Did Evergrande Buy Stake In Faraday Future To Gain Tech For China?

Faraday Future FF 91 at Laguna.

NOV 23 2018 BY VANJA KLJAIC 29

Was it just a play to gain access to tech?

Analysts are saying that the US $2 billion deal to buy a stake in Faraday Future looks like a scheme for China to obtain advanced technology in new energy vehicles.

The trade war between the United States and China is booming. Both sides are slapping each other with tariffs, and now, seemingly sneaky tactics are allegedly being employed by the Chinese in order to obtain advanced technology needed to produce new energy vehicles. According to the South China Morning Post, Faraday Future – a cash-strapped Tesla wannabe – a top university in Beijing and government-backed venture capital firms are singled out as part of China’s programme of unfair technology transfer and intellectual property theft – as revealed in a 53-page report released on Tuesday by the Office of the US Trade Representative.

The report is released in what many consider delicate timing. President Xi Jinping and Donald Trump are slated to meet next week, part of a scheduled meeting set to happen on the sidelines of the Group of 20 Summit in Buenos Aires, Argentina. Furthermore, the report outlines an update to the US agency’s Section 301 investigation of China’s technology and innovation-related policies and practices. It could, however, bring more urgency to the Trump and Jimping meeting. In turn, that could possibly lead to either truce in the two countries’ trade dispute or the escalation of the trade ware alltogether.

The whole thing started with a US$2 billion acquisition of a 45 percent stake in California-based electric car maker Faraday Future by Evergrande Health. While acquisitions like these are not surprising in the EV world, this, coming from a Hong Kong-listed subsidiary of China’s largest property company the Evergrande Real Estate Group, did ring some bells. After all, a property investment company, now investing in EVs, does seem like some broad diversification to anyone remotely introduced into the financial world.

Faraday Future FF 91

While we believe this will be resolved quite easily, it’s still interesting to see to what lengths are Chinese (both politically and financially) willing to go to hide their true hand. Many argue that China’s VC investments in US firms are made only for the purpose of stealing US intellectual property rights and trade secrets. While most of these claims can easily be filed under “tin foil hat army,” we do, however, believe that there where there is smoke, there’s outta be some fire underneath.

Categories: China, Faraday Future

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29 Comments on "Did Evergrande Buy Stake In Faraday Future To Gain Tech For China?"

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Impartial Observer

I don’t remember where I read it a while ago, but as part of the deal for Evergrande Health’s initial investment in Faraday Future, Evergrade acquired control of the holding company that owns the IP used in Faraday Future EVs and required Jia Yueting to step down from his role as the holding company’s CEO. This holding company is a separate entity from the company that owns the factory and assembly line equipment that would build Faraday’s EVs.

ThE_MarD

Heyyo, I agree with this. Faraday Future didn’t uphold their end of the bargain… Plus, have you seen the trade shows? The failed self-driving debut of the FF91? Where the lights dim and you can clearly see someone dressed in black jump into the driver’s seat?

They also expanded too quickly and blew through their funds faster that the agreed upon payouts by evergrande…

Jia Yeuting is just not a good CEO anymore. Letv was amazing at the start… But then look at the track record! Falsified their profits by moving money between the company’s branches and building up debt and loans to try and cover up how much debt and loans the company actually had… I wouldn’t be surprised if Jia Yeuting pocketed more than he deserved too…

He still won’t go back to China and face the courts, because he knows he’ll get jail time like his sister.

yo

If investing 2 billion in a company most likely to fail is how they get some IP then more power to them…
I also fail to see what great tech FF might have…
So what does FF have worth 2 billion??
New battery chemistry??
A new super inverter??
A super duper EV motor??
Or just a platform that can pass crash tests and drive fast??

Spoonman.

This, what did FF have to be worth stealing?

David

To be fair they only paid 800 million.

Pushmi-Pullyu

If it was $8 thousand I’d say they overpaid. As “Impartial Observer” said, didn’t FF already divest any IP it had (good or bad) to some other company?

antrik

I don’t remember, was it Faraday Future who boasted a while back how great their inverter was?… (Might have been Lucid.)

The cells are standard 21700, but the magic with these is in the packaging.

Perhaps more than with any individual component though, a lot of the magic is in integrating them well. You can buy decent off-the-shelf components for pretty much everything; but developing a well working EV from scratch still takes years…

Damocles Axe

If I were given $2B to obtain an EV car design, I would certainly NOT buy a failing company with no product like FF!

I would use the money to buy a half-dozen Tesla M3 cars and hire a team of engineers to tear them down and reverse-engineer the whole thing. Then I would end up with the plans for the world’s best car and hire some industrial artists to design a new body for it.

john Doe
There would probably be a problem with that solution, since more Chinese companies are preparing to export cars to Europe and America – where patent problems could stop all sales. China think long term in many cases. They buy companies with technology they are interested in, they keep the business running, and they may also use the technology in a Chinese company, to get higher volumes and dominate the market more. The company they bought are free to develop better technology, that they can later use in China. Look at technology Huawei bought from Nokia for example. Then they could utilize it to get high volume products they could ship globally. The same have I seen in a lot of industires. Products they can volume produce, and get a very high market share from. They used to build a lot of manufacturing equipment for volume production (often based a lot on a western made machine). They made volume production, but the quality was poor to OK. Then some of these chinese companies started to buy the best western made machines, and utilized it on a level never seen before in many industires. They were running the machines 24/7, producing high… Read more »
antrik

So spend years attempting to create a second-rate copy of something through reverse-engineering, instead of buying the original plans for a working design?… Sound like a bad idea, even if you ignore IP laws.

Kan

Good job comrades! As long as the party ticket sticks atop of the lapel pocket and the labor camp underwear and Christmas decorations keep arriving from the atheist regime, the band shall play on. Spying? Easy-peasy, you will sit idle doing nothing in a warm room and food on taxpayer money. Come back empty handed to China and you will be tortured slowly, you entire family’s social rating scores drop to the point that they will be refused access to public transportation.

ffbj

It’s easier to steal things than it is to create them yourself.
Just as in the case of Russia where it’s easier to sow descent in another society than to build a viable one yourselves.
I do prefer the Chinese though, as I feel they are more socially responsible, but then only to other Han Chinese.

Mahesvara

lol you prefer chinese where in their 3000+ year history is about war and conquer……… goodjob

Hauer

This is flat out ridiculous compared to other civilizations that did at least the same amount in a fraction of those 3000 years.

ModernMarvelFan

They paid $2Billion for it. Last time I looked, that is called bought, not stolen.

Pushmi-Pullyu

“…in the case of Russia where it’s easier to sow descent in another society…”

Hmmm, well, Vladimir Putin certainly would like to see the descent of NATO countries, but the primary purpose of Russian propaganda is to sow dissent in Western democracies. #GrammarNazi

ModernMarvelFan

First of all, if someone is paying $2Billion for a failed company, then no way it is called stealing. Chinese are known to steal IP. In this case, they actually paid for it. So, we should encourage them to actually paying for IPs rather than “stealing them” outright. so, I don’t see the problem here.

Second of all, Tesla is already preaching about spreading the EV IPs for anyone who wants to build a good EV. Well, let us share it with the Chinese then.

Lastly, I don’t see how much IP there is for Faraday Futures. They are pretty much a failed company from the start. Nothing really looks all that special anyway. If Chinese wants to steal or overpay for it, then let them have it.

Pushmi-Pullyu

I’ve suggested in the past that FF’s IP isn’t worth 2¢. While that is almost certainly an exaggeration, at the same time I think paying $2 billion just to get access to that would be every bit as foolish an investment as every other that anyone has ever made in this company. FF is is possibly the worst-managed company I’ve ever read about! Furthermore, FF is notorious for making all-hat-and-no-cattle claims which are so far over the top that at times they have been literally laugh-out-loud funny.

Let’s review the, ummmm… “highlights” of FF’s history:

•Claiming in its first press release that it would put a car into production within two years, when they didn’t even have a working mule, let alone any plan for an assembly plant!

•Showing a so-called “prototype” which was merely an empty shell — you couldn’t even steer the front wheels — one which was ridiculed as being a one-seater “Batmobile” wannabe!

•Touting a design for a factory which looked like a rejected concept render from the “Tron: Legacy” movie, rather than any factory which exists in the real world

•Fumbling publicity events so badly that they were literally laughed at by some attendees!

Dan

Surprise, surprise! NOT! I told you this scheme before! Actually Jia Yueting is a China fugitive. He bankrupted his Chinese Netflix then ran for US. And he tried to put FF on US stock market to repeat the same scheme. Someone on Wall Street was on in altogether with him. This was absolutely insulting! Getting American investors money to hire American engineers for IP that can be copied off later! Mind you that FF was not cheap either $150K! Btw, where is Lucid now? Lucid Air was said to be $60K. Where is it? Anybody chime in?

David

Where’s the Audi etron? Manufacturing of motors started in July, full vehicle manufacturing in September. And still no deliveries.

I’m sure it’s coming but Audi have gone awfully quiet.

BEVfan

Audi made a change in the software and that needs to get regulatory clearance and it takes about 3 months. There were spy photos of parking lots full of Audi E-Trons.
So when they will get the green light for the software change, reservation holders will get their cars in no-time.

antrik

Lucid is supposed to start production next year, after they got money from the Saudis…

Hauer

May I kindly use this opportunity to remind you that US agencies are routineley spying on European industry, „neutral“ Austria included, without paying us billions of € or $ for our tech.

So what.

Pushmi-Pullyu

As a general rule, U.S. intelligence agencies don’t feed industrial secrets to U.S. companies, even when they discover those secrets as a result of intelligence gathering. (Exception for military hardware.) Nor does the U.S. use military hacking groups to target foreign companies with the deliberate intent of stealing their IP and give that info to U.S. companies, as China does.

So let’s stop with the false equivalency, hmmm?

ModernMarvelFan

US military and government contractors have a free access to all patents filed at US patent office without paying a dime for it. Because they are used for military and government purposes.

antrik

The irony is that originally the design was officially supposed to be produced also by LeEco, YT’s original Chinese company. (Which actually ran into trouble first, starting the downfall of YT and his other ventures…) Back then, people even claimed that LeEco was really the main goal, and Faraday Future was just a front for their American development arm…

Bunny

Word is they have yet again found another investor and they are even planning to start building their second car design by 2020.

I think they are a long ways from being dead out of business.

Diesel
FF got screwed by Evergrande royally. Yes FF failed to honor some of its agreements, however per their terms there was not clause for withholding the remaining 1.2 billion owed. This was pushed via Evergrande by the chicomms to try and get him to return to China for a fake trial and real jail. Remember this is a country that jails streamers for singing 5 words of the national anthem in a cutsie voice. Google Yang Kaili if you didn’t hear about this insanity. Remember this before condemning the CEO for not returning to face the joke that is the Chinese legal system under the Chinese Communist Party. FF had some cool body designs and some semi inovative UX on display with the FF91. If I had to guess I would say that Evergrande was after the body designs as the majority of Chinese made cars still perform horribly in crash tests. The sole exception is BYD who does about as well as Toyota did in the early 90’s. So yeah I can believe that this was the an aquisition for the sole purpose of technology transfer. It certainly isn’t without precedent. We will have to wait and see if… Read more »
Impartial Observer

“Remember this is a country that jails streamers for singing 5 words of the national anthem in a cutsie voice. Google Yang Kaili if you didn’t hear about this insanity.”

Yes, that is a very disturbing and sad story.