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Faraday Future saved in nick of time

Faraday Future, the much publicized but troubled American EV project of former LeEco promoter Jia Yueting, has been thrown a lifeline by a fresh investment from one of China's largest real estate companies, Evergrande.

See Wiki articles for an overview:
https://en.wikipedia.org/wiki/Faraday_Future
https://en.wikipedia.org/wiki/Jia_Yueting
https://en.wikipedia.org/wiki/Evergrande_Group

There were reports earlier this year that FF has received some funding from an unknown Hong Kong investor. This benefactor, later revealed to be Season Smart Ltd., has entered into a JV agreement with FF to establish a new company "Smart King Ltd." in the Cayman Islands. Season Smart will provide $2 billion and hold 45% of this JV whereas FF owners will hold 33% by way of contribution through intellectual, technical and physical assets they have already acquired or created. Moreover, these assets will be remain vested in Season Smart as a sort of collateral. Effectively, FF's operations will be directed by Smart King Ltd. Although it was being suspected for a while, now it has been confirmed that it is Evergrande that has invested this amount (through its arm Evergrande Health) by acquiring 100% of Season Smart Ltd. Key personnel and directors are being appointed by Evergrande (link).

Forced to give up its ambitious Nevada project due to problems with suppliers and state authorities, Faraday Future has settled on an old Pirelli site in Hanford, California, for its new plant. Reconstruction has begun recently at this site.

A few months ago, Ruichi Smart Car (Guangzhou) Co., Ltd., owned by an affiliate company Smart Mobility (HK) Holdings Ltd., bid for and acquired a plot of land for $57 million in Nansha District, Guangzhou, to set up a future car plant and R&D center. This generated controversy, as Jia Yueting had been declared a defaulter with his Chinese assets frozen by the courts.
 

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Ff

Two more things have emerged after yesterday's revelation.

Smart King had been set up as far back as November 30, 2017. So, negotiations between FF and Season Smart had begun even before then, likely about a year ago.

Jia Yueting, with his core team, has been given almost unrestricted powers in running the company (Smart King) for the time being. Jia Yueting has received 10 voting rights per share, whereas Season Smart has 1 voting right per share. Also, Jia Yueting needs to appoint 5 out of 7 directors to the Smart King board and Season Smart has appointed two. So, even with a smaller shareholding, Jia Yueting can operate the company his own way; however, this concession is valid only till the end of this year. The precondition is that Jia Yueting and his team should begin mass production by the end of 2018. If this performance criterion is not achieved, these special rights shall lapse and control will revert to Season Smart from 2019.

Analysts suspect that Evergrande is playing the waiting game and is almost certain the FF team cannot start mass production by end-2018 (one only needs to look at Tesla's long history of production start-up debacles as a precedent), so is confident of regaining control by next year. In 2019 and 2020, Evergrande will have to pay out two tranches of $600 million to Smart King, and it is evident that Evergrande would like to see the project proceed and flourish under its guidance as its own money would be on the line.
 

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Re: LeEco LeSEE EV

https://www.reuters.com/article/eve...e-sets-up-headquarters-in-china-idUSL4N1V54L0

Evergrande Health says Faraday Future sets up headquarters in China

HONG KONG, Aug 14 (Reuters) - Evergrande Health Industry Group Ltd, which owns a 45 percent stake in U.S.-based Faraday Future (FF), said the new-energy vehicle startup has set up its operating headquarters in China on Tuesday and it plans to build five R&D and production bases across the country in the next decade.

FF aims to reach a planned annual production capacity of 5 million vehicles after 10 years as it will launch various multi-type vehicle series covering high- to low-end products in the global market to establish internet-based smart travelling, the company said in a statement.

Evergrande Health, a subsidiary of property developer China Evergrande Group, bought 45 percent of FF in June as part of the group’s diversification into high-tech sectors.

The new headquarters, called Evergrande FF Intelligent Automotive (China) Co., Ltd, will be responsible for technology research and development, as well as all of the production, operation and management of FF in China.

Evergrande Health said FF’s first high-end vehicle, FF91, has arrived at its production base in the United States and full-vehicle assembly has officially started.

FF was founded by Chinese entrepreneur Jia Yueting, whose conglomerate LeEco is battling a cash crunch after a period of rapid expansion, in a bid to overtake Tesla. (Reporting by Clare Jim; Editing by David Evans)
 

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Re: LeEco LeSEE EV

What?....
A production target of five million???
That is at the level of what Honda or FCA currently produces annually, and here we are talking of new energy vehicles, where R&D itself devours billions even for modest-sized startups (Xiaopeng, WM, etc), leave alone the manufacturing and marketing aspects of the business.

JLR committed about $18 bn recently, and that is only for moving most of their vehicles in the pipeline to new energy platforms over the next five or so years. They are not even talking of any huge increase in capacity (apart from the opening of their Slovakia plant for which ~$1.8 bn has already been sunk, and some upgradation of their Brazil plant, not part of the above spend)

VAG recently approved a $40 bn expenditure plan, part of an $82 bn war chest earmarked for investments in electric vehicle capacity and projects, and this is a manufacturer that already builds 10 million vehicles per year.
 

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Jia Yueting and Evergrande ructions

I didn't quite get the full import of the article (maybe because of translation), but it seems that trouble is already brewing between Jia and his white knight savior Evergrande group, with the former trying to pull off some underhanded tactics to undermine the latter out of a fear of losing control over FF.

I will be happy to be proven wrong.

http://news.bitauto.com/zonghexinwen/20181007/2108467711.html
 

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Faraday Future

Although FF received some breathing space by virtue of an interim award from the Hong Kong International Arbitration Centre, wherein FF could raise some emergency funds from outside financiers to stave off an impending crisis (Jia is spinning this as a "decisive victory" for his side) the award comes with a host of conditions. Evergrande, as largest shareholder, has first rights of refusal on any shares issued in lieu of this new financing. A floor has also been set on the valuation of shares issued or pledged to third-party financiers, and no more than $500 million can be raised for now (which FF's operations are likely eat up within a few weeks!). There have also been pay cuts, arrears, and layoffs. Moreover, going forward, FF cannot escape the oversight/consent of Evergrande in financing matters.

Things will be getting messier as Evergrande is gearing up for more legal battles against the FF core management. Also, Jia has only till the end of Q1/2019 (03-31-19) to demonstrably accomplish certain milestones in production ramp-up (start of trial production, trial batches, tooling calibration, process and spec validation, SOP/line-off, pilot batches, etc.).

https://www.yicaiglobal.com/news/faraday-future-evergrande-both-claim-win-hong-kong-arbitration
 
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