Welcome to The Morning Dump, bite-sized stories corralled into a single article for your morning perusal. If your morning coffee’s working a little too well, pull up a throne and have a gander at the best of the rest of yesterday.
Faraday Future Can’t Escape Faraday’s Past
We’re starting today with a story that picks up where one of my favorite Morning Dump headlines, “Faraday Future Continues To Produce More Drama Than Actual Cars,” leaves off. The Chinese-backed electric vehicle company has not delivered any cars as far as I can tell, but it has been the subject of increasingly awful stories, like “Chinese Tycoon Spent 8 Years, $3 Billion on EV That Went Unbuilt” from Bloomberg, which takes a deep-dive into death threats and all the cash-burn that’s been happening behind the scenes. Here’s the lede from that story: It’s worth noting that Faraday Future released this statement back in February about threats, per Inside EVs: The Bloomberg story doesn’t get better from there; the article goes on to make the case that the company’s founder, Jia Yueting, has been working behind the scenes to regain power at the company. Who is this guy? He sort of modeled himself as a Chinese Jeff Bezos-Elon Musk hybrid who built a vast empire that imploded on itself (he fled China in 2017 after a series of alleged frauds). These unfounded allegations have nevertheless continued against certain of the company’s officers and directors. Threats that began with lawsuits have escalated to threats of physical violence and even death threats. Well, he’s apparently making a comeback. From Bloomberg: It’s also worth mentioning here that the car doesn’t seem to be close to production, at least based on this review of a car we saw at Pebble Beach by Abby Bassett. From the review: But as YT reclaims power, it is over a company that’s under investigation by the US Securities and Exchange Commission in relation to the findings of the internal probe — information the Department of Justice has inquired about, too, according to Faraday. The startup also needs money, fast. After burning through more than $3 billion since it launched eight years ago, Faraday reported just $27 million in cash on Oct. 25th, and says it needs millions more if it hopes to finally ship its elusive SUV. I’m glad I’m not a billionaire because it seems like there’s a larger than usual risk of you buying something you shouldn’t buy, fixating on that dream, and slowly watching it unravel. Though, I suppose, the same could be said of us and our project cars.
Berkshire Sells More BYD Shares
BYD recently announced a 350% increase in profit as their electric car sales continue to soar in China. So why is their major backer, Berkshire Hathway (i.e. Warren Buffett) selling some shares? Is he worried about the future of BYD? Is this all a house of cards on the verse of crumbling? I don’t think it’s that serious. According to this Reuters blip, the amount that Berkshire sold was worth about HK$560.05 million or $71.35 million, bringing the company’s total stake down to 17.92% from 18.22% When Buffett bought into the company he spent about $230 million and, prior to this sale, had already made $600 million. Unlike some other billionaires, Buffett isn’t prone to making rash decisions and the slow sale likely reflects his philosophy. His firm can reap huge profits, cover his initial investment, and still own a substantial share of a company worth many many times what he paid for it.
Penske Pausing Its Used-Only Store Brands
The used car market isn’t going to suddenly get better, but there are some signs of improvement. In particular, a report from Automotive News today demonstrates that the big players in the space don’t think this used car boom will last forever: Roger Penske is one of the smartest people in the industry and his view is one worth listening to. While used car sales are still good and potentially profitable, the fundamentals are starting to shift. “We’ve really been moved out of our sweet spot because the cost of sale has moved up anywhere from $4,000 to $5,000,” Penske CEO Roger Penske said about Penske’s CarShop used-only unit Oct. 26. The best measure of the used car market is the Manheim Used Vehicle Value Index and right now it’s showing a mixed bag with wholesale prices declining from their pandemic highs but retail supply up nine days year-over-year.
American Axle Up For Sale?
There’s been a lot of buzz over American Axle, the Detroit-based Tier 1 supplier responsible for making the driveshaft and other drivetrain components in your car [Editor’s note: American Axle makes the entire drivetrain for the Jeep Cherokee Trailhawk; it’s impressive -DT]. In particular, Melrose industries might be into it. Why? I’m curious to see what the price is for this given that the acquisition market is a little soft and American Axle has annual revenue of over $5 billion ayear.
The Flush
There were some great Live Mas responses yesterday so here’s another question: If you were a billionaire, what company would you foolishly buy and allow to destroy you? I would probably buy a baseball team. Photos: BYD, Faraday Future, Penske, American Axle From the start, the corporate structure he set up seemed more like a shell game.
