Science Progress | Where science, technology, and progressive policy meet

How the Political Crusade Against Fisker Automotive Stifles Innovation

Fisker Karma SOURCE: Flickr/Fisker Automotive

Martin LaMonica via our partners at OnEarth.

Before raising more than $1 billion in private capital to start his own “green car” company, Henrik Fisker was a designer for the likes of Aston Martin and BMW, and it shows in the cutting-edge, plug-in electric vehicle he released two years ago. This is the kind of car that will make you turn around and notice — slung low to the ground, boasting bold curves and an overall sleek look.

Based in Anaheim, California, Fisker Automotive has sold about 2,000 of the innovative designer’s new Karmas, a hybrid luxury sedan that cost more than $100,000. But the company is now struggling and has become a target for politicians seeking to challenge the government’s role in encouraging innovation and energy efficiency.

Last week, Fisker and a Department of Energy official were hauled in front of a congressional panel and grilled on why the electric carmaker is in jeopardy of losing almost $200 million in federal loans. The fact is, you need a lot more than cool-looking cars to be a successful automotive startup. And Fisker has not delivered when it comes to business execution. The Karma came out later than originally planned and then got mixed reviews. Consumer Reports complained that the car was cramped inside, felt bulky when driving, and had a small back seat and trunk. The car suffered numerous technical glitches, as well. In an infamous incident, it had to be towed away during Consumer Reports’ testing because the batteries failed.

The car isn’t exactly a home run when it comes to its green claims, either. It runs on batteries for short trips and then uses a gasoline engine to maintain charge when the battery runs low — the same type of powertrain as the Chevy Volt. The EPA rated the Fisker Karma at 55 mpg equivalent on all-electric mode, but only 21 mpg in charge-sustaining mode for highway driving, which is well short of other plug-ins. (The plug-in Prius hybrid, by comparison, is rated at over 100 mpg for all-electric driving and 49 mpg in hybrid mode.)

But it’s not Fisker’s business or engineering failures that have gotten critics in Congress and conservative circles all revved up. They’re using the company’s problems as an opportunity to question the government’s role in commercializing clean tech innovation. By its definition, the Department of Energy’s loan guarantee program, which provided money to Fisker and failed solar company Solyndra, carries risks — after all, some new technology companies are destined to fail, just like any companies in an emerging market would.

No doubt the loan program could benefit from a review to make it more effective, but seizing on company failures to score political points is just a distraction from a more substantive discussion. And the negative publicity fanned by political hearings has already made the Energy Department more risk-averse and clean-tech companies “wary of being associated with government support,” according to a recent Government Accountability Office report.

Though Fisker started with private backing, when it came time to start producing the Karma and a lower-priced plug-in sedan called the Atlantic (which is still in the planning stages), the company sought and was approved for a $529 million federal loan guarantee meant for automakers investing in new technology and advanced manufacturing. But in 2011, when Fisker didn’t meet certain milestones to continue receiving money, the DOE cut it off. Fisker failed to make its most recent repayment and is considering going into bankruptcy.

Still, even if the company does go belly-up and never makes the Atlantic, it’s hard to see the rest of auto industry missing much of a beat. Automakers are well aware of the challenges regarding the public’s adoption of electric vehicles, namely high battery costs and the limited range of all-electrics. Fisker’s demise can be blamed on plenty of factors specific to its situation. Without the government loan, it would be just another plug-in auto startup that hit a wall trying to get market traction. At least five plug-in carmakers have failed to get beyond early prototypes in the past three years, a sign of how difficult it is to crack into the auto market. You can’t say that Fisker’s core powertrain technology was fundamentally flawed, because other automakers already use or plan to use the same approach.

In terms of policy, it’s become a conservative talking point that the government should stick to funding basic research and not provide loans to help grow young companies. But there’s still a case to be made for some role of government in advancing technologies with economic and societal benefits. Banks are wary of loaning money for first-of-a-kind projects to young companies because there’s substantial risk. Without some policy mechanism to scale up alternative energy and efficiency technologies, many business ideas that would help make our energy system cleaner will likely never make it beyond the labs or drawing boards. It’s worth noting that the DOE loan guarantee programs were crafted and authorized under President George W. Bush.

Ford, Nissan, and Tesla Motors also received loans from this program and are on track to pay them back. But it now looks like Fisker will not. What’s an acceptable rate of failure? Is there a way to structure the program to guard against politicians’ desires to favor pet projects? Can the program be reformed to minimize taxpayer risk? These are valid questions Congress should be discussing. In fact, last week Republican senator Lisa Murkowski voiced optimism that the loan guarantee program could be preserved with some simple changes. But in today’s politicized environment around energy, it seems constructive conservations of this sort are rare.

Financially, the people with the most money to lose in the Fisker saga are private investors, not public taxpayers, whatever the partisan rhetoric. And if there’s a broader chilling effect from Fisker’s political woes, it may well be on innovators and investors. In the past two years, the Department of Energy hasn’t provided any more auto or renewable energy-related loans despite having billions of dollars available. No doubt, that’s partly because some loan applications were deemed too risky. But the withering attacks from politicos in the wake of failed companies could also help explain why loans have effectively stopped. With the loan guarantee program at a stand still, there’s one less source of capital to help bring new energy technologies to market. That’s a loss for everyone.

Martin LaMonica is an independent technology and science journalist. An unabashed energy geek and long-time tech industry reporter, he writes for MIT Technology Review and other publications.

Comments on this article

By clicking and submitting a comment I acknowledge the Science Progress Privacy Policy and agree to the Science Progress Terms of Use. I understand that my comments are also being governed by Facebook's Terms of Use and Privacy Policy.