Faraday’s Future Still in Doubt

Beleaguered EV maker Faraday Future released its third quarter financial statements Monday, which showed narrowing losses, but also dwindling cash on hand as the company races the calendar to bring its product to market.

The company said in the filing it has “substantial doubt” about its ability to continue operations, Reuters reported. However, Faraday representatives downplayed the statement. 

“That phrase, ‘substantial doubt,’ is an industry term,” said Tim Gilman, senior manager of Public Relations at Faraday Future. “When we put together our third quarter results, we send it to an auditor. The auditor looks them over and adds things. This is a term that they have to put in because based on the money we have right now, it’s highly doubtful we can get to the finish line and make the vehicle. 

“We agree with that, and that’s why we need to raise additional funding, and we do have that funding in place. But the financial report can’t look to the future.”

During the third quarter, Faraday announced planned financing of as much as $600 million in a senior secured convertible notes structure, with an initial $52 million of committed funds. In October, Faraday announced a new standby equity line of credit with an initial commitment of $200 million which can be increased up to $350 million.

“We have completed important funding agreements and are optimistic that we can put in place the additional funding we need to launch the FF 91,” said Carsten Breitfeld, Global CEO of Faraday Future. “With that momentum, we are currently developing revised budgets and production plans, and hope to be in a position to announce the timing of delivering the FF 91 to users shortly after funding is secured.”

Still losing money, but less than before

Faraday can’t book any revenue until it delivers vehicles to customers, and that milestone has again been pushed out from Q4 2022 into 2023. The company still has 369 pre-orders on the books, though that’s down from 399 earlier in the year. 

Preorders are fully refundable, non-binding, paid deposits for Faraday vehicles. Futurist Alliance Edition preorders require a $5,000 deposit and FF 91 Futurist preorders require a $1,500 deposit.

As the company works to deliver its vehicles, Faraday reported an operating loss of approximately $81 million during the three months ended Sept. 30, 2022, compared to an operating loss of approximately $186 million for the same period one year ago. Net loss decreased to approximately $103 million during the most recent quarter, compared to approximately $304 million lost in the third quarter of last year.

Faraday reports assets totaling $541 million, which includes $32 million of cash on hand, compared to $907 million in total assets at the end of last year. Total liabilities were approximately $253 million, versus approximately $340 million at the start of the year. Faraday has spent a total of about $3.3 billion to get to this point. 

What are they doing? 

Faraday is spending its money completing the final stages of the “FF ieFactory California” manufacturing facility in Hanford, California. The company is investing in production and tooling, as well as engineering, testing, certification and validation capabilities. 

According to Faraday, these investments are less costly relative to the activities completed in 2021, accounting for the narrower losses this year. The decrease in operating loss was also driven by reduced expenses resulting from deferred purchases of components and parts, and certain other cost reduction efforts, including a slowdown in program development relating to future electric vehicle models.

“The third quarter marked a turning point for our company, and we are seeing positive momentum across our vehicle program and in our funding program,” Breitfeld said. 

“I am pleased to announce the completion of construction and equipment installation in vehicle assembly areas of our ieFactory California at Hanford. We also saw strong progress with FF 91 testing and validation programs, where key performance metrics of our FF 91 including vehicle range (EPA rating), acceleration, and braking are even better than we promised.”

Good news about the FF 91

On the road to delivering vehicles, Faraday has some cause for optimism. The California Air Resources Board certified the FF 91 Futurist as a zero-emission vehicle. According to Faraday’s published release, the FF 91 will have an EPA-certified range of 381 miles, 0-60 acceleration of 2.27 seconds, a top speed of 155 mph, and will accept up to 239 kW of DC charging power. 

“Testing and certification of the FF 91 continues,” the company stated, “with EPA range and CARB emission certification results recently received. Other official and non-official performance specifications were recently updated.”

Management shakeup

As previously reported by TheDetroitBureau.com, Faraday replaced several top officers this year. The action came after a shareholder lawsuit and a scathing letter signed by 140 employees of the company. 

Since that time, the company appointed Yun Han as chief accounting officer and interim chief financial officer effective Oct. 25. Han was most recently senior vice president and chief accounting officer of Romeo Power Inc., and spent more than 13 years with PricewaterhouseCoopers LLP. 

Those substantial doubts, though

There’s no doubt that Faraday Future still faces an uphill battle to survive. The company will have to deliver vehicles, and then work on becoming profitable. “The Company expects to continue to generate significant operating losses for the foreseeable future as we continue to incur expenses before generating meaningful revenue,” states Faraday’s Q3 report. 

With the economy facing substantial instability in the near-term, Faraday could still be in for a troubled future.