Troubled Chinese electric vehicle (EV) startup WM Motor has filed for bankruptcy, underscoring the difficulties faced in the highly competitive EV market that once positioned it as a rising star in the industry.
The company attributed its operational challenges to the impact of the COVID-19 pandemic, a sluggish capital market, and rising costs in raw materials. Nevertheless, the company pledged to make a comeback once it finalizes a restructuring plan in collaboration with global investors.
The company said on its official Weibo account, China’s popular Twitter-like microblog, on Oct. 10, “WM Motor’s planned reorganization will introduce strategic investors from across the globe to achieve its rebirth.”
From 2019 to 2021, its annual business operations losses doubled to $1.13 billion. The company has struggled since last year when it faced a sharp drop in car deliveries. Its total number of cars sold in 2022 was down by about one-third compared to the previous year, according to Chinese news portal Sohu.
Last month, Apollo Future Mobility Group canceled a $2.02 billion deal to purchase the company, citing financial market uncertainty, among other factors.
Overcrowded Market
The Chinese EV industry is overcrowded, with approximately 200 car manufacturers vying in a fiercely competitive market. Many of these players entered the market between 2018 and 2020. China tech giants like Huawei and Xiaomi invested in the industry, and real estate developer Evegrande also has an EV unit. During the pandemic lockdowns in 2022, competition escalated as Tesla cut prices, leading to many local EV carmakers following the move.Nikeik Asia cited research from U.S. consulting firm AlixPartners, which anticipates that, by 2030, less than 20 percent of 160-plus Chinese EV brands will achieve financial viability.
According to South China Morning Post, citing calculations made by China Business News, intense competition from major EV brands has led to the closure or financial distress of at least 15 prominent Chinese EV startups, including WM Motor, collectively capable of producing 10 million cars.
He Xiaopeng, CEO of EV startup Xpeng, stated in April that, by 2027, only eight EV manufacturers would remain in the market, as smaller brands wouldn’t be able to compete with larger ones in the rapidly expanding industry, the Post reported.
Obsolete EVs are being abandoned and accumulating in various regions of China due to intense competition and the discontinuation of government subsidies, Bloomberg reported.
China accounted for a significant share of the global EV market, registering two-thirds of the total 5.4 million EVs sold last year. Additionally, it holds a dominant position in the global car battery market, commanding approximately 76 percent of the market share, Politico reported.
However, in several key markets outside China, Chinese EV makers face growing obstructions from local governments.
In the United States, Chinese EV manufacturers face challenges competing with local brands, primarily because of the substantial 27.5 percent tariff introduced during the Trump administration to safeguard American carmakers. In Australia, the government has taken measures to restrict Chinese investment by preventing the acquisition of a local lithium producer and stopping a Chinese investor from raising its stake in a rare earth mine. Furthermore, the Indian government has thwarted investment plans by prominent Chinese EV manufacturers like BYD and Great Wall Motor in the country.
Nevertheless, in Europe, Chinese EVs benefit from a reduced tariff of 10 percent and favorable green policies, which have created opportunities for their expansion within the European Union. Consequently, European automakers find it challenging to compete in the EV sector within their own market, predominantly against Chinese rivals.
