Chinese electric vehicle startup WM Motor has filed for bankruptcy, an example of yet another once-promising EV upstart that has been pushed to insolvency as bigger players gain market share and Chinese spending on big ticket items dwindles.

WM Motor, backed by Baidu and Tencent, was one of the most well-funded EV startups in China, alongside Nio, Li Auto and XPeng. The company raised over $5.3 billion in funding, including one whopping $1.47 billion round in 2020. As it turns out, that money wasn’t sufficient to compete in China’s EV market, where automakers are crumpling under pressure to introduce new smart features and luxury products at increasingly lower price points.

WM Motor blamed macro-economic conditions for its demise. The carmaker said it’s been struggling to deal with operational issues since the pandemic, capital market stagnation, difficulty securing capital and price volatility in raw materials.

The impact of COVID-19 on the auto industry should not be underestimated. Automakers around the world were put under a significant stress test as they grappled with factory closures, logistics disruptions, and subsequent price increases in semiconductors amid a period of chip shortage. Then when Chinese EV makers finally emerged from behind the cloud after the pandemic, a new round of price war initiated by Tesla further strained their cash flow management.

But, as Lei Xing, co-host of China EVs and More podcast and former chief editor at China Auto Review, points out, every automaker is under the strain of those conditions — the ones with deep pockets and operational excellence will survive. And those that are too slow, like WM, won’t be able to make up enough revenue to cover their sizable losses.

And WM’s losses are great. In the three years ending in 2021, the company’s losses mounted to $1.13 billion, according to WM’s stock prospectus released in June 2022 for a planned Hong Kong IPO. That IPO didn’t happen, nor did a planned backdoor listing via a reverse takeover with Apollo Future Mobility that was meant to go through this year.

In September, U.S.-listed Chinese used-car dealer Kaixin Auto Holdings said it signed a non-binding letter of intent to acquire WM Motor, but the status of that deal is not clear in light of the bankruptcy filing.

WM Motor has signaled its intent to reorganize and introduce strategic investors from around the world to “achieve its rebirth,” according to a statement posted on the company’s Weibo account Tuesday.

Despite what the company says, Xing says he doesn’t see a future for WM.

“Even the leaders — Nio, XPeng, Li Auto — they’re by no means out of the woods,” Xing told TechCrunch. “If you look to the U.S. and Rivian’s convertible note offering, it means they needed money. So capital is still a problem for everyone.”

Indeed, Nio reported losses of $35,000 per car sold in the second quarter of this year. The company employs 11,000 people in R&D, but sold only 8,000 cars per month from April to June. It has invested heavily in robots in its factories, offers $350 augmented reality glasses for each seat in its cars and has introduced a cellphone that interacts with the car’s self-driving system.

Li Auto, which appears to be winning with a strong delivery streak this year, could also be caught off guard by a new rival. Aito, a Huawei-backed EV brand produced by Seres, is moving quickly in the smart SUV EV space, Li Auto’s bread and butter. The startup received more than 50,000 orders for its revamped M7 model within the first 25 days it went on sale, putting it among China’s five top-selling new energy vehicle manufacturers, according to August sales data. The M7 has all the features of Li Auto’s popular S7 SUV, but at a sub-$40,000 price point.

These are mere examples of the costs Chinese automakers are willing to incur and the speed at which they can move in order to meet and exceed the high expectations from consumers. It’s akin to how consumers around the world have become accustomed to getting a ride in a private vehicle for a fraction of the cost of a taxi. And as we’ve seen from ride-hail companies like Uber and Lyft, slashing prices will result in scale, but it’ll cost companies profits.

“None of these smart EV startups are safe, let alone the ones that are state-owned,” said Xing. “Look at Rising Auto, IM, Voyah. These are delivering a couple thousand units a month. It’s not sustainable. I believe you will see some of those dying out, as well.”

Over the past year, a range of EV startups — like Evergrande New Energy Auto, Aiways and Niutron — have either closed factories or stopped taking new orders. Byton, which was backed by Nanjing City government and state-owned carmaker FAW Group, filed for bankruptcy in June after failing to bring its first model, the M-Byte SUV, to production.

Automakers like BYD will likely be able to weather the storm, said Xing. BYD is the top EV-maker in China, with over 1.6 million units sold from January to August this year, according to China Passenger Car Association data. Tesla China, the second-largest automaker in the country, sold 390,222 units in that same timeframe.

“BYD still has additional cards to play,” said Xing. “They can still cut prices as soon as they need to do so because, like Tesla, they have vertical integration and their cost base is lower than other competitors, so they can sacrifice profitability for volume.”

Companies that have a large overseas presence — like Tesla and Geely — may also be able to stay afloat because they’ll survive the domestic consumption headwinds.

Zeekr, Geely’s young EV brand backed with hundreds of millions of dollars, for example, is pushing aggressively into international markets with a two-pronged strategy. On the one hand, it plans to soon start selling its luxury EVs in a handful of countries across Asia and Europe; on the other, it has an ongoing deal with Waymo to supply the latter’s robotaxis, which are expected to start testing in the U.S. by the end of this year.