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What happened
Fisker (NYSE: FSR) hasn’t even delivered its first electric SUV yet, but its road to profitability just got bumpier, and investors are taking notice. Shares of the EV start-up sank as much as 7.2% to a record low Friday before recovering some of that drop. As of 12:45 p.m. ET, Fisker stock was still lower on the day by 3.8%.
So what
The stock’s decline comes a day after investors had a chance to analyze earnings and commentary from EV leader Tesla. Tesla CEO Elon Musk surprised analysts yesterday after he stated on the company’s first-quarterearnings conference callthat Tesla was going to accept lower profit margins by keeping vehicle prices down and focusing on volume instead. That’s not great news for Fisker as it awaits regulatory approval to start shipping its Ocean SUV to customers. The Ocean will compete with Tesla’s Model Y SUV.
Image source: Fisker.
Now what
This week, Tesla reduced the price of its vehicles in the U.S. for the sixth time this year. The best-selling Model Y Long Range now is listed at less than $50,000 for U.S. buyers. Fisker’s initial model — the Ocean One — currently lists for $68,999. Fisker does plan to offer a lower-cost base model eventually, but that will have a range of just 250 miles versus the 330-mile battery range for the popular Model Y.
And Tesla is looking to maintain its leading market share through lower prices. On the conference call for investors this week, Musk touted the strong position his company is in as it reported net income of $2.5 billion in the first quarter. Musk stated, “we could sell for 0 profit for now and then yield actually tremendous economics in the future through autonomy.”
That means start-ups like Fisker with similar products will have to compete through price. That will make the road to profitability much more treacherous, and it’s why investors are reacting by selling Fisker shares today and driving the stock to its all-time low price.
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Howard Smith has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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