourcing design as much as possible to other companies expert in the car business, and then focusing on making the integration/assembly of all the relevant systems as low-cost as possible. (However, it’s an been documented to be an oversimplification to say, as some have, that Tesla’s initial model, the Roadster, is simply a Lotus Elise with an electric drivetrain.)
Time will tell if Tesla will be a long-term survivor. No question: succeeding as a start-up car company is very difficult. However, Tesla may have turned the corner.
Clearly, though, there’s a long way to go and plenty of opportunities for critics to pile on. In the wake of some bad press in February, when a New York Times reporter wrote a famously negative review of the Model S, Tesla still must fight the headwinds of skepticism about electric vehicles as a major automotive force.
Fisker’s woes don’t help. For the too-populous segment of oversimplifiers out there, it’s easy to extrapolate Fisker’s plight to other electric vehicle companies, particularly if they have a reason to want to make the sector look bad. To illustrate, Sarah Palin piled on by lumping Tesla with Fisker and calling them both as “losers”.
Tesla will do well to distance itself from Fisker as much and as quickly as possible, as they really do have a different tale to tell.