Struggling EV startup Faraday Future gets act two with Nasdaq SPAC debut

Attendees watch Faraday Future’s FF 91 electric crossover prototype after its unveiling at CES 2017 on January 3, 2017 in Las Vegas.

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Faraday Future was to be the ‘next You’re here. “He was going to be a leader in electric vehicles with his revolutionary FF 91 crossover that would usher in a ‘whole new species’ of automobile.

These were some of the claims surrounding California start-up EV during an elaborate unveiling of the FF 91 at the Consumer Electronics Show in January 2017. If all had gone according to plan, the vehicle would have been on the market for several years. , in front of an influx of electric vehicles from emerging start-ups and traditional car manufacturers.

Instead, the exact opposite has happened. The leaders who made these proclamations left Faraday Future; he abandoned a plan for a billion dollar plant in Nevada; and he is yet to build a vehicle. Its founder and CEO, Chinese billionaire Jia “YT” Yueting, also filed for bankruptcy in 2019.

But Faraday Future now has new life – and new capital – thanks to a PSPC deal with Acquisition company of real estate solutions. which provides the beleaguered automaker with $ 1 billion. The company’s shares jumped more than 15% after it began its Nasdaq debut Thursday under the ticker “FFIE.

It’s a new start for Faraday Future, but also a countdown to prove its worth to investors, including starting production and sales of the FF 91 within a year.

“We have been successful in convincing the capital market that it is now a different company, a company that can present a serious business plan,” Faraday Future CEO Carsten Breitfeld said in an interview. . “But now we have to deliver, and that’s absolutely essential.”

Realizing the plans is something new public electric vehicle start-ups have not been able to do. Starting with Nicolas last year, PSPC agreements for the automotive industry exploded, but reality has set in for many companies. The executives’ bold claims have led to federal investigations into electric vehicle start-ups such as Nikola, Canou and Lordstown Engines, which warned investors last month of the potential risks of bankruptcy.

Other electric vehicle start-ups such as Rivian and Lucid, a private company, which is expected to go public soon via a SPAC merger, delayed the production and delivery of their first vehicles.

“Building a vehicle is not that easy to do,” said Stephanie Brinley, senior automotive analyst at IHS Markit. “It’s a very complex and very capital intensive process. Even experienced automakers from time to time run into situations where programs are delayed.”

‘Under promise and no longer deliver’

Breitfeld, a former BMW executive, says the plan he sold to investors is achievable. It includes the start of production of the FF 91 limited edition 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 a simple and unique plan for the next 12 months and that is to get the car to the customers,” he said. “This is what I promised and what I will deliver.”

Breitfeld said he plans to “under-promise and over-deliver” to investors. The company’s production ramp-up is faster than that of Lucid, another luxury electric vehicle start-up, which is set to begin deliveries of its first vehicle, a $ 169,000 sedan called Air “Dream. Edition “, later this year.

Faraday Future’s FF91 electric car on display at the 2017 Consumer Electronic Show (CES) in Las Vegas, Nevada on January 7, 2017.

Frédéric J. Brown | AFP | Getty Images

Faraday Future is expected to build 2,400 vehicles next year, followed by 38,600 units in 2023 and over 300,000 vehicles in 2025. That compares to Lucid at 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 do not include down payments. This is down from the 64,000 bookings reported after the car’s debut in 2017, which were either free or via a $ 5,000 deposit for a “priority booking.”

To look forward

Along with an influx of cash, Faraday Future’s SPAC deal clears up to $ 150 million in debt to its vendors, who will take a stake in the merged company, Breitfield said. The company declined to disclose the percentage of Faraday Future the vendors would hold and the amount of debt that would be written off.

Swapping debt for equity is one of the many things Breitfeld said the company needs to accomplish before it can go public and launch the vehicle. Others included the change in perceptions of the company with media and investors, as well as better execution of its plans and setting up controversies with China and its founder, Jia, behind.

“It’s all behind us,” Breitfeld said in a previous interview in February. “It’s the past and it’s a different business now.”

Faraday Future’s new FF Futurist Experience studio, located at 5 East 59th Street in New York City.

Faraday future

Jia remains with the company as director of products and users, but does not have a stake, according to Breitfeld.

Despite the changes and new funding, Sam Abuelsamid, senior analyst at Guidehouse Insights, believes that Faraday Future still has significant hurdles to overcome in order to be successful. This includes a more competitive market than the company’s initial plans for CES 2017.

“They’re launching with one car, with more in the following years and we’ll see if they can actually put it into production,” he said. “If it does happen, then they enter a much more crowded and more difficult market to compete with someone like Faraday Future who has no track record or, to the extent that they have a track record, it’s very uneven. . “

Breitfeld argues that now is a “better time” to go out again because there is more government support for electric vehicles as well as greater consumer demand. But he knows there are still challenges to get into the market and part with his past and the other speculative companies supported by SPAC.

“I don’t really like this bundling approach because PSPC is basically a tool to go to market,” he said. “Of course, time will show who will really survive and how it will work, but we think we are in a very comfortable and strong position.”

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