Lance Zhou has a plan.
The chief executive of Karma Automotive has a vision to turn the Irvine-based luxury electric vehicle maker into one of the country’s premier and most exclusive automotive brands, with a long-term goal of about 5,000 sales a year.
That plan isn’t based on the past.
“Before, we didn’t have a clear strategy,” Zhou told the Business Journal last month at the company’s expansive new headquarters in the Spectrum, in one of his first interviews since taking over the top role at the closely watched company in 2017.
“We changed our company’s mindset from [that of] a big OEM to a big startup company. We came from Fisker, no doubt, but we are not Fisker anymore.”
Karma’s parent company, China-based Wanxiang Group Corp., bought the assets of what was then called Fisker Automotive and Technology Group out of bankruptcy in 2014 for a reported $149 million.
Zhou said the luxury car company has since fashioned a new identity.
“We are Karma [and] we are back to this market with our own capability.”
The chief executive’s plan also doesn’t involve following in the footsteps of Tesla Inc.—although Zhou wouldn’t mind being thought of one day as the Elon Musk of Orange County in terms of bringing new automotive technologies to market.
Zhou believes Tesla’s business model is still a question mark.
“We believe Tesla is a good company, but we are not sure if they are successful yet,” he said of the Palo Alto-based company, which sold about 300,000 cars last year but continues to face financial issues.
Coupes, Convertibles
Karma’s plan for success, Zhou said, includes rolling out new car models in partnership with iconic Italian design firm Pininfarina SpA, bringing new technologies to market, developing a car-sharing service and adding to its team of nearly 1,000 employees, including about 700 at its Irvine headquarters.
Zhou said the “first fruit of our labor with Pininfarina,” famous for its designs of Ferrari F.V., Alfa Romeo and Maserati, is expected to be unveiled in about three months, making it the second car in Karma’s lineup after the Revero, a plug-in hybrid electric luxury vehicle that starts around $130,000.
“It’s really beautiful [and] will make our current car ugly,” he said of the next car, laughing.
A few hundred Revero vehicles have sold since being brought to market in late 2016.
Beyond that, expect to see more models, but not a luxe variation of the numerous SUV and crossover offerings that larger automakers are rushing to market these days.
Karma’s forthcoming models will likely be a sports coupe and a convertible, Zhou said.
He said the coupe is a niche market and truly representative of luxury.
Plus, it can come to market with a new model sooner than other legacy brands thanks to its local presence and production facility.
“We don’t have competitors because our competitor—Ferrari, Aston Martin, McLaren—they’re far away and we will be the first to launch a car in this area.”
Karma has a 556,000-square-foot production facility in Moreno Valley; plans are also in the works to build a $375 million facility next year in China with the capacity to produce 50,000 cars a year.
It’s a realistic goal considering parent company Wanxiang is China’s largest automotive components company with more than $23 billion in revenue.
There are no immediate plans to mass produce a premium model—think Tesla—but Karma is entertaining the idea. If it happens, production would be in China and extend globally as “a premium car with mass production starting at 50,000 units.”
Mass production overseas isn’t a requirement for success, company officials said.
“A lot of companies [produce] in China first because they’re chasing volume, but our view is if you can succeed here, you can go anywhere,” said Matthew Clarke, Karma’s recently named public relations director and former head of Aston Martin Americas’ public relations and marketing.
For now, Karma’s choosing to stay bespoke with a goal of 5,000 units, each of which can be tailored into a one-of-a-kind vehicle for its buyers.
Company officials admit it’s still a far way from that sales mark—which would translate to nearly $700 million in sales annually, based on Revero’s current price—as it grows its retail network, currently at 18.
New Lines
Beautiful cars are expected to be one part of the carmaker’s competitive advantage, according to Zhou. So is technology.
There are ongoing efforts at Karma to develop a variety of high-technology experiences, especially as the future heads to autonomous vehicles, as outlined in its “CHASE” strategy, an acronym for connectivity, highest performance, artificial intelligence, shared mobility and electrification and platforms.
An early example this year was becoming one of the first to test and integrate BlackBerry’s QNX technology into its vehicles for cybersecurity management and its infotainment system.
It’s also considering plans to become a business-to-business provider of its technology, supplying parts and services to other large auto manufacturers.
Another venture is testing out a car-sharing operation through a standalone platform developed by San Francisco-based Ridecell Inc.
Initial offerings would target luxury hotels that offer guests an opportunity to test out a Revero during their stay, as well as partnering with key influencers and events.
Expect to see more Revero’s on the road and at high-end locales in Orange County going forward, he said.
“We are very proud to be here because we believe in the future—that luxury cars will be created here not in Europe anymore,” Zhou said.
Move Over Tesla
Karma has an opportunity to differentiate itself from other luxury electric car companies, particularly Tesla, according to Zhou.
Upstart automotive brands like Los Angeles has Faraday Future—which has furloughed workers while working through its own financial issues—may view Tesla as a lighthouse, but Zhou questions their long-term viability in terms of dealing with larger competitors.
Zhou said as Tesla tries to tap into the mass market with lower-priced models like a $35,000 version scheduled to be released this year, it will be unable to compete with the likes of Daimler AG, Volkswagen and Chrysler.
“They will gradually wake up,” he said. “If they really bring energy to this area they have a very good supply chain, quality control, money and sales.”
“I don’t think Tesla will have a big chance to win … and if we follow their strategy I don’t think we will have a big chance.”
The chief executive, now living in Mission Viejo, would know about the risks of competing against major automakers. He has more than 25 years in the auto industry; having previously served as chief executive and president of Beijing, Foton Daimler Automotive Co., a joint venture between Daimler and Chinese truck manufacturer Foton Motor, while also serving as Daimler’s global vice president.
He joined Karma in 2017, succeeding Thomas Corcoran.
“This is why we talk about our strategy being different,” Zhou said. “We’re looking for the customer who really understands luxury, who really understands high technology and wants to be unique—that is our customer, that’s the reason why we produce the car here.”
