Who can save Weimar again?

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Text / Li Xin

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The public opinion turmoil of the founder’s annual salary of over 100 million has just passed, and now WM Motor has been exposed to the fact that executives have cut their salaries by 50%, and employees’ salaries are only paid by 70%, so as to survive this round of capital winter.

Weimar does need to frugal off the winter. According to the prospectus submitted by Weimar to the Hong Kong Stock Exchange, from 2019 to 2021, the annual loss of Weimar will be more than 4 billion yuan, and the current cash reserve is only 4 billion yuan. Compared with the tens of billions of cash reserves of other new car-making forces, Weimar is indeed short of money.

Now, Weimar is already sprinting to be listed on the Hong Kong stock market, hoping to raise more funds to tide over the difficulties. But judging from the current situation, even if Weimar can successfully land on the Hong Kong stock market, the prospects may not be good.

Taking Leap Motor, which has just landed on the Hong Kong stock market, as an example, during the public offering stage, a total of 3,151 people subscribed for the Hong Kong public offering, but the subscription was not fully subscribed, which is only about 0.16 times the initial available subscription under the Hong Kong public offering. The final number of Offer Shares allocated to the Public Offering was 2,146,400 shares, representing approximately 1.64% of the total number of Offer Shares worldwide.

In contrast, Ideal and Xiaopeng were oversubscribed by 5.5 times and 14.73 times respectively when they landed in Hong Kong stocks.

On the first day of listing, Leapmotor suffered a break, and its stock price fell all the way, and now it has fallen by 60%. WM Motor, which is also a new energy car company, is currently facing financial difficulties, and its situation after landing in Hong Kong stocks is worrying.

In addition to the lack of money, WM Motor’s products have suffered frequent accidents in recent years. Last year, there were several spontaneous combustion incidents, which caused a sharp decline in WM Motor’s brand power and continued to affect WM Motor’s sales. In the first nine months of this year, Weimar only sold 28,161 vehicles. Compared with the sales of 80,000 to 90,000 by other new car-making forces, Weimar was significantly behind.

In the case of poor sales of the original models, WM Motor pinned its hopes on the new model WM Motor M7, which will be launched in the second half of this year. This new model is equipped with luxury configurations such as lidar, the latest self-driving chip, and ultra-high-resolution cameras. It is also a key product that WM Motor believes can cause a boom in the market.

It’s just that, with the wages of employees now being discounted, can Weimar’s new products catch up with the Savior? In the current predicament, who can help Weimar tide over the difficulties?

All salary cuts, Weimar’s financial difficulties are difficult to solve

WM Motor’s wave of salary cuts has spread from executives to grassroots employees.

Recently, according to Jiemian News, a source close to WM Motor said that WM Motor will carry out a series of active financial policies including “executives’ voluntary salary reduction by 50%”, hoping to survive this round of capital winter. .

But executive pay cuts don’t appear to be enough to get WM Motor through the storm. According to IT House citing internal employees of WM Motor, from October, WM Motor will pay 70% of the wages of grassroots employees. The employee did not disclose the specific reasons for the salary reduction.

This is not the first time WM Motor has exposed salary turmoil. In March 2020, according to Future Auto Daily, WM Motor held an online conference call for about 20 minutes for all CTOs (all Intelligent Networking Departments) to discuss the issue of year-end bonuses. HR notified all employees to cancel the year-end bonus through an online meeting, on the grounds that “the company’s annual KPI did not meet the standard last year”.

It is reported that WM Motor’s year-end bonus is about 3.5-3.7 months’ salary, which will fluctuate up and down, accounting for 30% of the employee’s annual income. In addition, the 13 salary clearly stipulated in the labor contract has also been delayed until June.

In contrast, in September this year, Weimar founder Shen Hui also attracted attention due to the sky-high annual salary. According to Weimar’s prospectus, Shen Hui’s salary is as high as 1.262 billion yuan, and personal income accounts for more than 30% of the company’s revenue.

However, the 1.262 billion yuan salary is divided into two parts: ordinary salary and restricted shares, of which the actual salary is 2.01 million yuan, and the remaining 1.259 billion yuan is restricted shares. That is to say, only Shen Hui of WM Motor can get 1.259 billion yuan of restricted shares to be converted into cash.

Weimar has repeatedly revealed that behind the salary turmoil, its financial situation has long been miserable.

According to the prospectus, the total revenue of WM Motor from 2019 to 2021 was 1.762 billion yuan, 2.671 billion yuan and 4.773 billion yuan respectively, and the adjusted net profit was -4.04 billion yuan, -4.225 billion yuan and -5.363 billion yuan respectively. The loss far exceeds the revenue.

Compared with Leap Motor, which has just landed in Hong Kong stocks, the losses of Leap Motor in the past three years were 901 million yuan, 1.1 billion yuan and 2.846 billion yuan respectively, with a cumulative loss of 4.847 billion yuan in three years. That is to say, the amount of zero-run loss for three years is equivalent to the amount of loss for WM Motor for one year.

Long-term losses have also stretched Weimar’s capital reserves.

According to the prospectus, as of December 31, 2021, WM Motor’s cash and cash equivalents were only 4.16 billion yuan. On a year-on-year basis, the cash reserves of the three new energy vehicle companies “Weixiaoli” were 55.4 billion yuan, 43.544 billion yuan and 50.160 billion yuan respectively.

According to Wired Travel, even this cash reserve of Weimar may be obtained by mortgaging related assets of the factory. Public information shows that Weimar has borrowed 2.42 billion yuan, 6.41 billion yuan and 9.953 billion yuan from banks in the past three years, and borrowed another 1 billion yuan for working capital in April this year. The price is that WM Motor uses some properties in its manufacturing plants in Huanggang, Hubei and Wenzhou, Zhejiang as collateral. If the relevant loans are defaulted and the lender enforces the mortgage, production may be significantly affected.

In addition, according to Titanium Media, a Weimar employee mentioned: “The company is out of money, and the headquarters building still owes tens of millions in property fees.”

Although this news was quickly refuted by the official rumors, it is an indisputable fact that Weimar is short of money. Even Weimar clearly mentioned in the prospectus that the risks it faces include “lack of necessary funds.”

In addition to the obvious financial risks, Weimar also has potential risks.

The prospectus shows that Weimar has several ongoing lawsuits with Geely Group as a defendant. In one of the lawsuits filed with the Shanghai Higher People’s Court, Geely Group alleged that Weimar violated trade secrets and claimed compensation of approximately RMB 2.1 billion and related litigation costs (trade secret disputes). In the remaining lawsuits filed with the Shanghai Intellectual Property Court, Geely Group claimed ownership of 27 registered patents and two patent applications held by Weimar, and claimed compensation of approximately RMB 1.16 million and its litigation costs (intellectual property rights) dispute).

In this regard, Weimar made a provision of about RMB 6.12 million for trade secret disputes and intellectual property disputes, which undoubtedly made Weimar worse.

Judging from the current situation and capital reserves of WM Motor, the current crisis cannot be delayed, and funds are needed to overcome the current difficulties. In the future, if it can be listed on the market, it may be able to raise more funds for development.

Will investors still lend a helping hand?

It has been 5 months since WM Motor submitted its prospectus to the Hong Kong Stock Exchange. Will WM Motor be successfully listed this time?

This is already the second time that Weimar has sprinted to the market. As early as the end of 2020, the website of the Shanghai Securities Regulatory Bureau disclosed that WM Motor Smart Mobility Technology (Shanghai) Co., Ltd. (hereinafter referred to as “WM Motor”) received listing counseling. listed.

But Weimar did not catch up with the good time to be listed on the Science and Technology Innovation Board. In December 2020, the Shanghai Stock Exchange revised and released the “Science and Technology Innovation Board Stock Issuance and Listing Review Rules” and the “Science and Technology Innovation Board Listing Committee Management Measures”. The policy for IPOs on the Science and Technology Innovation Board began to tighten, and many companies stopped on the Science and Technology Innovation Board.

Then in April of the following year, Weimar was revealed to have suspended its application for an IPO on the Science and Technology Innovation Board. After the collapse of the Science and Technology Innovation Board, Weimar hurriedly brought in Hong Kong and Macau capital to prepare for landing in Hong Kong stocks.

According to Tianyancha, in October 2021, Weimar received a D+ round of financing of over US$300 million, and the investors were PCCW, Xinde Group and GF Xinde. PCCW is a family-related company of Li Ka-shing, and Shun Tak Group is a family-related company of Macau gambling king Stanley Ho.

But the money is not for nothing. In the relevant announcement, Xinde Group has put forward listing requirements for WM Motor. If WM Motor fails to complete the qualifying initial public offering within the specified time after the closing of the share purchase agreement, SAIL (a subsidiary of Xinde Group) has the right to enjoy the right of redemption.

Investors of Weimar’s previous rounds of financing also have exit needs. According to public data, WM Motor has completed 12 rounds of financing, with a cumulative financing amount of 35 billion yuan.

From the perspective of Weimar investors, its lineup is really luxurious. There are not only well-known investment institutions such as Sequoia China, SIG Haina Asia, and Prancing Horse Capital, but also Internet giants such as Tencent and Baidu, and even introduced Shanghai State-owned Assets Investment Platform, Anhui Hefei Industrial Fund, Guangzhou Financial Holding Group and many others. State-owned industrial investors.

At this time, Weimar is only one step away from listing. Investors naturally hope that Weimar can be listed. For this consideration, there may be investors who can lend a helping hand to save Weimar from the disaster.

However, whether it is the current market environment or the status quo of the new energy vehicle industry, it is difficult for WM Motor to perform well even if it goes public.

First of all, from the perspective of the Hong Kong stock market, Hong Kong’s Hang Seng Index fell below a 13-year low. “From the perspective of various indicators, it is close to the level of January 2016 and October 2008. The decline of Hong Kong stocks this year is mainly related to the sharp rise in market interest rates. Interest rates have a negative correlation with valuations. The higher the interest rate, the lower the valuation. Under the environment of interest rate hikes in the United States, the Hong Kong Interbank Offered Rate soared from 0.3% to 5% within a year, exerting important pressure on the valuation of Hong Kong stocks.” Hu Yu, chief economist of Xinding Fund, once analyzed to Yicai.com.

The Hong Kong stock market is sluggish, and the era when new energy vehicle companies are highly sought after by the market has passed. Even if WM Motor successfully landed on the Hong Kong Stock Exchange, it will be difficult to arouse the interest of secondary market investors.

Take Leap Motor, which is the second echelon of new energy car companies with WM Motor as an example. Even though the monthly delivery is stable at more than 10,000 vehicles, it still suffered a sharp drop after its listing.

On September 29 this year, Leap Motor was officially listed in Hong Kong at an issue price of HK$48 per share. On the first day of listing, it closed at HK$31.9 per share, down more than 33%, setting the largest first-day decline in new shares listed so far in 2022. The market value evaporated by 24 billion Hong Kong dollars overnight. As of the close on October 27, Leapto’s share price was HK$18.82 per share, a drop of 60.8%.

Weilai, Ideal, and Xiaopeng also had a hard time in Hong Kong stocks. According to data from Futu Niuniu, since the beginning of the year, the stock prices of Weilai, Ideal and Xiaopeng have all fallen by more than 50%, of which Xiaopeng Motors has fallen by more than 80%. In addition, Weilai Automobile was also attacked by short sellers, and Xiaopeng was reduced by JPMorgan Chase and Citigroup.

All signs seem to show that the market is no longer enthusiastic about new energy car companies, which also means that even if WM Motor successfully landed on the Hong Kong Stock Exchange, it may not be sought after.

For Weimar, it may only rely on new products to prove its value.

Are new products a lifesaver?

As a new energy car company, product strength is not only the best proof of its own strength, but also the key to whether a car company can gain a firm foothold in the market.

At present, WM Motor has three models on sale, namely EX5, W6 and E.5, which are regarded as the companies that have launched more models among the new car-making forces.

However, many models have not fully bloomed in the market, but sales have gradually fallen behind.

According to the public data of the online travel query, the cumulative sales volume of Weimar in the first nine months of 2022 is 28,161. In contrast, NIO delivered a total of 82,434 new cars in the first nine months of this year; Ideal has delivered a total of 86,927 vehicles; Xiaopeng has delivered a total of 98,553 vehicles; Nezha has delivered a total of 111,190 vehicles; Leapmotor has delivered a total of 87,602 vehicles.

Weimar’s poor sales are directly related to its weak positioning and product strength.

At the beginning of its establishment, Shen Hui positioned WM Motor as “the Volkswagen of the electric vehicle version”, focusing on the mid-to-low-end market of 100,000-200,000 yuan. However, this price range is also the pricing of mainstream fuel vehicles, and it is difficult to start new energy vehicles, including the Xpeng G3, which is priced at 160,000, and it is also difficult to compete with the offensive of fuel vehicles.

Of course, in addition to positioning, the key factor affecting WM Motor’s sales is poor product quality.

Since 2020, WM Motor has frequently exposed spontaneous combustion incidents. Last year, WM Motor’s first model EX5 had 3 spontaneous combustion accidents in 4 days in December alone. It was once called by netizens as “the most popular” at the end of 2021. car companies”. These safety incidents greatly affected the reputation of Weimar, and naturally also had a greater impact on subsequent sales.

What is puzzling is that, in order to reduce the chance of spontaneous combustion of its own vehicle, Weimar actually “locks electricity” on the vehicle without notifying the owner. Locking power means that car companies rewrite the battery management system (BMS) to reset the voltage range of the power battery in order to limit the upper limit of charging and the total amount of discharge of the battery.

By adjusting the BMS, the voltage of the power battery cell and the speed of charging and discharging are reduced, and the probability of thermal runaway of the battery is also reduced, and the probability of spontaneous combustion of the vehicle is naturally reduced synchronously. But the direct impact is that the overall cruising range of the vehicle is shortened.

Such a simple and rude approach naturally caused dissatisfaction among car owners. Today, under the Weibo comments posted by founder Shen Hui, there are still car owners complaining about battery quality, battery life and other related issues. Under this, the sales of WM Motor’s original products will only further deteriorate, which will undoubtedly affect WM Motor’s capital return efficiency, and even affect the mass production of next-generation models.

In terms of software ecology, Weimar’s main models are still equipped with the old platform three years ago, while other new car-making forces are iterating every year. In terms of autonomous driving, Weimar mainly relies on Baidu’s technology, which means that Weimar lacks the advantage of self-research in autonomous driving.

Under the circumstance that the existing products are difficult to arouse the enthusiasm of the market, WM Motor may want to compete for the market by relying on the new model WM M7, which will be launched in the second half of this year.

In the prospectus, Weimar said that the M7 will be equipped with industry-leading L5-level hardware, including 4 latest Orin-X automotive-grade autonomous driving chips, with a total computing power of 1016TOPS; Up to 330°; 11 cameras, including 7 ultra-high-resolution cameras and 4 high-resolution cameras, enable the vehicle to identify obstacles up to 600 meters away.

From the hardware configuration point of view, Weimar M7 can be called luxurious. Shen Hui also has enough confidence in M7. He once publicly stated: “Weimar M7 is endowed with three major capabilities: super perception, super computing power, and super evolution power. Therefore, we prefer to call it ‘the world’s first fully integrated Scene Smart Mobile Space’.”

Under these hardware stacks, the price of the Weimar M7 must be high, and there is also greater financial pressure on the production side to purchase related high-end components.

The real problem facing Weimar is how to raise more funds to produce new models. In addition, in terms of brand image and technical strength, Weimar also has a lot of places to make up lessons.

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