The automobile business is cruel. It shows mercy to none. It is a giant hole that can swallow billions of dollars without a trace. Such seems to be the story of Faraday Future, the electric car company backed by Chinese billionaire Jia Yueting, who promised the moon but wound up delivering nothing but unpaid bills.
Faraday Future started by whispering catchy phrases like, “What if the back seat was the new front seat?” and “What if all those cars parked in driveways had more interesting lives?” As intriguing as all that was, the company got off on the wrong foot when it debuted its outrageously ridiculous FFZero1 single seat hypercar at the Consumer Electronics show in January, 2016.
It was a show car only, not a runner. And even though Faraday claimed it could leap tall buildings in a single bound, was faster than a speeding bullet, and more powerful than a locomotive, the world laughed at such a preposterous vehicle. The company tried to regain momentum. It jumped into Formula E racing with the Dragon Racing Team. It trumpeted its patent for a new power inverter that was smaller and lighter.
It brought high priced talent like Marco Matiacci, a former executive at Ferrari, into its management team with great fanfare. It held a splashy “virtual ground breaking” for its proposed factory in North Las Vegas. And it told the world how it was going to disrupt the automobile business by using an innovative new chassis that could be made wider, longer, or lower to meet the changing needs of the marketplace.
And then the wheels came off. It soon became apparent that Faraday Future was writing checks it couldn’t cash — literally. AECOM, the world’s largest industrial contractor, stopped work on the Nevada factory last September, claiming it was owed millions in back payments. Nevada state treasurer Dan Schwartz, flew to China to find out what was going on and came back saying that Jia had no money.
Apparently that was correct. In November, Jia Yueting sent and almost tearful letter to investors admitting that the company had let its finances get out of control. “No company has had such an experience, a simultaneous time in ice and fire,” he said. “We blindly sped ahead, and our cash demand ballooned. We got over-extended in our global strategy. At the same time, our capital and resources were in fact limited.” Soon all those high priced executives started fleeing what was clearly a sinking ship.
Since then, Jia has secured new financing totaling $2.2 billion from Sunac China Holdings, but that money is earmarked for Yeuting’s core electronics business, not for developing electric automobiles. Last week, Reuters reported that a parcel of land Faraday Future bought last year in Silicon Valley for its US headquarters has been sold off to raise money.
Faraday Future also had plans for a mini-factory and customer experience center on Mare Island, a former Navy base in San Francisco Bay. It spent $400,000 for an option on the property, then extended the option last fall. Today, the San Francisco Business Journal reports the extension has expired and there will be no second factory.
Business failures are nothing new. But the Faraday Future implosion should remind us all that making boastful claims is easy, building cars is hard. Elon Musk found that out a few years ago when Tesla Motors was close to bankruptcy and he was thinking of asking Apple to step in and rescue it. Is this RIP for Faraday Future? It sure seems that way.