(Yicai Global) Oct. 23 -- The shareholder dispute at American carmaker Faraday Future will not affect its Chinese arm's plan to build a factory in Guangzhou, according to an insider at the local investment promotion office.

Evergrande FF Intelligent Automotive's plan to build a plant at the Nansha Development Zone is in full swing, the anonymous source told National Business Daily yesterday. The power tussle between Faraday's founder, the controversial Chinese entrepreneur Jia Yueting, and white knight investor Evergrande Health Industry Group will not have any impact, he added.

Faraday's parent Smart King obtained the rights to 400,000 square meters of land in Nansha via an auction in April this year, and planned to build an all-electric vehicle factory there.

Evergrande Health, a subsidiary under property giant Evergrande Group, agreed in June to pay USD2 billion for a 45 percent stake in Smart King. It was scheduled to pay USD800 million this year, USD600 million next year and the same amount in 2020.

It had already paid the initial tranche in May. In July it signed a supplementary agreement to make a USD700 million payment the same month, as an advance on the later installments, provided certain requirements were met. At this point, Faraday had already burned through the initial payment.

But Faraday filed a request at the Hong Kong International Arbitration Center on Oct. 3 in an effort to revoke Evergrande's right to select who can invest in the carmaker and end all agreements between the two companies. The complainant believes that Evergrande flunked on the payment it should have settled in July, while the investor claims that Faraday did not meet the requirements outlined for the advance.

Neither party can disclose what those conditions were because of a confidentiality clause in the contract, a source close to Evergrande told Yicai Global.

Plodding On

A National Business Daily reporter visited the construction site for Evergrande FF Intelligent Automotive's production base in Guangdong on Oct. 13, and saw that despite the tiff between the shareholders, building work for the factory is still underway.

Workers at the site were operating pile drivers to set the foundation supports for the plant.

Evergrande Health has been working closely with the Nansha authorities, the investment board executive said. The infrastructure for the project will take some time to complete, maybe about a year, he added.

Who's in Charge?

One of the major puzzlers surrounding Faraday Future is figuring out who is actually running the show. Evergrande Health believes that it, as the firm's largest shareholder, allows Jia additional power at shareholders meetings so he can make major decisions for the firm. Jia holds 33 percent of the company and gets 10 votes for each of his shares. He has five directors on the seven-seat board, whereas Evergrande Health does not play a major role in Faraday's daily administration.

But that power is only granted on the basis that Jia can get mass production of Faraday's first car, the FF91, in place by the end of this year -- something which is looking less and less likely given the current lack of cash. If Jia fails to hit this target, his voting rights will be transferred to Evergrande Health, per an agreement signed by the pair.

Faraday has accused Evergrande Health of trying to take ownership of the China unit and the entire company's intellectual property. It has also asserted that the investor is trying to prevent Faraday from alternative funding so it can press on with bulk manufacturing.

Getting mass production underway has not been smooth sailing so far. A sample car caught fire after a display for company employees and their families last month due to issues with the battery, a source close to the carmaker told Yicai Global. He also said the firm is refusing to pay suppliers and has been letting staff go.

Faraday confirmed layoffs on Oct. 21, and announced that it would be cutting all of its employee's salaries and hourly wages by 20 percent.

Editor: James Boynton