Wheels start to come off China’s electric car market challenger

▶ Start-up backed by a $2 billion pledge loses steam with doubts emerging over finances

After China’s third-richest man backed entrepreneur Jia Yueting’s electric vehicle start-up with a $2 billion funding pledge, the wheels finally started turning at its plant in Hanford, California.

The once-abandoned factory came to life three years after Faraday Future executives visited the farm town to scout the location. Between plant visits from a state senator and local officials, Mr Jia started building his team. He hired plant workers, Tesla’s former head of intellectual property and litigation, and even the city’s former mayor.

“Vehicles are being assembled as I type,” Hanford’s city manager, Darrel Pyle, said in August.

The zest didn’t last long, as the new backer for the Chinese challenger to Tesla is now pumping the brakes. In an October 7 filing, billionaire Hui Ka Yan’s Evergrande Health said it engaged lawyers to defend the company’s interests after Mr Jia began arbitration on October 3 in Hong Kong.

Mr Jia’s company alleges that following Evergrande Health’s initial $800 million investment, it failed to inject additional funds into the business after Mr Jia fulfilled the required conditions, according to a statement posted on Faraday’s Twitter account.

Faraday wants to scrap the deal because Evergrande not only is withholding payments in a bid to allegedly get Faraday’s intellectual property, but it’s also preventing Faraday from accepting immediate financing from other sources, the Twitter posting said. Evergrande denied the claim.

The dispute raises more questions about Faraday’s financial footing just as the start-up prepares to bring out its first model after years of work. Additional delays could result in Faraday falling behind a slew of Chinese rivals, including NIO, that already are selling EVs, and others, such as Xpeng Motors Technology, that are nearing their launches.

The spat also represents another setback for Mr Jia, whose Shenzhen-listed flagship Leshi Internet Information & Technology lost $22bn in market capitalisation from its 2015 peak after regulators temporarily suspended trading and ordered him to return home and repay outstanding obligations. The company is now is vlujed at about $2.1bn.

A spokesman for Faraday, said the company was set to begin deliveries in the first half of 2019 for the first road versions of its FF91 model.