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Sputtering WM Motor Hopes For Recharge From New U.S. Listing With Kaixin

Sputtering WM Motor Hopes For Recharge From New U.S. Listing With Kaixin

Key Takeaways:

  • Kaixin Auto plans to acquire WM Motor and another NEV maker, aiming to establish itself as a new energy vehicle maker
  • Kaixin’s shares have declined by 44% since announcing the WM Motor acquisition, even after implementing a reverse stock split

By Edith Terry

Sputtering new energy vehicle (NEV) manufacturer WM Motor Holdings Ltd. found a potential savior in Kaixin Auto Holdings (NASDAQ: KXIN) last week, following the collapse of its planned acquisition by Apollo Future Mobility Group Ltd. (0860.HK). However, questions remain about Kaixin’s ability to rescue WM Motor, as the company’s market value is only $57 million.

Kaixin’s track record suggests that it may not be the ideal candidate to revive WM Motor’s struggling business. Furthermore, China’s NEV industry is experiencing consolidation after a boom period from 2018 to 2020, which poses additional challenges for Kaixin’s transformation into an NEV maker.

WM Motor is the first of the previous “NEV Dragon” startups, backed by major players like Baidu and Tencent, to face difficulties. Its previous potential savior, Apollo Future Mobility, lacked substantial revenues. In contrast, Kaixin’s financial capacity to support its ambitions is limited, relying on issuing new shares to acquire NEV makers like Morning Star Auto and WM Motor.

Despite implementing a reverse stock split, which is meant to bolster investor confidence, Kaixin’s share price has continued to decline. The company now faces the crucial task of securing the necessary capital to revive WM Motor’s operations, which were halted due to financial constraints.

WM Motor’s NEVs and strong branding are touted as benefits of the acquisition for Kaixin. However, the success of this partnership remains uncertain, as Kaixin’s financials are not encouraging. With only $7.1 million in cash equivalents at the end of 2022, Kaixin is ill-equipped to support the revival of WM Motor, which was valued at $2 billion in January of this year. Kaixin’s revenue in 2022 amounted to a mere $82.8 million, a significant decline from the previous year, and the company has been consistently unprofitable since 2019.

Entering the NEV industry during a period of consolidation and reduced government subsidies poses additional challenges for Kaixin. Experts predict that only a handful of players out of the estimated 300 in 2017 will survive. While some startups like Nio (NYSE: NIO), Xpeng (NYSE: XPEV), Li Auto (NASDAQ: LI), Leapmotor (9863.HK), and Hozon have managed to sustain stable sales, many others have struggled or ceased operations altogether.