By Richard Read
With every passing day, Faraday Future’s name seems increasingly ironic.
Troubles have been brewing at the U.S.-based, Chinese-backed electric car start-up for more than a year, with very little good news to break up the bad. The latest headline involves the company’s founder, Jia Yueting, who’s just had billions of dollars worth of assets frozen by the Chinese government.
It’s enough to make Uber employees chuckle and think, “Ugh, glad we’re not those guys.”
So many wrong turns
Red flags first flew over Faraday in April 2016, when the company suddenly backpedaled on aggressive production goals at its newly planned, $1 billion facility outside Las Vegas. Another flag was raised in June, when reports indicated that the company–which had no track record of building, marketing, or selling cars–had begun eyeing a second manufacturing site in California, long before its first plant was completed.
As bad as things might’ve seemed, though, all the aforementioned problems seemed “insider-y”–the sorts of problems that money and experience could fix. Fans told themselves that as long as Faraday’s designers built beautiful, sexy cars that inspired passion among consumers, everything would be okay.
Then came CES in January 2017.
Everything was not okay.
At CES, Faraday unveiled a underwhelming prototype of its electric, self-driving FF 91 model. The company did a terrible job of explaining what made the FF 91 different from its competitors, and the prototype didn’t perform as it should’ve onstage.
Perhaps worst of all, Yueting–who sometimes prefers to go by the nickname “YT”–failed to woo the audience. Not only did he have to contend with a language barrier, but he also lacked the charisma to sell journalists and analysts on the FF 91’s benefits.
Within weeks, insiders reported that Faraday was teetering on the brink of collapse. The stories of lavish spending, unclear chains of command, and a clueless Yueting at the center of it all were simultaneously stomach-churning and fascinating.
Shortly thereafter, Faraday announced far more sensible, scaled-back plans, which included building a smaller plant in Las Vegas and shifting much of its production to China. Other than a so-so animated video of the FF 91 “on the road,” however, the company has been fairly quiet in recent months–as quiet as its construction site in Nevada.
More bad news
Faraday Future’s problems aren’t isolated. They also plague Faraday’s parent company, the streaming video and consumer electronics firm called LeEco that Yueting founded and, until recently, led as CEO. Yueting has admitted that he pushed LeEco to spend far too much of its resources on developing costly smartphones and automobiles.
Unfortunately, neither his confession of guilt nor his more sober attitude have solved problems at LeEco or Faraday. With the help of Yueting himself, LeEco retired 15 billion yuan ($2.2 billion U.S.) of debt last year, and there’s still plenty more to go.
The situation has become so bad that the Chinese government has now intervened. This week, a court froze 1.24 billion yuan ($182 million U.S.) worth of assets held by Yueting, his wife, and three of LeEco’s affiliates after LeEco failed to pay interest on loans.
Also this week, the same court froze 519.1 million shares in LeEco’s primary subsidiary, Leshi and suspended trading in the company indefinitely. The shares were valued at $2.3 billion, per the final closing price.
Yueting has pleaded with investors and the public to give him and LeEco more time, promising to pay all debts. (Presumably that includes the monies that suppliers and providers have sued LeEco and Faraday to acquire.) Whether he’ll make good on his promises remains to be seen.