BEIJING: WM Motor Holdings is cutting salaries by half for management and nearly a third for staff members, Caixin has learned, as the electric vehicle startup struggles with sluggish sales and ballooning losses.
The Shanghai-based automaker began the cost-control measures in October, also cancelling annual bonuses and vehicle purchases subsidies, the source said, citing a Monday internal memo.
The company – which is planning a Hong Kong IPO after reportedly aborting plans to go public on Shanghai’s high-tech Star board – has postponed its salary pay date to the 25th day of the month from the eighth, giving it more leeway to improve cash flow, the source said.
The belt-tightening is part of WM Motor’s efforts to achieve sustainable growth at a time when many carmakers are suffering from Covid-induced supply chain disruptions, fundraising hurdles and China’s macroeconomic downturn, WM said in a document to its investors seen by Caixin.
The document described the salary cuts as a way for WM to scale back costs after its deficit had widened sharply for three consecutive years.
The EV manufacturer’s net loss swelled to 8.2 billion yuan (US$1.2 billion) in 2021 from 5.1 billion yuan in 2020 and 4.1 billion yuan in 2019, according to an IPO prospectus WM submitted to the Hong Kong Stock Exchange in June.
Founded in 2015 by former Geely executive Shen Hui, WM sells three EV models that target the competitive mid-tier market. Its customers are mainly ride-hailing platforms and other business clients.
In 2021, WM delivered 44,152 cars, the prospectus showed, putting it far behind bigger domestic rivals Nio, Xpeng and Li Auto, all of which are publicly traded in the US and Hong Kong and had annual sales of around 100,000 cars each that year. Sales of new-energy vehicles in China rose 160% to 3.52 million units in 2021, according to government data.
WM has two car manufacturing plants – one in the eastern province of Zhejiang and another in Central China’s Hubei province – with a designed annual production capacity of 50,000 cars each. In 2021, the factories had respective capacity utilisation rates of 71.5% and 16.2%, meaning that there was a lack of consumer interest in WM cars, but the company said that each plant can produce up to 150,000 vehicles a year once demand grows.
WM has also been hampered by other setbacks including a patent dispute with China’s leading automaker Geely Holding Group.
In September, a Shanghai court ruled that most of the 27 patents held by WM belong to Geely, and WM pay 5 million yuan to Geely as compensation. The startup was also ordered by the court to stop installing five components made with Geely technology in its cars.