Pay Cuts and Layoffs at China’s WM Motor Show EV Industry Stress

WM Motor Holdings Ltd., a Shanghai-based electric-vehicle maker backed by Baidu Inc. and started by a former Volvo executive, is facing financial difficulties due to the slow-motion shakeout in China’s crowded EV market. Founder and CEO Shen Hui wrote in a staff memo earlier this month that the company needs to cut costs to survive. As a result, salaries have been reduced by 30% for employees and up to 50% for some managers. At least 20% of WM Motor’s workforce has been laid off since November, and voluntary departures have resulted in a total count of fewer than 2,000 staff, which is a 40% drop. Some of the laid-off workers are still waiting for compensation, and payments to some suppliers and contractors have been delayed or only partially made. A few years ago, WM Motor was considered one of the most promising Chinese EV startups, setting delivery records and considering a listing on Shanghai’s Star board. However, it is now looking to list through a reverse merger in Hong Kong, where fellow EV maker Zhejiang Leapmotor Technology Co. had a disastrous debut last year. The intense competition in China’s auto market, where there were over 500 registered EV makers in 2019, has led to many smaller players collapsing or running out of funds. As the market matures and becomes more cut-throat, more high-profile companies are struggling, including Byton Ltd. and Evergrande New Energy Vehicle Group Ltd. WM Motor appeared to secure a fresh source of funding last month, when Apollo Future Mobility Group Ltd. announced that one of its units would buy the company for $2.02 billion in an all-stock deal, paving the way for a backdoor listing. However, the deal was subject to “a wide range of factors,” and Apollo Future Mobility representatives declined to comment. WM Motor had already raised capital 12 times as of October 2021, including from PCCW Ltd. and Shun Tak Holdings Ltd., despite never having posted a profit. Recently laid-off workers at WM Motor are seeking legal assistance to get their compensation, which should have amounted to one month’s salary for every year they worked at the company, plus an additional month’s pay. A formal application for arbitration could be filed in Shanghai if no progress is made by March 25, according to attorney Shen Zhou.