Often billed as China's Steve Jobs, Chinese entrepreneur Jia Yueting has filed for bankruptcy in a Delaware court, claiming he owes about $3.6 billion to his various creditors. The move could complicate the already perilous situation for the electric car start-up Jia helped launch, Faraday Future.
Itself laden with debt after losing about $2.15 billion since it was founded in 2014, a number of analysts warn that Faraday could become the latest in a growing list of once-promising battery-car start-ups to short circuit.
Vacuum maker Dyson on Oct. 10 pulled the plug on its own electric vehicle program before building a single vehicle. Founder James Dyson told employees in an e-mail he could "no longer see a way to make it commercially viable."
Since the beginning of the decade, a partial list of EV failures also includes Bright Automotive, AMP, Aptera, Coda, Detroit Electric, Fisker Automotive and LeEco, the latter also founded by China's Jia.
"Almost none of the battery-electric start-ups has had enough air under their wings to take off," said Anton Wahlman, an analyst and electric vehicle consultant.
While some of the names on the list were seriously underfunded, others generated plenty of cash. Fisker, one of the most notable flame-outs, raised more than $2 billion in cash and, unlike some of the other start-ups, did manage to put a vehicle, the plug-in hybrid Karma, into production.
Dyson, best known for its bagless vacuum cleaners, bladeless fans and high-velocity hand dryers, had planned to invest $2.7 billion to get its own EV program going. It had about 600 employees at the time the company's founder announced the project's termination, and it was preparing to set up a factory in Singapore to build a line of products expected to begin with a three-row crossover, according to patent documents that leaked out last May.
"This is a challenging time for our colleagues and I appreciate your understanding and sensitivity as we consult with those who are affected," Dyson wrote his employees in an e-mail first revealed by tech website The Verge. "This is not a product failure, or a failure of the team, for whom this news will be hard to hear and digest. Their achievements have been immense – given the enormity and complexity of the project."
Each of these start-ups ran into some unique headwinds. After Fisker declared bankruptcy in November 2013, analysts pointed to a variety of factors, including quality issues that delayed production of the Karma and caused several fires that created publicity problems, as well as a series of management mistakes that burned through the company's cash reserves.
Karma hasn't been the only one to underestimate its financial needs. If anything, that's a thread running through many of the failures, according to senior analyst Sam Abuelsamid, of Navigant Research.
The start-ups, on the whole, have "found out building a car is a lot more complicated than they thought, even if an EV powertrain is simpler than a gas powertrain," he said. "Trying to scale up to manufacture a complex machine is very difficult as the upstarts have become aware of."
Even Tesla, the only EV start-up that has made a real go of it in the U.S. market, has had to repeatedly raise new funding while generating only a handful of profitable quarters.
Complicating matters, EV start-ups largely misread the potential EV market, Abuelsamid added. Many shared the overly optimistic view of the Obama administration, which had anticipated that about 1.5 million plug-based vehicles would be sold annually by 2015.
"The EV market has not developed at the pace a lot of people thought in 2009 and 2010," said Abeulsamid. "It has taken a lot longer for EV adoption to pick up and that means a smaller market for these companies to grab."
The good news for those EV companies that have survived like Tesla is that sales for the battery car market were up 81% last year and continued to grow during the first nine months of 2019, hitting about 235.959 by the end of September. But that number was up by barely 1,200 plug-ins and pure battery-electric vehicles, or BEVs, sold through the end of September the year before, reflecting a sharp slump during the third quarter.
Despite the numerous failures of the past decade, there are plenty of start-ups still willing to give it a try. That includes such companies as Bollinger which, last month, revealed production versions of its first two models, a heavy-duty pickup and a heavy-duty SUV, both promised to go into low-volume production at a plant in the Detroit suburbs next year.
One of the most closely watched entrants is Rivian, another suburban Detroit venture that showed off its own battery-electric pickup and SUV models at the Los Angeles Motor Show last November. Rivian is considered one of the more likely success stories, said analyst Wahlman, because of the massive cash infusions it has generated from, among other sources Ford and Amazon. The online retailer recently committed to purchasing 100,000 battery-powered trucks that Rivian plans to assemble at an old Mitsubishi car plant in Normal, Illinois it has acquired.
"That's going to pump in enough money to keep them alive until at least 2030," Wahlman forecast.