Weima continued to succeed, and then what?

On March 7, WM issued another statement, this time finally bringing good news.

WM said that more than 100 dealer stores across the country will gradually resume normal services in the near future, and are also fully promoting the resumption of work and production, and urgently deploying spare parts to alleviate supply chain problems. The reopening of the door means that WM has finally ushered in the dawn, and Shen Hui's strategy of "exchanging time for space" has also achieved results.

However, there are many more problems with WM:

In early March, the Huanggang Labor and Social Security Supervision Bureau said it had set up a special team to investigate the rights protection of WM employees. Last month, it was reported that WM entered the mode of leaving all employees without pay, and some employees were notified not to work from home, and did not negotiate resignation and severance. In addition, the 2 billion yuan financing completed by WM in January this year is reported to have not yet arrived, which directly led to its tight cash flow and the need to cut budgets for all departments.

The problems encountered by WM today are also somewhat affected by new forces such as Xiaopeng, NIO, and Leap. In particular, the old problem of continuing to burn money and long-term losses has never been solved. WM is now temporarily alive, but the crisis alarm of the new forces in car manufacturing has not been completely lifted.

(Image from WM Motor's official Weibo)

If you want to survive in a desperate situation, Weima has to cross three hurdles

Has WM survived its darkest moment? According to the Institute of Value Research (ID: jiazhiyanjiusuo), this question needs to be answered from three perspectives: production, distribution, and capital chain. Only when the production line and distribution system resume normal operation and the capital chain is lifted alarm, can WM truly slow down.

First of all, look at the situation of dealers, which is also the biggest challenge that WM is currently encountering.

Since the end of February, consumer security departments in Shanghai and other places have successively received complaints from consumers, targeting the closure of a large number of WM stores, resulting in no response after sales, and all services such as maintenance and parts replacement suspended. Dealerships are the facades of car companies and the channels for enterprises to connect with consumers. When the store is gone, the connection between the company and the consumer will be broken.

The distribution system has become the anthill, which led to the collapse of the embankment, which is directly related to the reform in 2020. At that time, in order to speed up the opening of stores, WM announced that it would change direct sales to a partner model, provide subsidies, encourage partners to open stores quickly, and also embarked on the road of no return of burning money subsidies. According to the previously released prospectus, WM provided rebates and subsidies to dealers in 2021 as high as 2.1 billion yuan, exceeding the sum of 2019 and 2020.

Overexpansion laid the groundwork for today's collapse. Although WM said in its latest statement that more than 100 stores across the country have resumed business one after another, it is also a symptomatic but not a cure. The reform of the distribution system will become the most difficult equation for WM to solve in the future.

Secondly, looking at production, the situation is not optimistic.

On February 17, the Weima Huanggang factory was exposed to "almost an empty city", and related entries even appeared on Weibo hot search. Although WM issued a public statement that night, refuting rumors such as "the financial department set up a project without authorization" and "relying on scalpers to brush tens of millions", Shen Hui, founder and chairman of WM, also said on his personal Weibo that he would make every effort to ensure the resumption of work and production, but could not dispel doubts from the outside world.

The Huanggang plant is the core of WM's expansion plan. With a total investment of CNY 20.2 billion and an annual production capacity of up to 300,000 units, every plan at the beginning carried WM's ambitions. WM's other plant in Wenzhou, although it did not become an "empty city" like the Huanggang factory, did not realize its plan to resume work on February 8. Looking back now, WM's plan to build a second factory in Huanggang may still be too radical.

The factory shutdown is mainly due to two aspects: one is the shortage of upstream raw materials, parts supply and factory manpower, and the other is the lack of orders. Shen Hui had previously acquiesced that the former factor had a greater impact, even as he denied rumors of arrears to suppliers.

The subsidies of the distribution system are too expensive, and it takes money to build new factories, and the supply chain and the daily operation of factories are also closely related to money. Ultimately, whether the first two problems can be solved depends on when the third problem is solved – that is, when the financing is in place.

WM is not yet self-sufficient and is extremely dependent on external financing. According to the prospectus, as of the end of 2021, its total current liabilities had reached 9.477 billion yuan, but the company's cash and cash equivalents were only 4.156 billion yuan. In the past year, the impact of the epidemic on the upward trend and the increase in raw material prices will inevitably make WM's cash flow more tight.

In the view of the Value Research Institute (ID: jiazhiyanjiusuo), when the money is in place, WM's alarm can be phased off - but to completely escape, capital transfusion alone will definitely not work.

Burning money, losing money, financing is difficult, and it is difficult for new forces in car manufacturing to solve the knot

Weima has come to this point, in fact, from the beginning, laid the foreshadowing.

Shen Hui, who has worked in BorgWarner, Fiat, Geely and other major manufacturers, has a brilliant career and has a good connection in the automotive industry. In Geely's acquisition of Volvo, a sensational project, Shen Hui became Li Shufu's most valued right-hand man, and at the same time left a deep impression on many car circle bosses.

But perhaps this road has been too smooth, and Shen Hui's understanding of the difficulty of building cars independently is slightly insufficient. The Weima under him is more like a chick ripened by capital, and its inner skeleton is not mature.

WM's financing speed and scale are much more exaggerated than "Wei Xiaoli". As of 2018, before going public in the United States, NIO's total financing was less than 10 billion yuan, which was comparable to Xiaopeng in the same period, and the total amount of financing disclosed by Ideal was less than 5 billion yuan. But by the end of the year, WM had raised more than 20 billion yuan, and the current figure has reached 35 billion yuan.

Looking at the list of shareholders behind WM, Baidu has a heavy role. Since 2017, Baidu Capital, Baidu Group, Baidu Online Network Technology Company, etc. have successively participated in multiple rounds of financing by WM. In addition, predators such as Tencent and Sequoia China were also among the early shareholders of WM, all of which entered the market when its valuation was at its peak.

The amount of financing far exceeding the opponent is both honey and arsenic for WM. These early shareholders do not want to watch WM turn into a hot potato, which can only give shareholders an explanation if it goes public as soon as possible. Under the urging of capital, WM rushed all the way to the secondary market, pursuing short-term scale and rapid expansion, and the debt hole would become larger and larger.

Unfortunately, even if it is successfully listed, the situation will not necessarily get better. Compared with WM, "Wei Xiaoli" is in a much more optimistic situation, but it also has similar troubles - everyone is losing.

According to the financial report, NIO's net loss in fiscal 2022 was 14.559 billion, a year-on-year increase of 37.71%, and it has suffered losses for five consecutive years since listing. Xpeng's annual report has not yet been released, but it lost nearly 7 billion yuan in the first three quarters of last year, and the loss has been amplifying. Even the ideal with the healthiest financial situation has never achieved annual net profit since listing, with a net loss of 2.012 billion yuan in fiscal 2022, a year-on-year amplification of 526.79%.

It has been selling at a loss, and the new forces of car manufacturing seem to be under a curse. The reason is actually not difficult to understand: new energy vehicles are an emerging market, and all players are making a big bet at the expense of profits for share.

In the initial stages, capturing market share and user minds is far more important than making profits. Because the industry is developing rapidly, there is no ceiling in sight, capital is also willing to transfuse blood to feed, and maintains a delicate and reliable cooperative relationship with new forces in car manufacturing. But as time goes on, the cake is almost divided, car companies will begin to pursue profits, capital is still pursuing valuation, stock prices, and the two sides will highlight differences.

The further back you go, the harder it is for WM to raise funds. "Wei Xiaoli" and Zerorun, which have landed in the secondary market, also have complex capital forces tugging each other behind the scenes, each with its own difficulties. Capital urges new forces in car manufacturing to constantly compete for a larger market share and more users, but does not give them enough time to move towards refined and rational operation.

Financing, burning money, grabbing the market, falling into losses, and then encountering capital pressure, everything is like a dead knot, no one can solve it. Of course, it is not only WM who is trapped by money, but WM's today may also become the tomorrow of other new forces in car manufacturing - every step that WM has taken, latecomers should keep in mind.

The track is getting crowded, will Xiaomi and Baidu still have time to enter?

New energy vehicles are like a new era of siege, people inside are struggling, and people outside are constantly pouring in.

On March 6, just a day before WM announced its resurrection, Xiaomi also announced the new progress of the car manufacturing plan. Lei Jun, who attended the meeting in Beijing, told the outside world that Xiaomi's car manufacturing progress exceeded expectations, and it has recently successfully completed winter tests, and it is expected to be mass-produced in the first half of next year. Lei Jun also revealed that Xiaomi's automobile research and development team has exceeded 2,300 people, and he himself has spent half of his time on the automotive business.

In January this year, Jidu Automobile, co-founded by Baidu and Geely, also opened the intelligent driving generalization test in Guangzhou, which is the third city after Beijing and Shanghai. Frequent tests indicate that Jidu is one step closer to launch and mass production, and the production version of ROBO-01 displayed at the Guangzhou Auto Show last year carries Baidu's main hopes.

Lei Jun and Li Yanhong are ambitious, but can the increasingly crowded new energy vehicle market still accommodate these two gods?

In the view of the Institute of Value (ID: jiazhiyanjiusuo), there are definitely opportunities. After all, the penetration rate of domestic new energy vehicles has a lot of room for improvement, and relevant departments are still providing policy support. At present, Xiaopeng, Nezha, and BYD have basically wiped out the entry-level market, and their market share and profit margins are limited. However, the mid-end and high-end markets still have great potential, and they are also the direction of major car companies.

In addition to NIO, which is already based on the mid-to-high-end market, the price of several new models under Li Li is concentrated between 300,000 and 450,000, and the target group is quite clear. Traditional car companies such as BYD and Geely are also working on the middle and high-end, and the former has even launched a sub-brand "Yangwang" that explores the million-dollar range.

Xiaomi cars and jidu cars are also aiming at this price range. The limited edition of Jidu ROBO-01 Moonshot Limited Edition, which was listed in October last year, started at 399,800 yuan, which basically completely collided with Ideal and NIO. Xiaomi cars that have not yet been unveiled, the price range is between 100,000-300,000 yuan, and it is not a cost-effective route like other Xiaomi products.

However, with the lessons of the horses, Xiaomi and Baidu must also learn a lesson: money must be burned, but the degree must be well controlled.

In fiscal 2022, Xiaomi Automobile and other new businesses invested more than 3 billion yuan, which is three times higher than that of new automakers in the start-up period. Xiaomi is actually racing against time, hoping to use huge investment to shorten the R&D, launch, and mass production cycles and enter the market as soon as possible. On the surface, this route is no different from "Wei Xiaoli" and Weima. But there is one big difference - Xiaomi burns its own money.

Although Jidu Auto has independently completed multiple rounds of financing, it is always the two big backers of Baidu and Geely standing behind it. Until Xia Yiping stepped down as Jidu legal person in June last year and Baidu fully took over, Jidu Auto did not open an external financing window.

Burning their own money to build cars means that Xiaomi and Baidu can be more relaxed and have greater autonomy than the new forces of car manufacturing. However, Xiaomi and Baidu also have to explain to the shareholders behind them, and they need to hand over the answers in time. It's a pity that this game of racing against time has not yet reached the end, and the climate after the finish has become unstable.

Xiaomi and Baidu still have a chance to come later, but they have to face more unknown tests.

Write at the end

At the end of February this year, Shen Hui gave an in-depth interview. In this interview, he generously admits his shortcomings: lack of entrepreneurial experience, and layman in fundraising, especially with the primary market.

Shen Hui's real shortcoming is actually not that he is not good at dealing with capital - after all, WM has actually completed nearly 10 billion in financing over the years. Perhaps his biggest problem is that he miscalculated the speed at which WM burns money and the difficulty of making a profit.

Compared with Shen Hui and WM, Baidu and Xiaomi have advantages: stronger financial strength, as well as the experience and lessons brought by predecessors, all make them win at the starting line. However, as the market gradually becomes saturated and the rising channel continues to narrow, even Xiaomi cars and jidu cars born with golden spoons can feel the pressure on their shoulders getting heavier and heavier.

From Tesla's delivery of the first Model S to Chinese owners in 2014, to the establishment of NIO in November of the same year, to the launch of Zero Bell at the end of last year, new energy vehicles and new forces in car manufacturing have gone through nearly 10 years of ups and downs in this hot land. The space left for those who come after is becoming more and more limited, and every step ahead is bound to be more difficult.