How the Auto Industry Can Adapt to Thrive in an Asset-Light Economy

There are opportunities in every recession, just as there are opportunities in every boom. This time around, the recession has shown that to endure, companies need to embrace innovative new business models. As a life-long entrepreneur, I believe the next fundamental change we’ll see for companies broadly is a shift to asset-light models. And a recent Wall Street Journal column by Greg Ip makes just that point. As Ip states, “Value is increasingly derived from digital platforms, software and other intangible investments rather than physical assets and traditional relationships.” I could not agree more, and the automotive industry is a prime example. 

The automotive industry suffers from an estimated 20% overcapacity issue. This is a massive inefficiency in the market. It’s also where the asset-light model comes in. Based on our estimates, the industry has the capacity to produce approximately 100 million vehicles. And yet current production hovers around 80 million. 

It is with this in mind that we decided to pursue a partnership with an existing manufacturer, to reduce Fisker’s upfront costs and support our ESG mission by reducing the carbon footprint of our operations. We have entered into agreements with Magna International Inc. that will secure our Q4 2022 start of production timing for the Ocean SUV, with manufacturing planned at Magna’s European vehicle assembly facility. 

Magna brings decades of experience working with global brands, having produced more than 3.7 million vehicles of 30 different models. Together, we will continue to develop new technologies that will accelerate innovation across multiple automotive systems and architectures for Fisker vehicles.

The current pandemic is testing all of us in ways we’ve never imagined. The choices we make now will endure long after we return to normal. These are trying times, but we must embrace the future and stay resilient. I know personally what that means—I’ve always dreamt big and believe in the power of perseverance. Covid-19 is already speeding up the disruption of the automotive industry, which I believe will take place in the next five to seven years. My deep passion for cars means that I want them to remain a part of our future. To thrive, we need to focus on developing new technologies, new digital customer experiences, and a fundamental shift in the significance of software over hardware.  We still need hardware, but if it becomes more of a commodity, it can be shared and therefore be lower cost. This will increase profits and free up resources for design and software development. The private car will be with us for a long time, but the way we access it and develop it will change dramatically!