US electric car maker scraps $1b plant plans
Faraday Future halted work on Nevada project in November, calling stoppage a ‘temporary adjustment’
An electric car maker deserted its plan to construct a $1 billion (Dh3.67 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 dinancial officer Stefan Krause said Monday’s decision to scrap the plant was due to a shift in business strategy. The Gardena, California-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 sank more than $120 million (Dh441 million) into the project.
Change of direction
“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 freefall 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 line-ups. Established car companies are releasing more electric options and it’s unclear whether President Donald Trump’s administration will continue tax breaks that incentivise 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 that 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 anytime 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 900acre site at the Apex Industrial Park in North Las Vegas.
State Treasurer Dan Schwartz, a critic of the project, blamed state officials for giving false hope that the plant “would magically create 4,500 jobs.”