Bad news comes from China, where the LeEco group notes a deficiency of cash due to over-investment in various projects, possibly threatened a couple of EV start-ups in the future.
Chinese billionaire and Chairman/co-founder of LeEco, Jia Yueting, sent a letter to employees on the financial situation and apologized to shareholders for not budgeting properly for his various venture's cash needs.
LeEco earlier this year unveiled an electric car concept, and announced a plan to build $2 billion factory in China.
The company managed to secure over $1 billion for EV developments, but autonomous drive technology is still in its infancy, while related company Faraday Future has recently noted some delayed payments for its Nevada factory project and has been subject of several financing concerns in the past.
"In a lengthy letter to employees, company co-founder Jia Yueting apologized to shareholders and pledged to slash his income to 1 yuan (15 cents), slow LeEco’s madcap pace of expansion, and move the company toward a more moderate phase of growth.
LeEco is the umbrella holding company for a sprawling family of businesses that includes sports media, automobiles, smartphones and TVs. The company known for its LeTV streaming service has aggressively pursued funding and placed bets on new ventures, from an electric car plant in Nevada to a $2 billion acquisition of California TV maker Vizio Inc."
LeEco simply isn't able to raise enough cash or generate it from Leshi - apparently the only profitable entity in the group.
Here is some citations from the letter:
“No company has had such an experience, a simultaneous time in ice and fire,”
“We blindly sped ahead, and our cash demand ballooned. We got over-extended in our global strategy. At the same time, our capital and resources were in fact limited.”
“Our fundraising ability isn’t strong,” “The scale of our external fundraising had trouble satisfying the demands of our rapid expansion.”
Apparently, some "trimming the lowest 10% of employees" and reducing subsidies on its smart TV and smart phone business will aid in getting the company back on the right foot.
However, it is not hard to imagine if this plan isn't effective enough, larger capital-intense projects (like perhaps building electric cars) may have to be scaled back.