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article imageFinancial woes lead to scrapping of $1 Billion electric car plant

By Karen Graham     Jul 12, 2017 in Business
Las Vegas - In a move that experts say could spell trouble for the company and the broader electric car industry, Faraday Future is abandoning its plan to construct a $1.0 billion electric car mega-factory in Nevada.
American start-up company Faraday Future was established in 2014, with its focus on developing intelligent electric vehicles. The Los Angeles, California -based company was said to be building an electric car that would rival Elon Musk's Tesla.
The company's financial partners are LeEco, a Chinese consumer electronics company, led by entrepreneur Jia Yueting. In early 2015, Faraday announced they were going to invest $1.0 billion into a manufacturing facility, and after considering several locations, on December 2015, they settled on a location in North Las Vegas for its manufacturing site.
Construction of the mega-factory started in April of 2016, however, even then, Faraday's finances were in question. At the beginning of the construction phase, additional required infrastructure which Nevada has formally agreed to build was held up pending verification of Faraday's financial soundness and its ability to raise the money to finance the entire project.
Faraday Future s head of design  Richard Kim.
Faraday Future's head of design, Richard Kim.
Faraday Future
Construction on the project was halted in November 2016, with the company claiming the stoppage was a "temporary adjustment." And on July 10, the company announced it was abandoning the North Las Vegas project. Faraday Future Chief Financial Officer Stefan Krause said on Monday the move was due to a "shift in business strategy," according to ABC News.
Financial woes surface early
In January 2017, Faraday Future’s senior vice president of research and design, Nick Sampson, spoke with the BBC, acknowledging the company was "facing challenges." Referring to the glitzy Consumer Electronics Show (CES) press event, Sampson admitted, "Clearly something like [CES] requires funding and some resources."
"We are resource-limited at times. [It's] just a matter of keeping the cash flow balance between the different projects we’re trying to do. Things like [CES] have to take priority at this point in time. We’ll be starting again [on the factory] very shortly," he said. And the CES press event was quite a show, taking place away from the famous Las Vegas strip, even being attended by the mayor of North Las Vegas, John Lee.
Throngs of people come over to CES every year
Throngs of people come over to CES every year
Wikimedia Commons
One point of contention with a lot of people was the $230 million in taxpayer's money the company received. But it gets worse. Futuris, a company which specializes in luxury car interiors, has sued Faraday for breach of contract, demanding a payment of over $10 million immediately.
Growing too fast with too many irons in the fire
Faraday Future is just one part of a group of young EV firms in the United States and China that are backed by LeEco. LeEco started out 13 years ago as a Netflix-like video company that grew by leaps and bounds into a business empire that spans consumer electronics to electric cars.
According to the UK's Daily Mail, LeEco is now facing a severe cash shortage after expanding too fast and in too many directions. And for LeEco, this latest scrapped project marks the second setback in its goal of becoming a major EV manufacturer. It recently pulled out of a deal with British sports car maker Aston Martin to develop the RapidE electric car.
More about faraday future, Nevada, Electric car, assets frozen, Tesla rival