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Faraday Future scores unlikely lifeline from Chinese video game company

The deal could be worth up to $600 million to the perennially troubled EV startup.

Faraday Future

Would-be electric car manufacturer Faraday Future has pulled another unlikely rabbit out of its hat. While the serially troubled startup has shown a very promising EV, the company has, of late, become better known for its dramatic, feast-or-famine business developments. Late Sunday, the company announced that it has signed a 50/50 joint venture partnership with The9 Limited, a Chinese concern that makes online video games and develops blockchain tech. The deal could be worth up to $600 million in vital support for LA-based Faraday Future.

According to a statement from The9, the company will make an initial deposit of $5 million to help Faraday Future with its near-term financial woes. But it's not immediately clear what terms The9 will require of Faraday in order to trigger further tranches of investment en route to that potential $600 million limit.

As part of the agreement detailed in a Faraday Future statement, the struggling automotive startup has agreed to locate construction of a new model, dubbed the V9, in China. The new EV, which will be designed for the Chinese market, is to be based on the FF91, the incredibly quick, tech-rich and luxurious six-figure crossover SUV with which Faraday Future wowed audiences at CES 2017.

According to Faraday's release, "the expected annual production capacity of the joint venture is 300,000 cars," although it isn't immediately clear if all of that capacity is for the V9. If the new model is priced anywhere in the vicinity of where the 1,050-horsepower FF91 is expected to retail, 300,000 units would be an unprecedented volume for such an expensive automobile, electric or otherwise. 

Faraday's release also states that "the first preproduction car is expected to roll off the production line in 2020," though it's not clear when a salable vehicle is expected. As to other potential new vehicles, the announcement says only that "other future models could be created with additional agreements."

While it's all rather confusing, it's worth noting that the V9 is not an intended replacement for the FF91 -- the release notes that development of that vehicle is still ongoing, with "the goal of final delivery later this year." Complicating that timeline is the fact that it's not clear how quickly Faraday can complete an operational assembly plant in Hanford, California, nor is it clear if the company has anywhere near the number of employees necessary to ramp up production. In fact, it reportedly recently had to sell its Los Angeles headquarters in order to improve its cash position.

Faraday has been hemorrhaging red ink and key employees in recent years. Its previous partnership with a Chinese real estate conglomerate, Evergrande, went south in spectacular fashion last October. In late 2017, Evergrande committed to spend up to $2 billion to finance Faraday Future and get the FF91 to market, but Faraday burned through $800 million of that investment by mid-2018 without building a single salable car. 

With production still seemingly a long way off, Evergrande and Faraday became locked in a protracted and very public battle that nearly ended the automaker for good. The two parties mended fences in late 2018, opening the door to Faraday seeking new funding, like this very deal.

While the deal with The9 Limited is both surprising and encouraging, it's worth remembering that Faraday's new investor has only initially agreed to shell out $5 million in the near term. It's also not immediately clear how much money The9 Limited actually has at its disposal. 

The gaming company, which is best known for launching China's first virtual currency and for being the company to once hold the exclusive rights to World of Warcraft in China, is listed on the NASDAQ stock exchange and is said to be worth over $100 million.