LeEco is currently facing financial difficulties due to their rapid expansion in various businesses, but what does this mean to the automotive industry?
According to Bloomberg, Jia Yueting – LeEco’s CEO – apologized to shareholders and pledged to slash his income to 1 yuan (15 cents) in a letter sent to the company’s employees.
“No company has had such an experience, a simultaneous time in ice and fire. We blindly sped ahead, and our cash demand ballooned. We got over-extended in our global strategy. At the same time, our capital and resources were in fact limited”, Jia wrote.
But why is this information so important, you might ask? Well, for starters, the entrepreneur’s main venture – LeEco – acts as an umbrella company for a number of businesses, including LeEco’s automobile division, Faraday Future, and other partnerships associated with them.
The fact that LeEco is running out of cash could mean the delay (or worse) of its own LeSee autonomous vehicle, Faraday Future’s upcoming all-electric model, and even Aston Martin’s RapidE model – which began development earlier this year.
Regulatory finding show that Jia’s empire relies on a “risky financial model”, as the Chinese billionaire is using his original, successful business, Leshi (the equivalent of Netflix), as a launching ramp for his other companies. To make matters worse, Leshi’s stock has plummeted by almost a third since the start of 2016.
Moreover, in his memo, Jia accuses the car division for the reckless spending, saying it already devoured 10 billion yuan ($1,5 billion) in early development. By the looks of it, the future looks bleak, but it’s not over until the fat lady sings.