Elec­tric car­maker scraps plans for $1-bil­lion plant

The Hamilton Spectator - - BUSINESS - ALI­SON NOON

CAR­SON CITY, NEV. — An elec­tric car­maker de­serted its plan to con­struct a $1-bil­lion man­u­fac­tur­ing plant in south­ern Ne­vada in a move ex­perts say could spell trou­ble for the com­pany and the broader niche elec­tric au­to­mo­bile busi­nesses.

Fara­day Fu­ture chief fi­nan­cial of­fi­cer Ste­fan Krause said Mon­day’s de­ci­sion to scrap the plant was due to a shift in busi­ness strat­egy.

The Gar­dena, Calif.-based com­pany said in a state­ment that it will now look for an ex­ist­ing fa­cil­ity to pro­duce its elec­tric ve­hi­cles in Cal­i­for­nia or Ne­vada.

Fara­day Fu­ture halted work on the project out­side Las Ve­gas last Novem­ber, at the time call­ing the stop­page a “tem­po­rary ad­just­ment” that wouldn’t af­fect plans to be­gin pro­duc­tion in 2018. It sunk more than $120 mil­lion into the project.

“It can be some­what hard to be­lieve that a com­pany that was so ag­gres­sively spend­ing money and mov­ing things for­ward in their claimed goals will sud­denly change di­rec­tion and still get to where they want to get to,” said Karl Brauer, ex­ec­u­tive pub­lisher at Au­to­trader and Kel­ley Blue Book. “You kind of don’t know — is this just an ad­just­ment or is there go­ing to be a free fall here?”

He and oth­ers who closely watch the in­dus­try said the de­ci­sion comes amid sev­eral in­dus­try changes that could dras­ti­cally af­fect com­pa­nies like Fara­day and Tesla that of­fer uniquely all-elec­tric line­ups. Es­tab­lished car com­pa­nies are re­leas­ing more elec­tric op­tions and it’s un­clear whether Pres­i­dent Don­ald Trump’s administration will con­tinue tax breaks that in­cen­tivize the in­dus­try and mo­ti­vate buy­ers.

“I think the next 12 months are go­ing to be very telling,” Brauer said. “It could dras­ti­cally change the look of the elec­tric car in­dus­try.”

Fara­day’s an­nounce­ment came days af­ter re­ports that a Shang­hai court froze more than $180 mil­lion in as­sets be­long­ing to one of the com­pany’s big­gest back­ers, tech bil­lion­aire Jia Yuet­ing. The com­pany said Jia’s fi­nan­cial prob­lems were not re­lated to the de­ci­sion.

Jia stepped down last week from the helm of the pub­licly traded arm of LeEco, the Beijing-based con­glom­er­ate he founded over a decade ago. At the same time, he reaf­firmed his com­mit­ment to Fara­day Fu­ture.

The com­pany is at­tempt­ing an ex­cep­tion­ally ex­pen­sive feat — one that Tesla has not pulled off, Au­to­trader ex­ec­u­tive an­a­lyst Michelle Krebs said.

“Tesla has sold ve­hi­cles, but it’s not made any money, and that whole seg­ment is not do­ing par­tic­u­larly well,” Krebs said. “You’ve got an in­dus­try that is cap­i­tal-in­ten­sive and you’ve got an elec­tric ve­hi­cle mar­ket that is kind of shaky, so those two things prob­a­bly are at play.”

With elec­tric ve­hi­cles in par­tic­u­lar, she said, there’s no sign that there will be a big pay­off any time soon, “there’s just never enough cash.”

Thou­sands of jobs had been an­tic­i­pated to come with the con­struc­tion and launch of the pro­posed plant on a 900-acre site at the Apex In­dus­trial Park in North Las Ve­gas.

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