Fisker CEO and Chairman Henrik Fisker joins Yahoo Finance's Pras Subramanian and Akiko Fujita to discuss the electric vehicle maker's latest models, the outlook for production and supply chain issues, auto segments and competition, and how the Inflation Reduction Act could impact the electric vehicle market.
AKIKO FUJITA: We are beginning this hour, though, with the EV competition heating up, as carmaker Fisker says it now has more than 56,000 reservations for its upcoming Ocean electric SUV. In its latest earnings report, the company's second quarter loss coming in narrower than expected as it affirms the expected timing plan for the start of Fisker's Ocean production later this year.
Joining us now to discuss the road ahead, we've got the Founder and Chairman and CEO of Fisker, Henrik Fisker. We've also got Yahoo Finance's Pras Subramanian joining in on the conversation. Henrik, it's good to talk to you today on the back of the update that we got yesterday. 56,000 reservations lined up, but now's the hard part-- you've got to get into the production side of things. How are things shaping up as you go into November?
HENRIK FISKER: Well, very good. As we said yesterday on our earnings call, we have our manufacturing partner, Magna, have already built 55 vehicles and continue to build vehicles. And we received a couple of really nice test vehicles to drive around in LA a couple of days ago. So it's not like we are starting to suddenly build cars. We have built cars the entire year.
And we have also, I think, managed our supply chain really well. So we are still on schedule. I think we might be the only EV company that has not delayed production or lowered our production forecast. In fact, we're trying to increase our production next year due to the high demand we see on our vehicles.
PRAS SUBRAMANIAN: Hey, Henrik. Pras here. So you note that the 55 prototypes are coming off the line there-- are they actually from off the line, the Magna star plant in Europe? And also, I've seen-- yeah, go ahead.
HENRIK FISKER: Sorry, yeah, I was just going to say, yes, it is, of course, from the Magna plant in Europe. Again, it's one of the advantages of working with an existing car manufacturer like Magna or contract manufacturer that normally, we would be building our own manufacturing plant-- most likely, we would have prototypes made by somebody else, which is normal for an EV startup. But in this case, Magna is actually building our prototypes.
PRAS SUBRAMANIAN: So, Henrik, I've seen you on Instagram-- you received delivery of that one of those prototypes taken around town in LA, Santa Monica. What's your impression of that prototype and what do people telling you on the street about it too?
HENRIK FISKER: I've been in the car industry for about 30 years, and I'm extremely impressed with the quality of this prototype already. We still have some fine tuning to do. It's not perfect. And I want perfection. But it's great to drive it around.
Definitely gets a lot of looks because people are wondering, what is this? And it's pretty exciting. It drives phenomenally. We have really set it up to both be sporty but also comfortable enough for normal US roads.
And I think that's the key. It's easy to make a comfortable car, a sporty car. But to actually find that perfect mix is very difficult, and we spend a lot of time on fine tuning it. We have a race car driver that is driving it on the sporty side. And then we have other engineers and myself looking for a little bit more of the comfort in the daily drive.
AKIKO FUJITA: Henrik, let's talk about the price point here. The first deliveries we're talking about will be on the higher end. But we're talking about a range of anywhere from $37,500, roughly, to $70,000. I've heard you say before that you want to aim for volume here-- bring the costs down so you can see a lot more wider adoption.
What's stopping you from that right now? What is the bigger concern-- is it the demand side in the market or is it the supply issue?
HENRIK FISKER: No, there's nothing stopping us. But we have most orders for our high end vehicle that is fully loaded-- $69,000. We just sold out of our sort of limited edition, 5,000 vehicles Ocean 1. It's fully loaded, $69,000. We actually took a $5,000 non-refundable deposit here in the US, and it sold out-- we started in July and it sold out in July.
We are seeing just a high trend towards the higher end models. But obviously, to get into the real high volume of hundreds of thousands of vehicles, we do need a vehicle for $37,500 and we will start producing that vehicle and delivering that vehicle already in Q3 next year. We have promised to allocate some production for that vehicle. Even if we could potentially make the entire next year only the high end models, that probably is demand enough, but we'll still release some of the, I would say, the base vehicles for $37,500. So I think we have no sort of issues with supply chain at this point in time.
PRAS SUBRAMANIAN: Henrik, you mentioned that cheaper price point-- the Pear SUVs coming out in 2023, I believe. And you're also going to build that in the US in the Foxconn plant in Ohio. And talking about how that plant could potentially produce 250,000 vehicles a year-- do you see that demand there at that high level for that kind of car?
HENRIK FISKER: Absolutely. I mean, it's actually-- I just want to correct-- we come out with that in 2024. But yes, absolutely. I think there's a real lack of cool, good-looking, fantastic, high tech EVs that are affordable. Right now, it's easy for anyone to say, hey, name five cool EVs for $100,000, but name me five cool EVs for $30,000, that's very difficult.
In fact, I can't name you any right now. So I think that's going to be a huge demand for that vehicle. Our strategy is to go into market segments where there's very few competitors. And that's why we are doing this vehicle for under 30. We think there's a huge potential in that market. And this car will be amazing, revolutionary. It's a different approach to a vehicle. So we are very excited about it.
AKIKO FUJITA: Henrik, in terms of the lower price point, something I imagine you're looking at as a potential tailwind is what's playing out in Washington, DC. The Inflation Reduction Act includes a credit for $7,500 for new EVs. How big of a boost are you anticipating on that front?
HENRIK FISKER: Well, right now, the new legislation is actually probably not that great for the consumers. It's going to offer less choice to the consumers. I'll be surprised if there's even 10 vehicles in the US that will qualify for the full amount, because there's also a lot to do if there's enough battery materials and other things in the vehicle.
So I'm not sure this is really a great legislation. But it really doesn't have an impact on us, because, as we mentioned, we are going to produce our Pear here in the US. We are also negotiating with different battery makers about making batteries here in the US. And on the Ocean, we will also eventually produce our vehicle here in the US as well.
So I think we're really sitting well in this competitive environment, also because of the pricing-- our vehicles are below the maximum prices that are in this legislation. So I think we are sitting really well when it comes to that legislation.
AKIKO FUJITA: Yeah you mentioned that you think there can be improvements in the bill. What specifically is your concern with how it's written? And how much of this also has to do with that very issue you talked about, which is sourcing? A lot of the materials still aren't necessarily coming from the US-- when you look at EVs broadly-- and this bill specifically says that it needs to be within North America.
HENRIK FISKER: Yeah, you know, I don't think these type of bills where you force certain things on consumers that even doesn't exist. I think naturally, we are going to see EVs being produced here in the US. But everybody has to remember, you can't produce a vehicle anywhere unless you at least have a home market.
And I would say that whole market needs to be at least 50,000 vehicles. And for a high volume vehicle, it's probably over 100,000. So we have to get this turn towards EVs. And what I'm fearing a little bit with that new legislation that actually is going to slow down the adoption of EVs, because a lot of people won't get a credit on the EV they want-- specifically if it's an imported EV.
And that means they're going to have a slower-- you're going to slow down the adoption of EVs. And what that means is you're also going to not see, then, factories be put up in the US if there's not a market here for it. So I think it's sort of the opposite intent of what was the original idea, was to get fast acceleration into EVs. And then automatically, you will see factories be put up here in the US.
Now, in our case, we are a US company. We happen to manufacture our Ocean in Europe right now, but we are going to have manufacturing here in the US after '24 of the Ocean. And like I said, the Pear's already built here. So obviously, it's not going to affect us that much. But I think it's going to affect a lot of other EVs that are imported and where the consumer won't actually get the discount on the vehicle.
PRAS SUBRAMANIAN: Henrik, speaking of production and manufacturing-- Lucid, one of your competitors, had a pretty difficult quarter last quarter where they had to slash their production forecasts. They also are very asset-heavy where they're building their own factories from scratch in this country and also elsewhere. Do you think that your performance here and your guys' ability to hit your milestones, it's validating this asset-light business? Is that sort of the future of where EVs are going is have a professional manufacturer make these cars for you that you design, you actually create for your users, and that's the way to go in terms of getting things onto the market as fast as possible?
HENRIK FISKER: Well, you know, I don't want to comment on other competitors and their strategies. But our strategy from the beginning was sort of the Apple strategy, where we do have contract manufacturers that manufacture our vehicles. And it allows us to concentrate on developing IP, develop the vehicles, design the vehicles, and actually develop them extremely fast to get the newest technology in the vehicles.
So I think our strategy has proven to be correct so far. We have secured capacity for probably about close to 400,000 vehicles. And that's very difficult to do if you build your own factories that quickly. So by 2024, we will have that type of capacity. So for us, it's about getting great, high quality vehicles to market.
It's not about me walking around in a factory and showing off. So I think that our strategy right now has paid off really well. And I kind of see it with the vehicles that's coming out of Magna's plant. And of course, Foxconn have fully acquired the plant we're going to build our vehicles in in Ohio.
So this is our strategy. And I don't think it's a strategy anybody else can adopt that easy, because there isn't that many contract manufacturers. We have a special deal with Magna where Magna owns a part of Fisker. We have a special relationship with Foxconn. I know the chairman from Foxconn, and we have a really interesting strategy that we kind of cooked up together about making the world's most revolutionary vehicle.
So it's not something I think people can just go and say, hey, can you manufacture my car? This is many years of collaboration. And also, the contract manufacturer has to believe that your car can actually sell in the numbers. And that's why we went out and, of course, take reservations to prove that there is a high interest in our vehicles.
PRAS SUBRAMANIAN: Henrik, one last question here-- thanks for elaborating more on that contract manufacturing situation. But I wanted to follow up on developing your own IP. You mentioned in that last answer. You talked about the Pear-- also with the rapid development process. What does that mean, exactly? How are you able to take that kind of like from sheet to actual car on the road? What's that process like?
HENRIK FISKER: So we have actually made an internal development process that allows us to develop a vehicle from first sketch on the paper to production in less than 2 and 1/2 years. Normally in the industry, it's probably closer to 4, 4 and 1/2 years. And that, of course, not only takes cost out, but it also allows us to put newer technology into the vehicle.
So for example, the Ocean-- all the technology you see in that vehicle when you get it in November this year is actually from last year. We chose it last year, whereas normally a car you would buy this year, the technology is probably already three years old. So that's one advantage. The second way to actually do that, and specifically with the Pear, what we are concentrating on is a very innovative process where we try to reduce parts in the vehicle specifically for the Pear, because we've got to get the cost down.
We try to actually reinvent how you think about a car and what should be in a car. So we have eliminated certain things in the Pear that we think is not necessary because we want to add some high technology in a segment where it currently doesn't exist. So it's not an easy process.
I probably don't want to give the recipe out in public. But we're well on our way. We're in the production development of the Pear. Our first prototype is already going to be ready end of this year. So I think that's what's unique about Fisker. And in that, when we are developing this vehicle, we are developing a lot of new IP.
We have already filed over 70 patents at Fisker. And we filed only patents on things we think is really valuable. You can file patents on all kinds of stuff, but we really concentrate on the valuable part. And I think the Pear, when it comes out, you will see that it's dramatically different than anything you've seen on the road, not only in terms of design, but even functionality.
It doesn't have a normal hatchback. It doesn't have a normal trunk opening. It is a different way of getting into the vehicle. And this vehicle was derived, basically, by user scenarios of young people in megacities. So it's not derived in a normal way you do a car where you just compare what the competitors are doing and then you try to see if you can do something similar.
AKIKO FUJITA: Well, we look forward to monitoring all the progress there. Henrik Fisker, founder, chairman, and CEO of Fisker, appreciate your time today. And our thanks to Pras Subramanian as well.