Tesla Motors Inc (TSLA): How Much Does Fisker’s Financial Position Matter?

In recent months, the dire financial straits of Fisker Automotive have become even more apparent. Production of the Fisker Karma has stalled, the company missed a payment on its Department of Energy loan, and reports are surfacing that the automaker has hired bankruptcy advisers. With Fisker’s future resting on hopes of a buyout for pennies on the dollar, it is worth examining what, if any, effect this has on the broader automotive industry.

A better electric car

While the Fisker Karma was unable to generate rave reviews, the Model S, made by Tesla Motors Inc (NASDAQ:TSLA), has received top honors from Automobile, Motortrend, and Consumer Reports. Partially because of a superior product, but also because of smart management and more than its fair share of luck, Tesla has done the opposite of Fisker. Where Fisker is missing DoE loan payments, Tesla Motors Inc (NASDAQ:TSLA) has paid its loan back nine years ahead of schedule after raising over $1 billion in capital from the private markets.

Where Fisker has halted production, Tesla Motors Inc (NASDAQ:TSLA) is now producing its Model S at an annualized rate of over 20,000 units per year. And, most critical for shareholders, Tesla’s stock has tripled in value over the last year, valuing the Silicon Valley automaker at over $10 billion.

At this point, Tesla Motors Inc (NASDAQ:TSLA) can’t keep up with demand for the Model S and the halting of Fisker production reduces the existing supply of high-end electric vehicles. Tesla is trying to capture buyers otherwise purchasing a conventionally powered car in the $70,000 plus price range but, without Fisker, Tesla Motors Inc (NASDAQ:TSLA) becomes a near monopoly on electrified luxury transportation.

There’s no substitute (or is there?)

Tesla is trying to steal bits of market share from high-end automakers and Fisker’s goal was the same, just not executed as well. A four door high performance sedan like the Fisker Karma could have threatened sales of Porsche’s Panamera sedan. The Panamera represents part of Porsche’s expansion beyond the sports car segment, partially facilitated by Porsche’s majority owner, Volkswagen AG which is building on this expansion to increase Porsche’s profits.

Beyond the Panamera, Porsche is selling a performance luxury SUV called the Cayenne, an SUV that is strongly outselling the Panamera sedan. The Cayenne would not have been likely to be threatened by the Karma, but Porsche will need to watch out for the Model X, Tesla’s electric crossover offering due out in 2014.