How high is the threshold for making cars?, FF91 "Jia style delivery" questioned data | Automotive | Jia style

Jia Yueting, who has been making cars for nine years and going to the United States for six years, has been jokingly told that he will return to China next week and has announced the success of car manufacturing. Recently, LeEco founder Jia Yueting has once again returned to the public eye and become a hot topic of discussion.

Regarding Jia Yueting's announcement of successful car manufacturing, public opinion has shown multipolar polarization. Some people express support and optimism, believing that Jia Yueting's persistence is admirable; Some people also express doubts, believing that "Lao Jia is going to harvest another wave of leeks"; Some people show a wait-and-see attitude.

Why is the announcement of successful car manufacturing questioned?

As a member of the "new force" in car making, Jia Yueting's car making plan began in 2014. At that time, Jia Yueting, who rose to fame with LeTV, suddenly flew to the United States and, together with former Tesla executive Nick Sampson, founded LeTV ENV Inc. in California, preparing to build cars. In August of the same year, the company was renamed Faraday Future.

In January 2017, FF officially released its first mass-produced electric vehicle, the FF 91. But with the outbreak of LeEco's debt crisis, FF also had to stop production. Subsequently, Jia Yueting abandoned LeEco's mess and boarded a plane in the United States, fully dedicating himself to his dream of making cars, leaving behind a popular internet meme among domestic netizens about "returning home next week.".

In recent years, due to the breakdown of the funding chain and the lack of credit, the delivery path of FF 91 has repeatedly been delayed. Despite FF's difficult survival, some investors still believe in Jia Yueting. For example, Xu Jiayin from Evergrande. In June 2018, Evergrande Health injected $2 billion into FF, becoming the largest shareholder with a 45% stake. However, not long after, FF and Evergrande had a falling out over the payment of financing funds and went to court, ultimately reaching a settlement. Evergrande no longer invested in FF. It was not until July 2021 that FF successfully went public on NASDAQ's backdoor SPAC, raising $1 billion, that the survival of FF 91 could continue.

This year, FF actions have been frequent and there is a strong trend of breaking ground. On January 17th, FF officially announced cooperation with Huanggang City, Hubei Province. FF's China headquarters will be located in Huanggang, and the Huanggang government's guidance fund and related industry funds will contribute to help FF build its China headquarters. On April 15th, FF announced that it had completed the production of its first mass-produced vehicle, the FF 91 Futurist, and was offline at its factory in Hanford, California, USA. On May 31st, FF held the ultimate launch event for FF 91&Faraday Future 2.0, announcing that the car was priced at $309000. Starting today, FF will accept full payment from the FF 91 2.0 Futurist Alliance and reopen online ordering.

However, some netizens have expressed doubts about Jia Yueting's announcement of successful car manufacturing. One is that the payment method for FF 91 delivery was criticized for being in the form of doughnut money. The delivery of FF 91 is divided into three stages, and only the first stage was announced at the press conference. At this stage, consumers need to pay the full amount of FF 91 for the vehicle in order to book and receive vehicle usage training. The second stage is the "FPO co creation stage", where all FPOs need to wait for vehicle delivery after fully paying the vehicle price. In the third stage, it will be the turn of other ordinary car buyers, who also need to pay the full amount of the car and wait for delivery. Secondly, FF's current financial situation is worrying, and it is uncertain whether it can sustain the delivery date. Through financial report data, it was found that FF's financial condition is poor. Since its establishment, the company has accumulated losses of over 3 billion US dollars, with a net loss of 552.1 million US dollars for the fiscal year 2022. As of the close on June 5th, the price per share of FF was $0.270.

Meanwhile, some netizens have also expressed that if Jia Yueting can achieve mass production and delivery, it will also be a milestone event in the history of electric vehicles.

How high is the threshold for making cars?

According to incomplete statistics, since the announcement of car manufacturing, Jia Yueting has burned over 40 billion yuan for car manufacturing. In addition to Jia Yueting, Dong Mingzhu, Lei Jun, Li Ka shing, Yao Zhenhua, Ma Yun, Ma Huateng, and others have also invested in car manufacturing.

In March 2015, Tencent signed a strategic cooperation framework agreement with Foxconn and Hexie Auto on "Internet plus Smart Electric Vehicle", indicating that the three parties will actively carry out innovative cooperation in the field of "Internet plus Smart Electric Vehicle" in Zhengzhou, Henan Province. In the same month, Alibaba and SAIC Group jointly announced that they would set up a 1 billion yuan "Internet Car Fund" to jointly build "cars running on the Internet" and lead the development of "Internet cars" in China. In September 2015, Baidu and BMW launched a strategic cooperation to jointly build intelligent autonomous vehicles. In 2016, Dong Mingzhu set Zhuhai Yinlong New Energy Company as the target for Gree Group to enter the automotive manufacturing industry. She planned to fully acquire Yinlong New Energy for 13 billion yuan, but the acquisition plan was opposed by some shareholders and could only increase her holdings. In 2021, she ultimately won about 336 million shares of Yinlong New Energy through a judicial auction for about 1.828 billion yuan, accounting for 30.47% of the total share capital of Yinlong New Energy. In March 2021, Xiaomi Group announced that it plans to establish a wholly-owned subsidiary responsible for the intelligent electric vehicle business. The initial investment is 10 billion yuan, and it is expected to invest 10 billion US dollars in the next 10 years.

At present, the results of entrepreneurs entering the "car making" industry are not ideal. In July 2021, Guanzhi Automobile was frozen by the court for 8.5 million yuan in assets. In February of this year, multiple 4S stores of Weima Motors were also shut down and factories were shut down. In March, another equity freeze was added, with Weima Automobile Manufacturing Wenzhou Co., Ltd. being the company whose equity was frozen, with a total amount of approximately RMB 4 billion. In April, Evergrande Automobile also temporarily suspended production at its Tianjin factory due to funding issues, and it did not resume until May. On May 4th, Gree Electric Appliances hit the limit down during trading, with a daily market value evaporating over 20 billion yuan. The reason was that its subsidiary, Gree Titanium New Energy, had a net loss of 1.905 billion yuan in 2022 and a debt to equity ratio of 99%.

How high is the threshold for making cars? Li Bin, CEO of NIO Auto, bluntly stated, "The capital threshold for car manufacturing is 20 billion yuan. A few years ago, I said it was 20 billion yuan, but now it may not be possible to do it without 40 billion yuan." Why is the threshold for car manufacturing so high? There are mainly the following points: first, research and development investment. According to relevant data, in the whole year of 2022, Tesla invested 3.075 billion US dollars in research and development, NIO invested 10.84 billion yuan in domestic research and development, Ideal Automobile invested 6.78 billion yuan in research and development, and Xiaopeng Automobile invested 5.21 billion yuan in research and development; The second issue is the industrial chain. Although Tesla's industry chain model has been recognized, it has not yet reached a competitive level compared to the traditional car industry chain; The third is the issue of autonomous driving technology. At present, new energy autonomous driving is not as environmentally friendly as gasoline vehicles in all aspects of performance; The fourth issue is with the battery. Battery technology is one of the main shortcomings of current electric vehicles, especially in the high energy storage consumption and significant range degradation of batteries at low temperatures. The fifth issue is insufficient infrastructure. The farther away from the commercial center, the less charging infrastructure there is, making it more difficult to find charging stations, and often there are also many people queuing up for charging.

Where is the future of new forces in car manufacturing?

2023 is a year of relatively internal competition in the automotive industry. As Tesla and traditional car companies begin to lower prices, there is less time and space left for new forces in the automotive industry. At present, most of the "new forces" in car manufacturing are in a loss making state. According to financial report data, in 2022, NIO Automobile had a net loss of up to 14.437 billion yuan, while Xiaopeng Automobile incurred a net loss of 9.14 billion yuan during the same period. Ideal Automobile had a net loss of 2.032 billion yuan, and Zero Run Automobile had a loss of 5.1 billion yuan. Li Xiang, CEO of Ideal Automobile, once said that the three years from 2023 to 2025 will be an extremely brutal elimination race because there is not a need for so many companies in the market.

On the other hand, although the development of new energy vehicles still faces difficulties, the trend of new energy vehicle development is relatively clear. New energy vehicles are the main direction for the transformation and upgrading of the automotive industry, and China is also leveraging the new energy track to achieve "lane changing overtaking". According to data from the Ministry of Industry and Information Technology, China's production of new energy vehicles has ranked first in the world for 8 consecutive years. According to data from the China Association of Automobile Manufacturers, from January to April this year, the production and sales of new energy vehicles reached 2.291 million and 2.222 million, both increasing by 42.8% year-on-year, with a market share of 27%; The export of new energy vehicles reached 348000 units, a year-on-year increase of 170%.

On June 2nd, Premier Li Qiang presided over an executive meeting of the State Council to study policy measures to promote the high-quality development of the new energy vehicle industry. The meeting pointed out the need to "build an industrial ecosystem that integrates the development of 'vehicle energy, road and cloud'", and to continue and optimize the policy of reducing and exempting purchase taxes on new energy vehicle vehicles. In the future, new energy vehicles may once again usher in a boom.

Who can stay among this group of "new forces" in car manufacturing? This requires time to verify and is truly anticipated.