The phone calls are the same, but the answers have changed.
A decade ago, when Henrik Fisker was taking a crack at the unthinkable — creating from scratch not just a new car but an entirely new car company — he had countless conversations with suppliers throughout the automotive industry. Most didn't go well.
Often, the parts Fisker needed were prohibitively expensive or nonexistent. Belief was also in short supply.
"At that time, there was no suppliers that believed a new car company could be founded and actually be successful because it hadn't been done for so many years — and the few that tried it had failed," Fisker told Automotive News. "Secondly, there was no suppliers who knew pretty much anything about the electrification of the automobile."
This skepticism wasn't limited to Fisker. At that time, Tesla was working to get its first car, the Roadster, off the ground.
"We faced a really, really questioning world," Peter Rawlinson, Tesla's former chief engineer, told Automotive News. "We faced suppliers who were just not willing to quote the components because they fundamentally did not believe it was possible for a new entry to exist as a car company at all, let alone as an EV creator."
Today, Fisker and Rawlinson are part of new ventures. After Fisker Automotive filed for bankruptcy in 2013, its founder has regrouped with Fisker Inc., a Newport Beach, Calif., outfit gearing up to release the EMotion electric sedan by the end of this decade.
Rawlinson, who left Tesla in 2012, is chief technology officer at Lucid Motors in Newark, Calif., not far from the Tesla factory in Fremont. Lucid hopes to start production of an electric sedan called the Air in 2019.
But as these two green-car acolytes work toward bringing their respective brands' first vehicles to market, the backdrop against which they do so is entirely different from a decade ago.The inevitability of electrification across the industry has gotten clearer — and closer. Key players from legacy automakers, including Volkswagen, Ford Motor Co., General Motors and Renault-Nissan, are pouring billions of dollars into developing electric vehicles.
Former hydrogen bulls Toyota Motor and Hyundai are committing major resources to EVs, as are smaller outfits such as Volvo, backed by China's Geely, and Jaguar Land Rover, backed by India's Tata. For many brands, it's no longer a question of whether their lineups will be electrified, but when and in what form.
That changes things for today's EV startups — not just Lucid and Fisker but also Nio, Faraday Future, Bollinger Motors, Detroit Electric and SF Motors. Fighting to create a segment of the automotive industry a decade ago was much different from taking on legacy automakers for a piece of that burgeoning market today.
But the entrepreneurs leading those upstarts remain confident they can muscle their way into voids that established companies are ignoring or not adequately addressing.
"The pace of their uptake is conspicuously slow, much slower than many believe," Rawlinson said, "and I think there is a golden opportunity here for new entrants."
Fisker agrees, citing continued demand from early adopters whom companies like his hope to lure with vehicles that are clearly identified as electric — and out of the mainstream. Despite Tesla capitalizing on this appeal for years with the Model S and X, today's startups still see an opening.
"It's an opportunity for new car companies to go in, and if they are capable of developing new technologies that they can get earlier to market [than legacy automakers] ... they can catch the attention of consumers," Fisker said.
On the fringe
The space those new entrants are carving out for themselves still largely is confined to relatively low-volume fringes; initial products from Lucid, Faraday Future, Nio, Detroit Electric, Fisker and Bollinger are either expensive ($100,000 and up), intended to be built in limited quantities or both.
And while there's no shortage of chatter from EV startups about white space in the market for their forthcoming products, none is actually to consumers yet — and most are still at least several years away.
Every day that passes without these vehicles being on sale is another day that the legacy automakers — late to the party as they may be — are scaling and tooling up, developing their future products and honing their marketing machines, all elements that most have down to a science after decades of producing vehicles en masse.
The elephant in the room for any startup, particularly in the automotive space, is still money. The exceptionally high cost of building and bringing a vehicle to market remains the key hurdle every company faces, and thus, it's kept the number of industry newcomers low.
"In terms of startups looking to develop their own vehicle from the ground up and challenge OEMs directly, we're not seeing many new startups that are seeded expressly for that purpose," said Kerry Wu, senior analyst at CB Insights.
Tesla remains the most successful, and yet it remains a cautionary tale. After launching three vehicles over the course of a decade, it is still unprofitable and struggling with the enormous capital needed to bring its first mass-market offering, the Model 3, online at scale.
Future's in doubt
Faraday Future is another reminder of how tough the road is. Backed by Chinese billionaire Jia Yueting, the company came out swinging two years ago with high-profile announcements of a $1 billion factory — later announced for North Las Vegas, Nev. — and a dramatic 1,000-hp supercar concept.
But a stark shortage of cash — among other issues, including rampant executive turnover — has waylaid the company's efforts to bring the FF 91 EV crossover to market. Faraday has since abandoned plans for the Nevada plant, instead turning its attention to leasing a former Pirelli tire plant in central California.
Insiders tell Automotive News that Faraday is attempting to negotiate a cash infusion from a company outside the automotive space that would be a crucial lifeline. Barring that, a bankruptcy is expected.
Nick Sampson, senior vice president of r&d at Faraday Future and Tesla's former head of vehicle and chassis engineering, declined to comment on the company's financial situation. But he defended Faraday's initial decision to incur the financial and logistical burden of building an assembly plant from scratch, saying many contract manufacturers aren't familiar with the production of battery packs or aluminum and carbon bodywork.
"Even if you try to use contract manufacturing, a lot of other work and education would have to go into those elements," Sampson said. "It's better to have that in your hands."
Fisker said he reached the opposite conclusion during his first pass at running a car company.
"If I would have known how tough it really is, I would have done it differently, and what I'm doing differently today is, I am not trying to do everything myself," Fisker said. "I don't know that it's necessarily a good idea to go out and build a factory and develop a car at the same time like some of the other startups have tried to do. I think that's doomed to fail."
Meanwhile, Lucid's plan to build a $700 million factory in Casa Grande, Ariz., has been in a holding pattern for months for another round of fundraising — the company's fourth to date. Rawlinson conceded that it's taken longer to close this round of fundraising than expected. Lucid aims to build the plant in three phases that stretch into the 2020s, with the first costing around $240 million.
Attracting investors
These examples have not gone unnoticed by investors in the EV space.
"I think there has been somewhat of a shift or at least hard lessons learned, not just from the failures earlier this decade, but also more recently the struggles that companies like Faraday have endured," Wu said. "And I think it's an acknowledgment of the fact that despite the technology shift in the industry, it still at its core is very capital intensive."
This has caused fewer startups to emerge with the singular goal of producing a vehicle that challenges existing automakers, Wu said. Instead, many investors today are not only waiting until later in a company's life cycle before investing large sums, but more importantly, they're coming from other industries that overlap with the automotive world.
Batteries, charging infrastructure, autonomous technology and ride-hailing are all seen as increasingly viable opportunities for companies and investment firms looking to cash in on global changes to mobility.
Global investors put $156 million into equity-financed deals within the EV landscape in 2013; that number has surged to $4.2 billion through November this year, according to CB Insights' data.
This is why nearly every EV startup today talks about its vehicles in the context of potential ancillary revenue streams.
Even Fisker has his eye on generating revenue from something other than just the car he wants to sell. Fisker made waves in November by revealing that he had filed patents on a solid-state battery design he hoped to debut at CES in January.
Solid-state batteries are considered a holy grail that could compel widespread global adoption of EVs. Compared with standard lithium ion batteries used today, they promise higher energy density, faster charge times, reduced production costs and lower flammability. Ford, Volkswagen, Toyota and Hyundai are among the automakers working on solid-state battery breakthroughs.
Based on the lengthy process of scaling up production, Fisker hopes to have his in-house solid-state batteries inside his company's vehicles by 2023 or 2024.
Fisker's ace in the hole could be licensing the use of this technology to players both in and out of the auto industry.
"I fundamentally believe all automakers will ultimately compete on brand, design, [user experience] and product," Fisker said. "But, the licensing gives a young company like Fisker Inc. revenue."
Fisker said he is considering an offer from "one of the biggest consumer companies in the world" to use the technology outside the automotive space. He declined to name the company, but Panasonic, Samsung and LG all have massive investments in battery technology globally.
Improving business case
The increase in investment dollars into the EV startup space also has been driven by the impending arrival of the large automakers and their suppliers.
"With these major investments coming in from the top OEs," Wu said, "it's giving investors the confidence that the EV ecosystem is going to be more sustainable than earlier in the decade, when there was a lot of optimism around the space, but a lot of the economics weren't just there yet."
At the same time, the role of suppliers shouldn't be underestimated. Despite Tesla standing as the lone modern startup success story, suppliers now believe in the business case for EVs.
They see the smaller startups as an effective test bed for new and emerging technologies that big automakers eventually will use at scale.
"We're seeing many suppliers who really want a relationship because they want to understand and know what the needs of the future are," Faraday's Sampson said. "They've certainly come around."
Fisker also has noticed a conspicuous interest from suppliers in future technologies.
"The difference between then and now," he said, "is they are willing to work together with us to develop these parts because they do believe that EVs are here to stay, and if they work to develop cutting-edge technologies, it will benefit them because eventually, the big guys will ask for it, also."
This success with suppliers even has translated to Bollinger, which, unlike Faraday or Fisker or Lucid, doesn't have a legacy EV pioneer in the executive suite.
Bollinger has shown a prototype of its battery-powered B1, an all-wheel-drive utilitarian 4x4 that it hopes to start producing in 2019.
The company claims 10,000 no-obligation hand-raisers to date, though no pricing details have been released.
"I was surprised at how much help we got before even the first order," said its founder, Robert Bollinger. "Since the prototype has come out, all the other manufacturers that we weren't already talking to approached us, so everyone is constantly in touch with us trying to get our business."
Hiring engineers and manufacturing experts is another potential pain point for startups that may lack the credibility and financial viability to ensure an employee's work makes it to consumers. There's a dearth of talent because EV technology is so new, but it's quickly becoming an attractive field.
"Today, you don't really have a lot of people with five to 10 years of electric-vehicle experience," Fisker said. "Most only started a few years ago, so while the next two to three years will be tough, after that, it will ease up."
The bottom line
Then there's the matter of profits.
Tesla hasn't turned an annual profit yet, and its latest loss, $671 million in the third quarter, was its worst yet. That hemorrhaging of cash — at a rate calculated by Bloomberg of $8,000 an hour over the last 12 months — plus prolonged delays in getting Model 3 production up to speed have led many to expect Tesla to seek another cash infusion in the near future.
Porsche and Volkswagen have warned that EV development would eat into margins during the next decade. At this year's Frankfurt auto show, BMW and Daimler executives made it clear that future profits would be dampened by lower margins on EVs.
"Let's assume that they have about half the margin of an ordinary internal combustion engine car, so from a margin perspective, obviously, we will have a lot of pressure," said Frank Lindenberg, CFO of Mercedes-Benz.
Others in the industry dispute the notion of unprofitability — particularly if it's used as an argument to discourage startups from entering the EV space.
GM has promised that its next-generation EV modular platform, due in 2021, will tip its electrified-vehicle business into the black. Renault's "Drive the Future" plan forecasts that the operating profit for the company's next generation of EVs between now and 2022 will exceed the margins of the rest of the group.
EVs are "turning into a significant contributor to our performance," Renault CEO Carlos Ghosn said in October.
Even on a smaller scale, EV makers can reap plenty of cash from their vehicles, Rawlinson insists, contrary to the notion that any EV-centric venture is inherently unprofitable.
"I would profoundly challenge that," Rawlinson said. "I can't disclose the figures, but we've analyzed our business model to death, as you'd imagine, and we have mouth-watering margins on our car."
But only if the company can get that far.
