SHANGHAI (Reuters) - China’s Leshi Holdings said on Tuesday it had secured commitments for $600 million to support its automotive unit and LeEco high-tech business, which has been grappling with a cash crunch.
In a statement sent to Reuters, Leshi said the fund commitments came from more than 10 Chinese companies. An initial tranche of $300 million would be delivered by the end of the month and be invested in the auto business and LeEco Global, it said.
LeEco, which has invested in high-tech products from electric cars to smartphones, was facing a shortage of cash and suffering from expanding too fast and in too many directions, its chief executive Jia Yueting told staff in a letter last week.
The announcement comes amid concerns that the cash-strapped group could run into a crisis or abandon its electric car ambitions - a project which has already cost it 10 billion yuan ($1.5 billion) in development according to Jia himself.
Zhou Jianping, chairman of Hailan Group, an apparel firm leading the fresh investment, was quoted in the statement as saying that they are injecting the fund to support China’s indigenous automobile industry as LeEco’s connected cars project could propel China to the top of the industry.
Jia has been vocal about LeEco’s ambition to usurp Tesla Motors with its electric supercar in development with Faraday Futures.
Richard Windsor, an independent technology industry analyst, said he expects financial pressures to force LeEco out of its automative business, where the company has little competitive advantage.
“I suspect that the automotive ambitions will be reluctantly curtailed which I think gives LeEco its best chance of success in its other endeavors,” he said.
Reporting by Sijia Jiang, John Ruwitch and Samuel Shen; Editing by Clarence Fernandez/Keith Weir