As pricing competition in the biggest car market in the world heats up, Chinese electric vehicle startup WM Motor has filed for bankruptcy, signalling the end of a prospective leader among China’s EV manufacturers.

According to a filing made on the national business bankruptcy information disclosure website on Monday, the bankruptcy case is being handled by a court in Shanghai.

In September, the ailing EV manufacturer and U.S.-listed used car reseller Kaixin Auto Holdings announced a non-binding acquisition term sheet.

The transaction took place after WM Motor’s attempt to list via a backdoor reverse takeover with Hong Kong-listed Apollo Future Mobility failed.

After two earlier unsuccessful attempts by WM Motor to seek a listing in Shanghai’s STAR Market and Hong Kong, the failed bid was considered as a survival tactic.

WM Motor was one of the burgeoning Chinese EV companies, along with Nio, Li Auto, and XPeng, when it was founded in 2015 by recognized auto industry veteran Freeman Shen. 

Baidu, a major player in Chinese technology, and Shanghai’s state-owned asset regulator were among its sponsors.

However, the Shanghai-based firm was having a difficult time turning a profit in the capital-intensive auto industry.

According to WM Motor’s stock prospectus published in June 2022 for a planned Hong Kong IPO, the company’s yearly losses increased to 8.2 billion yuan ($1.13 billion) over the three years leading up to 2021.

With higher discounts and tax advantages for green automobiles, China’s passenger vehicle sales ended a losing skid since May and resumed growing in August year-over-year.

However, worries continue to exist regarding consumer spending on expensive products like cars in the context of an uncertain post-COVID economic recovery.

Expectations were high for WM Motor Holdings Ltd. in February, a Shanghai-based electric vehicle manufacturer founded by a former executive of Volvo AB and funded by internet giant Baidu Inc. It now runs the risk of succumbing to the slow-motion shakeout in China’s competitive EV industry. 

In the past, founder and CEO Shen Hui stated in a staff memo earlier this month seen by Bloomberg News that the company needed to reduce costs to survive. According to a subsequent message dated November 21, salaries have been drastically decreased, with some managers taking 50% pay cuts and employees seeing 30% pay cuts in October.

China’s vehicle market is becoming more competitive; in 2019, there were more than 500 registered EV manufacturers, many of which were smaller competitors vying for government subsidies. As domestic producers like BYD Co. and Tesla Inc. gained more dominance, more than half have shut down or run out of money.