The Fuse

Faraday Future Fights for a Slice of the Electric Vehicle Market

by R. Kress | November 17, 2015

As both new and established automotive companies enter the electric vehicle space with luxury offerings, the headlines are quick to label these products as “Tesla Killers.” The uniquely secretive startup Faraday Future launched its latest salvo with an announcement of its plans to invest $1 billion into a U.S.-based production facility. Contenders for the location of the facility include California, Georgia, Louisiana and Nevada, with the final choice to be announced in the coming weeks. But while much has been made in the media about Faraday Future’s leadership, reportedly composed of a few high-profile former Tesla executives, the company may not be gunning directly for Tesla. Instead, Faraday Future is an early entrant into the EV market that Tony Seba, author of Clean Disruption of Energy and Transportation and lecturer at Stanford University, says is one of many that we can expect to see in the coming five years.

“This is actually a good time to enter [the EV market],” Seba tells the Fuse. “There’s a lot of room to grow and we still have years of market development. I think the tipping point will be closer to 2020. After that, if you hadn’t entered the market by 2018, you may be left behind.”

Seba cautions, however, that while EVs are still in the very early stages of their adoption life cycle, any company entering the space now will still be miles behind Tesla. Furthermore, any new EV company coming to market will have to decide how to position itself relative to Tesla: Will it be cheaper, faster, or more luxurious? Whatever tack Faraday Future chooses may decide its fate.

Perhaps the biggest differentiation between Tesla and Faraday Future to date is each company’s respective approach to secrecy. Tesla is famous for more than its car: CEO Elon Musk has become a household name for his showmanship and unconventional business moves, best exemplified by making all of Tesla’s patents open-source. Faraday Future, however, has yet to publicly announce a CEO and divulge other specifics about its cars other than to say that the company will provide a range of “100-percent electric and intelligent vehicles [that] will offer seamless connectivity to the outside world.” As Seba sees it, this secrecy does not serve Faraday Future, and it does not serve the world of EVs at large.

“There’s no strategic advantage to secrecy,” Seba says. “The more open you are the more you can create an ecosystem of developers and suppliers that can help you increase your market share. That’s why Tesla decided to open their patents: They want people to develop the same types of charging stations, for example, so more EVs can go on the road. We’re in an area where openness is a strategic weapon.”

Despite Faraday Future’s attempts to remain mysterious, Fortune cites anonymous sources reporting that the company is in fact owned by LeTV—a Chinese company that creates an online video product similar to Netflix.

Despite Faraday Future’s attempts to remain mysterious, Fortune cites anonymous sources reporting that the company is in fact owned by LeTV—a Chinese company that creates an online video product similar to Netflix. Fortune also managed to obtain documents showing that the company is incorporated under the name Faraday&Future with a business listing showing Chaoying Deng, a director for a film production affiliate of LeTV, as its Agent for Service of Process. Fortune also unearthed a 2014 report from Colliers showing that the Faraday Future building in Gardena, California was sold for upwards of $13 million to LeTV. Faraday Future did not respond to our request for an interview by press time.

faraday future

Seba believes that the U.S. EV market is a strong investment—and if Faraday Future proves to have Chinese backers, they are making a savvy entrance into the market. He compares the Chinese investment in the EV market to the Asian nation’s past efforts in the solar space where it is now the world’s largest manufacturer of PV panels.

“This is a multi-trillion dollar opportunity just like solar.” Seba says. He went on to explain that Faraday Future’s decision to be based in the U.S. with a $1 billion production facility was just good business.

“To invest in a U.S.-based company and then bring that technology back to China would be huge, because western brands are usually big in China for luxury and automotive,” Seba says. “Western brands—more than Chinese brands—have this patina of quality [in China]. So I wouldn’t be surprised if that’s the reason. But it could just be an investor who sees a big opportunity to do this in the States, period.”

FoxConn, the China-based manufacturer that produces the iPhone, is also developing and building an electric car.

Seba does not see Faraday Future’s decision to bring its manufacturing plant to the U.S. as a reversal of the more typical production flow of building in Asia for consumption in North America. He notes that FoxConn, the China-based manufacturer that produces the iPhone, is also developing and building an electric car. To build and sell an EV in the U.S., however, would be a selling point that could take a company like Faraday Future worldwide. He also notes that electric vehicle construction is largely automated but requires highly-skilled labor to interact with the robotic equipment. With that context in mind, Seba says that Faraday Future’s billion-dollar plan to produce its cars in the U.S. “makes total sense.”

In that sense, Seba argues that electric vehicle manufacturing is more akin to building computers than traditional cars. Many of the necessary parts are readily available for a company like Faraday Future to purchase and assemble. What’s more, an EV only has about 20 moving parts in sharp contrast to the 2000 or even 3000 moving parts that underpin an internal combustion vehicle.

“There are so few moving parts to an EV… that you don’t need to build that big of a supply chain,” Seba says. “You need a battery factory nearby and about 20 moving parts. From a technology perspective, it’s not that hard to put an EV together. At the same time, the incumbents—the Fords, the GMs and the Toyotas of the world—have not taken this market seriously. That’s left a vacuum for a lot of companies to get into this space.”

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