Funding of FF91 Chinese-Super NEV Car Not a Problem in Next Few Months, LeEco’s CEO Says

Zhou Jiangong

(YicaiGlobal) Jan. 16 — Jia Yueting, the founder of Leshi Internet Information & Technology Corp. [SHE:300104], which trades as LeEco and recently unveiled their super new energy vehicle, the FF91 to great acclaim in Las Vegas, Jan. 3 2017, spoke exclusively to YicaiGlobal’s CEO, revealing funding is to be resolved in a matter of months.

Jia Yueting has made a personal investment into every new product of his company LeEco and is hardwired to prepare for future challenges, including the funding of future ventures and spoke exclusively to Yicai’s Zhou Jiangong of the challenges ahead.

Below is an abridged version of the interview:

Zhou: First, I must extend my congratulations on the warm response to the unveiling of your FF91 in Las Vegas. Any thoughts to share?

Jia: I believe there are many possibilities for the FF91. I would say the release has been very effective overall. Everyone from the US to Chinese media and users now have different perspectives into the trend of next-generation vehicles. The FF91 is a revolutionary highlight of the trend.

Jia: I was impressed by the feedback from a vast amount of people who witnessed the unveiling. They really approve of the product the way it can locate a parking space and reverse itself within a very complicated outdoor environment. Technically, that’s a really demanding task. This feature would be very valuable in the future.

Zhou: You mentioned the word ‘future’. I have a picture in my mind – I envisage a big shopping mall where the parking lot is very crowded, the driver must circumvent this to enter. However, LeEco’s FF91 can orientate itself to get in and find an unoccupied spot. That is a killer feature. Do we have to wait until it comes true? How long until this works in reality?

Jia: Very soon. That function comes with the FF91 manufactured in batches. They will be delivered by 2018. You’ll see that function up and running upon delivery.

Zhou: Did you find any difference between the response of the US and Chinese media in their response to the release?

Jia: I did, indeed, but they both evaluated the product almost on a par. The Stateside-media was more objective, prior to the Jan. 3 unveiling, the US media, especially the mainstream outlets, did not report the story too thoroughly, or in great technical detail, as the FF91 had faced some issues recently. Now that the show is over, I think they have a very objective view about it and hold it in a high regard. They feel the FF91 is a leading product, a game changer in its field. I believe that is a fair view of Faraday Future’s achievements and creativity. The Chinese media gave equally high opinions. Many small media outlets still prefer to report the negatives, but that is immaterial. The facts remain that the product speaks for itself and stands out from the competition in a convincing fashion. We’re still very happy about how the media responded to the release of the FF91 overall.

Zhou: I’ve also read a lot of reports from western media, including the mainstream media and other sources. Apart from those positive responses, I believe it’s true that western media explored the story from the perspective of the technical and from the perspective of the new-energy vehicle industry quite distinct from the way the domestic Chinese media did.

Jia: Yes, that’s true.

Zhou: On the other hand, they raised many questions. The first of two points that struck me is that they doubt the ability of the FF91 to be mass produced.

Jia: The FF91 has reached the criteria for mass production, from research and development to a stage where over 90 percent of it is fixed. This is a very important criterion for mass production.

Zhou: What about funding?

Jia: We aim to solve this problem in a couple of months. I have also constantly invested personally in the FF91 and LeEco is also giving constant assistance.

Zhou: What will you do next to raise funds?

Jia: The next A-Round of funding will be launched soon.

Zhou: Do you hope to get funds from North America or China?

Jia: It will be North America and Europe. China is also being considered.

Zhou: Now, China is tightening up policy on outbound investment. Will that influence your financing in China?

Jia: It may not impact financing very much, however, I will consider it as a factor. So, North America and Europe are my first choices for funding.

Zhou: Are there potential investors approaching you after this release?

Jia: In fact, they are there all the time. Many far-sighted investors are watching the whole LeEco vehicle plan. After our launch on Jan. 3, especially when the crowds saw the test drive, they got a better understanding of the FF91 and LeEco.

Zhou: What kind of investor do you want? And, from what background?

Jia: The first thing is their grasp of the concept. Does the investor really recognize the trend and direction of the development of the automotive industry? Secondly, do they want to invest money or time to promote the reform of an industry that has a hundred-year history? Thirdly, is the investor able to be strategically cooperative? These are all key points when we make our judgement.

Zhou: When people talk about LeEco now, they don’t simply focus on its contribution to the history of the automobile industry. In fact, people focus more on its whole capital chain.

Jia: Yes.

Zhou: Will you pull through the similar problems facing both automobile and smartphone enterprises, as your listed company is also in the same position of seeking financing?

Jia: I think that these difficulties are good stepping stones for the next big leap of the company. So, for LeEco, I think the difficulty with funding will not be a big problem and it will be solved in the coming months. Since the rapid pace of our corporate strategy was in automobiles and smartphones, the latter was still in a period of burning money last year. The automobile industry is still in a state of flux and demanding huge investment, thus we are facing big challenges on financing.

LeEco’s weakest link then was capital organization. So, we adjusted our strategy. First, our price setting policy will change a great deal. We will start to seek the rapid growth of positive cash flow, while maintaining the scaled rapid growth of our user base.

Second, we will slow down those projects which are important but not that urgent.
The third point is very important. We need to rapidly improve the competence of our financing team, to make our organizational ability meet strategic demands. The positive effects will be clear in a couple of months.

Zhou: You are still in a harsh period. You neglected to mention how to solve these difficulties. As an outsider, I think LeEco is in a very unfavorable environment now. To some extent, LeEco’s name, brand and standing have been severely damaged when a name is vital for financing. How do you now turn the tables to raise funds and attract investment?

Jia: Reputation is indeed a primary consideration, but in my opinion, if you are creating value and leading an industry’s progress, this also becomes very important. I believe there are far-sighted investors and those who are willing to drive the progress of this industry and society to make a big exploration and investment with LeEco. Now, there are more far-sighted investors in China than before. I believe that we will meet.

Zhou: We had an in-depth discussion in 2015. I was very impressed by your words at that time. You spoke of why LeEco always challenges itself and spoke of how this strategy may well bring the company down. The current situation LeEco faces reminds me of the saying that the method is always correct if your goal is correct. On reflection, you are doing this against those odds. Would you reconsider this method?

Jia Yueting: Whether we can make it depends on three factors, namely our objectives, method and our capacity to fulfill them, these represent the integral and crucial key factors.
First, I believe the direction, objective and model of LeEco to be correct and through it, a new model for the next generation will be created. Second, I also hold that LeEco is adopting the correct method. Method and capability are dialectical. When your capability is lacking, you will encounter problems even when you adopt the right methods. When you have a very strong capability, then the radical method you employ will have more effect. Thus, we cannot say whether it is right, or wrong, as it is subject to the same constraints.
The problem LeEco faces now is down to its capability, yet if we are capable, then our pace is correct. Of course, we will slightly slow the pace down, to make our method, or objective, match the improvements in our ability.
In the past, we always expected our organization would follow our strategy. But now it can be seen the capacity of some departments have not developed at the same pace, therefore we need to trim our objectives and method to strike a balance.
Zhou: Do you think there is still time to adjust?
Jia Yueting: Yes, absolutely.
Zhou Jiangong: As you are facing financing difficulties at present, are you willing to abandon one or two departments to sacrifice control at this juncture?
Jia Yueting: In fact, control is very important for the whole of LeEco. There are two reasons. On the one hand, LeEco’s approach is very forward-looking and the success of this will be related to the passion and commitment of the entire team, on the other hand, the technological innovation generated from coordination with each department brings about brand new product experience and product values, which is a very important competitive power. Hence, in the overall financing consideration, the right of control is a very important factor for LeEco. If the right of control is lost in some sectors, then coordination within LeEco will be significantly reduced and will have a negative effect on the development and formulation of strategies of the company.
Zhou Jiangong: You can also get a majority-voting right in China.
Jia Yueting: Yes, so in some sectors we can sell a large proportion of the shares, but the controlling right is very important to the entire LeEco ecosystem.
Zhou Jiangong: You will explain it to your investors very clearly, and it is a principle that you stick to, right?
Jia Yueting: Yes.
Zhou Jiangong: Some Chinese Internet companies will get a majority-voting right after going public in the US. Will you set up such a mechanism?
Jia Yueting: I will consider it.
Zhou Jiangong: When we talked about LeEco’s ambition to make automobiles in 2015, you said almost every member of your team objected to such a move. You put your own money in every new field that you aimed at. Do you think you were a little bit capricious?
Jia Yueting: Yes, to some extent, but I must create different things and take greater risks. We have never regretted any major strategic choice we made, nor admitted they were wrong. It’s just a matter of pace and ability, namely how the methods and capabilities better match the strategic needs.
Zhou Jiangong: You also mentioned that you will do what you should at the right time, and then adjust. Even though the probability of failure is as high as 99 percent, we will still try in view of the one percent probability of success. Then, there will be more shares and investments coming here in the future. So, will your words be regarded as irresponsible towards shareholders?
Jia Yueting: When we made such fundamental choices, why did I then choose to fund it with my own money? I did not expect to influence other investors as much as possible, as the risks would be borne by myself. In fact, I will stick to this in the future. LeEco’s corporate nature will bring continuous challenges, both external and internal in its future development, and we will still adhere to this idea. My opinion remains unchanged that, even if we have to take a risk, the consequence should be borne by myself to free our shareholders from similar risks.
Zhou Jiangong: As your personal financing capacity seems to have been stretched out to the max, it is hoped there will be more external funds coming in. Then, though you will maintain your controlling power over the company, other investors also must consider their own financial interests and returns. So, your strategy will change accordingly. How did you get through this dilemma by introducing external financing?
Jia: First, I will reiterate that our strategy will not change, simply that we must change our organizational competence. As I said before to you, about engaging in the automobile industry, with its higher demands, stricter access standards, we now feel thankful for the lessons learned there.
Second, we have seen a significant historical opportunity, the integration of vehicles and the internet, and this may trump Apple’s achievements of integrating television and the internet eight years ago. Due to this, I have always focused on the industrial opportunity of the integration of television and the internet, which brought about our groundbreaking product, the Super TV of our LeTV division. One or two years later, there will be an integration of vehicles and the internet, which will bring a greater boom. So, LeTV is a company meeting such conditions. There are five technological difficulties facing the vehicles of the future – the internet, internet technology, artificial intelligence, the powering of the vehicle and the vehicle itself. The breakthrough in these five respects may bring about a radical innovation in products. If our expectations are realized, LeTV has the capacity to do this job. So why not concentrate our efforts towards this? Then, our staff all began to prepare for the business, and we have made our formative steps early in 2013.
Our strategic partner, Faraday released the car on Jan. 3, and everyone realized that the car is a highly-advanced product and may indeed represent the future trend in the auto industry. This was also our prediction of the car four years ago, which underpinned the entire product development process. It also means that we never make major strategic decisions on impulse. By taking this strategic move, we’ll be able to achieve something that Chinese automakers were unable to do in the past several decades. We’ve created a totally new model…and this is what I always advocated – the fusion of internet-based consumer electronics and the car industry offers a once-in-a-lifetime opportunity for Chinese companies to surpass their European, American, Japanese and Korean competitors. Once we gain an advantage in this field, we’ll be able to change our future.

Zhou Jiangong: I’m curious to know, what is the government’s attitude to this? Because I know that the government is very positive about Chinese companies acquiring foreign automakers. For example, the government offered funding for the acquisition of Volvo. So, what is the government’s attitude toward companies like LeShi?

Jia Yueting: Some forward-looking provinces…especially those run by leaders with great vision…they think highly of Le Shi’s model, and have pledged very strong support. We’re very grateful for this. But Le Shi is a purely market-oriented company, and our relationship with the government is, in truth, not that close. Besides, I’m not very good at networking, so our communication with the government is limited. So, we still want to push forward the development of the FF91 supercar following a purely market-oriented approach, using advanced technology. But I’d still like to thank the Zhejiang government for their support, and the governments in some other provinces. We know that our model has been recognized by the people, so we spared no effort in pursuing our goal. After all, a company must rely on its own strengths. In the auto business, we’ve acquired a substantial amount of resources over the years, and such cumulative acquisition and development of capability in technology are what matters the most.

Zhou Jiangong: So, what you’re saying is that some local governments have agreed to provide you with financial support, but will you use it now?

Jia Yueting: Yes, some governments have pledged funding support, and we’ll consider the proposals so long as the conditions are fair.

Zhou Jiangong: If you had to give up one of the subsidiary businesses of LeEco, when you rank them, would you put the FF91 supercar at the top?

Jia Yueting: All the seven subsidiaries of LeEco are very important. I think we won’t reach a point when we must give up one, as it’s a strategic decision. We’re still very confident that our strategy is highly advanced. We won’t reach that point.

Zhou Jiangong: Do you think good luck has played a part in your success?

Jia Yueting: I don’t believe in luck. Whether a company will be successful is decided by itself. We believe that LeEco can control its own fate.

Zhou Jiangong: As Steve Jobs once said “The people who are crazy enough to think they can change the world are the ones who do”. Some people say that you’re a crook, and some others say that you’re crazy. What’s your comment on this?

Jia Yueting: First, I seldom listen to what others think of me. Whether they say good things or bad things about me, I think they have nothing to do with me. Because we believe, so long as we’re creating something that’s truly valuable to mankind, that’ll be enough. Other people’s opinions will disappear as things gradually evolve in the real world.

Zhou Jiangong: Thank you very much, Mr. Jia. I wish LeEco every success with its endeavors to overcome current difficulties, and to pursue even more ambitious goals.

Jia Yueting: Thank you.