EV Bankruptcies in China: WM Motor goes bankrupt
Promising Chinese electric vehicle startup WM Motor (also known as Weltmeister) has filed for bankruptcy.
In a document filed in a Shanghai court on Monday, WM Motor indicated that it had faced operational problems in recent years. It said in a note on its Weibo page that production and sales had not sufficiently covered expenses, reversed losses and satisfied debts.
China's auto industry experts say the company's financial problems have been attributed to a number of factors, including intense competition in China's EV market, rising costs and supply chain disruptions, as well as the repercussions of the pandemic and market fluctuations. EV startups often face difficulties in securing the capital needed for operations and growth.
It is estimated that by 2023 there will be around 200 electric vehicle (EV) manufacturers in China, frankly too many, even for a large market. This is a direct result of the Chinese government's goal to have 25% of all new car sales be electric by 2025. The market is so large that several EV manufacturers are starting to falter due to price wars rapidly growing led by large manufacturers such as SAIC and BYD.
A report from Globe Newswire indicated that in September this year, US-listed used car retailer Kaixin Auto Holdings proposed a non-binding acquisition term sheet with WM Motor, aiming to help the troubled electric vehicle maker offering it a new market. According to the company's stock prospectus released in June 2022 for a planned Hong Kong IPO, WM Motor's annual losses rose to 8.2 billion yuan ($1.13 billion) in the three years leading up to 2021. The company it never had any profits.
This step came after WM Motor's previous attempt at a shell listing through a reverse takeover with Hong Kong-listed Apollo Future Mobility, which failed. Unsuccessful listing attempts on the Shanghai STAR Market and Hong Kong were interpreted as last-ditch attempts for the company.
As early as 2020, automotive experts in China predicted that due to the pandemic, niche EV manufacturers would quickly go into crisis as demand and government subsidies dried up. They weren't wrong.
In the fourth quarter of last year, Freeman Shen, CEO of Shanghai-based WM Motors, announced drastic spending cuts via an internal company letter. Managers' salaries were reduced by 50% and those of other employees by 30%. Bonuses were also canceled and “next payday postponed.”
Shen attributed the company's problems to COVID, market declines, supply chain challenges and a sharp increase in raw material costs. He wrote to employees: “I hope you all understand, and together we can survive the winter.”
According to a November 2022 report by Barry van Wyk in The China Project, the company was losing money from the start due to product defects that led to explosions and fires. Unfortunately, videos of WM cars burning quickly spread online
.In October of that year, Weltmeister recalled some of its vehicles due to a spontaneous combustion problem, which the company attributed to defects in the battery manufacturing process. Chinese business news website 36kr has recorded at least 10 spontaneous combustion incidents involving Weltmeister cars from 2020 onwards.
This won't be the last Chinese electric car company to go bankrupt
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The article EV Bankruptcies in China: WM Motor goes bankrupt comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/fallimenti-ev-in-cina-la-wm-motor-va-in-bancarotta/ on Sat, 21 Oct 2023 09:23:08 +0000.