Out­look bleak for LeEco’s Ne­vada elec­tric-ve­hi­cle plant

China Daily (USA) - - FRONT PAGE - By FAN FEIFEI in Bei­jing and LIA ZHU in San Fran­cisco Con­tact the writers through fan­feifei@chi­nadaily.com.cn

The out­look for Chi­nese in­ter­net firm LeEco’s elec­tric-ve­hi­cle fac­tory in the US state of Ne­vada re­mains bleak, al­though the Bei­jing-based firm said it will ag­gres­sively raise cap­i­tal.

A state of­fi­cial showed his con­cerns about the fate of Fara­day Fu­ture, the elec­tric car­maker build­ing a $1 bil­lion plant in North Las Ve­gas, which was backed by LeEco, and the fi­nan­cial strength of LeEco and abil­ity of Jia Yuet­ing, its CEO and founder.

“The projects Jia in­vested in, in­clud­ing in China, seem very dif­fi­cult for him per­son­ally to re­al­ize,” Ne­vada State Trea­surer Dan Schwartz said in an in­ter­view with China Daily.

“If you look at Leshi (LeEco’s listed arm) it has roughly $6 bil­lion in rev­enue, but it’s net­ting about $50 mil­lion.

That profit mar­gin is less than 1 per­cent. ... Gro­cery stores make 2 per­cent to 3 per­cent,” Schwartz saod.

“It’s clear Mr Jia doesn’t have any money; it’s clear that Leshi isn’t mak­ing money. That’s the rea­son for my con­cern.”

Schwartz said the fac­tory con­struc­tion stopped ear­lier last week, and he be­lieved it was be­cause no pay­ment had been re­ceived from Fara­day.

A state­ment from Fara­day Fu­ture last week claimed it never halted work on the Ne­vada fac­tory, but fin­ished the first phase of con­struc­tion, with plans to move into the sec­ond phase in Fe­bru­ary.

“The dam­age to the state will be fairly min­i­mal, be­cause we haven’t is­sued any bonds. The gov­er­nor would be very em­bar­rassed, and the eco­nomic de­vel­op­ment agency would be very em­bar­rassed,” said Schwartz.

For North Las Ve­gas, the con­se­quences might be more se­ri­ous be­cause the city has ba­si­cally run out of money; it was count­ing on the project to get them out of the hole.

LeEco did not deny de­fault­ing on con­struc­tion costs for the FF project, and con­firmed the cap­i­tal isn’t avail­able, say­ing it is now ac­tively rais­ing money.

In Au­gust, the com­pany an­nounced it would in­vest 20 bil­lion yuan ($2.9 bil­lion) to build an auto park in Zhe­jiang prov­ince to mass-pro­duce elec­tric cars. It said on Mon­day the project will be­gin con­struc­tion by year-end.

Shen Meng, di­rec­tor of Chan­son & Co, a bou­tique in­vest­ment bank in China, said there is still doubts whether LeEco’s elec­tric-ve­hi­cle projects in Ne­vada and Zhe­jiang could re­al­ize mass pro­duc­tion.

“The com­pany is fac­ing a fund­ing gap, and where the over 70 bil­lionyuan cap­i­tal raised in the past has gone is still a mys­tery,” said Shen.

Jia has said that the firm has prob­lems in sup­ply chain man­age­ment and cap­i­tal is­sues, and pledged to end over­ex­pan­sion and cash burning.

AP

A man takes photos of the self-driv­ing all-elec­tric car named LeSee, which is pro­duced by LeEco, at a car expo in Bei­jing.

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