Doubts swirl around Faraday Future’s future
“The ball is in their [Faraday Future’s] court,” Dan Schwartz, state treasurer of Nevada, told EE Times Friday (March 11). “I’d suspend judgement until they deliver what they said they would.”
If this doesn’t sound like a ringing endorsement from a key public official in Nevada — where Faraday Future has promised a billion-dollar, 3-million-square-foot plant — that’s because it isn’t.
Faraday Future’s plan for its state-of-the-art manufacturing plant in North Las Vegas, which is supposed to bring 4,500 jobs, has stalled. The public has seen little progress, despite the planned groundbreaking for the plant, which Faraday Future promised during a CES press conference in January.
At issue, apparently, is lack of cash.
The story of Faraday Future, whose major financial backer is a Chinese company, is intertwined with China’s stumbling stock market and the credibility of an Internet firm in that country. The non-existent transparency at the U.S. startup hasn’t helped to clear the picture, either.
The future of Faraday Future is largely at the mercy of Leshi, a publicly traded Internet company in China. Leshi is a parent company of a media firm called LeEco, which bankrolled Faraday Future. LeEco, formerly known as LeTV, has been often described as China’s Netflix. Little is known, however, about how much real money LeEco has committed to Faraday.
More to the point, the core question Schwartz and others are asking now is this: Does Faraday’s billionaire Chinese backer, Jia Yueting, who owns Leshi, have the financial resources to get a $1 billion car factory off the drawing board and into the desert?
Doubts have proliferated since early December, when the trading of Leshi shares on the Shenzhen stock exchange was suspended. Skeptics have grown progressively louder with repeated delays of Leshi return to the trading floor.
In late January, the State Treasurer Schwartz, on KNPR radio in Nevada, said, “China’s financial markets have been in a tailspin, and I need to understand why the shares of Mr. Yueting’s company will not open as previously stated.”
After that, Chinese officials reportedly pushed back the date for Leshi’s trading to resume on March 7.
That milestone has come and gone with no change. As of Friday, March 11, Leshi’s shares remain in limbo.
State Treasurer Schwartz last month requested that Faraday Future provide a $75 million performance bond. He explained that the bond is necessary because it becomes a guarantee that the factory will be built — before Nevada starts work on supporting road, rail and utility projects.
Handwringing over whether Faraday Future wiil be ready for the performance bond intensified recently after reports that the startup could not assure Schwartz the $75 million would be available even when Leshi’s shares are unfrozen this month.
Unanswered questions
The situation appears to have improved a little, however. Faraday Future sent a letter on March 2 to Steve Hill, director of the Governor’s Office of Economic Development (GEOD), promising that the company will acquire a surety bond of up to $75 million and deposit another $13 million into escrow accounts to go toward engineering and preliminary construction of water, wastewater and rail facilities.
So, is the state of Nevada now breathing a collective sigh?
Not necessarily.
When asked what else Schwartz wants from Faraday Future, he said, “I’d like to get a letter from their bankers saying that the company actually has $500 million to $1 billion to build the promised factory.”
The startup has produced no such letter.
Instead, Faraday Future said in its letter to the GEOD that it will deposit about $3 million in an escrow account by mid-March and another $10 million by mid-May to finance its share of bringing utilities to its manufacturing site.
Is mid-March the deadline the State of Nevada set?
What happens if the money isn’t deposited by then?
How long will Nevada wait?
Schwartz told EE Times, “There are still a lot of questions” on this deal, and “you are asking some of them.”
Schwartz said that he has already said more than he should when he was on KNPR’s radio show. Acknowledging that he recently had a conference call with Faraday Future, Schwartz said, “Until they deliver what they said they will, I’d suspend judgment,” for now. “We will see.”
Over the last few years, Faraday Future, founded in 2014, was portrayed as a fast-paced, fast-growing tech company. By September of that year, the startup was equipped with a 124,000-sq. ft. office building in the Los Angeles suburbs, purchased by its Chinese backer, LeTV, for $13.25 million.
Concept car launch
Armed with talent recruited from Audi, BMW, Boeing, Apple, Jaguar, Tesla and a lot of former NHTSA officials, the startup has bared its ambition to rapidly design and roll out multiple EV models based on the so-called “variable platform.”
Although the company was reportedly planning, initially, to unveil a fully working prototype at CES, Faraday Future ended up showing at its press conference a non-working, static “concept car,” called FFZero1, which looked like a one-seat race car.
At CES, Mark C. Boyadjis, senior analyst, infotainment & HMI at IHS Automotive, told EE Times, “Most likely FFZero1 will never get produced, and it won’t resemble Faraday Future’s first commercial product, when the company is ready to roll it out in a few years.” In fact, the company didn’t mention a launch date for its first real car, except for a vague reference to “in a few years.”
Others also remarked, after the press conference, that Faraday Future provided practically no data related to either the vehicle or the company. Faraday Future stuck to talking points on “design, idea, and vision,” said Jeremy Carlson, senior analyst at IHS Automotive, adding that the company offered “zero talk on any figures or numbers” associated with its vehicles, or details of any underlying technology.
executives from left: Richard Kim, head of global design;
Ding Lei, co-founder, global vice chairman, managing director,
LeTV; and Nick Sampson, senior vice president,
R&D and product development (Photo: EE Times)
As the company’s long-term financial viability faces more and more public questioning, Faraday Future is trying the patience of the rock stars in the high-tech industries. The Guardian last month reported that Faraday Future’s chief battery architect, Porter Harris, quit in January. The publication quoted an unnamed executive saying, “He was the battery. He designed it and did all the patents.”
Nonetheless, earlier this month, Faraday Future shared upbeat news that it received its first US patent (#9,241,428 B1) for a power inverter. The company boasted, in a lengthy blog dated March 1st, that the new inverter “was conscientiously engineered to manage power levels well beyond the known limits of electric vehicles today,” noting that it achieves “20-30% greater power density than our competitors’ applications.”
According to Faraday Future, this is one of the more than 100 new patents the company has summited to the U.S. patent office last year.
Is this enough evidence to convince the world that the startup is alive and well, charging full-speed ahead?
Hardly. The current word on the street is that Faraday Future might end up as an Intellectual Property company, trying license its patents to others.
Classic startup story
Before taking some of its wraps off at CES, Faraday Future kept itself shrouded in mystery as long as it could (and it still is). But it knew well enough to give out high-profile interviews (with little substantive information) to a few select media outlets so that the company was able to keep the intrigue going.
But now, it has completely stopped talking. It communicates with the external world entirely through its own blogs and through rumors on the street.
In many ways, Faraday Future’s story is the classic story of a startup, filled with ambition, passion and big talk. The cast of characters in the making of Faraday Future includes: a Chinese Internet billionaire with a passion for EVs, an all-star engineering team consisting of talent from highly admired tech companies, and a governor so eager to bring a “transformative project” to his state that he called a special session of the Nevada legislature to create new tax incentives to seal the deal with Faraday.
The Governor’s Board of Economic Development in January approved giving $215.9 million in tax incentives for Faraday Future’s North Las Vegas factory. Whether the plant ever opens, however, is still anybody’s guesses.
— Junko Yoshida, Chief International Correspondent, EE Times
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