By
Godfrey Benjamin
January 2nd, 2024
WM Motor’s struggle highlights the challenges smaller companies and new startups face in China’s fiercely competitive EV market.
China’s electric vehicle (EV) landscape is witnessing a significant development as WM Motor, a notable player in the industry, officially filed for bankruptcy protection in a Shanghai court. The announcement came through a notice published on China’s national enterprise bankruptcy information disclosure platform.
WM Motor, founded in 2015 by the renowned automotive veteran Freeman Shen, initially appeared as a promising contender among the rising EV startups in China. It stood shoulder to shoulder with industry giants like Nio (NYSE: NIO), Li Auto (HKG: 2015), and XPeng (NYSE: XPEV), bolstered by the backing of influential entities including Chinese tech giant Baidu (9888. HK) and Shanghai’s state-owned asset regulator. This strategic support lent early credence to WM Motor’s prospects in the fiercely competitive electric vehicles in the country.
Apollo Backs Out of $2 Billion Acquisition Deal with WM Motor
However, the company’s journey took an unexpected turn as it grappled with financial challenges amidst a rapidly evolving EV landscape. Last month, the company faced a significant setback when Hong Kong-listed Apollo Future Mobility Group Ltd backed out of the proposed $2.02 billion takeover deal.
The company cited factors such as prevailing uncertainty in the financial market sentiment as the reason for the deal’s abandonment. The failed acquisition with Apollo Future Mobility was seen as a lifeline after two prior unsuccessful attempts to secure listings on Shanghai’s STAR Market and the Hong Kong Stock Exchange.
That same month, another car company, the US-listed second-hand car dealer Kaixin Auto Holdings (NASDAQ: KXIN), had revealed a non-binding acquisition term sheet with the struggling EV manufacturer before the recent bankruptcy filing.
The Company Faces Financial Crisis
The company’s financial crisis extends beyond the failed acquisition deal. Despite its initial promise and formidable backing, WM Motor found it challenging to turn a profit in the capital-intensive Chinese automotive sector.
Its annual losses ballooned to 8.2 billion yuan ($1.13 billion) over the three years leading up to 2021, as disclosed in its stock prospectus released in June 2022 in anticipation of a planned Hong Kong IPO.
In September 2022, the company secured $1.47 billion in a series D funding round. Despite the funding, the firm has officially started a bankruptcy proceeding at a Shanghai court.
Meanwhile, WM Motor’s struggle highlights the challenges smaller companies and new startups face in China’s fiercely competitive EV market. With giants like BYD Co and Geely Automotive Holdings Ltd dominating the scene, the company found it increasingly difficult to stay afloat.
The new development unfolded against a broader recovery in China’s passenger vehicle sales, ending a streak of losses since May. This revival can be attributed to enticing discounts and tax incentives for environmentally friendly vehicles, which have contributed to a more positive consumer sentiment in the Chinese automotive market.