How Do Faraday Future Reduce Their Operational & Labor Costs

Faraday Future is an American startup company established in 2014 and focused on manufacturing electric vehicles. Eight years have passed since its inception, and Faraday Future is still not able to launch its first production vehicle FF 91. There are multiple reasons for this delay. But one of the most important factors is the financial struggles the company was going through these years. Faraday Future is now working to reduce its labor and operating costs.

In August 2022 FF announced that it will further raise $600 million worth of investment as funding since they wanted to deliver its flagship all-electric model FF 91 later this year.

Faraday Future Luxury Electric Car
Faraday Future Luxury Electric Car

As part of a new financing agreement, the firm will get an initial investment of $52 million in funding [1].

Most EV startups that claimed to disrupt the automobile industry by offering high-tech solutions are now struggling to secure themselves from decreasing cash flows and rising inflation. Faraday Future is not different from other EV startups that went publicly listed through blank check mergers.

The EV industry does not progress at a much more rapid rate this year as compared to previous years. The reason for this decline in performance is the strict regulations and rising prices of raw materials [2].

To combat financial difficulties, Faraday Future is now trying to reduce its operational and labor costs. For doing so, multiple strategies have been made and will be adopted in the future. In this article, we have discussed some of the strategies FF is adopting to reduce these costs and go ahead with launching their vehicle soon.

Read Key Differences between Faraday Future and Tesla

Buildup Manufacturing Facility in China

With over 1.4 billion population, China is one of the fastest-growing economies in the world. China ranks among the second largest economy per nominal GDP after the U.S. Over the past four decades, the Chinese government has gradually opened its economy to investors around the world.

This has made China one of the top exporters in the world accompanied by an industrial policy that promotes local manufacturing [3].

In the last two decades, most American companies have built their manufacturing plants in China. To take advantage of low-cost labor and established infrastructure.

Faraday Future Reduce Their Operational & Labor Costs
Faraday Future Reduce Their Operational & Labor Costs

In June 2022, Faraday Future shared the news that it has been planning to build up a manufacturing facility in China by 2025.

The company further declared that they are seeking a suitable location to build its future vehicle facility that will also serve as the local headquarters for the Chinese market.

There are multiple reasons for entering the Chinese market, despite the company facing financial challenges and SEC investigations.

According to Faraday, having a presence in China would enable the business to reduce costs, minimize lead times, and resolve supply chain complexity. While also manufacturing customized vehicles for the regional market [4]

Squeezing Current Manufacturing

At the time of its foundation, Faraday Future planned to introduce seven different electric vehicle portfolios but changed the plan after some years. The reason is simple, FF has faced financial crises at different points in time.

Now, they have shifted their focus to developing just two models: FF 91 Futurist Alliance and FF 91 Futurist. According to the news report shared by Reuters, the company also squeezed its planned factory size in North Las Vegas, Nevada.

As per the change plan, FF will produce 10,000 cars per year instead of 150,000 in 2015. FF wanted to extend its manufacturing facilities but will do so in the future after getting enough sales of the two models [5].

The report also disclosed that Faraday Future may introduce FF 81 model which is lower in price compared to the high-end luxury model FF 91. The FF 91 car could have a price tag of $300,000. But the company is currently developing this model with two variants.

Manufacturing and doing R&D work on a single model is a cost-saving option for a company already facing a crisis. Though FF has declared the date of launching their first car later this year, car enthusiasts are still waiting to get the flagship FF 91 model all-electric vehicle [5]

Faraday Future Reduce Their Operational & Labor Costs
Faraday Future Reduce Their Operational & Labor Costs

Read Faraday Future Luxury Electric Car FF 91 

Downsizing

Downsizing is a process of reducing a company’s workforce or a division to cut costs in case of a financial crisis or recession. According to the Verge; To keep the electric vehicle startup running while it battles with its key investor. Faraday Future is lowering the pay of some of its staff by 20 percent and laying off some others in 2018.

The company’s ultimate objective of shipping the first production model of its premium electric car the FF 91. By the end of that year, had suffered a major setback. As a result, till the present year, FF is still delaying the delivery of the FF 91 model [6].  

The layoff and salary cutting occurs in 2018, and the reason behind this is the back-off by a primary investor China’s Evergrande Health Industry Group Ltd. Evergrande Group refuses to pay a $2 billion investment to FF, which was already going under the financial crunch [7].

Read How Much Faraday Future Invested In Their Company

After Evergrande refused to hold its financing contract, Faraday Future is now trying to reduce its operational and labor costs. The company has taken the tough decision of downsizing. Although this has created multiple challenges for the company, it is also unavoidable [6].

The success of a company’s long-term corporate strategy is closely related to employee retention rates that are high and low turnover rates. Even though downsizing is a temporary solution to reduce high labor costs.

Although for a limited time FF has done layoff to reduce costs. It is advised to use HR strategies that will not only keep good personnel but also improve the quality of the products by utilizing their valuable experience.

Sustainable Production Methods

Achieving a sustainable manufacturing process will not only help to save energy costs but also protects the environment. Besides delivering an all-electric vehicle which shows the forward-thinking approach of Faraday Future toward clean energy technologies. FF also utilizes a sustainable manufacturing approach in production [8].

Faraday Future Reduces Labor Costs
Faraday Future Reduces Labor Costs

Faraday Future is implementing the utilization of sustainable materials and procedures by using cutting-edge production techniques.

Designers at FF utilize the conscientious design approach in making a final product. They design every machine and part to be used for years or even decades.

They create cars with the full life cycle in mind, so the majority of their parts may be recycled or repurposed when a car reaches the end of its useful life. Therefore, sustainable production techniques not only save operational costs but also make our planet a cleaner and greener place to live [9].

Read Faraday Future FF91 – The Fastest Charging Electric Car: How It Changes The Future of Charging? 

Variable Platform Architecture

To increase efficiency and productivity, Faraday Future built every vehicle based on the Variable Platform Architecture (VPA). This specific architecture not only helps in reducing costs but also provides robustness and is highly adaptable to facilitate a wide range of vehicles.

The idea of VPA is based on the modularity of the parts to be assembled. For example, the flat battery pack technology used in FF vehicles can be replaced and repaired with lesser maintenance [8].

Further Recommendations To Reduce Labor and Operating Costs

This section recommends any further approaches to reduce labor and operating costs that can be adapted at Faraday Future.

Lean Manufacturing

In lean manufacturing processes, the non-value-added process will be removed from the system. It not only saves labor costs but also increases labor productivity. Lean production increases the whole system’s efficiency. Therefore more units can be produced by workers, reducing labor cost per unit [10]

Provide Training

All workers at the factory should be well-trained in their respective domains. Initial and ongoing training programs should be held at FF which empower the workforce to implement best practices in production. It will reduce errors and enhance productivity [10].

Increase Safety

FF should invest in increasing their employees’ safety within their facility. Employees are the most valuable asset for any company. Therefore safety protocols not only reduce the chances of accidents but also reduce labor compensation costs [10].

Standardization

Standardization of processes and procedures will increase production as well as in achieving economies of scale. Adopting standardization in manufacturing will decrease errors, increase productivity, and enhance workers’ efficiency [10].

Read Battery Replacement Cost for Electric Scooter

Faraday Future is already implementing a VPA approach to manufacture every part of the car that considerably reduces operational costs.

Faraday Future FF91
Faraday Future FF91

Technology Implementation

Although FF has the edge in implementing hi-tech engineering solutions for all phases of manufacturing. Whether it’s an AI-based user interaction program, the use of FF Echelon Inverter, zero gravity seat design, or multiple other tech aspects already discussed. Faraday Future is bridging the gap between traditional traveling with future ways of mobility.

Conclusion

By reducing labor and operating costs will add up a become a significant part of Faraday Future’s budget. While there are multiple ways to minimize these costs and increase the overall productivity of a company.

As we have discussed how FF is implementing various approaches to minimize these costs. We have also recommended some of the strategies that can be adopted by FF to enhance overall efficiency. We hope that the challenges faced by FF will be proactively tackled by their management and launch the flagship vehicle soon.

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