Faraday Future strikes deal to make cars in China with mobile gaming company

Troubled electric car startup Faraday Future has received another surprise lifeline in the form of a new 50/50 joint venture partnership with Chinese online video game company The9, the EV company announced Sunday. The9 says it’s willing to contribute up to $600 million to the overseas joint venture, and Faraday Future has promised to use that money to make a new car in China (and for the Chinese market) by 2020 called the V9.

The new car will be based on the FF91, the ultra-luxury electric SUV that Faraday Future debuted at CES 2017, and the one that it’s spent the last few years struggling to get into production. The9 and Faraday Future claim they will be able to make 300,000 cars per year, though they have not shared where they would be built.

Faraday Future says the new joint venture will also help the startup try to get the FF91 into production in 2019 in the US. The9 says in its own release that it will make an initial deposit of $5 million, which Faraday Future says it will use to “overcome its short-term cash flow difficulties and support its ongoing equity financing efforts.”

The9 said in a filing with the SEC that the $600 million will go to the joint venture — not to Faraday Future’s US operations — in three $200 million installments all tied to milestones. The first will come within two months, as long as joint venture has been properly set up in Hong Kong. Faraday Future then has four and a half months to provide evidence that it’s secured land and local funding for a factory in China to unlock the second $200 million deposit. After that, Faraday Future has three months to provide the joint venture with the concept design of the V9, which will unlock the final $200 million installment.

The news comes just a few days after The Verge reported that Faraday Future had sold its Los Angeles headquarters in a bid to generate short-term cash, and a few weeks after the startup had to tell employees on unpaid leave that they wouldn’t be able to come back just yet.

The9 is publicly traded on the Nasdaq stock exchange, and has a market cap of about $100 million. It’s “one of the earliest enterprises building virtual community in China,” according to a 2018 press release. The9 got its start when it launched an online community called “Ninth City” way back in 1999, where people use virtual currency to “conduct online social and exchange activities such as playing games, reading, music, etc.” It also once held the exclusive license to operate World of Warcraft in China, though it lost that asset in 2009. Known more as a game development company, The9 has also recently moved into blockchain technology.

Founded in 2014, Faraday Future originally made waves as a secretive startup that hoovered up a ton of talent from the likes of Apple, Tesla, and most every traditional automaker. The startup found itself on the brink of financial insolvency at the end of 2017 in large part because of the high cost of designing and manufacturing a car from scratch, but also the financial mismanagement of founder and CEO Jia Yueting.

Jia took over control of the company in 2017 after self-exiling himself to the US in order to escape the collapse of his other company, LeEco, in China. Jia and LeEco (and the myriad related companies spawned in and around it) are still on the hook for hundreds of millions of dollars in China, which has resulted in him being placed on a national debtor blacklist.

Faraday Future was rescued at the end of 2017 by Chinese real estate conglomerate Evergrande, which pledged $2 billion to the startup. But the relationship between Evergrande and Faraday Future eventually soured in 2018. Faraday Future spent the first installment of that investment ahead of schedule, and when Jia asked for an advance on the remaining money, the two sides got locked in a heated battle for control over the EV startup that ultimately led to hundreds of layoffs, the departure of numerous executives and Jia’s only remaining co-founder, and a delay of the FF91.

Evergrande and Faraday Future eventually agreed to restructure the deal at the end of 2018, allowing the EV startup to seek new funding in order to get its car into production. But Faraday Future struggled over the last few months to lock down a deal, and in the meantime hundreds of employees remained on unpaid leave, while others left to start jobs at competing companies.

Faraday Future now faces the difficult task of trying to hire talent to fill those positions, many of which are crucial roles. For instance, the company recently lost many of the people in charge of the development of the company’s electric drivetrain to rival EV startup Rivian.

Update March 25th, 11:30AM ET: Added information from The9’s SEC filing about the details of the agreement.