Faraday Future is cancelling its plans to build a fancy new $1 billion factory in Nevada. That really should come as no surprise. The company stopped construction on the proposed project last year, after falling behind in payment to AECOM, the global construction company hired to do site work for the factory.
Second Factory Nixed
Since then, the company has abandoned plans for a second factory and “customer experience center” on Mare Island, a former Navy base in San Francisco Bay that is being developed into an industrial park. Faraday Future did bring a car to the Pikes Peak hill climb this year, but it is only a prototype of the all electric SUV the company would like to build — someday. It is also involved in Formula E racing with the Dragon Racing team.
Faraday Future CEO Out
The company is headed by Chinese billionaire Jia Yueting, who fancies himself as another Elon Musk but is really more like a latter day version of Preston Tucker. Last week, the hyperactive Jia stepped aside as the company’s CEO. At about the same time, a Chinese court froze assets amounting to $180 million. Officially, the company says neither development had anything to do with pulling the plug on the Nevada factory.
Earlier this year, Jia told investors in a tearful message that he might have overspent their money. “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.” That’s the point at which most of the high priced talent that had flocked to the company started running for the exits. Jia is also a minority investor in Lucid Motors.
On July 10, Faraday Future Chief Financial Officer Stefan Krause said the decision to stop work on the factory was due to a shift in business strategy. The company now says it will look for an existing facility to produce its electric vehicles in California or Nevada. Tesla began in a former GM/Toyota factory. SF Motors, about which little is known, is another Chinese owned electric car startup that has recently agreed to take over an idle factory near South Bend, Indiana. The facility used to manufacture Hummer H2 SUVs.
“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,” says 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?”
The larger question could be what, if anything, the fall from grace by Faraday Future may mean for the electric car industry in general. “I think the next 12 months are going to be very telling. It could drastically change the look of the electric car industry,” Brauer says.
Autotrader executive analyst Michelle Krebs adds these thoughts. “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. There’s just never enough cash.”
“The history of this industry is littered with grand startups that never came true,” Brauer observes. “Faraday has all the earmarks of one of those companies that promises you the world but doesn’t necessarily deliver it.”
Source: ABC News