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New Electric Car Startup Looks To Capitalize On Tesla’s Stock Tumble

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Chris White Tech Reporter
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The auto industry’s newest electric car start-up looks to make a move on Elon Musk’s Tesla Motors, which saw its stock take a tumble on Monday.

Faraday unveiled its not yet built concept car — the FFZero1 — at the Consumer Electronics Show in Las Vegas on Monday — the all-electric vehicle, according to Faraday, will deliver its 1,000 horsepower luxury electric car to consumers in the market for Tesla-like alternatives to fossil fuels.

Faraday’s senior vice president of research and development, Nick Sampson, told Reuters earlier this week that the market’s newest EV will be a luxury car, much like Tesla’s Model S, and will be built in a $1 billion manufacturing facility in Nevada, a state known for dolling out subsidies to EC companies.

Musk’s ventures have received nearly $5 billion dollars in public subsidies over the years, with more than $1.2 billion from the Nevada legislature. Sampson has given assurances that Faraday will not go into direct competition with Tesla, despite the new up-start’s pilfering employees from Musk’s government-subsidized Tesla.

The timing of the unveiling of the FFZero1 is telling, considering Tesla’s recent stock dump.

The 13-year-old electric car company’s stock took a hit on Monday, after shares of the electric automaker tumbled by 8 percent after the day’s trading. Tesla reported a smaller than expected delivery total — 50,580 vehicles — over the past year. That number was revised down from 55,000 after last year.

It’s stocks closed the end of the year above $240, but stumbled on the first day of trading in 2016, falling to $223.

Driving the downturn, insiders believe, were the slagging numbers of Tesla’s first SUV, the Model X, which saw only 208 deliveries since October. The startup’s misfortunes could have been worse, however, as analysts doubted Tesla’s ability to reach 17,000 vehicles.

One positive outcome for Tesla Motors was the uptick in its Model S deliveries, which pitched upward by 75 percent from last year. Company officials initially intended on shipping 55,000 cars out this year, the Model S and Model X included.

But even with the positive Model S numbers, the company’ officials soon realized they needed to revise down their original number to 50,000 after noticing in August that they were spreading themselves too thin trying to build both models.

Perhaps the reason for the inconsistent sales, analysts believe, is the basic structure of Tesla’s vehicle distribution scheme. Musk set up the country’s first widespread all-electric car company to sell cars directly to customers, meaning he had to essentially mass distribute his Models S and Model X vehicles without the help of franchise dealerships.

Sampson envisions a similar plan for the FFZero1, wherein Faraday Future vehicles will be sold directly to owners.

“Initially they’ll be sold to owners, but we also see the changing landscape in the industry, there are far more people that will want just mobility in the future,” he said.

Faraday is financially backed by billionaire Chinese Jia Yueting, and is part of a slew of Chinese-backed electric car companies itching to make a name for themselves in the Elon Musk-dominated electric car market.

Yueting, the founder of smart TV maker and consumer electronics LeTV (300104.SZ), as well as Leshi Internet Information & Technology Co., could face the same headwinds that have plagued Musk’s distribution efforts: crafting tech-heavy cars that can’t be mass-produced.

“Nobody has ever been successful with company stores, though plenty of manufacturers have tried them,” Bob Lutz, former vice chairman for GM, wrote in October. “When I came to BMW in the Seventies, it had five factory stores,” Lutz continued.

He added: “The idea was, like Tesla, to be in control of the retail environment and give customers an upscale experience. They were all money pits.”

“They just can’t be a mainstream electric-car company,” Edmunds.com senior analyst Jessica Caldwell said.

She added: “They tried to do something different,” but it hasn’t worked as intended primarily because they focus on designs, not production.

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