LeEco may ditch Electric Vehicle project in U.S.

Early 2016, LeEco formed a U.S. subsidiary, Faraday Future, to build a $1 billion electric vehicle plant in Nevada and the company founder Jia Yueting continued to move forward with the plan despite the cash crunch.

Aluminium, with its properties, is bound to play a dominant role in order to bring the weight of electrical vehicles down. A lower carweight not only increase the battery range but also indirectly decrease the costs for the expensive battery pack. Aluminium is used in various areas of electric vehicles and for the build-up of its infrastructure including battery housings, E-drives, inverters, BIW, and charging stations. Therefore, the EV project created a hype among the aluminium industry in the U.S.

After the recent financial bailout, LeEco is in a situation where it will have to abandon the U.S. project. In January desperate to ease a cash shortage, LeEco signed a financing agreement with a Chinese property developer dubbed Sunac China Holdings.

Jia expected Sunac to invest in LeEco's U.S. project, which needs capital to resume construction of an assembly plant near Las Vegas. But, after researching China's electric-car market and inspecting LeEco's assembly plant in the U.S., Sunac decided against it primarily for the following factors.

• In China, EV sales have been supported by government subsidies. It remains to be seen whether consumers are willing to buy EVs without incentives.
• Automakers need more battery breakthroughs to cut cost.
• Both China and the United States still lack extensive networks of battery recharging stations.

Sun made it clear that Sunac has no plans to invest in LeEco's EV project now despite admiring Jia's entrepreneurship and ambition. Jia has been made the chairman and a new CEO and a chief financial officer have been appointed for LeEco.  

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"It would be good if [LeEco] can do well in one or two of its business areas…The rest should be sold" or spun off into joint ventures with strategic partners, said the Sunac Chairman.

In January, LeEco unveiled a production model of the FF 91 electric luxury sedan at CES in Las Vegas. But construction of the Nevada assembly plant is at halt now due to cash crunch. Now with Sunac Chairman Sun’s entry into the directorial board, discontinuing the Nevada plant seems to be the next management step.