Struggling electric car startup Faraday Future entered one of the fastest-growing world championships in racing—Formula E—through a partnership with Dragon Racing last season. Now The Verge reports that the cash-strapped company may have to get out of Formula E to save cash.
Despite a report last month that the Formula E partnership wasn’t affected by Faraday Future’s wider problems, sources are now telling The Verge that the four-year contract Faraday Future has with Dragon Racing may be nixed to save money:
[W]ith the company scrambling to find new investment money, thanks to the trouble at LeEco (which is also involved in the sponsorship of the race team), Formula E might be one place where the company can save a little bit of cash.
Keith Smout, the commercial director for Dragon Racing, said in an email to The Verge that FF and Dragon have a four-year contract, and that it’s “in good standing.” But he also said the two sides “are discussing season 4 right now.” (Season 3 ended in July.) “Where there is smoke there is fire,” he wrote in a follow-up.
Two anonymous sources who spoke to The Verge alleged that Faraday Future was behind on its payments to team owner Jay Penske, the son of racing legend Roger Penske. A high-level person within Formula E who requested anonymity told The Verge that Penske is actively seeking another marque to partner with instead of Faraday Future. The team simply struggled to work well together this season, according to a report by Motorsport.com, with one race engineer for driver Loïc Duval even departing mid-season over a disagreement over radio protocol.
Worst of all, some of the Faraday Future staff who championed motorsports within the company have left. One unnamed source who spoke with The Verge described the Formula E partnership as ex-CEO Matteo Mattiacci’s “baby.” Mattiacci came to the company from Ferrari, where he was the one-time head of Ferrari’s Formula One team. He left Faraday Future in December. Faraday Future’s own Head of Motorsport & Special Programs Nate Schroeder also left the company in July.
A Big Investment For A Small Company
Through their partnership with Dragon Racing, Faraday Future embedded three to four engineers with the team, according to team members we spoke with at the Mexico City ePrix in March. It was a partnership the Faraday Future members were excited about, as they claimed that knowledge gained developing Formula E’s relatively simple electric drivetrain easily translated into their road car development.
At the time, members of the Faraday Future Dragon Racing team described it as a stable, strong partnership, where funding wasn’t threatened since it was closely tied to the company’s research and development budget.
They declined to discuss with Jalopnik how much that investment was as they said they were “a private company,” but car specs reported by Electrek put each car’s cost at $350,000. The team runs four cars per race, and budget for the dozen or so Faraday Future employees (including not only their engineers, but communications staff and mechanics) working on those cars would easily put Faraday Future’s Formula E budget in the low millions, The Verge estimates.
However, the return on that investment hasn’t been good, at least in terms of results. The new partners finished the season in eighth place out of ten teams after non-FF Dragon Racing finishing second and fourth in the prior two seasons.
Things look even bleaker on Faraday Future’s corporate side, however. They recently had to secure another, existing factory to get started on their FF 91 road car after construction of their Nevada mega-factory was halted amid a serious cash crunch. This was after a Chinese court froze $182 million in assets of Faraday Future’s main financier Jia Yueting. That’s all on top of a host of other issues related to poor organizational structure and financial mismanagement.
The Future Looks Expensive
Faraday Future’s representatives told Jalopnik in Mexico that they were set to add another engineer in their partnership for the next season, but really up their investment in Season 5 with an all new car that would allow them to develop a whole powertrain, motor, gearbox and inverter.
With huge marques like Audi and BMW upgrading their participation to full-on works efforts in Season 5, and looming financial struggles for Faraday Future as a whole, it makes sense that this gradually expanding commitment would come under scrutiny during a cash crunch.
Then you have Mercedes and Porsche about to drop big bucks on a Formula E program in Season 6 in addition to all the bigger, more established brands already racing there. Formula E is only going to get more expensive from here on out, which is not good for the smaller companies like Faraday Future in the series.
That being said, a Faraday Future representative denied that their partnership with Dragon Racing was going south, The Verge reports:
FF was much more upbeat about the relationship. “There have been no business decisions made on whether to pull out [of Formula E],” a spokesperson tells The Verge. The rep added that FF had engineers “on the ground in Spain this [past] weekend” testing for season 4, which starts in December. “On our end, and on Penske’s end as well, the contract is in good standing, and both parties are honoring all their obligations within the contract.”
To Faraday Future’s credit, racing feels like the lone bright spot for the company lately. While their Formula E partnership hasn’t won races, it allowed them to get their name on a real, honest-to-goodness working car before the FF 91 materialized into a working prototype.
Then the FF 91 prototype set a new production electric car record at Pikes Peak—never mind that the car itself hasn’t made it into production yet. Then again, if there’s one thing that the FF 91's Pikes Peak record and the not-yet-for-sale Ford GT’s 2016 Le Mans win showed us, it’s that racing plays fast and loose with the meaning of “production car.” But still, a record! That’s something.
So, if Faraday Future is priced out of continuing in Formula E, hopefully they can still claim a few wins in the FF 91 somewhere.
Jalopnik has reached out to team and Faraday Future representatives for comment on these reports, and will update this story if we receive a response.
UPDATE [4:57 p.m.]: A Faraday Future representative told Jalopnik that they remain committed to their Formula E partnership with Dragon Racing, and that the company’s Vice President of Research and Development is now over their motorsports efforts:
Faraday Future continues to maintain its partnership with Dragon Racing in the FIA Formula E Championship. We continue to honor our commitments as evidenced by our testing for Season 4.
Nick Sampson, VP of R&D for FF, will continue to oversee the motorsports program.