Embattled Chinese electric vehicle (EV) start-up WM Motor
has filed for bankruptcy, sending a reminder to the rest of the industry about the cutthroat competition in the world’s largest automotive and EV market.
The Shanghai-based carmaker’s petition is being reviewed by the Shanghai No. 3 Intermediate People’s Court, according to a filing published on the national enterprise bankruptcy information disclosure platform on Monday. It normally takes six months before a court in China gives its verdict on a bankruptcy case.
WM said in an official post on Weibo, China’s Twitter-like social-media platform, on Tuesday that it would still aim for a rebirth funded by strategic investors from around the world.
“Among troubled EV start-ups in China, WM is the most well-known, as venture capital and private equity investors placed much trust in [founder Freeman Shen Hui] and its vehicles,” said Ding Haifeng, a consultant at financial consultancy Integrity in Shanghai. “Its failure is also a rude reminder to other start-up founders and investors that the fast-growing mainland Chinese EV market will become tougher for cash-strapped players because a flood of new models will hit the market in the coming two years.”
At least 15 once-promising EV start-ups
with a combined annual production capacity of 10 million cars have already either collapsed, or been driven to the verge of insolvency, as bigger players gain market share, leaving smaller contenders like WM to fight for scraps, according to a report by state-owned newspaper China Business News mid-last month.
Moreover, He Xiaopeng, the CEO of Guangzhou-based EV start-up Xpeng
, said as early as April that only eight EV makers would remain by 2027, because smaller players will not be able to survive the fierce competition in the fast-growing industry.
Founded in 2015 by Shen, a former CEO of Zhejiang Geely Holding Group
, and once viewed as a potential domestic rival to Tesla, WM raised about 40 billion yuan (US$5.5 billion) from investors such as Baidu, Tencent Holdings, Hong Kong tycoon Richard Li’s PCCW, the late Macau gambling magnate Stanley Ho’s Shun Tak Holdings and high-profile investment firm Hongshan.
The company has grappled with financial problems since the second half of 2022 due to a sharp fall in deliveries. Late last year, WM cut staff salaries by up to 50 per cent
and shut most of its showrooms across the mainland to overcome its financial troubles.
WM suffered another blow last month, when its US$2 billion reverse-merger deal with Hong Kong-listed Apollo Smart Mobility
collapsed. On September 11, US-listed second-hand car dealer Kaixin Auto said it had signed a non-binding agreement to buy WM by issuing a certain number of new shares, without disclosing the value of the deal. This attempt at a bailout by WM has also fallen through.
China’s crowded EV market has 200 players, ranging from conventional carmakers that are struggling to migrate to battery-powered vehicles and pure EV makers such as Tesla
to technology behemoths such as Huawei Technologies and Xiaomi, which plan to churn out smart cars by melding their expertise with hi-tech car technologies such as autonomous driving, self-parking and voice-activated controls.
Currently, one out of every three new cars taking to the mainland’s roads is powered by batteries. EV sales could amount to 8.8 million units this year, an increase of 55 per cent over last year, according to a forecast by UBS analyst Paul Gong.
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