Byton suspending operations for six months due to financial trouble

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Chinese EV startup Byton is halting operations for at least six months due to financial problems that have been exacerbated by the COVID-19 pandemic, the company has confirmed to The Verge, following reports from The Detroit Bureau and local media. This comes after employees in China have complained they are collectively owed millions of dollars while the company struggled to complete a $500 million funding round.

Byton already furloughed hundreds of workers at its North American headquarters in Silicon Valley in April and all but admitted that its first vehicle — an all-electric SUV with a massive dashboard screen called the M-Byte — would be delayed again due to the impact of the pandemic. This is all despite Byton being backed by China’s oldest state-owned automaker, First Auto Works (FAW), and having already completed a new factory in Nanjing, China, last year.

“Like everywhere, the COVID-19 [pandemic] has posed great challenges to BYTON’s funding and business operations,” Byton spokesperson Dave Buchko said in a statement to The Verge. As a result, he said, the company’s management and its board of directors decided to implement the six-month suspension. Most of the company’s employees in China will be furloughed, with “only a small group of the team will be retained to stand by for possible business needs.”

Byton was founded in 2016 with backing from Chinese internet giant Tencent and Taiwanese manufacturing conglomerate Foxconn by former BMW executives Carsten Breitfeld (who led the i8 program) and Daniel Kirchert. Byton announced the concept version of the M-Byte at the 2018 Consumer Electronics Show, and shortly after, it revealed that FAW was investing in and partnering with the startup.

The FAW deal was initially seen as a vote of confidence in what Breitfeld and Kirchert were building, especially since so many other EV startups at the time were struggling for funding and desperate to partner with big OEMs. But it eventually became a source of tension for Breitfeld, who left the startup in early 2019. Last September, as The Verge first reported, Breitfeld said that the Chinese government — via FAW — “pushed the direction of Byton [to a place that was] not in line with what I thought we should do.”

Breitfeld said at the time that Byton had used the Nanjing factory and other assets as collateral for the money that FAW invested and that he felt the state-owned automaker was “going to drive it to a stage where the whole Byton thing will be shut down, they will just keep the plant and the [electric vehicle] platform.”

Breitfeld’s exit is, in fact, now part of a new legal dispute between the startup and its co-founder. In August 2019, Byton filed a previously unreported lawsuit against the Breitfeld accusing him of stealing and using the startup’s trade secrets at Iconiq, a separate Chinese EV startup that he worked following his split with Byton (and before he became CEO of Faraday Future). Byton claims Breitfeld announced his new position with Iconiq at the Shanghai Auto Show in April 2019, despite not resigning from Byton until the following month.

The also startup alleges that Breitfeld wrongfully poached employees on his way out, that they were “using and relying on Byton’s confidential and trade-secret information to allow Iconiq to compete directly with Byton,” and that “many of the depictions and descriptions of lconiq’s vehicles are remarkably similar to Byton’s vehicles.”

Breitfeld has disputed much of this in court filings and contends that Byton’s board of directors removed him as CEO in January 2019 before ultimately terminating him in April of that year. Breitfeld also alleges that Byton only filed the lawsuit to preempt any legal action he might take to receive the millions of dollars of compensation he believes he is contractually owed. That includes the remainder of his annual net salary from 2019, plus “deferred compensation benefits, pension insurance, German pension, annual leave, home trip expenses,” plus the value of “tax advice, housing, cars, driver, school fees for his children, [and] guaranteed salary for his wife,” which were all provided by Byton. Breitfeld also believes Byton should “repurchase of all of his equity interest” in the company.

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