Making electric cars isn’t cheap. In fact, it’s so costly, even manufacturers who are able to successfully bring a car to market rarely reach profitability.
That’s the challenge facing two L.A.-based electric vehicle-makers as they try to transition from prototype to mass production.
For Gardena-based Faraday and Future Inc., the difficulty in making a production-ready vehicle has brought on mounting debt and anxious creditors. The firm has also hemorrhaged talent, much of which has jumped ship to rival electric vehicle-maker Evelozcity Inc., based in El Segundo. Evelozcity is attempting to make a cheaper vehicle, targeting the consumer market through a subscription model, a relatively new proposition for an electric carmaker. The company has yet to reveal its first vehicle publicly while Faraday has shown off three models so far.
Evelozcity co-founder and Chief Executive Stefan Krause – who was formerly Faraday’s chief financial officer and chief operating officer – said the market is still a hard place for electric vehicle-makers to reach profitability.
“If we are honest and analytical about it, nobody is making money with electric cars,” said Krause, who attributed financial challenges to lack of low-cost, high-yield batteries and orthodox designs.
The difficulties for the car companies don’t stop with technical aspects, however, and one of the biggest issues for both Faraday and Evelozcity isn’t a production problem at all.
“If there’s one thing that 2018 taught us is that it doesn’t stop when you produce a vehicle if you have aspirations to be a large-scale auto company. Producing the vehicle doesn’t even seem like half the battle,” said Jeremy Acevedo, manager of industry analysis for Santa Monica-based auto research firm Edmunds.com Inc. “The bigger impetus is to not get lost in the fray.”
Faraday was the first of the two electric consumer vehicle-makers to jump into the marketplace. The company was founded in 2014 by Chief Executive Jia Yueting, who before Faraday was the founder of Chinese online video outlet LeCo and Singapore-based telecommunications firm Sino-Tel Technologies Co. Ltd.
Faraday unveiled its first electric car in January 2016, targeting the high-end market with a luxury design.
The firm, however, began to run into cash flow problems later that year, which led to the defections of several key employees including Senior Vice President of Product Strategy Nick Sampson, General Counsel James Chen, Product Head Robert Filipovic, Manufacturing Line Director Bill Strickland and Vice President of Vehicle Design Richard Kim.
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