Harvey - answers in red below...
How our Kandi Technologies(We) makes money. Please let me know if I've had this right:
Kandi Technologies sells parts to JV............we make 50% of the profits 100%
JV assembles the car and sells to ZZY.........we make 50% of the profits Yes
ZZY runs CarShare .............................. ....we make 9.5% of the profits Yes
So, for every car on the road... We made money 3 times. (if each is profitable) Yes!
Also, I was wondering about pricing.
We are the sole vender of the parts.
JV is the sole car distributer to ZZY.
ZZY is the only segment that derives income from the general population.
Therefore, how is the pricing of the parts and then the assembled cars determined? see below
Who gains the government subsidies? ZZY
Is it ZZY? They are the buyers. Yes
Is this why they can rent so inexpensively? Yes
Can We adjust pricing to move profitability between segments? see below
Pricing decisions are not revealed publicly so all we can do is reason. Mr Hu created the 3 entity business model consisting of Kandi, Kandi JV and ZZY. Mr Hu manages this 3-entity business. Pricing decisions must be a win-win for Kandi and our partners in the Kandi JV and ZZY. Prices naturally rise to what the market can support so we must start with ZZY. As EV acceptance and performance increases we can expect ZZY to increase leasing and rental fees in the future. Right now ZZY is a start-up and not profitable, but is probably satisfied to break even and is more focused on future profitability which promises to be huge. I would therefore reason that EV prices to ZZY can rise to a level above the sum of PRC and local subsidies - a level that causes ZZY to break even. I would expect that there are some governing conditions in the Kandi JV / ZZY contract. I would expect that the Kandi / Kandi JV contract allows Kandi a reasonable margin on Kandi manufactured parts and guarantees that Kandi is the sole supplier of certain parts. If EV selling prices rise to what the market can support, I would expect the Kandi JV to be the beneficiary of any additional profit. This would best serve Kandi's interests since its future value will largely be based on its 50% ownership of the Kandi JV. All explained without facts and numbers - the best I can do :)
