Attendees will see the prototype of Faraday Future’s FF 91 electric crossover vehicle after it was unveiled at CES 2017 in Las Vegas on January 3, 2017.
Faraday Future should be the “next Tesla”. It would lead the way in electric vehicles with its groundbreaking FF 91 crossover, which would usher in an “entirely new breed” of automobiles.
Those were some of the claims made by the Californian EV start-up during an elaborate unveiling of the FF 91 at the Consumer Electronics Show in January 2017. If everything had gone according to plan, the vehicle would have been on the market for several years. against an influx of electric vehicles from emerging startups and traditional automakers.
Instead, the opposite happened. The executives who made these proclamations left Faraday Future; there was a plan for a $ 1 billion factory in Nevada; and a vehicle has yet to be built. The founder and CEO, the Chinese billionaire Jia “YT” Yueting, also filed for bankruptcy in 2019.
But Faraday Future now has new life – and capital – thanks to a SPAC deal with Property Solutions Acquisition Corp., which will provide $ 1 billion to the competitive automaker. The company’s shares soared more than 15% after debuting Thursday on the Nasdaq under the ticker FFIE.
It’s a fresh start for Faraday Future, but also a countdown to prove itself to investors, including starting production and sales of the FF 91 within a year.
“We were able to convince the capital market that this is now a different company, a company that can deliver a serious business plan,” said Carsten Breitfeld, CEO of Faraday Future, in an interview. “But now we have to deliver and that is absolutely crucial.”
Executing the plans is something that new public EV startups couldn’t do. Starting with Nikola last year, automotive SPAC deals exploded, but reality has arrived for many companies. Bold claims by executives have sparked a federal investigation into EV startups like Nikola, Canoo and Lordstown Motors, which last month warned investors of possible bankruptcy concerns.
Other privately owned EV startups like Rivian and Lucid, slated to go public soon via a SPAC merger, have delayed production and delivery of their first vehicles.
“Building a vehicle is not that easy,” said Stephanie Brinley, IHS Markit’s senior automotive analyst. “It’s a very complex process and very capital-intensive. Even seasoned automakers get into situations where programs are delayed from time to time.”
‘Under Promise and Deliver’
Breitfeld, a former BMW executive, said the plan he sold to investors was feasible. It includes starting production of the limited-edition FF 91 for $ 180,000 over the next 12 months, followed by cheaper models and other electric vehicles in the months and years to come.
“There is one simple, single plan for the next 12 months and that is to get the car to the customers,” he said. “It is what I promised and what I will deliver.”
Breitfeld said he plans to “over-promise and over-deliver” to investors. The company’s production ramp-up is faster than that of the other luxury EV startup, Lucid, which is expected to begin shipping its first vehicle – a $ 169,000 sedan called the Air “Dream Edition” – later this year.
The Faraday Future FF91 electric car on display at the Consumer Electronic Show (CES) 2017 in Las Vegas, Nevada on January 7, 2017.
Frederic J. Brown | AFP | Getty Images
Faraday Future is projected to build 2,400 vehicles in the next year, followed by 38,600 units in 2023 and more than 300,000 vehicles in 2025. Compared to Lucid with 20,000 next year and 135,000 vehicles by 2025.
Faraday has a near-completed plant in California capable of producing up to 30,000 vehicles per year. It also has plans for manufacturing partnerships in South Korea and China.
Breitfeld said the company has more than 14,000 reservations for the FF 91, but many of them don’t include down payments. That’s less than 64,000 reservations since the car debuted in 2017 that were free or via a $ 5,000 deposit for a “priority reservation”.
Look to the future
Aside from a cash inflow, Faraday Future’s SPAC deal will help pay off up to $ 150 million in debt to suppliers who will participate in the post-merger company, Breitfield said. The company declined to disclose what percentage of Faraday Future the suppliers hold and how much debt is being paid off.
The debt-to-equity swap is one of several things the company must complete before it can go public and bring the vehicle to market, according to Breitfeld. Others included changing media and investor perception of the company, better executing its plans, and moving beyond controversy with China and its founder, Jia.
“That is all behind us,” said Breitfeld in an earlier interview in February. “This is the past and this is a different company now.”
Faraday Future’s newly created FF Futurist Experience studio is located on 5 East 59th Street in New York City.
Jia will remain with the company as Chief Product and User Officer, but, according to Breitfeld, has no stake.
Despite the changes and the new funding, Sam Abuelsamid, senior analyst at Guidehouse Insights believes that Faraday Future still has significant hurdles to being successful. One obstacle is a more competitive marketplace than the company’s original plans from CES 2017.
“They start with just one car, with others in the years to come, and we’ll see if they can actually get it into production,” he said. “When it comes down to it, they enter a much denser and tougher market to compete for someone like Faraday Future who has no track record or, if they have a track record, is very spotty.”
Breitfeld argues that now is a “better time” to start up, as there is more government support for electric vehicles and higher consumer demand. But he knows there are still challenges to get to market and part with his previous and other speculative SPAC-backed companies.
“I don’t like this grouping approach that much because SPAC is essentially a go-to-market tool,” he said. “Of course, time will tell who will really survive and how that will work, but we feel in a very comfortable and strong position.”