Leading Chinese carmaker Geely and a clutch of state-owned companies from Zhuhai have joined hands to bail out embattled electric vehicle maker Faraday Future (FF), founded by failed Chinese tycoon Jia Yueting.
Some 30 institutional investors from China, US and Europe and a trust are investing US$1 billion in the carmaker, following which FF will be valued at about US$3.4 billion and become a public company.
FF and Property Solutions Acquisition Corp (PSAC), a special purpose acquisition company or SPAC, announced on Thursday that they would merge into one entity in a deal that will fund the production of FF91, a luxury electric car FF unveiled in 2017.
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The two companies did not reveal the names of the investors, but Zhejiang Geely Holding Group controlled by Chinese billionaire Li Shufu is among the anchor investors in the so-called PIPE (private investment in public equity), sources with knowledge of the deal said.
Hangzhou-based Geely did not respond to queries on Thursday.
The statement did, however, mention that a top three Chinese OEM (original equipment manufacturer) was among the anchor investors.
“Faraday Future is a unique and differentiated electric vehicle company with significant growth prospects for the future,” said Property Solutions co-CEO and chairman Jordan Vogel. “We believe the excellent management team, led by Dr Carsten Breitfeld, and industry-leading technology will allow Faraday Future to reach its true growth potential.”
SPACs refer to shell companies that raise funds in an initial public offering with the aim of buying a private company. For the company being acquired, the merger is an alternative way to go public over a traditional IPO.
Sources said that home appliance giant Zhuhai Gree Group and real estate developer Zhuhai Huafa Group, two major state-owned companies controlled by the government of Zhuhai in Guangdong province, are also among the investors.
Shanghai-listed Zhuhai Huafa Industrial, a unit of Huafa Group, said on Wednesday that its parent was in talks with relevant parties about investments in FF, but the publicly traded subsidiary was not involved.
The deal adds to evidence that China’s local governments are upping the ante on the future of mobility amid rosy forecasts for rising penetration of green vehicles in the world’s largest car market.
Last April, the government of Hefei, said it would invest 7 billion yuan (US$1.1 billion) to build plants with start-up and Tesla rival NIO in the capital city of Anhui province in eastern China. In September, WM Motor, another Chinese EV start-up, raised 10 billion yuan in series D funding, which was led by a Shanghai-based, state-owned investor group that included SAIC Motor.
The investments by local governments were aimed at eventually creating an industrial chain with big economic scale, analysts said.
“Local governments in China have faith in the EV sector now,” said Cao Hua, a partner at the private equity firm Unity Asset Management. “They believe the industry will grow fast in the coming decade and effectively prop the local economies with establishment of a complete supply chain.”
Under Beijing’s “Made in China 2025” industrial master plan, 20 per cent of all new cars hitting the streets by 2025 would be new-energy vehicles. That would translate into more than four million such new cars on the road by then.
Deliveries of green cars are expected to account for a fifth of the total vehicle market by 2025, up from 6 per cent last year, analysts said.
FF will join the fray against Tesla and Chinese upstart rivals – NIO, Li Auto and Xpeng, which are developing smart EVs featuring digital connectivity and driver assistant systems based on sophisticated sensing equipment and 5G technologies.
The Los Angeles-based start-up was founded in 2014 by Jia with ambitions of challenging Elon Musk’s Tesla. It aimed to launch the FF91 in 2019, expected to be sold at US$200,000, but delayed production plans multiple times because of a series of financing issues.
Two sources with knowledge of the FF deal said that it would be a risky move to invest in the company given its financial squeeze and slow progress in developing new models.
Jia, also founder of streaming company LeEco, stepped down as CEO of FF in 2019 and finalised his personal bankruptcy filing in June. A creditor trust was established to receive all of his equity interest and personal assets in the US under the debt restructuring plan. Jia controlled a 33 per cent stake in Faraday.
Earlier this month, Geely, owner of Volvo Cars and a shareholder in Daimler, formed a partnership with Baidu to build EVs for the Chinese online search giant, and set up a joint venture with Taiwanese Apple supplier Foxconn Technology Group, which will build cars for other marques.
Sources said FF will enlist Geely to provide contract manufacturing services for the FF91.
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