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Chinese Tesla challenger hits funding snag
[HONG KONG] After China's third-richest man backed entrepreneur Jia Yueting's electric-vehicle startup with a US$2 billion funding pledge, the wheels finally started turning at its plant in Hanford, California.
The once-abandoned factory came to life three years after Faraday Future executives visited the farm town to scout the location. Between plant visits from a state senator and local officials, Mr Jia started building his team. He hired plant workers, Tesla Inc's former head of intellectual property and litigation, and even the city's former mayor.
"Vehicles are being assembled as I type!" Hanford's city manager, Darrel Pyle, said in August.
The zest didn't last long, as the new backer for the Chinese challenger to Tesla is now pumping the brakes. In an Oct 7 filing, billionaire Hui Ka Yan's Evergrande Health said it engaged lawyers to defend the company's interests after Mr Jia began arbitration on Oct 3 at the Hong Kong International Arbitration Centre. Mr Jia's company alleges that following Evergrande Health's initial US$800 million investment, it failed to inject additional funds into the business after Mr Jia fulfilled the required conditions, according to a statement posted on Faraday's Twitter account.
Faraday wants to scrap the deal because Evergrande not only is withholding payments in a bid to allegedly get Faraday's intellectual property, but it's also preventing Faraday from accepting immediate financing from other sources, the Twitter posting said. Evergrande Health denied the claim.
The dispute raises more questions about Faraday's financial footing just as the startup prepares to bring out its first model after years of work. Additional delays could result in Faraday falling behind a slew of Chinese rivals, including NIO Inc, that already are selling EVs, and others, such as Xpeng Motors Technology Ltd, that are nearing their launches.
The spat also represents another setback for Mr Jia, whose Shenzhen-listed flagship Leshi Internet Information & Technology Corp lost US$22 billion in market capitalisation from its 2015 peak after regulators temporarily suspended trading and ordered him to return home and repay outstanding obligations. The company now is valued at about US$2.1 billion.
In response to questions sent Oct 4, John Schilling, a spokesman for Faraday, said the company was set to begin deliveries in the first half of 2019 for the first road versions of its FF91 model.
Mr Schilling didn't respond to requests for comments on the arbitration involving Evergrande Health.
Shares of Evergrande Health rose 0.1 per cent at 10am in Hong Kong after dropping 16 per cent on Monday. The company, part of Mr Hui's China Evergrande Group, runs "high-end international hospitals, community health services and health management services", according to its website. Its Healthy Land project is an experiment to bring healthcare services to seniors in large real-estate developments.
Mr Hui - who sits atop a US$30 billion fortune, according to the Bloomberg Billionaires Index - has been diversifying his empire away from the property market. Last month, his group announced a US$2.1 billion investment in Guanghui Group, an owner of BMW dealerships.
Evergrande Health said in a June filing that Faraday has 1,400 global employees, as well as research-and-development centers in Beijing and Shanghai. Its plans for R&D and production bases in cities such as Guangzhou are aimed at bringing "advanced new energy automotive technology to take root in" China, according to the filing.
After the deal was announced, Mr Jia met California state senator Andy Vidak at the Hanford plant, according to the Hanford Sentinel newspaper. In September, Mr Pyle welcomed new workers at the facility, which the company has said will employ 1,000 people by the end of 2019.
That month, Faraday appointed Jeff Risher, former head of intellectual property and litigation at Tesla, as vice-president of product, technology and IP strategy. On Oct 3, the company said it hired John Lehn, a former mayor of Hanford, as director of government affairs.