Faraday Future Abandons Production Plant as Chinese Backer Goes Bust

Matt Posky
by Matt Posky

Faraday Future, the American electric vehicle startup backed by LeEco founder Jia Yueting, has abandoned plans to construct its now infamous $1 billion factory in Nevada due to severe financial woes. It’s another nail in Faraday’s coffin as the firm was claiming it would resume construction of the plant less than six months ago.

Work at the North Las Vegas site stalled in 2016 after repeated nonpayment to the construction firm and numerous suppliers.

It’s become a bit of a running gag, as Jia has begun pleading with literally anyone who will listen to give his automotive endeavors more time to pay up. Last week on Weibo, China’s biggest social-media site, Jia publicly promised to repay his debts as he committed himself his electric car businesses. He then resigned as chairman.

“Please give LeEco some time, please give LeEco car some time,” Jia wrote, admitting he had made financial errors in the past. “We will pay back creditors, suppliers and any other debts.”

Meanwhile, Faraday Future is taking a more pragmatic and dignified approach than begging for amnesty on social media.

“We have decided to put a hold on our factory at the Apex site in North Las Vegas. We remain committed to the Apex site in Las Vegas for long-term vehicle manufacturing,” said Stefan Krause, FF’s chief financial officer for the last few months, in a statement to the Nevada Independent. “We at Faraday Future are significantly shifting our business strategy to position the company as the leader in user-ship personal mobility — a vehicle usage model that reimagines the way users access mobility. As a result of this shift in direction, we are in the final stages of confirming a new manufacturing facility that presents a faster path to start-of-production and aligns with future strategic options.”

Faraday already claimed it was scaling back production plans at the Nevada worksite to do exactly that earlier this year. Now it apparently needs an entirely new location to ensure the success of an unspecified business strategy.

It would be refreshing to hear someone at the company just say they’ve finally had enough at this point. Faraday has endured hardships that would have obliterated most startups over twelve months ago. Staffing and retention issues, shadowy Chinese leadership, financial mismanagement, over-zealous marketing campaigns, project delays, legal troubles, scorned business partners, and much more have coalesced to make Faraday Future the absolute disaster we know and love.

Mercifully, the corporation’s death appears imminent. According to Business Insider, the company is scaling back its workforce yet again and inside sources claim it is dangerously close to missing its payroll. While the company has stated it would like to refocus its efforts on fundraising, it’s unlikely to persist long enough to acquire new financial backing without help from Jia Yueting.

Having already spread things thin over at LeEco, Jia has been trying to ensure his Chinese car company (LeSee) survives while also spending capital on Formula E. In the hopes of keeping some positive attention on Faraday, the company’s FF91 recently participated in the Pikes Peak International Hill Climb, where it actually besting a Tesla Model S P90D. However, Shanghai courts froze $183 million in assets due to missed loan payments from LeEco last week. Without a backer, future publicity for the FF91 could be a problem. Currently, CFO Krause is on an extended business trip to find new investors. He’s hoping to scrounge up over a billion dollars in capital.

While Faraday should have been focusing on engineering and production all along, one billion dollars could help it get development back on track. But if it misses payroll, even once, it’s almost unfathomable that anyone would stick around to see the car reach production.

Either way, that doesn’t bring back the nearly 13,000 jobs in Southern Nevada that were promised as part of the factory’s construction. Nevada Governor Brian Sandoval has assured taxpayers they aren’t on the hook for the $335 million incentive package, as it was placed into a trust fund. Faraday only received $398,000 in tax abatements for 2016 and another $206,000 for 2017. Sandoval stated that the remaining funds would be redistributed into the community.

Some lawmakers who opposed the plan from the start used Faraday’s announcement as an opportunity to be heard.

“Go back and watch all the testimony of the proponents of that thing — look at the rosy scenario, how fantastic this is, how minimal the risk is and how this is going to be the greatest thing,” said state assemblyman Ira Hansen. “Those of us who were skeptics, we got treated like pariahs. I’m not gloating. I honestly wish this would have gone forward. I’ve just been in the business long enough and in politics long enough that if something seems too good to be true, it usually is too good to be true.”

[Image: Faraday Future]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Detroit-X Detroit-X on Jul 13, 2017

    Chinese backers can't be trusted? OMG. Even for car companies nobody cares about? OMG2.

  • Voyager Voyager on Jul 14, 2017

    Case study material for business students how not to do things. The surprising thing is that all common sense seemed to have been thrown aside, in this day and age.

  • Ted “the model is going to be almost 4 inches longer and 2 inches wider than its predecessor”Size matters. In this case there is 6” too much.
  • JMII Despite our past experience with Volvo my wife wants an EX30 badly. Small, upscale, minimalist EV hatch is basically her perfect vehicle.
  • Dukeisduke Is the Volvo EX30 even on sale yet? It was pulled from the NACTOY awards because they were having software problems with the vehicle.
  • Wjtinfwb If you've only got 5k to spend on transportation, I cannot imagine a worse way to spend it than on a GM orphan from Sweden that's 15 years old with 150k on the clock and limited plus expensive parts availability and dwindling techs who'd even want to work on it. Go find a similar vintage Camry or Accord with 150k miles or even a Ford or a Chevy, whatever. Hell, even an old Jaguar is less of a crapshoot than a Saab. At least you can still get parts.
  • Kwik_Shift Brands that were considered from China include BYD, Dayun, Great Wall Motors, Maxus, Nio, Omoda/Chery, Seres, XPeng, and Zeekr. KG Mobility from South Korea also made the list of candidates.That's a lot of car companies from there ready to head here.
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