As soon as it announced a price cut for its premium electric vehicle models, Fisker Inc.’s stock began sputtering.
Its share price edged down nearly 3% on Oct. 23, the day of the announcement. It sunk further thereafter, and closed at $4.93 on Oct. 26, a 7% decrease since the announcement.
The Manhattan Beach car company said it was reducing the price of its premium Ocean Extreme model by $7,500, to $61,499. The price change will go into effect immediately.
“Customers who have already ordered or purchased an Extreme will receive a $7,500 price adjustment, even if their vehicle has already gone to production,” the company said.
Additionally, two other versions of the Ocean will see their prices increase starting Nov. 6. The Ultra will be priced at $52,999, up from $49,999, and the Sport will be $38,999, up from $37,499 currently, according to the company.
Chief Executive Henrik Fisker said that it was essential that the company respond to competitive realities in the growing EV market. Namely, that the market is getting more competitive while consumer demand for electric vehicles seems to be dropping.
“We want our customers to have greater access to the Ocean and to be able to take advantage of its exciting combination of innovative features, striking design, sustainable materials, and class-leading range,” Fisker said in a statement.
Investors, however, were not so keen on the idea.
“Investors don’t like price cuts,” said a story in Barron’s from Oct. 23. “It can signal less demand or more competition. Both are likely true.”
Competing electric car manufacturer Tesla Inc. has been cutting prices of some of its Model 3 and Model Y versions after reporting softer sales in the third quarter.
The starting price for the Model 3 is listed at $38,990 on Tesla’s website, down from $40,240 previously, according to a CNBC story.
The long range Model 3 fell from $47,240 to $45,990. And the Model 3 Performance fell to $50,990 from $53,240, the financial news site said.
Tesla’s Model Y Performance sports utility vehicle now starts at $52,490, down from a previous price of $54,490, according to CNBC.
“Beginning at the end of last year,” the CNBC story continued, “Tesla began cutting the prices of its cars across the world in a bid to stoke demand amid concerns over slowing consumer spending in markets like the U.S. and China and as competition in the electric vehicle space ramped up…Tesla’s price cuts have also pressured just about every other EV maker to do the same.”
But not every electric car maker is cutting prices.
Faraday Future Intelligent Electric Inc. in Gardena is holding to its hefty starting price of $309,000 for the FF 91 2.0 Futurist Alliance and a base price of $249,000 for the FF 91 2.0 Futurist model.
EV market
Pavel Molchanov, an analyst with Raymond James & Associates Inc., noted in a research report on the electric vehicle industry from Oct. 3 that he projected an increase in global market share from 14% last year to 25% in 2025 and 50% in 2030.
“Looking to 2030 and beyond, petroleum phase-out policies in jurisdictions such as the European Union, California and Canada aim to end the production and sale of conventional vehicles, but consumer preferences will need to change meaningfully for such targets to materialize,” Molchanov said in the note.
Again noting the market share increases in the next few years, he said that competition
of legacy automakers and new entrants is intensifying.
In the report, Molchanov said that as Fisker scales up and creates operational risk, a key source of uncertainty that is keeping him on the sidelines with the stock is about buyer preferences vis-à-vis the various versions of the Ocean.
“Premium-priced versions are being prioritized for the first 12 (months to) 18 months, but the longer-term margin profile remains a question mark, especially given that the Ocean is not eligible for the U.S. federal tax credit.”
Molchanov had a market perform, or hold, rating on Fisker stock.
