Chinese EV startup WM Motor files for bankruptcy
The Chinese electric vehicle (EV) startup, WM Motor, has officially filed for bankruptcy. This development represents the decline of a once-promising contender in the Chinese EV industry, which is witnessing intensifying price competition in the world’s largest automobile market.
The bankruptcy case of WM Motor is being processed by a court in Shanghai, as indicated by a filing dated Monday on the national enterprise bankruptcy information disclosure platform. This filing underscores the challenges faced by some players in the highly competitive and rapidly evolving electric vehicle market in China.
WM Motor had initially shown promise as a rising star among Chinese EV manufacturers but is now grappling with financial difficulties that have led to its bankruptcy filing. This situation reflects the broader dynamics and challenges in the electric vehicle industry, where companies must navigate fierce competition, evolving consumer preferences, and shifting market dynamics to establish a sustainable presence.
In September, Kaixin Auto Holdings, a U.S.-listed second-hand car dealer, had announced a non-binding acquisition term sheet with the beleaguered electric vehicle (EV) manufacturer, WM Motor. This deal was significant as it came on the heels of WM Motor’s failed attempt at a backdoor listing through a reverse takeover with Hong Kong-listed Apollo Future Mobility.
The collapsed deal with Apollo Future Mobility had been viewed as a crucial survival strategy for WM Motor, following two previous unsuccessful efforts to secure a listing on Shanghai’s STAR Market and the Hong Kong stock exchange. These difficulties underscored the challenges faced by WM Motor in its pursuit of capital and stability within the highly competitive and dynamic EV industry in China.
Kaixin Auto Holdings’ involvement in a potential acquisition of WM Motor had raised hopes for a possible lifeline for the troubled EV maker, but the subsequent bankruptcy filing suggests that the company’s financial challenges ultimately proved insurmountable.
WM Motor, founded in 2015 by the respected auto industry veteran Freeman Shen, initially held significant promise and was considered one of the emerging stars in China’s electric vehicle (EV) startup landscape. It was often mentioned alongside other prominent Chinese EV companies like Nio, Li Auto, and XPeng. WM Motor boasted a roster of notable backers, including Chinese tech giant Baidu and Shanghai’s state-owned asset regulator.
Despite the early optimism and robust investor support, the Shanghai-based startup encountered considerable challenges in the capital-intensive automotive industry. It struggled to achieve profitability, which is a common hurdle for companies in the competitive and financially demanding EV sector. These financial difficulties ultimately contributed to WM Motor’s decision to file for bankruptcy, marking a significant setback for the once-promising company.
WM Motor faced considerable financial challenges in the lead-up to its bankruptcy filing. According to the company’s stock prospectus released in June 2022 for a planned Hong Kong initial public offering (IPO), the company reported annual losses that had doubled to 8.2 billion yuan ($1.13 billion) over the three-year period leading up to 2021. These substantial losses were indicative of the financial strain that WM Motor was experiencing despite its early promise and strong investor backing.
The Chinese passenger vehicle market exhibited signs of recovery in August, with year-on-year sales growth after several months of decline. This improvement was attributed to deeper discounts and government tax incentives for green vehicles, which helped boost consumer sentiment. However, lingering concerns remained about consumer spending on significant purchases like cars, given the uncertainties surrounding the post-COVID economic recovery in China.
WM Motor’s financial struggles and eventual bankruptcy filing reflect the challenges faced by some players in the Chinese automotive industry, which continues to evolve amid changing consumer preferences, regulatory changes, and economic uncertainties.
