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Electric cars

Electric carmaker Faraday Future gets opportunity to rebuild after settling dispute with main investor Evergrande

  • Both sides agree to drop all allegations against each other
  • Evergrande to restructure US$2 billion investment for 32 per cent stake
PUBLISHED : Tuesday, 01 January, 2019, 7:32pm
UPDATED : Tuesday, 01 January, 2019, 11:12pm

Embattled electric car start-up Faraday Future is free to conduct debt and equity financing after it settled a dispute with mainland China property conglomerate Evergrande Group, a key investor, on Monday.

Evergrande said it had agreed to restructure its pledged US$2 billion investment in the Los Angeles, California-based carmaker, which is controlled by Chinese entrepreneur Jia Yueting, ending a months-long dispute. Both sides have also agreed to drop all allegations against each other.

Evergrande Health jumps 10 per cent after arbitration calls for truce in war with electric car maker Faraday Future

Faraday had targeted December 2018 for the production of the FF91, a luxury electric sport-utility vehicle model, and planned to deliver the first batch in the first quarter this year.

“Cash is crucial for electric car start-ups,” said Yin Ran, a Shanghai-based investor involved in bond and private equity investments. “It is good news for Faraday, as it now has new opportunities to raise fresh funds after the settlement of its dispute.”

According to US technology news network The Verge, Faraday has started discussions with several potential investors about financing. The cash-strapped carmaker faces an uphill task, as it owes big amounts of money to suppliers, according to analysts.

At the end of 2017, Evergrande, which is controlled by mainland China tycoon Hui Ka-yan, said it would invest US$2 billion in Faraday over three years for a 45 per cent stake, bailing out the ailing carmaker. But the two companies have been embroiled in a series of disputes over the past several months.

Faraday ... now has new opportunities to raise fresh funds
Yin Ran, Shanghai-based investor

Evergrande had accused Faraday of manipulating it into paying US$700 million ahead of schedule, while Faraday said Evergrande was deliberately delaying investment to starve the company and obtain control of its intellectual property. To date, Evergrande has invested US$800 million in Faraday.

Following the settlement on Monday, Evergrande will hold a 32 per cent stake in Faraday without any additional investment in the start-up. Jia, founder and global chief executive at the carmaker, also has the option of buying back the shares owned by Evergrande within five years.

The property giant has also agreed to release its control over Faraday assets used as collateral for part of its investment. Faraday will now be able to use these assets as collateral for debt financing.

Cash-strapped electric car maker Faraday Future to cut pay, lay off staff in dispute with China Evergrande unit

Jia is blacklisted in mainland China as a debt defaulter because of the collapse of LeEco, an online television content provider he founded and ran.

Elsewhere, US-listed Chinese electric carmaker Nio launched its second production model, the ES6, last month after reporting the sales of 2,000 units of its ES8 model in October, beating Tesla’s sales on the mainland.

Faraday Future accuses Evergrande of deliberately holding back funding to gain control of electric car start-up

Also in December, Xpeng Motors, another mainland China electric car start-up, started delivering the first batch of its five-seater G3 SUV.

New-energy vehicle sales topped 860,000 units in the first 10 months of 2018 in mainland China, up 75.6 per cent from a year earlier.

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