Embattled Faraday Future Sets Up Car Sales Unit in Zhuhai

A new-energy vehicle venture with links to U.S. electric-car startup Faraday Future and its fugitive founder Jia Yueting was registered in Zhuhai, sparking speculation that the cash-strapped carmaker is making a new attempt at targeting the China market.

FF Automobile Zhuhai Co. Ltd., wholly owned by FF Hong Kong Holding Ltd., was set up in the southern city of Zhuhai in Guangdong province with registered capital of $250 million, corporate registration records showed. FF Hong Kong also owns 95% of FF China, Faraday’s Beijing-based unit registered in 2017.

Jia Chentao, a supervisor of LeEco Eco-Auto Zhejiang and the legal representative of FF Hong Kong, was registered as the legal representative of FF Automobile Zhuhai, public records showed. The new company’s business covers new-energy vehicle sales, auto parts development, and research, auto rental and artificial intelligence system-related services.

Beeplus, a co-working space service provider in Zhuhai, confirmed that FF Automobile Zhuhai rented office space in the Hengqin new district.

Analysts said the new Zhuhai venture signals Faraday’s intention to enter the China market. Faraday didn’t respond to Caixin questions about the new company. A local official said there is no information about Faraday’s project in Zhuhai.

The formation of the new Zhuhai venture came as Los Angeles-based Faraday scrambled to achieve mass production of its first car model, a plan that has been repeatedly delayed by a cash crunch and debt woes of company founder Jia.

Faraday said in December that it was getting closer to starting mass production of the FF91 electric sport-utility vehicle, about two months after the company secured a bridge loan of $45 million from Chicago-based merchant bank Birch Lake and New York-based private equity firm ATW Partners.

Faraday once planned to build a $1 billion factory in Las Vegas to produce the FF91. It canceled those plans in 2017 in favor of leasing a smaller, existing factory in Hanford, California, where tire company Pirelli used to operate.

It will be a challenge for Faraday to tap China’s new-energy vehicle (NEV) market as regulators toughened market entry rules to curb excessive investment. According to a 2018 policy, investors, both domestic and foreign, are required to have a sales record of more than 30,000 electric passenger cars, or 3,000 electric commercial vehicles, or equivalent sales of 3 billion yuan ($435 million) over the previous two years before being granted a permit for NEV production.

Faraday was established in 2014 as part of Jia’s ambition to build electric cars in China and the U.S. to challenge Tesla. However, heavy investments in the car project drained up the capital of Jia’s tech conglomerate LeEco and created a massive debt overhang for the company and himself. Jia fled China to the U.S. to develop Faraday and has not returned since the summer of 2017, leaving behind 11.9 billion yuan ($1.8 billion) of debts. He was blacklisted as a debt defaulter by a Chinese court.

While Jia’s businesses in China collapsed, the Faraday project also encountered a capital crunch and failed to start production as planned. In late 2017, Chinese real estate giant Evergrande Group agreed to buy 45% of Faraday to provide a $2 billion lifeline to the company. But the deal collapsed after the two parties fell into a months-long dispute over business control.

As Faraday sought to line up new funding, Jia’s personal debt issues became a major obstacle. In September 2019, Jia stepped down as Faraday’s chairman and CEO to distance the company from the debt disputes. Jia remained as the company’s chief product and user officer.

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How LeEco Fell From Glory

In October 2019, Jia filed for Chapter 11 bankruptcy in the U.S. state of Delaware. He listed personal net debt of around $2 billion claimed by 154 creditors, according to court filings. The bankruptcy proceeding was completed in May, under which a creditor trust was established with his equity interests and earning rights in Faraday to compensate creditors, mainly Chinese institutions. Jia no longer held any stake in Faraday.

Faraday said it was more than 50% owned by employees and partners after Jia’s bankruptcy. The company has pledged to continue pushing forward production and working on new funding.

In October, Faraday was reported to seek a public listing in the U.S. by merging with a special-purchase acquisition company (SPAC). The carmaker’s CEO Carsten Breitfeld told Reuters that the company was working on a reverse merger deal with a SPAC and “will be able to announce something hopefully quite soon.”

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

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