Notes
Mr. Hu was extremely passionate about the future of the company, while also acknowledging that there had been certain missteps, and that growth isn’t ever as fast as one would like. He painted a very promising picture of what’s to come in 2015, including more cities, stronger government support, and definitely a broader product portfolio.
As for specific details, there wasn’t too much new, but he did expand on the following:
· Answering the very first question of the day, which was ‘how much is Kandi owed by the government’, he announced that on 11/7 when he departed for the States, he received word that the Q2 subsidy reimbursements had been paid to the local level, so he expects them to make their way to Kandi soon. 200rmb was the amount ($30M+).
· Kandi is working with Tianning Power (the largest battery producer in the country) to co-develop new battery technology that will be used first in the Cyclone to be release in the first-half next year. Without going into specific technology details before they’re public, he did say say that it’d have half the cost and twice the life of the existing technology.
· Kandi wouldn’t be increasing its investment in ZZY, since now that ZZY is not using nearly as much capital to build out garages, other investment funds are supplying their capital needs.
· As expected, regarding the Tesla meeting, the Chinese govt officials he accompanied had extended him an invitation that he couldn’t very well refuse. They had a productive meeting discussing battery technology, etc. He did not meet with Elon Musk.
· On Hangzhou subsidies, he was upbeat about it, saying that they are still in negotiations with the city around the details. He confirmed that the city would not be providing reimbursement at the individual vehicle unit level, but rather to ZZY/Kandi for the entire micro-bus program. And said, ‘So, if we deliver 1000 vehicles, as an example, they’d reimburse us for that, instead of car by car.’ He also add that other cities were looking to follow that structure.
· Urban Beauty and City Cowboy are to be launched in first half of 2015, and that their delay had been that Li Shufu thought their interiors weren’t up to international standards for technology and build. That brought up a question as to whether he had thoughts of export at some point, and he said yes (others may have a different recollection of the detail on this one).
· There were many questions around the currently production capacity, his ability to forecast, etc., and his comment was that, “within 2-3 years I believe we can become a ‘real car company’. He further clarified this by saying that this meant a run rate of 200,000 cars per year.
· He made several references to future government support, comparing the past year when ZZY and Kandi had expended so much of their own capital to build out infrastructure, etc. to a new national policy where the government would actually be providing/funding infrastructure. This seems to align with certain announcements we read from China around a renewed level of focus around support for green technologies, infrastructure development, etc. It was during this thread that he mentioned Wan Gang holding a future EV conference where policy changes would be announced. He didn’t say when. Again, others can weigh in on this.
· Reiterated that of the 86 cities that the PRC has designated as pilot cities, 2/3 have come to Kandi to discuss working together. He added that unless they provide funding, real estate, and favorable policies, he won’t work with them.
I would put the attendance at 75-80 people or so, maybe 100. From the questions that were asked (people asking questions were asked to identify themselves), it appeared that there were a few folks from retail money management firms, but I didn’t see any large institutional folks. On that point, Mr. Hu said he did expect that as they get larger, they’d be more interesting to larger I-banks. I personally asked him if when the time comes to raise additional capital, he’d be open to engaging a larger, more well-known global banker, and he said yes he’d be open to that.
A couple of times during the meeting he asked for suggestions and feedback from everyone in the room, and people had plenty to say about IR, transparency, the auditor, clarity in financials, holding conference calls, PR’ing the expected earnings release date, and much more.
On the auditor, one attendee, who certainly appeared to be a short, hit him pretty hard on Albert Wong. Mr. Hu gave what I thought was an honest answer that thus far, 1) he was satisfied with their work, 2) while Wong had represented several clients who had been delisted, they themselves had never run afoul of the SEC, and 3) frankly he hears lots of negative sentiment about the Big-4 in China. This was one example where he clearly opened it up to the crowd for input on what they should do, saying that it’s tough to satisfy investors on this point.
