The story of Faraday Future and its $1 billion electric automobile plant in the Nevada desert is a cautionary tale about a governor who didn’t pay attention to the details.
It’s a story about a Legislature that was so eager to create jobs that it failed in its responsibilities to the citizens of Nevada—and it’s about a rogue Chinese billionaire who is now over his head in trouble back home.
The story began when the state of Nevada wooed and won the Tesla gigafactory in Reno. The jury is still out, but northern Nevada is booming and Tesla is one of the reasons why.
Nevada, like many other states, has a north-south divide, and the governor was eager to throw a bone to the southern city of Las Vegas.
Then, along came Faraday Future, a secretive company financed by Chinese billionaire Jia Yuteng.
The governor stopped in Beijing on the way home from a trade mission to Australia, where he met Jia to ensure he was serious about setting up shop in Las Vegas. Whatever Jia said to him, it carried the day.
Soon afterward, the governor called a special session of the Legislature, which approved a $175 million infrastructure bond as well as $250 million in tax abatements.
Faraday promised to invest $1 billion in the plant and create 4,500 jobs in economically challenged North Las Vegas. Legislative leaders rammed the deal through the body, with only a handful of conservatives voting against it.
I was asked to present the bond to the state’s board of finance for approval.
To shorten an 18-month story, this deal was suspect from the start: a company that had never produced a car in its history, entering a very crowded industrial field, built in the middle of parched sand dunes, financed exclusively by a mysterious—now clearly a rogue—Chinese entrepreneur.
What could go wrong?
Just about everything did. Eventually, on July 10, Faraday Future pulled out of the deal. Up until weeks before, the state’s director of economic development testified before the Legislature that everything was on track.
The Chinese billionaire’s scheme has been called a “Ponzi scheme” by one of China’s leading corporate executives. And Nevada, while not out a lot of money—we did not issue the bonds—is busy wiping egg off its face.
Lessons for the complacent? Do your due diligence, and do it thoroughly.
Jia fooled a lot of people, including the government of Nevada. We all make mistakes, but even if you supported the deal initially, this one became pretty obvious shortly thereafter.
The fake groundbreaking ceremony, held outside of a fancy model factory amid piles of sand, should have been the tipoff. Several months later, Jia publicly announced he was running short of cash—time for the state to bail. But that didn’t happen.
Finally, don’t hand out tax abatements and major taxpayer funding before you’ve reminded yourself of a very fundamental truth: If it’s too good to be true, it probably is. That’s especially true when government inserts itself into the private sector.