Faraday Future averted disaster at the end of 2017 when it secured a major new investment from the healthcare division of Chinese real estate group Evergrande. But that money — some $800 million — was gone by July, according to a new filing with the Hong Kong Stock Exchange. Now, Evergrande is accusing Faraday Future founder and CEO Jia Yueting of trying to back out of the deal, and says it will take “all necessary actions” to protect itself and its shareholders. News of the filing was first reported by Reuters.
The Chinese conglomerate says Jia used “manipulating” tactics to persuade the board of directors who oversaw the deal to advance another $700 million. In the meantime, The Verge has learned that Faraday Future has struggled after having spent the first $800 million. Some of the company’s vendors and suppliers have not been paid, and layoffs are being considered, according to three former employees and sources close to the company, who asked not to be named out of fear of legal retribution. Representatives for Faraday Future did not respond to a request for comment prior to publication.
The new financial trouble comes at a critical time for Faraday Future. The company has spent all of 2018 retooling a factory in Hanford, California, where it plans to manufacture its first car, an ultra-premium electric SUV called the FF91, by the end of the year. Even that process has stumbled, though, as The Verge learned that the company’s first and only preproduction version of the car — the first thing to be made at the Hanford facility — caught fire in late September.
The fire happened hours after the company showed off the car at a “Futurist Day” event for its employees and families. The full extent of the damage is not clear, as the company has made employees sign non-disclosure agreements specifically related to the fire, the former employees say. But it’s viewed as a major setback ahead of the start of production later this year.
The more pressing trouble, though, may be that some of Faraday Future’s suppliers and vendors have not been paid for weeks. The stopped payments were a direct result of Jia having spent the first $800 million installment by July, which came from Evergrande through a complex structure of offshore companies, the former employees and sources close to the company say.
Emails reviewed by The Verge that date back to the beginning of August show Faraday Future representatives trying to explain this as “delays” in payment processing. Others show repeated promises that checks were being issued, but awaiting signature, or held by the company’s “treasury department” for over a month, which two former employees who worked closely with Faraday Future’s finances say was the same stall tactic used in 2017 when the company was nearly out of money.
One vendor, who asked not to be named because they are afraid of damaging their chances of being paid, say a Faraday Future representative suggested this person’s company hire a collection agency. At least three others have filed liens with the California Secretary of State, one for nearly $400,000 owed over equipment it sold to Faraday Future, official documents show.
The company previously had trouble paying suppliers in 2017, with some going so far as to sue Faraday Future in court for repayment. The company owed at least $100 million at the start of 2018, and the company began using the new investment money to make good on those debts. Faraday Future held a “supplier summit” in February, which the company’s supply chain head said was meant to help these companies “walk away with renewed confidence about our plans and our funding.” Not all debts have been repaid, though. In a previously unreported lawsuit filed this summer, Nevada-based Astound Group claims Faraday Future still owes around $1.5 million for work dating back to 2016, including unpaid invoices from the 2017 launch of the FF91 at the Consumer Electronics show.
Jia has a history of money trouble. Best known as the founder of troubled tech conglomerate LeEco, he is currently living in the United States after having his assets frozen in China in 2017. He was placed on a national debtor blacklist, and while he still controls the listed arm of LeEco, a different real estate giant (Sunac) recently took control of some of the conglomerate’s subsidiaries.
It was also Jia’s handling of the company’s money that helped put Faraday Future in the tenuous financial straits last year, as The Verge reported in December. A private-turned-public clash between him and Faraday Future’s then-CFO got in the way of new investments, and derailed an attempt to restructure the company through bankruptcy.
While Jia was eventually able to secure funding from Evergrande, the deal came with severe terms, like assigning away the rights to Faraday Future’s intellectual property and many of its assets. Evergrande has spent the intervening months setting up Faraday Future-branded research and development centers in China, and recently purchased a $2 billion stake in a major Chinese auto dealership company.
Comments
I expect nothing from Faraday Future and I’m still let down.
By zduboss on 10.07.18 2:39pm
Only the car? The fire didn’t spread to loose sacks of cash or important documentation? As fires go, not nearly enough to compete with legitimate fires.
By Silver Surfer Has The Power on 10.07.18 4:25pm
I really want for there to be a legitimate competitor to Tesla in both style and performance, but, more and more, Faraday Future is proving itself to not be that competitor…
By phishfi on 10.07.18 3:03pm
I always thought FF would wind up like Fisker. Further, that Telsa would eventually face real competition from ‘traditional’ automakers moving into its space.
By Aleph Ruehl on 10.07.18 3:27pm
The fight between Tesla and traditional automakers is getting interesting. It’ll be a question of whether Tesla can manufacture at scale first, or if traditional automakers can catch up to Tesla’s electric and battery tech first.
By OpssYourBad on 10.07.18 6:05pm
lol, tell which car company is investing in battery production. If you have any idea why tesla was FORCED to do this and you see how NO other car company is doing it there is no other conclusion to take other than all others are building compliance cars
By SDE Bellisarius on 10.07.18 7:26pm
VW, GM and Mercedes have invested in battery companies. GM in LG and VW and Merc in CATL. No need to build your own batteries if you can invest in a company already doing it and secure yourself a steady supply. It’s not like either of those companies will be building millions of EVs anytime soon.
By low_tech on 10.08.18 10:36am
VW and Mercedes are producing small numbers of EVs in Europe already and Mercedes have a tie-up with Renault/Nissan who are the biggest EV producers.
BMW is the other one of the conventional manufacturers who could rain on Tesla’s parade.
I have a Model 3 on order but its now looking like deliveries in Europe wont be until 2020 and, by that time, there could be a lot more competition.
The other thing that will be interesting is how they stand up to use – the one I sat in in California didn’t strike me as terribly well made.
By Dr Strange on 10.08.18 11:59am
Mercedes Benz announce they are building a battery plant in the US http://www.thedrive.com/tech/24083/mercedes-benz-breaks-ground-on-ev-battery-factory-in-alabama
By redeo on 10.08.18 9:31pm
Tesla’s electric and battery tech is open sourced. The problem for legacy manufacturers isn’t tech.
By harkening on 10.07.18 8:15pm
This! Tesla battery tech is nothing special. Legacy manufacturers are too busy making real money to be concerned with this niche. Let Tesla do the heavy lifting, they will fly in when the time is right.
By Sw4mq on 10.08.18 4:48pm
Well there will be one, but it’ll be Chinese and pushed along by their government which is actively involved in their businesses (particularly ones deemed important to the future of which EV’s have been designated). You can see it in that last paragraph – the transition to China of whatever tech they had is all set, I’m sure they hired as many folks from Tesla etc. as they could while they were gathering the knowledge:
"the deal came with severe terms, like assigning away the rights to Faraday Future’s intellectual property and many of its assets. Evergrande has spent the intervening months setting up Faraday Future-branded research and development centers in China, and recently purchased a $2 billion stake in a major Chinese auto dealership company."
By SasparillaFizz on 10.07.18 3:53pm
There is Nio, which is also Chinese but looks way more promising but then again, any company that doesn’t have Jia Yueting at its head looks more promising. Check nio.io it looks very good.
By Danny 0109 on 10.08.18 1:53am
Why this startup gets so much coverage? I feel like it’s a 10th article about Faraday’s financial troubles.
By Pavel Rusin on 10.07.18 5:00pm
Because there is a shitload of money involved, and they spent years hyping themselves up.
By fleshsw0rd on 10.07.18 5:58pm
Because of the same reason Theranos got coverage: Multi-billion dollar company implosions are always fun to watch. As long as you’re not an investor.
By OpssYourBad on 10.07.18 6:07pm
This is a guy Elon pays just so he’s not the craziest EV maker
By dwightk on 10.07.18 6:59pm
Shouldn’t you make EVs first to be called "EV maker"?
By Bogdaniec on 10.07.18 11:46pm
I mean, technically, they DID make one. It’s just that it happened to catch fire and got destroyed immediately after.
By Charles L on 10.08.18 11:35am
The fact this company is called "Faraday Future" says it all. Absolute zero bone of original thought or creativity. A blatant Tesla clone, destined for failure.
By inteliboy on 10.07.18 10:45pm
What’s more sad is that they trash the Faraday name with the mess they’re doing.
By raresh on 10.08.18 5:26am
Just shows you how difficult it is to start a car manufacturing company these days.
By Just In Beaver on 10.08.18 2:43am
Healthcare division of a real estate group…um what?
They just need to throw in the towel, its not happening and they’re just delaying the inevitable.
By GNTsquid on 10.08.18 10:45am