After WM Motor founder Freeman Shen’s annual salary of 1.2 billion yuan ($164 million) aroused heated discussion, the Chinese second-tier electric vehicle maker is now reportedly carrying out large-scale salary reductions, including a 50% cut in executive pay.
The reductions seem to have spread from the management team to the grassroots level. Starting in October, WM Motor is paying 70% of the wages of grass-roots employees, causing intense deliberation on various Chinese job-seeking platforms.
This is not the first time that WM Motor has been exposed to cut salaries. In 2020, some employees said that the company had stopped paying year-end bonuses on the grounds that key performance indicators (KPI) were not reached, without giving clear assessment criteria. An insider claimed on Q&A platform Zhihu that when he joined the company, part of his salary was expected to be converted into a year-end bonus. According to the normal plan, employees who successfully completed the previous year’s work can receive this bonus, which is equal to about 40% of their annual salary.
WM Motor, established in 2015, is one of many young electric vehicle makers based in China, focusing on the low-end market of 100,000 yuan to 200,000 yuan. Its founder, Freeman Shen, once worked for Geely and led the acquisition of Volvo. In August 2016, it received round-A financing of $1 billion, and in 2020 it secured a 10 billion yuan financing round.
At that time, Shen said publicly many times that WM Motor aimed to be the first EV maker in China to make profits, even making a bet with Wang Xing, the founder of food delivery giant Meituan, saying that “WM Motor will definitely be one of the top three EV makers in China in the future.”
In September, 2019, WM Motor decided to explore the middle and high-end market, launching the EX6 model with a price tag of close to 300,000 yuan. However, this model has not been recognized widely by consumers. In recent years, this brand has repeatedly fallen into controversy due to high sustained losses, greatly reduced R&D expenses, slow updating of models, and the sky-high annual salary of the founder.
A poor fiscal situation is the first problem that WM Motor needs to solve. According to its financial reports, from 2019 to 2021, its losses have continued to increase, and the loss in 2021 alone was as high as 8.2 billion yuan. The gross profit margin from 2019 to 2021 was -58.3%, -43.5% and -41. 1% respectively, indicating that it is not profitable at all.
Slow sales growth is also bothering WM Motor. In the first half of this year, it delivered nearly 22,000 new cars, up 62.2% year-on-year. However, the figure is not considered excellent when compared with its competitors in the same period. NETA and Leapmotor, which have often been contrasted with WM Motor, delivered 63,000 vehicles and 52,000 vehicles respectively in the same period, with year-on-year growth rates of 199% and 265%.
In addition to consumers, the attitude of the capital market towards Chinese EV brands has gradually changed from radical enthusiasm to conservative prudence. In September this year, Leapmotor saw lackluster trading during its debut, and its share price has now dropped from HK$48 to HK$19.84.