Faraday Future backer LeEco is running out of cash, CEO admits


LeEco LeSee concept, 2016 Beijing Auto Show

LeEco LeSee concept, 2016 Beijing Auto Show

Faraday Future plans to put an electric car into production within two years at a brand-new factory with a stated price tag of $1 billion.

So far, this ambitious plan has had the backing of Chinese billionaire Jia Yueting, and his LeEco tech empire.

But now LeEco may be running out of cash.

DON'T MISS: Faraday Future imperils electric-car factory, misses payment to contractor

In a letter to employees, Jia admitted that LeEco has overextended itself, and said he would cut his own salary to help save money, according to Bloomberg.

"We blindly sped ahead, and our cash demand ballooned," Jia said in the letter, referring to the company's automotive programs and other recent expansions.

In the letter, Jia said LeEco's automotive division has already spent 10 billion yuan ($1.475 billion).

LeEco’s U.S. headquarters in San Jose, California

LeEco’s U.S. headquarters in San Jose, California

Some of this money has gone to Faraday Future, which plans to unveil its first production electric car at CES in January.

LeEco also showed its own electric concept car—called the LeSee—at the 2016 Beijing Motor Show, and has a partnership with Aston Martin separate from Faraday.

In addition to its automotive programs, LeEco recently launched its phone and television lines in the U.S.

ALSO SEE: Faraday Future's backer shows another electric luxury sedan

It also promised $2 billion to acquire California-based electronics company Vizio.

Much of the funding for these projects is based on loans acquired by pledging LeEco stock as collateral.

But stock prices have been on the decline, dropping almost a third since the start of 2016.

At the groundbreaking for Faraday Future's production facility in North Las Vegas (April 13, 2016)

At the groundbreaking for Faraday Future's production facility in North Las Vegas (April 13, 2016)

The stability of LeEco has already led to questions from Nevada treasurer Dan Schwartz regarding the company's ability to fund Faraday Future's factory, which will be located in North Las Vegas.

Earlier this year Schwartz asked for greater transparency in LeEco's funding before signing off on a $120 million state contribution for the necessary roads, power lines, and water mains to supply the plant.

MORE: Faraday Future vs Nevada treasurer: electric cars vs taxpayer protection

In March, Faraday put up a $75 million bond, and set aside $13 million in an escrow account, in an attempt to reassure the state that it could meet its financial obligations.

Faraday itself has had some more recent financial issues as well.

Last month AECOM—the lead contractor on the factory—sent a letter to Faraday stating the carmaker was late on a $21 million deposit for an escrow account to cover material costs and subcontractor work.

_______________________________________________

Follow GreenCarReports on Facebook and Twitter

 
Follow Us

Take Us With You!

 


 
© 2018 MH Sub I, LLC dba Green Car Reports. All Rights Reserved. Stock photography by izmostock. Read our Cookie Policy.