Fisker Automotive BackgroundFisker Automotive was an automobile manufacturer which set out to become the first and largest luxury plug-in vehicle manufacturer. Fisker received a loan from the Department of Energy for $528.7 million to develop a new eco-friendly plug-in vehicle. Fisker designed a beautiful vehicle, called the Fisker Karma, and unveiled it at the 2008 North American International Auto Show with an expected delivery date to customers in 2012. The brand established a relationship with dealerships, rather than opening their own, to funnel sales for their vehicle and were starting to scale relatively smoothly.
The foundation for the company was set for a successful scale into market, however, difficulties in manufacturing and vehicle reliability ultimately led to the company’s collapse. Why Fisker Automotive Failed at ScalingFisker Automotive had set the groundwork to scale successfully into the luxury car market, however due to complications with their manufacturing, the company ended up going bankrupt after only delivering about two thousand cars. Fisker Automotive used batteries manufactured by A123 Systems in their new Fisker Karma to cut the costs of manufacturing their own batteries.
This cost-saving measure backfired however, since many of the Fisker Karmas would arrive to the customer and the batteries were dead on arrival or shortly after.Unfortunately for the brand, one of these faulty cars was sold to Consumer Reports, a company which seeks to educate consumers on new products. This brand new Fisker Karma had completely shut down and stopped working right in the middle of the Consumer Reports’ office driveway. This failure during the test proved to be a devastating blow to the automotive company’s reputation. Videos and articles of this beautiful one hundred thousand dollar vehicle completely dead on a tow truck making its’ way back to a Fisker dealership began to go viral.
At this point, Fisker had two obstacles to overcome: they had to recall all of these brand new vehicles for repairs to stop them from breaking down, and they had to deal with gaining a reputation of making an unreliable product. Issues continued to mount when Fisker’s entire European shipment of cars flooded in late 2012 during Hurricane Sandy, some of which caught fire and burned due to a circuit in the batteries, causing another $30 million in damages to the company. A123 Systems filed for bankruptcy in October of 2012, delivering another devastating blow to Fisker Automotive as they no longer had a viable source for their batteries. After defaulting on their government loans, Fisker Automotive also filed for Chapter 11 bankruptcy in November of 2013. Fisker had set the right foundation for a successful launch by creating a product that was new to the market and garnering support from potential customers, but ultimately failed in scaling into the market due to manufacturing faults.
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What I Would do Differently if I Were the CEOIf I were Fisker Automotive’s CEO, I would scale in a different way. The primary reason Fisker failed is because of product failure. I would have focused more of the company’s time and resources towards quality control and testing to ensure the reliability of the product.
Had they taken more time in testing the vehicles and the batteries they were using, I am confident the reliability issues would have become evident sooner and it would give them the opportunity to fix the issue before it spread rather than scrambling to fix the problem after it damaged their company’s reputation and finances.Although it would have cost them more money, Fisker did have the financial capability of developing their own batteries because of the large loan they had received from the Department of Energy. If I were in charge of the company I would have spent the money on developing our own batteries for the vehicles, which my company has control over, rather than going to another company to make the most crucial part of my product for me.
