image

LeEco

Faraday Future says it’s on track with US$1b automotive plant in Nevada

California-based electric car maker says its operations haven’t been disrupted by a cash shortage at its China-based backers, refuting a media report that construction on its car factory had been halted

PUBLISHED : Wednesday, 16 November, 2016, 8:44pm
UPDATED : Wednesday, 16 November, 2016, 10:35pm

Faraday Future, the LeEco Group venture that makes self-driving electric cars, said it’s poised to begin construction of the second phase of its Nevada factory in February 2017, refuting a report that work had been halted due to a cash crunch at its main investor.

The carmaker had already completed construction of the first phase of its factory in North Las Vegas in Nevada state, California-based Faraday Future said in a press statement issued from its China office.

The carmaker had halted construction of the US$1 billion plant after LeEco had missed several payments to its contractor AECOM, Reuters reported on Wednesday, citing a Faraday spokesman in saying construction would resume in 2017.

LeEco, which had expanded from its video streaming business into making smartphones, television screens, film production and autonomous cars, last week said it was running short on cash because it had expanded too aggressively.

In a letter to LeEco’s staff, the company’s founder and chief executive Jia Yueting said that the company was running out of cash as it was unable to raise external funds quickly enough to bankroll its expansion plans.

In his letter, Jia singled out the car unit as one of the firm’s most expensive ventures, and said that the company has already poured 10 billion yuan (US$1.45 billion) into early development.

Less than two weeks after Jia’s cash woes, LeEco abruptly did a U-turn and announced that it had raised US$600 million from several of the founders classmates in business school, and from a string of Chinese companies. Most of these funds would be directed toward the car business as well as LeEco Global Holdings, Jia’s company said.

Faraday and LeEco are meant to share technology in their self-driving electric cars. Faraday’s model is called the FFZero1, while LeEco’s model is called the LeSee Pro. Both models are meant to be launched in 2017.

In August, LeEco announced that it had plans to invest 12 billion yuan in an electric car factory located in Zhejiang province in eastern China. The plant will reportedly produce 400,000 electric cars annually by 2018.

Still, the complex relationship between Faraday and LeEco hasn’t had everybody convinced. The venture was a “Ponzi scheme,” Nevada’s state treasurer Dan Schwartz said, in a Tuesday interview with Reuters.

“You have a new company that has never built a car, building a new plant in the middle of the desert, financed by a mysterious Chinese billionaire,” Schwartz said, according to the Reuters report. “At some point, as with Bernie Madoff, the game ends.”

business-article-page