Let’s put this out there first: Faraday Future is not “vaporware.” This comes up every time we mention the company, and it’s simply not accurate. There’s no doubt that they are over-hyping their products for a company at this stage of development, but they also have over 1,000 employees–most of them engineers–working on real electric vehicle technologies, and that’s not vaporware.
We have reported on some top talent from Tesla, Apple and more traditional automakers going to the startup. Most of the power electronic team of the GM EV1 went to Faraday Future. All those people are developing real tech. It’s dismissing to call their work “vaporware,” but some clear mismanagement at the top is certainly putting their work at risk, and that’s a real problem for the EV industry.
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Recent reports suggest that the company is in debt and that the money from Jia Yueting, a Chinese billionaire and FF’s main financier, has stopped coming. Buzzfeed reviewed documents suggesting the company is about $300 million in debt and suppliers are now suing the company. We’ve talk to suppliers who are also questioning the company’s ability to pay them.
There’s a bigger point here. When an electric vehicle company fails, it looks bad for the entire industry regardless of the circumstances that led to the failure. It’s unfortunate, but true.
In 2013, the bankruptcy of a few startups, namely Fisker, A123, and Better Place, spooked the investment community and virtually stopped money from going into EV ventures. It took a few years for money to start flowing back into the segment; it’s now at a record high in 2016.
On a broader note, if Faraday Future craters, it will become a talking point of fossil fuel-funded politicians just like Solyndra’s bankruptcy, which hurt the solar industry – even though Faraday isn’t taking any money from the government beyond perspective tax breaks on its plant in Nevada. Fossil fuel talking heads wouldn’t let a detail like that stop them from declaring the end of the electric car and a rationale for removing incentives and even taxing EVs.
When Yueting announced his investments in electric vehicle startups Faraday Future and Atieva, now known as Lucid Motors, he mentioned how important the sector will be to fight climate change and reduce air pollution, especially in his home country.
If he wants to keep his credibility and continue to be a leader in the effort to move to electric powered transportation, he needs to bail out Faraday Future right now.
Yueting announced that he secured around $600 million in financing for his electric vehicle ventures last month, but the money clearly hasn’t made its way to Faraday Future yet. The money technically is going to LeEco, Yueting’s main company, which has been described as the “Netflix of China,” but it has also branched out into consumer electronics.
LeEco is also working on an electric car, but the way it was described to us by company insiders is that Faraday Future is the one developing the technology and LeEco will be the brand in China – not unlike what most foreign automakers are doing in China, or what GM is doing with Opel in Europe.
They could be waiting for the company to unveil their first production-intent vehicle at CES next month and gauge the reaction before unlocking the money, but that’s far from a perfect plan. Partners are already walking away.
Tesla used its unveiling events to drum up demand and take reservations with deposits. In turn, it was able to go back to suppliers and secure contracts to bring those cars to production, but Faraday Future can not expect people to place reservations for their vehicles if the company is $300 million in debt and being sued by suppliers left and right.
Yueting should refinance Faraday Future right now, if he really can, and let the company sort out its debt before going into the unveiling at CES next month. Otherwise, even if the vehicle is a technological marvel, it will be dead on arrival.
Let Yueting know that if he is serious about electric vehicles, he needs to bail out Faraday Future. You can tweet at him @jiayueting and share this article.