The dying Weimar Peak has come full circle. On September 11, Kaixin Auto announced that it had signed a non-binding letter of intent for merger and acquisition with WM Motor, and planned to issue a certain number of new shares to acquire 100% of the equity held by its shareholders. A second-hand car dealer came to "rescue" WM Motor, which many people in the automotive industry did not expect. You know, at this moment, the "white knight"'s own delisting risk has not yet been eliminated.
Weima is waiting for the white knight
Shen Hui of PlayerUnknown’s Battlegrounds always hopes to beat Tian Banzi.
After experiencing falling sales, losses, layoffs, and store closures, in the past year, as the founder, chairman, and CEO of WM Motor, Shen Hui was still running his personal Weibo, and the outside world would have almost concluded that this new car-making force, which was once in the same echelon as Weilai, Xiaopeng, and Li Auto, was about to disappear.
However, according to the news, after Shen Hui’s height restriction order was revoked in early July, WM Motors shipped batches to Europe in mid-July, and after reaching an in-depth capital-level cooperation with Jizhaojia Smart Heavy Industry Group in Beijing in late August, WM Motors announced its entry into the Thai electric vehicle market on September 8. All kinds of actions are silently announcing that Weimaraner is still alive and is seeking a chance to survive overseas.
Weimar’s creditors also hope that Weimar will quickly borrow Apollo Travel to be listed in Hong Kong and complete self-rescue. However, on September 8, Apollo Travel announced the termination of the acquisition project on the grounds of "taking into account (including) global market turmoil and geopolitical conflicts, continued uncertainty in the financial market atmosphere, and short-term economic recovery after the epidemic and other business factors."
A basin of cold water completely extinguished Weimar’s dream of going public for nearly a year.
Two days later, on September 10, WM Motor announced through its official Weibo: "After careful consideration, WM Motor has voluntarily terminated the RTO (reverse takeover) process with Apollo Travel on the Hong Kong Stock Exchange."
For WM Motor, Apollo Travel's termination of the acquisition means that it once again missed the opportunity to save itself on the curve. Just when the outside world was hotly discussing that WM Motor was really going to fail this time, a turning point appeared again. Kaixin Auto, a second-hand car retail service provider from Anhui, suddenly jumped out.
On September 11, Kaixin Auto announced that it had signed a non-binding letter of intent for merger and acquisition with WM Motor, and planned to issue a certain number of new shares to acquire 100% of the equity held by its shareholders.
As soon as the news came out, the outside world was curious, is WM Motor in danger? Who is the successor behind the scenes?
▲ (On January 17, 2023, the Beijing Wufangqiao Weima User Center has moved out of the automobile park.)
Maybe when it comes to Kaixin Car, everyone will be a little unfamiliar. In fact, its predecessor was the used car project of the social networking site Renren. In 2015, Renren established a wholly-owned subsidiary, Renren Auto, to launch used car financing services. In 2018, Renren Automobile changed its name to Kaixin Automobile and began to officially enter the used car retail track.
In May 2019, Kaixin Auto was “backdoor listed” in the U.S. stock market through SPAC (Special Purpose Acquisition Company). The next year, Kaixin Auto and Haitaoche were fully integrated, and Lin Mingjun, the founder of Haitaoche Group, became the chairman and CEO of Kaixin Auto. Kaixin Auto has also transformed into a new retail platform for high-end cars.
A second-hand car dealer came to "rescue" WM Motor, which many people in the automotive industry did not expect. But if you think about it carefully, you can understand that with WM's current market size and its outdated technology compared to other OEMs, it may be difficult to find other buyers.
However, it is still unknown whether this merger will be successful.
Generally speaking, a letter of intent is a preliminary agreement on merger and acquisition matters reached after negotiation between the two parties. Certain clauses in the letter of intent are binding, such as confidentiality clauses, cost-sharing clauses, etc. During the negotiation period, the target company can no longer negotiate merger and acquisition terms with others.
The original letter of intent expresses an intention and is not a formal agreement. Moreover, the letter of intent signed by Kaixin Automobile and WM Motor also added the word "non-binding". A securities institution person explained to the "market" that it has no legal effect in theory. "In other words, there are still many variables in it."
A small episode is that Apol After lo Chuxing announced the termination of the acquisition, faced with a lot of mess, Shen Hui also visited the Munich Auto Show, and then flew to New York. He only left one sentence on Weibo: "All good things are hard to come by, just wait for the flowers to bloom."
At that time, there were voices from the outside saying that Shen Hui was going to become the second person to "return to China next week"? It wasn't until Kaixin Auto's letter of intent to acquire Kaixin Automobile came out that everyone felt relieved, guessing that he might be looking for new money.
Is this a two-way redemption?
WM Motor, which is caught in the whirlpool of company shutdown, employee demands for wages, and supplier arrears, what value does it have to Kaixin Automobile? The latter has made it clear in the announcement:
"Currently, WM Motor has two intelligent manufacturing bases with Industry 4.0 standards: Wenzhou Production Base and Huanggang Production Base. WM Motor is the first among new car-making forces and one of the few that has both intelligent manufacturing bases for a long time. It is a representative enterprise with two new energy vehicle production qualifications, and is the first car company among the new car manufacturing forces to realize the digitization of the entire industry chain. "
In short, WM's smart factory and new energy vehicle production qualifications are what this used car dealer group needs most. The once majestic WM Motor is now just a hair away from demise. It is a good time to "buy the dip".
Kaixin Automobile has been working hard for a long time to build cross-border cars. As early as August 2021, the company announced the establishment of a new energy vehicle department and the formation of new energy vehicle R&D, production and marketing teams, which can be regarded as officially becoming a reserve force in the car-making army.
But the company’s chairman and CEO Lin Mingjun has always believed that “professional things must be left to professional people.” He once said frankly that Kaixin Automobile is not good at vehicle manufacturing plants involving production and operations. Since then, he has continued to look for suitable acquisition targets as the main body of car manufacturing.
In September 2021, Kaixin Automobile announced the acquisition of 100% equity in Henan Yujie Times Automobile Co., Ltd. and entered the microelectronics market. Although Yujie had little sales at the time, its subsidiary Lingtu Motors had the qualifications to build cars, which was what Kaixin Auto valued. However, due to changes in Yujie's shareholders, the reorganized managers had objections to the merger and acquisition, and the acquisition did not proceed.
But Kaixin Auto did not give up its dream of building cars, and soon turned its attention to the field of new energy commercial vehicles.
At the end of last year, Kaixin Auto announced the development of medium-sized commercial new energy vehicles. At the beginning of this year, the company established Anhui Suzhou New Energy Vehicle Company to focus on new energy commercial vehicles. In July, Kaixin Automobile launched its new energy commercial vehicle brand Tanlu, and jointly held the first delivery ceremony of electric logistics vehicles with Bujia Automobile, a domestic new automotive retail logistics and delivery service platform based on Internet of Things technology and big data computing.
▲ (The first model of the "Tanlu" brand. Photo source/Kaixin Auto official Weibo)
At the same time, in the field of new energy passenger cars, Kaixin Auto is also waiting for opportunities. One month before signing the letter of intent for merger and acquisition with WM Motor, the company had just completed the delivery of Maolinstar, which became a wholly-owned subsidiary of Kaixin Automobile.
It is understood that Maolinstar is a company registered in the United States, and the actual controller behind it is Gu Lei, who has worked for Chery, BAIC and other car companies. The company owns Wuxi Maolinstar Technology Co., Ltd. and Henan Yujie Times Automobile Co., Ltd.
After the acquisition was completed, Kaixin Automobile naturally acquired Punk Auto, a new energy vehicle brand owned by Henan Yujie Times, as well as its complete production line and sales network. This made Lin Mingjun, who was in a difficult transformation period, very happy. He regarded the delivery as an important milestone in the successful transformation of Kaixin Auto.
At present, the Punk brand mainly focuses on A0 and A00-level new energy products, and has 500 domestic dealer channels. The target market is mainly concentrated in third- to sixth-tier cities. Lin Mingjun believes that the microelectronics market has huge domestic sales and export potential, with low manufacturing costs and high export gross profits.
After acquiring WM Motor this time, Kaixin Automobile will further enrich its product matrix of new energy vehicles.
Bo Wenxi, chief economist of IPG China, also said that Kaixin Auto’s acquisition of WM Motor will increase their ability to enter the new energy vehicle market and enhance their competitiveness. "For WM Motor, being acquired by Kaixin Automobile will allow them to get more financial support to continue to develop and promote their own new energy vehicle products."
But currently, the market value of Kaixin Automobile is US$95.31 million (approximately RMB 690 million), and WM Motor was valued at US$2.51 billion (approximately RMB 17 billion) in January this year. Can Kaixin Automobile handle this tough nut? Many people in the outside world also doubt whether Kaixin Auto can really save Weimar from the fire.
Financial reports show that Kaixin Auto lost US$196.5 million and US$84.706 million in 2021 and 2022 respectively. As of the end of 2022, the company's cash and cash equivalents were only US$7.102 million.
In addition, Kaixin Auto's stock price has been hovering around US$1 since the beginning of 2022, and later fell below US$1. According to the requirements of the U.S. stock market, if the price of a listed company's stock is less than $1 per share and this status continues for 30 trading days, the Nasdaq market will issue a pre-loss warning.
On March 29, Kaixin Auto stated that it had received a notification letter from Nasdaq. As of September 25, 2023, if the stock still does not meet the minimum stock price requirements, it will face delisting. As of the close of trading on September 13, Eastern Time, Kaixin Auto's stock price was less than US$0.25 per share, and the risk of delisting has not been eliminated.
Buyers can’t protect themselves, and it’s even more difficult for WM Motor to make a comeback. Bai Wenxi also believes that the specific details and future development of this acquisition will take time to observe and verify.
The “Four Little Dragons” are no longer around
Now everyone only knows "Wei Xiaoli", but when the first wave of new car-making forces blew up in the past, WM Motor, Byton, NIO and Xpeng were also called the "Four Little Dragons" of the new forces. This shows how similar the starting points and situations of these startups were.
Just a few years have passed by, and the "Four Little Dragons" have also come out with two endings.
Nio and Xpeng have experienced peaks and troughs, and now they have found their own routes and are gradually on the right track; Byton Motors, after burning through nearly 10 billion in funds, failed to even achieve mass production of its first model and eventually went bankrupt. WM Motor has also been on a roller coaster of fate, and it is still unclear whether it can successfully break through.
Unlike the three founders of "Wei Xiaoli" who all have Internet industry backgrounds, Shen Hui, the founder of WM Motor, is an out-and-out veteran of the automobile industry. At the age of 30, Shen Hui was already the general manager of BorgWarner, one of the world's largest auto parts suppliers. When he was less than 40, he joined Geely Automobile as group vice president and was a core member of Geely's acquisition of Volvo. Later, he served as Volvo Cars' global senior vice president and chairman of China.
In the eyes of capital, Shen Hui is a professional manager who understands cars and the market, and he is "reliable" all over his body. Therefore, when he started his business in 2015, in the financing process, WM Motor successfully received real money from major investment institutions, with a total financing of approximately 41 billion yuan.
But when you have too much money, how to spend it becomes a problem, and people who focus on money are prone to have twisted thoughts.
▲ (On November 28, 2018, Shen Hui spoke at the "East-West Technology" hosted by CNBC Dialogue" forum.)
Tens of billions are not a small sum, but car manufacturing is an industry with heavy investment and a long return cycle. Every money must be calculated carefully and every project must be cautious. Especially in the initial stage when one's own hematopoiesis has not been realized, the business will be too big all of a sudden, and it is easy to be constrained by funds.
Taking this factor into consideration, “Wei Xiaoli” initially focused on the three major parts of new energy vehicles and intelligence, and outsourced production. But not WM Motor. It may be that Shen Hui is used to the way of traditional car companies. He used it to build a factory as soon as he raised money. This is a heavy asset. From the Wenzhou factory in 2016 to the Huanggang factory in 2018, WM Motor's total investment exceeded 26.7 billion yuan. On the other hand, the R&D funds that should be invested are pitifully little.
WM Motor's prospectus shows that from 2019 to 2021, the company's R&D investment was 893 million yuan, 992 million yuan and 981 million yuan respectively. During the same period, Xpeng Motors' R&D investment was 2.070 billion yuan, 1.726 billion yuan, and 4.114 billion yuan respectively; NIO's R&D investment was 4.429 billion yuan, 2.488 billion yuan, and 4.592 billion yuan respectively. Both of them are far better than Weimar in terms of numerical value and growth rate.
The low level of R&D investment has caused WM Motor to be unable to form its core advantages and its products have become mediocre.
Consumers are not stupid either. In 2019, WM Motor delivered a total of 16,900 new cars, ranking second among the new car-making forces in sales, second only to NIO. But in 2020, WM's annual sales were 22,000 vehicles, falling to fourth among new car manufacturers; in 2021, WM's ranking fell to fifth with sales of 44,200 vehicles; in 2022, WM's cumulative sales totaled only 29,400 vehicles, a 30% year-on-year decline. During the same period, annual sales of Nezha Auto, Li Auto, Weilai, etc. have exceeded 100,000 vehicles.
The founder Shen Hui cannot absolve himself of the blame for things reaching this situation.
Zhou Hui, a former employee of WM Motor, told "City Circle" that Shen Hui is a gentle person and easy to talk to. This quality is fine for ordinary people, but for a company manager, it is likely to be a fatal weakness.
Zhou Hui gave an example. At WM Motor, in principle, projects worth more than 5 million yuan must be discussed by the marketing committee. The project leader needs to be scrutinized by all management. Where every money of the project is spent and the prospects of the project, the person in charge needs to give a reasonable explanation and judgment.
Some people describe a B-level project as an S-level project by splitting a project worth more than 5 million yuan into two projects worth less than 5 million yuan, skipping the marketing committee and reporting directly to Shen Hui. "Because everyone knows that Shen Hui will not say 'no', he will only say you do it first, and the project will be approved." Zhou Hui said.
In Zhou Hui’s view, Shen Hui is a qualified professional manager who can take the company from 1 to 10 and to 100 under the leadership of a talker. But when he plays the role of "talker", he is easily manipulated by his subordinates.
The result can be imagined. People who want to do well in this corporate environment have no choice but to leave the company. People who only focus on making money work on their own, and eventually the company falls apart.
After a hundred days of self-rescue, the chaotic situation in front of Shen Hui gradually became clear. Kaixin Automobile’s acquisition of WM Motor is an opportunity for Shen Hui. If everything goes well and the outcome is known before the end of the year, he will have an explanation for himself and his creditors. But if it doesn't work out this time, does Shen Hui have another way out?
(Zhou Hui is a pseudonym in the article)