Faraday Future Scraps Plans For $1B Plant In North Las Vegas

CARSON CITY, NV — An electric car maker is scrapping plans to build a $1 billion manufacturing plant in North Las Vegas.

Faraday Future's decision Monday was due to a shift in business strategy, said Chief Financial Officer Stefan Krause. The company, which is based in Gardena, California, said in a statement it will look for an existing facility elsewhere in Nevada or in California to build its electric vehicles.

Faraday Future stopped work on the project in November, calling the stoppage a "temporary adjustment" at the time that wouldn't impact plans to begin production in 2018. It sunk more than $120 million into the project. (For more local news, click here to sign up for real-time news alerts. If you have an iPhone, click here to get the free Patch iPhone app.)

"It can be somewhat hard to believe that a company that was so aggressively spending money and moving things forward in their claimed goals will suddenly change direction and still get to where they want to get to," said Karl Brauer, executive publisher at Autotrader and Kelley Blue Book. "You kind of don't know — is this just an adjustment or is there going to be a freefall here?"

He and others who closely watch the industry said the decision comes amid several industry changes that could drastically affect companies like Faraday and Tesla that offer uniquely all-electric lineups. Established car companies are releasing more electric options and it's unclear whether President Donald Trump's administration will continue tax breaks that incentivize the industry and motivate buyers.

"I think the next 12 months are going to be very telling," Brauer said. "It could drastically change the look of the electric car industry."

Thousands of jobs had been anticipated to come with the construction and launch of the proposed plant on a 900-acre site at the Apex Industrial Park.

State Treasurer Dan Schwartz, a critic of the project, faulted state officials for giving false hope that the plant "would magically create 4,500 jobs."

The state pledged $335 million in incentives to the company, but had not yet spent any taxpayer money on the project, according to Steve Hill, director of the Governor's Office of Economic Development.
He said the state, recognizing both the opportunity and risk of the endeavor, required the company to invest at least $1 billion before it received the tax breaks and infrastructure improvements approved by state lawmakers in 2015.

Faraday's announcement came days after reports that a Shanghai court froze more than $180 million in assets belonging to one of the company's biggest backers, tech billionaire Jia Yueting. The company said that Jia's financial problems were not related to the decision.

Jia stepped down last week from the helm of the publicly traded arm of LeEco, the Beijing-based conglomerate he founded over a decade ago. At the same time, he reaffirmed his commitment to Faraday Future.

The company is attempting an exceptionally expensive feat — one that Tesla has not pulled off, Autotrader Executive Analyst Michelle Krebs said.

"Tesla has sold vehicles, but it's not made any money, and that whole segment is not doing particularly well," Krebs said. "You've got an industry that is capital-intensive and you've got an electric vehicle market that is kind of shaky, so those two things probably are at play."

With electric vehicles in particular, she said, there's no sign that there will be a big payoff anytime soon, "there's just never enough cash."

"The history of this industry is littered with grand startups that never came true," Brauer said. "Faraday has all the earmarks of one of those companies that promises you the world but doesn't necessarily deliver it."

By Alison Noon, Associated Press

Photos credit: Jae C. Hong and John Locher, Associated Press