Faraday Future's Parent Company Has a Compulsive Spending Problem
Jia Yueting, head of China’s LeEco, is finally copping to claims that there was insufficient money to support the company’s wild expanse into new territories.
This is particularly bad news for the moderately sketchy American automotive startup Faraday Future, which is strategically partnered with LeEco and is quite possibly doomed if its parent doesn’t shape up.
According to Bloomberg, Jia has issued a memo apologizing to employees and shareholders for his reckless leadership. In the letter he also pledged to reduce his income to one yuan (15 cents), while reining in LeEco’s brazen expansion and ensuring a more reasonable pace of growth for the company in the future.
Jia says LeEco will immediately begin cost cutting, decreasing subsidies offered to customers and focusing instead on established businesses instead of new ones. Those new ventures ready to be ignored are likely to include a self-driving car named LeSEE, a concept vehicle built with Faraday Future, and a massive electric car plant being built in Nevada.
That desert EV factory has already come under heavy scrutiny. Nevada’s state treasurer, Dan Schwartz, had expressed repeated worry over Jia’s involvement with Faraday Future. Schwartz even traveled to China earlier this year and attempted to meet with executives at LeEco.
A Faraday Future representative explained to Business Insider in May that LeEco’s business was separate from that of Faraday Future, because Jia was backing Faraday Future with personal assets. Except LeEco actually is bankrolling Faraday Future, including the Nevada factory, and the company is already behind on its bills to the tune of several million dollars.
The LeeSEE and Faraday Future vehicle projects are both part of LeEco’s unlisted ventures; not officially claimed as part of the company but operated via separate unlisted entities. While LeEco has not disclosed any financial numbers for the non-listed companies, they are no less interconnected. Jia Yueting has also borrowed massive amounts of capital to finance the automotive ventures, using his own shares in the listed entities as collateral.
Matters relating to Faraday Future are further complicated as it’s unclear who actually runs and owns the company. It has no CEO and how many shares LeEco or Jia Yueting actually own is a complete mystery. The company has also seen key personal abandoning ship and its promised production vehicle was a no-show at its own Consumer Electronics Show unveiling last January.
We’ll see what happens next, but it sure sounds like Jai and LeEco are thinking of abandoning the automotive industry and focusing on its bread and butter business of video-streaming services. However, Gizmodo spoke with LeEco North America’s Chief Revenue Officer today, who attempted to reassure everyone by saying, “The United States is our highest priority within the company,” and that the car project with Faraday Future was “extremely important.”
Bowman then admitted that LeEco was definitely open to gaining more investors. “As we look through three prioritized countries we will be looking for capital partnerships in all three of those countries,” he said.
[Image: Faraday Future]
Join the conversation
Latest Car ReviewsRead more
Latest Product ReviewsRead more
- Darren Mertz In 2000, after reading the glowing reviews from c/d in 1998, I decided that was the car for me (yep, it took me 2 years to make up my mind). I found a 1999 with 24k on the clock at a local Volvo dealership. I think the salesman was more impressed with it than I was. It was everything I had hoped for. Comfortable, stylish, roomy, refined, efficient, flexible, ... I can't think of more superlatives right now but there are likely more. I had that car until just last year at this time. A red light runner t-boned me and my partner who was in the passenger seat. The cops estimate the other driver hit us at about 50 mph - on a city street. My partner wasn't visibly injured (when the seat air bag went off it shoved him out of the way of the intruding car) but his hip was rather tweaked. My car, though, was gone. I cried like a baby when they towed it away. I ruminated for months trying to decide how to replace it. Luckily, we had my 1998 SAAB 9000 as a spare car to use. I decided early on that there would be no new car considered. I loathe touch screens. I'm also not a fan of climate control. Months went by. I decided to keep looking for another B5 Passat. As the author wrote, the B5.5 just looked 'over done'. October this past year I found my Cinderella slipper - an early 2001. Same silver color. Same black leather interior. Same 1.8T engine. Same 5 speed manual transmission. I was happier than a pig in sh!t. But a little sad also. I had replaced my baby. But life goes on. I drive it every day to work which takes me over some rather twisty freeway ramps. I love the light snarel as I charge up some steep hills on my way home. So, I'm a dyed-in-the-wool Passat guy.
- Paul Mezhir As awful as the styling was on these cars, they were beautifully assembled and extremely well finished for the day. The doors closed solidly, the ride was extremely quiet and the absence of squeaks and rattles was commendable. As for styling? Everything's beautiful in it's own way.....except for the VI coupe....it's proportions were just odd: the passenger compartment and wheelbase seemed to be way too short, especially compared to the VI sedan. Even the short-lived Town Coupe had much better proportions. None of the fox-body Lincolns could compare to the beautiful proportions of the Mark V.....it was the epitome of long, low, sleek and elegant. The proportions were just about perfect from every angle.
- ToolGuy Silhouetting yourself on a ridge like that is an excellent way to get yourself shot ( Skylining)."Don't you know there's a special military operation on?"
- ToolGuy When Farley says “like the Millennium Falcon” he means "fully updatable" and "constantly improving" -- it's right there in the Car and Driver article (and makes perfect sense).
- Master Baiter New slogan in the age of Ford EVs:FoundOnRoadDischarged
LeEco is one of a number of Chinese "lifestyle" flash-conglomerates that are trying to grow very fast and very wide, selling a suite of products and the promise of a "lifestyle". Xiaomi is probably the most successful of this type, but there are others. LeEco happens to be aiming much higher than most. Think of a Japanese keiretsu, but much faster-moving and without the financial stability of a bank, insurance and heavy-industry arms.
Why do investors keep falling for these supercar start-up scams? Every year at least 10 are launched, but none ever produce vehicles. The visionaries (and their connected 'advisors') always walk away with the fat salary they collected before the investors finally pull the plug. I could actually move some new products and hire some people if anyone wanted to invest a fraction in some practical ideas. But, churning out parts and creating a few stable jobs isn't sexy, I guess.