EV start-up Fara­day scales back US plans

Au­tomaker pares down ve­hi­cle se­lec­tion

Global Times - Weekend - - AUTO -

Elec­tric lux­ury car start-up Fara­day Fu­ture, one of sev­eral Chi­nese-funded com­pa­nies tak­ing aim at Elon Musk’s Tesla Inc, is throt­tling back on plans to build ve­hi­cles in the US, the com­pany and pub­lic of­fi­cials said.

Fara­day, an af­fil­i­ate of Bei­jing­based Leshi In­ter­net In­for­ma­tion and Tech­nol­ogy Corp, has also pared its planned prod­uct port­fo­lio down from seven to two ve­hi­cles, ac­cord­ing to two sources with di­rect knowl­edge of the com­pany’s plans.

Fara­day will build a much smaller auto assem­bly fa­cil­ity than orig­i­nally planned in North Las Ve­gas, Ne­vada, a city of­fi­cial said late on Tues­day.

North Las Ve­gas city man­ager Qiong Liu said Fara­day told the city it will build a 60,390-square-me­ter fa­cil­ity, be­gin­ning later this year, on the site of a plant orig­i­nally planned to take up 937,500 square me­ters.

The down­siz­ing fol­lows an ac­knowl­edg­ment in the au­tumn of 2016 by the com­pany’s founder, Chi­nese tech en­tre­pre­neur Jia Yuet­ing, that his global op­er­a­tions were overex­tended. Former Fara­day ex­ec­u­tives have said the com­pany strug­gled with cash flow is­sues al­most from its in­cep­tion.

At least a dozen key US ex­ec­u­tives have de­parted Fara­day in the last nine months, ac­cord­ing to the com­pany and sev­eral of those ex­ec­u­tives.

In a state­ment, Fara­day said it still plans to even­tu­ally con­struct the larger plant, but gave no timetable.

Fara­day is still hir­ing con­trac­tors to be­gin build­ing the fac­tory shell, ac­cord­ing to a source fa­mil­iar with the plans, but there is no firm date for com­ple­tion.

“We re­main com­mit­ted to the State of Ne­vada and are con­tin­u­ing our $1 bil­lion in­vest­ment in the re­gion over the next few years,” Fara­day said in the state­ment.

Fara­day an­nounced plans in De­cem­ber 2015 to build its first auto fac­tory in Ne­vada, with an an­nual ca­pac­ity of 150,000 and a planned open­ing in late 2017. Doc­u­ments sub­mit­ted to the state showed a planned in­vest­ment of $1.3 bil­lion.

Doc­u­ments pre­pared for Chi­nese in­vestors in early 2016 by Fara­day’s fi­nance team and not pre­vi­ously made pub­lic show the com­pany was pitch­ing a $1 bil­lion con­vert­ible bond of­fer­ing, say­ing it planned to build a range of seven elec­tric ve­hi­cles, from an ul­tra-lux­ury flag­ship to a tiny com­muter car.

Now, the com­pany has scaled back its ini­tial prod­uct port­fo­lio to just two mod­els – the FF 91 flag­ship un­veiled in early Jan­uary and a slightly smaller, less ex­pen­sive crossover des­ig­nated FF 81 and aimed at the Tesla Model X, peo­ple fa­mil­iar with the com­pany’s plans told Reuters.

A source fa­mil­iar with the com­pany’s think­ing said the smaller Ne­vada plant likely will be set up to build fewer than 10,000 cars a year and may not open un­til 2019.

Fara­day’s change of plans comes af­ter Jia se­cured a $2.2 bil­lion infu- sion for his cash-strapped prop­er­ties, in­clud­ing Fara­day’s sis­ter com­pany LeEco, from a real es­tate com­pany, Sunac China Hold­ings.

Two sources said fu­ture pro­duc­tion of most Fara­day ve­hi­cles, and com­pan­ion mod­els for Chi­nese sis­ter brand LeSee, likely will be cen­tered in East China’s Zhe­jiang Prov­ince, which has agreed to heav­ily sub­si­dize con­struc­tion of a new assem­bly plant with a 450,000 ve­hi­cle ca­pac­ity that could open in 2019.

Fara­day stopped work on the Ne­vada plant last fall. Ne­vada’s state trea­surer Dan Schwartz told Reuters a $75 mil­lion per­for­mance bond re­quired from Fara­day be­fore the state is­sued bonds for in­fra­struc­ture devel­op­ment at the fac­tory site has not ma­te­ri­al­ized.

Sev­eral Fara­day sup­pli­ers, in­clud­ing seat sup­plier Fu­turis and me­dia provider Mill Group, have sued the com­pany for non­pay­ment, ac­cord­ing to court records.

Jia planned to fol­low Fara­day’s 2016 con­vert­ible bond of­fer­ing in China with a Se­ries A ven­ture cap­i­tal raise in late 2017, then shift to debt fi­nanc­ing from US in­vestors in 2018, ac­cord­ing to one of the doc­u­ments.

The ul­ti­mate goal was an ini­tial pub­lic of­fer­ing in 2020, when Fara­day ex­pected to be build­ing 1 mil­lion ve­hi­cles a year in the US and China, and its pro­jected mar­ket value would be about three times the cur­rent size of Tesla.

Fara­day Fu­ture un­veils its FF 91 elec­tric car at the 2017 Con­sumer Elec­tron­ics Show in Las Ve­gas, the US on Jan­uary 3.

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