WM Motor (hereinafter referred to as "WM")'s road to survival is not over yet. On September 8, Apollo Travel announced on the Hong Kong Stock Exchange that due to factors such as turbulent global market conditions, continued uncertainty in the financial market atmosphere, and short-term economic recovery, relevant parties have agreed to terminate the acquisition agreement for Weimar. This also means that Weimar’s efforts over the past nearly year ended in failure.
What was unexpected was that soon another knight in white appeared riding on colorful auspicious clouds. 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.
Whether it is "backdoor" Apollo travel or "commitment" to Kaixin Auto, it can only be regarded as Weimar's helpless move. This is not only because if Apollo Travel acquires WM Motor, it will need to issue twice as many additional shares as itself, or because Kaixin Automobile, a second-hand car dealer from Anhui, faces the risk of delisting because its stock price is below $1, but also because if Kaixin Automobile’s acquisition is included, this is already the fourth time that WM Motor has hit the capital market.
In the past, WM Motor was the top student among the new car-making forces.
In 2020, Meituan Wang Xing predicted that there will only be three new car-making forces left in the future - "Wei Xiaoli". For this reason, WM Motor founder Shen Hui refused to accept that WM Motor must be one of the top three new forces in the future.
Such confidence comes from strength. In 2019, WM Motor's cumulative delivery of new cars ranked second among new car-making forces, second only to Weilai. It is also one of the new car-making forces with the most financing, with cumulative financing exceeding 35 billion yuan.
How did Weimar slide to the edge step by step? Will there be a chance to return to center stage in the future?
cost of choice
What is not known is that before the widely circulated "new car-making forces" - Weilai, Xiaopeng, and Ideal, there are also the front waves known as the "Four Little Dragons". Except for Weilai and Xiaopeng, whose identities remain unchanged, the other two are Weimar and Byton.
From the perspective of founders alone, Weimar is probably the most reliable one. Unlike other founders who mostly cross over from the Internet, WM founder Shen Hui is from the automotive industry.
In his twenties, he entered KLT Energy Company in Kansas and became the factory director; at the age of 30, he served as the general manager of BorgWarner China, the world's leading auto parts company; in 2007, he was appointed as the president of Fiat China (which owns brands such as Ferrari, Jeep, and Dodge); two years later, he joined Geely and became a director and vice president of Geely Holdings. During his tenure, he participated in the largest overseas merger and acquisition in the history of the Chinese automobile industry - Geely's acquisition of Volvo. Shen Hui has done almost everything a professional manager can do.
The logic of building a car is completely different from that of the Internet. Considerable progress can be achieved without relying on ABtest. Even electric cars have as many as 10,000 parts. At the same time, it also requires you to have enough patience to prepare and wait. Li Xiang, the founder of Li Auto, said in his own acquisition course, "You must be prepared to open 10,000 stores before you can open this first store and sell this first car."
Riding on the spring breeze of switching from oil to electricity, WM Motor has gone smoothly on the road to financing, with a public financing amount of more than 35 billion yuan. Among them, the D round of 10 billion financing led by Shanghai State-owned Assets and SAIC, with participation from Baidu and SIG, set a record for the most financing by a new force.
But correspondingly, the road of selling cars has become increasingly narrow for Weimar. In 2019, WM Motor still ranked second among new car manufacturers in the delivery list, but by 2021, WM Motor has slipped to fifth place. Compared with the rapid growth of its peers, such as Xpeng's 263% year-on-year growth, Weimar's growth rate that year was only 96.3%, not even outperforming the market.
The reason why this situation occurs, Bohu Finance believes that the problem lies in choice.
Shen Hui, who came from a traditional car background, attaches great importance to the core capabilities of car companies. He once said: "If I choose OEM production, I will not sleep well every day." So WM became the first new force to build its own factory. In 2016, WM built its first level 4 smart factory in Wenzhou, and a few years later built a second one in Huanggang, Hubei, with a combined production capacity of 250,000 vehicles. Weimar spent 26.7 billion yuan on the investment in the factory alone.
But the problem is that so far, new energy vehicles are still a large-scale industry, and they need to rely on selling cars to amortize various costs. Without the support of scale, it is difficult for enterprises to generate funds themselves, and all funds depend on financing.
This almost plunged Weimar into a whirlpool.
Due to the large investment in factory construction and other aspects, Weimar's R&D investment is slightly insufficient from the financial report. According to the prospectus data, Weimar's R&D investment in the three years from 2019 to 2021 was 893 million yuan, 992 million yuan and 981 million yuan respectively. However, Weilai invested 4.18 billion yuan in R&D in 2021 alone, which is more than Weimar for three years in one year.
The lack of technical investment and sufficient product definition capabilities has caused Weimar to gradually fall behind in market competition. At the beginning of this year, in an interview with "Chinese Entrepreneur", Shen Hui also reflected that Weimar lacked some features and missed some opportunities in its initial product positioning. Especially in 2022, when peers are all racing, Apollo Travel revealed in its announcement to acquire WM Motor that in the first half of last year, WM Motor sold only 16,500 electric vehicles. Last year, domestic production and sales of new energy vehicles reached 7.058 million and 6.887 million respectively, a year-on-year increase of 96.9% and 93.4%.
Insufficient delivery forced Weimar to seek additional financing. But on the one hand, financing has become more difficult due to years of losses by new energy vehicle companies and the overall downward environment. On the other hand, Shen Hui, who is a professional manager, lacks the experience of starting a business from 0 to 1.
Since 2019, Weimar has tried to impact the capital market, and has successively moved to the Science and Technology Innovation Board and Hong Kong stocks, but failed. At the beginning of this year, WM Motor fell into a capital chain crisis. Not only did its subsidiaries have their 4.04 billion yuan equity frozen, but according to relevant media reports, the Wenzhou factory also fell into a shutdown and employees' wages were suspended.
On the day Apollo Travel announced its intention to acquire WM Motor, WM Motor CEO Shen Hui posted a picture on Weibo. The content of the picture was a frame from the movie "Furong Town". There was a line on the picture: Live, live like an animal.
The era of fast fish eating slow fish
To discuss whether Weimar can break through, we need to focus on two issues. One is whether it can raise money.
Kaixin Auto was formerly a second-hand car project owned by Renren. In 2019, it was “backdoor listed” on the U.S. stock market through a SPAC (Special Purpose Acquisition Company). A year later, Kaixin Auto merged with Haitaoche and then began to get involved in new energy vehicle manufacturing projects.
Judging from its own financial situation, the current market value of Kaixin Auto is only 690 million yuan, which is far lower than the earlier valuation of WM Motor. The operating conditions of Kaixin Auto are not optimistic either. In 2022, Kaixin Auto suffered a loss of US$84.706 million, and as of the end of last year, its cash and cash equivalents were only US$7.102 million.
At the same time, the acquisition method is also through "issuing new shares and acquiring 100% of the equity held by its shareholders" rather than cash, which also means that WM still needs to rely on Kaixin Auto's listing status to seek financing.
Although Kaixin Auto’s U.S. stock performance was mediocre on the day the news was announced, just yesterday, Kaixin Auto’s share price, whose stock price has been hovering below $1 for a long time, was 1,600% guaranteed, reaching $3.06. As for whether the two companies can successfully join forces, we still need to see the subsequent official announcement.
The second question that needs to be answered is whether WM can withstand the current competition.
There are many problems facing Weimar. In terms of market competition, the domestic market has entered a stage where the fast fish eats the slow fish.
On the cost side, everyone is constantly reducing costs.
According to a research report released by UBS, BYD has a cost advantage through vertical integration and scale. The production cost of BYD Seal is 15% lower than that of Tesla Model 3. And just yesterday, foreign media broke the news that Tesla's integrated die-casting process has achieved another breakthrough, which can die-cast almost all complex chassis parts of electric vehicles into a whole.
Even for new forces, the cost reduction is obvious. Needless to say, the ideal of top students, Xiaopeng, which has suffered serious losses, is also improving. With the increasing sales of the G6 model and the launch of subsequent models, Xpeng is expected to achieve scale effects. At the same time, its cooperation with Volkswagen also allows Xpeng to turn its technological leadership into real revenue.
On the product side, competition is becoming increasingly fierce. As the new energy vehicle market gradually transforms from a dumbbell type to a spindle type, various companies are constantly launching new models in the hope of occupying more shares. For example, BYD has launched the high-end brands Yangwang and Denshi, and NIO has launched the mid- to low-end brand Alpine to develop pure electric vehicles with ideal layout for extended range. Traditional fuel vehicle manufacturers including Geely, GAC and other traditional fuel vehicle manufacturers are also accelerating their efforts.
Under such fierce competition, it is very difficult for Weimar, which is already a step behind, to catch up.
Of course, there are also reports that overseas will be where Weimar’s vitality lies. There is some truth to this view. Although the financing problem has not been solved for a long time, Weimar has done quite well in promoting its overseas expansion. In July last year, the WM EX5 model obtained the WVTA EU large-volume certification; in March this year, WM Motor said it had won overseas orders of more than 10,000 vehicles. In July this year, WM Motors began shipping to Europe.
Compared with domestic competition, competition in overseas markets is obviously much smaller. At the same time, it is becoming a trend for domestic new energy sources to go overseas. At the recent Munich station, Chinese manufacturers showed off their presence. WM Motor, which mainly targets the mass market, is also expected to reap dividends due to its cost-effectiveness.
Kaixin Auto’s own channel capabilities can also be beneficial to WM Motor’s expansion into overseas markets. According to public information, in April this year, Kaixin Auto announced that it would cooperate with China Vehicle Import and Export Co., Ltd. (CMCAUTO) to establish a joint trading platform for new energy vehicle exports, with the goal of achieving a total transaction volume of US$10.8 billion in the next five years.
However, it is still unknown whether this transaction will be successful and whether Weimar can seize the window period. Zhang Xiuyang, secretary-general of the China Passenger Car Industry Alliance, said that being forced to change tracks is of little significance. Nowadays, the investment attitude of capital towards new car-making forces has changed from radical to cautious. New car-making forces still need to improve the overall quality of their products, enhance brand trust, and return to rational growth paths and business logic.