After making a splash at the Consumer Electronics Show in 2017 and announcing plans to build a giant new factory in Las Vegas, then virtually disappearing when it ran out of money, the company was revived with a new investment this year, bought a much smaller factory in California, produced several prototypes, and is now collapsing again.
On its way down a seemingly endless financial whirlpool, the company laid off or furloughed the majority of its employees and has launched a legal war against its latest benefactor. Its five founding executives left, and employees launched a GoFundMe page to stay afloat.
Artist’s impression of Faraday Future’s proposed plant in Hanford, California
In what could be the final chapter of Act 2, the company last week sued its largest investor, Hong Kong conglomerate Evergrande in a Los Angeles court claiming that the investment group was intentionally trying to starve the company of cash in a surreptitious takeover bid. A group of Faraday Future employees followed up with a suit claiming “conspiracy” by Evergrande and unfair treatment of the employees, who have an ownership stake in the company.
Together, a report in the Verge suggests, the two lawsuits paint a clearer picture of the financial machinations behind the scenes driving increasingly erratic news from Faraday Future.
The lawsuits hinge on Faraday Future’s CEO and founder, Jia Yueting. Jia, who is widely liked and known informally as “YT” within the company. Jia was placed on a debtor blacklist in China after starting Faraday Future for failing to repay debts incurred at a previous electric-car company’s he started in China, LeEco.
Faraday Future FF91 prototype
The lawsuits note that Evergrande only agreed to invest in Faraday Future on the condition that Jia step down from his position as director of any company related to Faraday Future and give up his controlling shares in a holding company that owns Faraday. Jia agreed to the terms, the Verge suggests, because Evergrande agreed to pay off his prior debts in China, according to the court filings.
While Jia formally met the terms of the agreement, according to the filings, Evergrande reportedly claims he was still acting as a “shadow director” behind the scenes. Based on this, the company reportedly withheld $300 million of financing that it had promised in July.
An Evergrande holding company ultimately owns Faraday Future’s intellectual capital—the designs and engineering and manufacturing specifications for the car. So if the company were forced into bankruptcy, Evergrande would hold the keys to restarting it—which gives rise to the Faraday employees’ “conspiracy” claims. With none of the founding executives still on board, though, it’s unclear whether the vision for the car could be revived.
Faraday Future completes first pre-production FF91 on August 28, 2018
In October, a Hong Kong arbitrator ruled that Faraday could seek additional funding beyond Evergrande’s, and the company has said that its remaining executives are earnestly seeking a new investor.
Among the possible funding avenues is a new cryptocurrency from Dutch blockchain company EVIAO Blockchain, which claimed over the weekend that it is talking to Faraday. Faraday Future would not confirm the report, and some have questioned the report’s credibility.
It’s not clear what the market would be for the $300,000 luxury electric FF91 sedan that Faraday Future is trying to build. At the rate the company encounters crises, we may never know. It is helpful, however, to have a roadmap to what electric car companies may be viable. Faraday Future’s road to market is paved with so many potholes and blind corners that it’s hard to see the destination. Currently, that road winds through the courts. It’s likely to be a long and arduous trip.