Chinese-backed startup targets Tesla with $1 billion U.S. plant

SAN FRANCISCO (Bloomberg) -- Faraday Future, the startup backed by Chinese billionaire Jia Yueting, has big dreams of taking on Tesla Motors Inc., starting with a $1 billion investment in a new U.S. factory that will build electric cars starting in 2017.

Nick Sampson, a former Tesla director who is Faraday’s senior vice president of r&d, said Faraday plans to introduce its first electric car in two years and quickly follow with several other models. Faraday is based in Gardena, Calif., where it has been developing its first model with 400 employees.

Jia Yueting is founder and chairman of Leshi Television, a popular Chinese online video site. 

Faraday, which is so secretive that it will not reveal the name of its CEO, is the latest in a group of Chinese-backed startups to start work on electric cars in the U.S. Along with Karma Automotive LLC and Atieva, Faraday has opened operations in the U.S. to take advantage of American engineering and design knowledge. 

“We will launch a single model and follow with a range of vehicles in a faster way than others have achieved,” Sampson said in a phone interview. “We’re looking at seven different vehicles.”

The problem with electric cars has been that they lose money, and with cheap gasoline, American consumers are increasingly buying SUVs and pickup trucks. Tesla has lost $1.9 billion since 2007 and major carmakers like General Motors and Nissan Motor Co. have lost money on plug-in hybrids and EVs.

Revenue streams 

Sampson said Faraday has a different way to make money, with plans to offer connectivity and autonomous driving in its cars. He envisions a rolling smartphone that knows its drivers and their technology preferences. Faraday hopes to make money not just on the car, but on subscriptions for connective services, apps and other infotainment that is piped into the car, Sampson said.

“Our business model is not based around moving a car out of the dealer,” Sampson said. “We envision this like a smart phone. The revenue starts once you get the device in the owners’ hands. We’re looking at subscriptions and apps and other opportunities.”

Faraday also will look at car-sharing services, he said.

The startup is packed with managers who left Tesla in recent years.

Besides Sampson, the company’s website lists Dag Reckhorn as vice president of manufacturing; he was director of manufacturing for Tesla’s Model S. Alan Cherry is vice president of human resources; he was a human resources director at Tesla. Tom Wessner is vice president of supply chain; he was Tesla’s director of purchasing. 

Sampson, who supervised vehicle and chassis engineering, left Tesla in January 2012; Elon Musk said at the time that he asked for Sampson’s resignation because there wasn’t a “good fit for him within the company.”

Factory location 

Faraday hopes to announce the site of its factory in the coming weeks. The company is looking at locations in California, Georgia, Louisiana and Nevada.

In Nevada, spokeswoman Stacy Morris said the company is looking at North Las Vegas, which declared a state of emergency in 2012 as collapsing property values sapped the state’s third-largest city of revenue as it was paying debt service on a new city hall, a wastewater treatment plant and a regional park.

If North Las Vegas lands the factory, it would be the second major coup for Nevada as it attempts to diversify its economy and promote itself as a center of electric-car manufacturing. Tesla is building the world’s largest lithium-ion battery factory east of Reno after Gov. Brian Sandoval last year signed off on tax breaks worth as much as $1.3 billion for a plant on which Tesla expects to spend $10 billion over 15 years.

More recently, North Las Vegas has been luring commercial marijuana-growing operations and other businesses to a 2,000-acre industrial park with promises of easy access to power transmission lines, freeways and no corporate income tax.