California EV startup Faraday Future (FF) has signalled that cost-cutting measures are coming, as interim CFO Jonathan Maroko indicates that the company has “substantial room to reduce costs”.
The CFO told investors on Monday that spending discipline was needed “on both on a per vehicle cost and on a company-wide level”, and that after the company delivered its first ever FF91 EV, the target is now to “ramp up production in conjunction with those cost cuts”.
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However, when questioned by an analyst, Maroko says that the company is “not yet ready to disclose” any guidance on volumes required to get to a cashflow or Ebitda breakeven level, despite “having a sense internally”. The company reported a net loss of $124.9mn in Q2, bringing the company's accumulated deficit of $3.8bn since beginning operations. But it tried to assuage any investor grumbles by attributing the losses to essential capex.
“I think it is important to understand the perspective that this figure is representative the amount of capital which has gone into building the business into where it is today,” says Maroko, who joined the firm late last month in the wake of an earnings restatement announcement. Cash balance at the end of the quarter was just $19.4mn, but the finance chief stresses there is a further $171.3mn of "gross committed funding", as well as an equity credit line of "up to $350mn".
“I am sure there will be a lot of attention paid to our vehicle production and vehicle delivery numbers," Maroko continues. But while citing an estimated 10,000/yr vehicle production capacity, he urges that current production and delivery numbers should be taken with a pinch of salt.
Exclusivity
“The number of vehicles produced and delivered this year, while obviously important, does not meaningfully determine the long-term value of our business. What drives our long-term value is our ability to achieve product-market fit,” he says.
Achieving material volume is not on Faraday Future’s list of priorities, as the company believes it operates in a unique market segment, which CFO described as “a hybrid of technology, luxury, and performance”.
It is true that FF is in rarefied air with respect to the price of its EVs; the FF91 tips the scales at $309,000, with its nearest EV pure play competitor being Lucid, whose most expensive EV, the Sapphire, sells for around $250,000. But the market crossover between FF and Lucid may be greater than CFO is prepared to admit, as both companies serve the luxury, high performance EV segment, although Lucid addresses the sedan and FF the SUV segment.
Nevertheless, FF is choosing to double down on exclusivity. “At this stage in the business, we are being very strategic and selective in deciding who we deliver our vehicles to,” says Maroko.
Earlier this month, it announced another two of its so-called 'developer co-creators' and again the firm continues to walk a tightrope between credible motoring figures and vacuous celebrity. Legendary British racing driver Derek Bell was joined by Kelvin Sherman, an agent who boasts collaborations with Justin Bieber, Kendall Jenner and Kanye West among others.
“I encourage analysts and investors to look at other publicly traded, ultra-high-end vehicle manufacturers. You will see that huge production and delivery figures are not requirements for establishing meaningful market capitalisation,” Maroko continues. “What is required for us is improved margins, increased awareness of our vehicles, and the creation of brand strength.”
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
