Faraday Future, the California start-up electric carmaker financed by Chinese billionaire Jia Yueting, has ambitions — really, really big ambitions.
First, it wants to beat Tesla Motors in electric cars, and second, to accomplish that, it wants to build a $1 billion auto plant in North Las Vegas, about 400 miles south of Tesla’s giant Nevada battery factory.
The secretive company’s route to this success so far includes hiring top people from Ferrari, BMW and others, unveiling a 1,000 horsepower electric race car concept and winning the backing of Nevada’s governor to build the factory.
Of course with factories comes state subsidies and tax breaks, and that’s where the rub comes in.
Dan Schwartz, Nevada’s treasurer, is questioning the company’s ability to secure financing for the plant, a project that needs government support for power lines, water mains and roads, as well as employee training programs.
His concern, on behalf of Nevada’s taxpayers, is that Chinese tech entrepreneur Jia’s holdings in Leshi Internet Information & Technology Company largely rely on equity-backed loans.
Jia has pledged 87 percent of his holdings in Leshi— his flagship firm — for cash that he then plowed back into his companies, which are largely pledged to back loans to build the plant.
Schwartz believes that this financing strategy could leave Nevada taxpayers vulnerable to the up and down swings of China’s volatile stock market.
Leshi’s stock was halted on the Shenzhen market last December, and has dropped 11 percent since trading resumed on June 3, a move that increases Schwartz’s fear that a margin call could prevent Jia from funding the plant.
“You can see where this leads,” Schwartz said in a phone interview with Bloomberg News. “His Internet company is successful, but that doesn’t generate the billions of dollars he’d need. Where’s he going to get the money?’’
For Schwartz, Jia and Faraday Future need to explain clearly how they plan to provide stable financing to pay for the factory.
His concern is the state’s significant incentives consisting of $215 million in tax credits and abatements, and $120 million worth of publicly financed infrastructure improvements.
Only when Faraday Future provides accurate financial due diligence will Schwartz support a state debt sale to fund the plant’s infrastructure.
Until then, the roadblock is still in place.