Tesla’s Biggest Competitor Is On The Brink Of Complete Collapse
The electric vehicle company created to compete with Tesla Motors is in dire financial straits, according to an investigation by tech media outlet, The Verge.
Silicon Valley startup Faraday Future’s (FF) financial situation is dire amid mounting debts, unpaid bills, lawsuits, and financial mismanagement, The Verge reports. The report suggests the company is having a terrible time keeping up with its money-bleeding competitor.
The outlet’s reports are based on interviews with former employees and executives who say money from the company’s biggest backer, a Chinese billionaire named Jia Yueting, has all but dried up. They also claim FF’s intellectual property (IP) is owned by a group called FF Cayman Global, a revelation that could potentially destroy FF’s relationship with investors.
The interviews reveal a culture at FF where the company’s vice president and public face, Nick Sampson, crafting grand, but vague, visions about how the company will liberate customers from old outdated fossil fuel-powered technology.
Sampson assured reporters in January that FF’s first electric vehicle 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 renewable energy companies.
Elon Musk, who chairs both Tesla and solar panel provider SolarCity, has 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 FF will not go into direct competition with Tesla, despite the new up-start’s pilfering employees from government-subsidized Tesla.
But the similarities between the two companies are striking, starting with their marketing styles and going on into their executive boards — FF’s executive board is a who’s-who of Tesla castoffs and various California techies.
Faraday Future unveiled a crazy-looking concept car instead of the production-ready electric vehicle it had promised at an auto-confab earlier this year, casting a pall of goofiness of the company’s mission. Construction on FF’s Nevada factory has been delayed.
Critics have made similar complaints about Tesla’s vehicles. Consumer Reports, for instance, blasted Tesla’s Model X in November, calling the “flawed” futuristic-looking vehicle overly complex. It also suggested the vehicle’s Falcon doors were stylistic but not functional.
The missteps have not gone unnoticed by the FF’s insiders. Anonymous ex-executives with the company tell Verge investors should be alarmed, because FF is going down in flames.
Former employees told The Verge that FF is a combination of two companies, with one located in the Cayman Islands involved specifically to own the company’s intellectual property.
“If you’re an investor, you’re fucked,” one anonymous ex-executive told the outlet. “The company doesn’t own the IP.”
Fortunately for FF, Tesla’s business model and financial standings have also been scrutinized by analysts.
Devonshire Research Group (DRG), an investment firm, shorted Tesla’s stock in May after issuing a report stating the company’s financial model is a kind of “Ponzi scheme” strikingly similar to the one created by “Enron.”
The company’s “financing model is fragile,” DRG said about the company’s increasingly complex business model. “It is attempting to manage multiple financial instrument models under the same accounting umbrella — to our knowledge, one of the last companies to attempt this level of financial innovation was Enron.”
Tesla merged with SolarCity in November, partly to prop up the latter’s sagging financials.
One minor “misstep in the next two years,” the group added at the time, “risks entering a death spiral.”
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