By Mike Ramsey 

NORTH LAS VEGAS, Nev. -- Nevada is officially in the car making business.

Faraday Future Inc., an electric car startup financed by a Chinese billionaire, started construction on a new assembly plant in a dusty tract 25 miles north of the Las Vegas Strip.

The plot of land off Interstate 15 is surrounded by solar farms, a fireworks factory, marijuana growing centers. But soon the walls will go up on what state officials hope is an extension of the outsize gamble the state already has made on electric cars by backing Tesla Motors Inc.'s giant battery factory outside of Reno.

Nevada signed off on a total of $1.6 billion in incentives for the two projects, most of it for Tesla's factory. The plant from Faraday, though, requires a leap of faith. Faraday has no announced products and doesn't even have a public prototype. Nonetheless it has hired 700 people in the U.S., and it has pledged to add more than 1,000 additional people in California alone in the next four years.

"This is special," said Gov. Brian Sandoval. "This is a great opportunity for us to work together for a new beginning."

Faraday, based in Los Angeles, has promised to hire 4,500 people at the plant and invest $1 billion.

Nevada officials aren't blind to the risk. The state treasurer, Dan Schwartz, has refused to sell state bonds to finance infrastructure until Faraday proves it can finance the $1 billion project.

"We just want to go to sleep at night knowing they will follow through," Mr. Schwartz said in an interview.

He has requested a $75 million bond to ensure the infrastructure investments the state planned to make are paid. So far, Faraday hasn't met the conditions the state has set out to obtain the incentives. The infrastructure investments could be significant because the remote site has limited access to water, Internet and sewage.

The risk could prove its worth if it sets off a flurry of development from suppliers to the plant. Faraday says it has lined up 90% of the suppliers it needs to build its first cars -- though it hasn't chosen a battery supplier.

"We are just kicking off the process; we are excited to be part of the team," said Mervin Dunn, co-chairman of Futuris Group, a automotive seat maker and interiors supplier that is scouting sites nearby for a plant.

It would be easy to discount the Faraday, which has been working in secret for nearly a year, except for its vigorous hiring of dozens of people from Tesla and virtually every other auto maker in the world. It took Tesla five years to produce the low-volume Roadster using a Lotus chassis and an additional four years past that to introduce the Model S.

Faraday's plan is to launch production next year, though that would be a herculean effort given the start of construction on the plant.

Faraday is testing its electric car technology by putting batteries and motors into existing cars bodies. The company says only it will debut its first prototype "soon."

Faraday plans to build an electric car with long driving range and autonomous features. Executives have said the car might be used more like a shared vehicle, where people pay by the mile.

While Faraday aims to build and sell a car in the U.S., it also could be aiming to take advantage of China's fast-growing electric car market. China's incentives favor domestic manufacturers, and Faraday may qualify despite its Los Angeles headquarters address because it is financed heavily by Jia Yueting, a Chinese entrepreneur often compared with Tesla's Elon Musk.

Nevada has aggressively courted new businesses to diversify the state's economy. It has one of the lowest percentages of manufacturing employment in the nation. That could change with the opening of Tesla's gigafactory, which Tesla says will employ 6,500 when finished.

The massive structure is being built in phases. Tesla says its construction is ahead of schedule. The current building is large at 800,000 square feet, but below the 10 million square foot structure initially envisioned. It will be expanded over time, the company says.

Most of the incentives for the Tesla gigafactory are tied to a sales tax reduction. Tesla, so far, has only claimed $9.6 million in tax credits related to its investment in the site, according to state records. It, along with Panasonic Corp., have invested $374 million through the end of 2015.

Write to Mike Ramsey at michael.ramsey@wsj.com

 

(END) Dow Jones Newswires

April 13, 2016 19:26 ET (23:26 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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