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How Faraday Future’s former ‘savior’ plans to take on the EV market

How Faraday Future’s former ‘savior’ plans to take on the EV market

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California’s newest EV startup Evelozcity has three models coming starting 2021 — but they might not be what you think

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(L to R) Evelozcity head designer Richard Kim, CEO Stefan Krause, and head of technology Ulrich Kranz.
(L to R) Evelozcity head designer Richard Kim, CEO Stefan Krause, and head of technology Ulrich Kranz.
Photo: Evelozcity

As Faraday Future careened toward what looked like certain doom late last year, the man who was brought in to fix the company’s financial woes resigned. He was fed up, according to former employees, with facing resistance from the company’s founder (and now CEO) to his suggestions of how to stop the financial bloodletting. In the weeks that followed, that man — Stefan Krause, a former BMW and Deutsche Bank executive — remained in negotiations to come back to Faraday Future if certain demands were met. But when the two sides couldn’t come to an agreement, Faraday Future issued an excoriating (and excruciating) public takedown of Krause and CTO (and fellow former BMW executive) Ulrich Kranz that claimed the two were fired for “malfeasance and dereliction of duty.”

Out of the ashes of that relationship, Krause and Kranz founded — what else? — a new EV startup based in California called Evelozcity, Inc. Krause, who multiple former Faraday Future employees told me last year was often referred to as the company’s “savior” during his time there due to how his ruthless financial efficiency kept Faraday aloft, tried to keep Evelozcity a secret in the months since as he gathered talent and formed a business plan. But a number of former Faraday Future employees split off to fill Evelozcity’s early ranks, and a lawsuit quickly put the startup in the spotlight. Faraday Future accused Krause, Kranz, and other former employees of Waymo v. Uber-style trade secret theft in the lawsuit, and alleged that the two executives essentially founded Evelozcity with stolen employees — claims that the new startup called “recklessly inaccurate.”

With the bandaid ripped off, Evelozcity is now trying to get its own story out there, and the startup made Krause — who now runs the show — available for interviews last week to a handful of outlets around the globe, including The Verge.

During the conversation, which covered both specific and broad strokes of Evelozcity’s plan, Krause made it clear he wants to make an affordable electric car with Evelozcity. But he also wants to do much more than that.

Three different electric vehicles, all built on the same platform

The company’s main goal is to design a “skateboard” that houses all the battery and electric drivetrain / propulsion technology, which will then be shared by three different types of vehicle “cabins.” That includes a commuter car, a car meant for autonomous ride-sharing, and a small van for deliveries.

The first Evelozcity-designed vehicle — Krause won’t say which one just yet — will come to market in 2021, with the others soon behind. The company will start in the US, attempting to sell the consumer vehicle directly, while pitching the van and ride-sharing vehicle to other businesses. Evelozcity will then expand to markets in China and Europe.

All three of these vehicles will have a range of at least 250 miles, Krause says, and will also each be built with some high level of autonomy in mind. The company is developing its own battery layout, as well as the software to manage it, but it’s already working with outside engineers and suppliers to develop the autonomous technology, Krause says.

“We have the philosophy to really try to buy as much as we can from suppliers, and source, because that’s where we believe the industry will go to more and more,” Krause tells The Verge. “Suppliers are moving into this space and offering complete solutions.”

Evelozcity has only had one big “design session” so far, Krause says, but he already expects the company’s vehicles to look much different from EVs that are either on the market or being teased.

“We want to go away from building an EV that has the look of a combustion engine car.”

“We want to go away from building an EV that has the look of a combustion engine car,” he says. “If you look at most of the current EVs, they still resemble the architecture of a combustion engine car, with many of them still having a place for an engine, even though there is no engine anymore.”

This has led to EVs carrying with them the same traditional “three box” design that has existed since the horse-and-buggy days, Krause said, where the engine goes up front, the passenger cabin is in the middle, and a storage compartment at the rear.

By taking advantage of the extra space usually given to an engine, while also moving most of the car’s technology to the skateboard, Evelozcity’s designs will have a standout look and more room inside, Krause says. “If you don’t have an engine in the front, and the front of the vehicle really only deals with crash test requirements, you can think about the looks of the cars quite differently. And you can use the [cabin] space on top of the skateboard much better.”

Another way that Evelozcity will be different, Krause says, is that unlike other EV startups like Tesla or Faraday Future, the company won’t build its own cars. “We believe the future lies in contract manufacturing, and working with partners in terms of the production of vehicles,” he tells The Verge. “The [company’s] focus is mainly on design and engineering and sales and marketing, not so much on production.”

The Evelozcity CEO didn’t divulge how much funding the company has raised so far, but he said that it is enough to get the company into production. “The number it takes [to get to the start of production] is more or less around $1 billion,” he says. “Those are the numbers that are floating around for how much you need to go down that path, and it’s not dissimilar for us. It’s around the same ballpark.”

Since the company isn’t setting out to produce its own vehicles, Krause says he only envisions needing a maximum of around 350 employees by next year. The company is currently at around 100 employees, a group that includes Faraday Future’s former design chief, vehicle line head, vehicle engineering director, and head of interior and exterior design trim.

The accusations being flung by Faraday Future speak to a larger truth when it comes to acquiring talent in the EV industry: while it’s still young, it’s a hyper-competitive market for qualified employees.

“We’re not going after luxury cars, high end sports cars... we believe the sweet spot in the market is around $35,000.”

Krause says Evelozcity has attracted its early employees because the company already has a good strategy laid out, and that he’s secured the funding to back it up. “I think people are liking our story,” he says. “We’re not going after luxury cars, high end sports cars — we’re going for a car that hits the sweet spot of the market with a price point that will be competitive below $50,000. We believe the sweet spot in the market is around $35,000.”

It also doesn’t hurt that he headquartered the company in California (Los Angeles, to be exact), which has become a hotbed for EV startups. “Over the last couple of years, there has been a bit of a cluster developing in the EV industry between Los Angeles and San Francisco,” Krause says. “You find a lot of the suppliers and companies that are dedicated to this space in this area, so you have access to partners, you have many technology companies working on [the same things], and you have many startups.” 

Of course, the other side of being in both these physical and figurative spaces is that companies like Tesla or Apple are almost equally likely to poach your staff. Krause says it’s expected that Evelozcity will lose some talent along the way. “We will have a fluctuation, for sure. We will be targeted, and some of our employees may get good offers. I think it’s just an issue that we have to deal with as an industry,” he says. “I think we will be protected for a while as we develop this and as people are building their resumes, but for sure later it will continue to be competitive. And I tell you that the compensation levels in the EV industry at the moment are certainly rising, and that will continue, especially once the large manufacturers start going after these people as well.”

China's Regions Suffer Air Pollution At Beginning Of 2017
The Chinese government’s attempts to rein in pollution from fossil fuels has led to aggressive incentives and policies that encourage EV development.
Photo by VCG/VCG via Getty Images

Those major auto manufacturers have all made varying commitments to add electric cars to their fleets in the coming years, most of them ranging in the billions of dollars. And there’s an express emphasis in these new investments on selling these new EVs (and hybrids) in Europe and China, where governments are more actively trying to phase out combustion engine cars. Many of these top tier carmakers already sell cars in China, but are also pursuing joint manufacturing ventures with Chinese automakers in order to produce EVs in the country — a requirement if they want to tap what is the largest market for electric cars without suffering through high import tariffs.

Meanwhile, EV startups pop up seemingly every day inside China as the country’s auto industry matures. Some, like NIO or SF Motors, have already made it stateside.

China will likely be the leading EV market for a while

Krause wants to sell Evelozcity’s cars in China, too, but doesn’t think all this competition is limiting. “The market will be big enough to see hundreds of companies go to the start line, and then we all will go into the race,” he says. “If it’s a fair competition, the best ones may win, and over time we will see consolidation happening, we will see some companies disappear. For us and our investors, if it’s consolidation, that means M&A [mergers and acquisitions] opportunity, that means exit opportunities for investors. It actually means good news.” He also says he’d be willing to finding partners to work with in China in order to crack the market there by producing within the country’s borders.

Finding success in China may be the real key for Evelozcity. EV sales are on the rise here, but they only made up 1.2 percent of the overall car market in 2017. The EV market share in China was three times higher. It’s only expected to grow, too — 40 percent of the global investment in electric cars is happening in China, and the country is expected to account for 50 percent of global EV sales until 2030. Meanwhile, the federal EV tax credit in the US narrowly survived being cut out of the recent tax bill, and renewable energy (and the subsidies for it) has fresh opposition in the highest levels of the government after the 2016 election.

Krause isn’t worried about whether the tax credit will be around when Evelozcity comes to market. And some volatility in the market is to be expected, he explains. What he really worries about is whether or not there is “a change in attitude towards EVs” when it comes to potential customers in markets like the US. “I think over time, if consumers want it, and the people in the country want it, the political reality will adjust to it,” he says.

This is also where the small delivery van and autonomous ride-sharing ideas come in, too. Krause has designed Evelozcity to be flexible in ways that are meant to help the startup survive what is a laundry list of unknowns. But that doesn’t mean he’s uncertain about whether he’s bet on the right ideas. “I’m looking at: will consumers want these products in the future? Will there be a strong demand for these types of products in the future? And the answer to these questions is definitely yes. And definitely a global yes as well.”  

The name — a portmanteau of “EV,” velocity, and city — might take a back seat some day

Asked whether or not Faraday Future is finally behind him, Krause reiterates he can’t comment on specifics considering the latest lawsuit. “We continue to hire, and we continue to work on our project, and that should tell you that we are not concerned about this,” he says. “I stand by my statement that these are false and desperate allegations that are being put forward. For us, other than having to deal with some lawyers, it has not been a big distraction.”

And lastly — the company’s name? It’s a portmanteau of “EV,” velocity, and city, which Krause says he likes it because “it kind of describes, with just the company’s name, what we are doing.” But even he understands it doesn’t exactly roll of the tongue. In time, the company’s products, and maybe even its brand name, could be different, he says.