Kandi Technolgies Corp (KNDI)

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Kandi Technologies - Highlights Of The Second U.S. Investor And Analyst Conference
Nov. 17, 2014

http://seekingalpha.com/article/2689275-kandi-technologies-highlights-of-the-second-u-s-investor-and-analyst-conference

Disclosure: The author is long TSLA, KNDI. (More...)
Summary

Three new pure electric cars will be introduced in 2015, K12 “City Beauty”, K13 “City Cowboy”, and KD17 “Cyclone.”.
The new electric cars to utilize advanced batteries with a driving range of 300 miles, greater than Tesla Model S.
The new batteries are safer, last twice as long as the current batteries, yet cost about half.
The new cars will likely be sold directly to consumers, and possibly overseas.
Central government subsidy check of $32.6 million for the quarter ending June, 2014 has been received by the local government.

"The Stone Age did not end for lack of stone. The Oil Age will end long before the world runs out of oil." - Sheikh Zaki Yamani, former Saudi Arabia Oil Minister.

Abstract

Kandi Technologies (NASDAQ:KNDI) hosted the second U.S. investor and analyst conference on Wednesday, November 12, 2014 at the Hyatt Regency Hotel in San Francisco, CA. The first investor and analyst meeting was held on September 5, 2012 in Atlanta, GA. There were approximately 100 attendants last week, compared to about 30 investors who attended the Atlanta event two years ago.

Two days prior to the conference, Kandi reported impressive third quarter earnings. Revenue grew 158% YoY and was the second highest in Kandi history. The company also achieved record GAAP income for the quarter.

The presentation slides can be viewed here. Mr. Hu started with the presentation, followed by a Q & A session. Mr. Hu spoke Chinese with Kewa Luo, Kandi Investor Relation Manager, translating. The presentation slides are well prepared, and contains excellent and concise information about the company. The presentation materials provide an invaluable tool for investors' due diligence, especially investors new to the Company and its market.

One day prior to the conference, Mr. Hu confirmed he visited Tesla (NASDAQ:TSLA) with some Chinese government officials. The meeting with Tesla was about battery technologies. No other details were disclosed.
New Car Models for 2015

Recall that on October 6, 2014, Kandi announced the new PEV model KD17 "Cyclone". The Cyclone and other new cars will be equipped with the latest technologically advanced batteries (to be discussed later). Kandi has just received the Cyclone testing report from the government and a press release is expected soon. Cyclone is expected to be available in the first half of 2015.

Exhibit 1 - Kandi new model KD17 "Cyclone"

On July 9, Kandi announced the new model K12 "City Beauty" at Kandi EV Group's first Supplier Conference held in Hangzhou's First World Hotel. The car was touted by attending vendors as a superior product. For over four months, there were no news released about this sleek-looking mini EV. Conference attendees learned that Mr. Li Shufu had asked Kandi to upgrade the design of this beauty in and out, to transform the car from targeting affordable, lower-end segment of the market to the "higher end, tech savvy" customer base. He also wanted the car to become marketable globally. More functions are being added to the car, including driver's assisted technology. Mr. Hu mentioned that the car can be easily maneuvered by drivers with minimal driving skills.

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Exhibit 2 - Kandi new model K12 "City Beauty"

This is the first time attendees learned of the new model K13 City Cowboy in about two and a half years. Similar to the City Beauty, the City Cowboy is being upgraded to meet global marketing standard as well. These two models will be available in 2015.

Mr. Hu mentioned that Geely's first priority is now the JV and its EV projects, with Volvo its second priority, and the traditional ICE cars their third priority. This comes as no surprise since Li Shufu recently remarked at the Fifth Global Forum held in Wuhan, China "The traditional auto industry is heading for bankruptcy, no longer has a market." What surprised attendees was why Geely has such involvement with Kandi's own City Beauty and City Cowboy products, would that make Kandi a division of Geely? This prompted an attendee asking whether or not an acquisition of Kandi is possible. Mr. Hu answered "Yes, an acquisition is possible", then he jokingly added "but I'm not sure who will acquire who." (or maybe he meant "who will acquire Hu".) Nevertheless, Geely's active involvement with EV development has been very positive for Kandi, "Geely has helped improve Kandi's new products substantially", Mr. Hu said. When asked whether or not, Kandi's new EVs will be sold directly to consumers, Mr. Hu twice responded "Very possible, very possible", then he added "We have been approached by a European company about distributing our cars in Europe".

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Exhibit 3 - Kandi new model K13 "City Cowboy"

Besides these new models, the JV's currently working on other EV models. For instance, pictures of Kandi's new mid-size SUV K30 based on Geely's popular Emgrand 7 RV were posted on the Sohu site on September 9.
New Batteries and New Technologies

Perhaps the most exciting news from the conference is the new battery announcement. Mr. Hu disclosed that all of Kandi and Geely new EVs will be equipped with new batteries co-developed between Kandi and Tianneng Group, the leader of the Chinese green new energy industry. Tianneng Group was founded in 1986 and is located in Changxing, Zhejiang province. Tiannneng employs more than 20,000 employees and holds more than 700 national patents. Its battery products were named as "the Best Chinese Motive Battery Brand" and "the Most Customer Reliable Electric Vehicle Battery Brand". Tianneng Group is listed as "36th of the top 500 global new energy enterprises in 2013", "Top 500 of China private enterprises", and "Number1 of top 10 China battery industry" for 10 years.

battery-join.jpg

Exhibit 4 - Tianneng new battery announcement

On October 23, 2014 Tiannneng Group announced its new batteries with breakthrough technologies. Separately, Tiannneng and Kandi jointly developed a customized version of the new batteries that will be exclusively deployed in all of Kandi and Geely's new EVs. The new batteries will also feature Kandi's battery power management technologies.

The new battery has a driving range of over 300 miles, higher than Tesla Model S which has a driving range of 208-265 miles. Tesla driving range is currently topping all other electric cars on the market. The second place, Toyota Rav4 EV, has a driving range of 103 miles. The driving range for the current world's best seller Nissan Leaf is only 84 miles. Exhibit 5 shows an interesting fact - Despite its high price tag, Tesla Model S has the lowest cost per mile of range.

Mr. Hu said that, despite the incredible driving range, the new batteries cost only half of the current batteries, and last twice as long. The new battery is safe, and is protected with thirty six patents.

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Exhibit 5 - Despite hefty price tag, Tesla Model S cost per mile is the lowest
Subsidies

When asked about subsidies, Mr. Hu said that the Central government has already paid Kandi JV subsidies through the first quarter of 2014. Subsidies for the quarter ending in June was supposed to be paid in July, but it was delayed. The subsidy check of 200M RMB (approximately $32.6 million) finally arrived to the local government in early November, and should get to the JV anytime now. The Central government still owes the JV a subsidy check for the third quarter.

Regarding local subsidies, Mr. Hu mentioned ZZY has never got paid from Hangzhou or Shanghai governments. Hangzhou subsidy policy is still waiting to be approved. Once it get approved, the buildup in Hangzhou will resume. The proposed amount of Hangzhou subsidy is very similar to that of the Central government. He confirmed Kandi will deliver one thousand EVs to Chengdu in December. Nanjing process might take a while, therefore the delivery timeframe is not yet determined.

Mr. Hu mentioned that out of the 86 pilot cities, about two-third of those cities have approached Kandi JV to discuss about Car-Share deployment in their cities. He said that in order for Kandi to work with them, besides local subsidies, the cities must also provide free "green lands" to build Car-Share stations. Street Car-Share stations is much preferred over vertical parking garages because they're much faster to build and cost a lot less.

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Exhibit 6 - Subsidies and tax break incentive
Outlook

From time to time when asked, Mr. Hu hinted about the short-term and long-term outlook. About Hangzhou, he said more Car-Share stations will be built after Hangzhou subsidy is announced. He expects more Car-Share announcements will be made with new cities, even though "government process can take a long time". For now, monthly production of 2,000 EVs is likely. "It will take between one and two years for Kandi JV to begin producing 100,000 EVs per year", he said.
Conclusion

Mr. Hu is very concerned about the manipulation and the volatility of KNDI. During the meeting he asked for suggestions and feedback from attendees. Valuable feedbacks were collected, including transparency, suggestion that Kandi hold earnings release conference calls , provides quarterly guidance, gain industry analyst coverage, and increase institutional ownership.

Mr. Hu is very confident about the future of Kandi. He envisions 2015 will be the transition year for the company, more Car-Share cities, more government support, and a broader range of PEVs. The new cars contain high-tech features, utilize advanced batteries with driving range of 300 miles per charge, targeting upper middle class. These cars will likely be sold directly to Chinese consumers, with opportunities to be marketed overseas. This is why Kandi confidently mentioned in the Form 10-Q that its new products will be "massively competitive".

The JV will likely market the City models domestically and also overseas, which Geely has lots of expertise. This means the JV function will expand beyond the Car-Share business, into selling directly to domestic and overseas customers.

Mr. Hu mentioned the current five-year plan calls for half a million EVs on the road by the end of 2015. By the end of 2020, five million EVs will be on the road in China. Kandi's PEV share of the market is expected to increase exponentially.