PHEV maker Fisker hunts for money in China. Is it worth an investment?

Wanxiang’s purchase of battery maker A123 http://www.plugincars.com/wanxiang-gets-final-approval-buy-a123-systems-126289.html may turn out to be the best thing that ever happened to Fisker Automotive. www.fiskerautomotive.com  Huh? Yeah,  now Fisker not only has a battery supplier, but I bet Wanxiang will give Fisker some kind of bridge loan to keep it afloat while it seeks a “strategic partner” i.e. some company with cash to invest in the struggling plug-in hybrid electric company.   But Fisker still needs cash, fast.  And it is sniffing around China to find some.

Development of its next model, the Atlantic, is stalled awaiting funding.  Production of its current model, the Karma, was also stalled as Fisker waited to hear the fate of its battery maker, A123.  (and it didn’t have any money…)  Now it knows A123 will survive. “We will start to re-negotiate the contract for batteries with Wanxiang in the very near future now that the sale is complete,” Fisker spokesman Roger Ormisher told me.

Fisker halted production of the Karma because A123 couldn’t supply batteries and, frankly, Fisker couldn’t pay for them!

Wanxiang American www.wanxiang.com is willing to help Fisker with more than just batteries, it seems.  Wanxiang America president Pin Ni told me. “We will be interested in any way we can help Fisker since they are a customer of A123 and A123 is currently a shareholder of Fisker,” he said.    There is precedent for making a loan to Fisker. Wanxiang came to the rescue of A123 back in November 2012 with a $50 million loan.  http://www.bloomberg.com/news/2012-11-05/a123-systems-gets-50-million-loan-from-wanxiang.html  Guess it was worth it since Wanxiang owns A123 now.  Well, maybe it wasn’t worth it, but that is another blog….

But, sources tell me Fisker has also been talking to Dongfeng Motor Group www.dfmc.com and Beijing Automotive Industry Group Corp (BAIC) regarding some kind of investment.  State-owned Dongfeng, the former 3^rd Auto Works, is China’s second largest automotive group based on sales volume, according to LMC Automotive.  www.lmcautomotive.com  In case you were wondering, SAIC is the largest.  Of course, I am not sure if this includes all commercial vehicles.  It may only include light vehicles.  In any case, Dongfeng is big.

I am not sure what part of Dongfeng Fisker has been talking to.  Dongfeng is a kind of confusing company.   Dongfeng Motor Corp sold half its vehicle operations to Nissan back in 2003 and the resulting Dongfeng Motor Co. is 50% owned by Nissan.  http://www.dfl.com.cn/dfl/info/introduce_en.aspx But, Dongfeng the parent company also has joint ventures (these are separate companies formed to produce cars as opposed to the Nissan venture, in which Nissan actually bought part of the existing Dongfeng….) with PSA, Honda, Kia, and now it has formed a truck JV with Geely, uh I mean Volvo.

Anyway, Fisker talked to Dongfeng about getting some help, likely through a strategic partnership.  That went nowhere according to a source in China.  No wonder.  Dongfeng has its hands full, it seems. And access to EV technology from a variety of sources.  Indeed, Dongfeng has an EV subsidiary and has said it will be selling two EVs by 2015. One will be under its self-developed brand, Fengshen, another will be under the Venucia brand, which it produces with Nissan.  Got it?  Good cause I am not sure I do.  In any case, Dongfeng has some EV technology.   And its hands full with all those foreign partners.

Fisker has also approached Beijing Automotive Industry Group Corp. or BAIC about cooperation, sources tell me.  BAIC is China’s fifth largest automotive group, according to LMC.  I don’t know how that is progressing.    Last November BAIC said it would invest 1.7 billion RMB to build three plants to produce new energy vehicles by 2015.  That term, new energy vehicle, is rather vague, of course.  It could mean BEVs or PHEVs or even hybrids or CNG vehicles these days.  The definition has gotten a bit looser over the years.

But BAIC will likely have access to very good EV technology.  It already had a 50/50 joint venture with Daimler.  And the two companies just announced that Daimler will take a 12% stake in BAIC Motor, the passenger car unit of BAIC Group.  http://www.daimler.com/dccom/0-5-7153-1-1571316-1-0-0-0-0-0-9293-0-0-0-0-0-0-0-0.html Now this is likely confusing to those of you who don’t follow China’s auto scene obsessively.  But it is similar to what Nissan did with Dongfeng, on a smaller percentage basis.  Generally when a foreign automaker wants to produce cars in China it has formed a separate company –a joint venture – which is 50% owned by each party.  So, it is a separate corporate entity.  Nissan, and now Daimler, actually bought into the existing Chinese company.  Too much information, I know.  In any case, besides being busy sorting out how this new company that is 12% owned by Daimler will work, BAIC likely has access to EV technology now.

Fisker spokesman Ormisher would not confirm that Fisker had talked to Dongfeng and BAIC.  “We can confirm we have had a great deal of interest from companies across 3 continents,” he said in an email.

Another thing to consider is whether Fisker is a desirable partner.  The cars are nice looking, but the Karma was totally bashed by Consumer Reports in September of 2012.  Among the faults cited by Consumer Reports, aside from the fact the battery failed on the first drive:  “Poor dash controls, limited visibility, a cramped interior, awkward access into and out of the seats, an engine that is noisy when running, long battery recharge times, and a small backseat and trunk. The Karma’s heavy, SUV-like weight affects agility and performance, and the Karma lacks the oomph you would expect.”  Ouch. http://news.consumerreports.org/cars/2012/09/fisker-karma-earns-a-failing-grade-from-consumer-reports.html

Having said that, I do think there is a market for the Karma in China.  There is a certain segment of very rich Chinese who would want to own the same car as Leonardo DiCaprio, one of Fisker’s small stable of famous owners.

My advice to Fisker? (Not that they have asked for it, but if Fisker get funding from this source my arm will hurt from patting myself on the back.)  Hit up China Grand Auto http://www.chinagrandauto.com/ for money.  The dealership group has already agreed to be Fisker’s distributor in China.  http://www.chinagrandauto.com/ It is the second largest dealership group in China in terms of 2012 revenue.  It has plenty of cash, and is even weighing going public in China, which would boost its cash hoard.  Seems like an obvious choice.  Unless China Grand doesn’t have confidence in Fisker’s vehicles.