Backer Clouds Outlook for Faraday Future EV Startup

The outlook for California-based electric-car startup Faraday Future Inc. is uncertain after its backer, the chairman of media giant Leshi Internet Information & Technology Corp., told shareholders the company has overexpanded and is running out of cash.

Jia Yueting concedes in a lengthy letter that the company has over-expanded and is running out of cash, thereby clouding the future of its California-based Faraday Future Inc. electric-car startup. The company is best-known for its LeEco video streaming service. In July Leshi it spent $2 billion to buy U.S. television maker Vizio Inc.

In a letter to shareholders, Jia concedes the company “sped ahead, and our cash demand ballooned,” Bloomberg News reports. The news service says Jia has bankrolled his company’s aggressive expansion primarily by borrowing against his own shares in Leshi.

Acknowledging the company has little ability to raise funds externally, says Jia has slashed his salary to one yuan (15 cents) and vows to slow the company’s growth rate.

Jia specifically points to Faraday Future as an example of the company’s overspending. He says the unit has already spent 10 billion yuan ($1.5 billion) on initial product development. Faraday, which rounded up more than $1 billion from Chinese investors, declared less than a year ago it intends to open a $1 billion EV factory in Nevada next year.

But the state of Nevada has balked at its agreement to provide Faraday with $215 million in tax breaks and support for the factory’s water, power lines and roads until Leshi invests more in the project. In February Nevada demanded $75 million in collateral before beginning any infrastructure improvements. The state also set up a trust fund to recover tax abatements until the plant investment actually reached $1 billion.