Fisker Tries a New Approach to EV Sales and Service

Convincing consumers to step up to pay a premium for a battery EV (BEV) has been one of the biggest marketing challenges of the past decade, especially in the US. Car dealers selling conventional internal combustion engine (ICE) vehicles are often reluctant to push customers to BEVs due to lower margins and concerns about losing after-sales service revenue. Tesla famously tried to overcome these challenges by operating its own network of retail stores and service centers. Now, designer Henrik Fisker is preparing for a different approach to the problem as he prepares to launch his eponymous automaker.

Lessons from the Competition

Tesla made waves in 2008 when it began opening what would eventually be a global network of 378 company-owned stores. This proved to be problematic in the US and other countries where automakers have relied on independent franchised stores to sell their products.

Franchised retailers take away the burden of procuring real estate, building showrooms, service centers, and dealing directly with customers from the manufacturer while giving up some of the margin on sales. On the other hand they lose a lot of control over the actual sales process. Due to the substantial investment that the independent businesses have made in their retail and service infrastructure, they have lobbied for and won legislation in many states that prevents automakers from directly competing.

These franchise restrictions on new car sales have limited or prevented Tesla from selling cars in nearly half of the US. As Tesla has struggled with cash flow in the early part of 2019, it has tried to close most of its existing stores and shift to an online only model for sales, but it has been thwarted by lease commitments on most of the properties it occupies.

Fisker has likely watched Tesla’s struggles to both deliver vehicles and provide timely service to customers. Unlike the launch of Fisker Automotive in 2010, which relied on franchised dealers to sell its 2,450 Karmas that were built before it went bankrupt, this time Fisker wants to use an online-only sales model for the electric SUV it plans to launch in late 2021. This is similar to the approach Tesla pioneered in 2018.

The Best of Both Worlds

Where Fisker will be unique is on the service side. Rather than company-owned service centers, it is lining up a network of franchised service providers. The startup aims to recruit independent service providers not affiliated with existing dealers at first and Fisker will provide training and parts. Providing service to Fisker customers is expected to be an incremental revenue stream for these businesses without any of the margin impact that an existing dealer of ICE vehicles might face.

Fisker plans to launch in North America with a $40,000 electric SUV followed by additional models. By the time the first of these arrives in 2021, Fisker will face far more competition than Tesla did when the Model S launched in 2012, making this a particularly challenging market entry. Given Henrik Fisker’s resume, his vehicles will almost assuredly be attractive. He is also partnering with other companies to source major propulsion and energy storage components. The CAPEX savings from bypassing retail outlets from day one should help the bottom line and the approach to service may help overcome some concerns from customers that have heard about issues with servicing Teslas.

With more BEVs coming to market all the time, interesting times are ahead as we watch attempts to innovate in selling them to consumers.