Despite lackluster car sales in China, the chief financial officer of Chinese carmaker WM Motor says he remains confident about the future of electric vehicles in China.
Zhang Ran (张然), partner and CFO of WM Motor Technology or Weltmeister (威马汽车), a Shanghai-based EV carmaker, told Securities Daily (证券日报) in a recent interview that although the industry is bound to experience highs and lows, it is on the right track and currently only going through a natural sorting-out process.
“It’s not just about electric vehicles,” says Zhang, “but boils down to the three major developments: electrification, intelligent networking, and autonomous vehicles, which together will form an unstoppable trend.”
He went on to say that one or two months is not enough to develop a long-term assessment of the NEV market. “[T]his September’s production and sales figures may be lower than last September's, but, overall domestic new energy vehicle production and sales figures have increased by over 20% since the beginning of this year.”
Zhang commented that the NEV sector is actually a rare bright spot against the auto market slowdown of the overall automotive market. In his view, China’s national energy security strategy, which places high priority on the development of green NEVs, fuels the growth of this industry. In the end, it will be "up to consumers" to decide whether electric vehicles will outcompete traditional gas-fueled vehicles, he explained.
Founded in 2015, WM Motor is one of a many NEV startups that are transforming China's transportation landscape. WM Motor is backed by lead investors Baidu and Tencent. Its fourth and latest round of funding this past March raised CNY 3 billion (USD 428.5 million), boosting the carmaker's total funding amount to USD 1.6 billion to date.
In April, WM Motor debuted its EX5 2.0 model and EX5 Pro model. Its next model, the EX6 Limited, is set to launch by the end of 2019.
WM Motor's month on month sales have slumped by 38.21 percent for the month of September, according to the China Automotive Technology & Research Center (CATARC) (中国汽车技术研究中心), with only 1,344 cars delivered in the same period. WM Motor has delivered only 12,656 vehicles since the beginning of this year, which fell far short of meeting its stated target of 100,000 units from last year.
In addition to their underwhelming sales figures, WM Motor and its three subsidiaries have also been the target of a major lawsuit by Geely (吉利汽车). Geely sued WM Motor for alleged infringement of commercial secrets and asked for CNY 2.1 billion (USD 300 million) in compensation, the highest amount ever for a domestic commercial intellectual property dispute.
In light of these events, Zhang’s comments may come across as an attempt to reassure investors that WM Motor can survive the current capital winter in China, the world’s largest auto market, where sales have been falling for 15 consecutive months as of this September .
In addition, government subsidies and tax breaks for NEV firms have also been slashed, further putting many NEV car companies under great financial strain in China. According to Janet Lewis of Macquarie, “the government’s lack of desire to support the market more is that they would like to see a rationalization take place, rather than having 50 different automakers.”
The auto market is just a bellwether of China's slowing economy. Not only the auto market, but China’s economic growth has been slowing as a whole. This is attributed largely to the slowdown in consumption of services and consumer expenditures, according to senior partners at McKinsey.
Contrary to some narratives, the trade-war with the US, is rather a minor factor in the overall cooling of China’s economic growth. China’s net trade surplus accounted for only 0.78 percent of its GDP in 2018 and therefore is not a major cause for the slower growth.
Trade tensions between China and the US may have had an indirect, albeit relatively minor, effect on consumer confidence and private sector investments into manufacturing. However, the disappointing performance of the auto industry should be seen as part of a greater trend – decreased consumption as well as changing Chinese consumer preferences and attitudes towards car ownership.