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Why Tesla Survived and Fisker Won’t

Tesla’s innovations in batteries give it an edge that Fisker, focused on design, lacks.

Fisker Automotive and Tesla Motors, two startups founded to make battery-powered cars, are both in the news, but for very different reasons. Tesla Motors recently announced that it is selling cars faster than it expected, which the automaker says will make the first quarter of 2013 its first profitable quarter ever. Fisker Automotive, in contrast, has furloughed workers to cut costs and is reportedly close to bankruptcy.

The different fortunes of the two companies can be traced to a number of factors, and indeed, Tesla itself has come close to failing and has been forced to scramble for funds. But one strategic decision stands out. Tesla has developed its own core technology—the batteries, the electric motor, and the systems for controlling them. Fisker focused more on the look of the automobile, relying instead on technology developed by its suppliers.

“Fisker tried to be innovative with the design. Fisker seemed to think if you designed a beautiful car, people would buy it,” says Brett Smith, codirector for manufacturing, engineering, and technology at the Center for Automotive Research. “The Tesla vehicles are good looking, but Tesla focused more on the technology, not the sheet metal.”

Tesla’s in-house technology development has given it both a cost and a performance advantage, not only over what Fisker can offer, but indeed over what any other automakers can offer. A key example is Tesla’s battery technology. “Tesla’s lithium-ion battery pack technology is five to 10 years ahead of competitors when it comes to a passenger electric vehicle application, as measured by performance and cost to manufacture,” says Andrea James, an analyst for Dougherty. “Tesla’s battery lead allows it to produce a better vehicle at more affordable price.”

When Tesla was founded, it was based on an idea from J.B. Straubel, now Tesla’s chief technology officer, that commodity lithium-ion batteries designed for portable electronics could be used to make relatively low-cost battery packs for electric vehicles. Thousands of the small, cylindrical cells could be wired together to provide enough energy and power to propel a vehicle for hundreds of miles. To make this work, and to ensure the battery pack would be safe, Straubel had to develop a proprietary system for monitoring and cooling the batteries (see “JB Straubel: Engineering Electric Sports Cars”).
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