Art
Particularly on a month to month basis. As Mr. Hu stated at the Shareholders "Meet & Greet" last month in SF, which was lightly addressed and missed by most, KNDI (I assume through its Yongkang Scou subsidiary) is now also in the Battery Management System (BMS) construction business similar to TSLA. Effectively we get the raw batteries, customize and tweek them for the specific vehicle. (see definition in link above).
Because of this, KNDI (not JV) is now also in in the Battery business and can get a bigger mark-up then what we saw in the first quarter when we sell them to the JV (or others).
Here is where the confusion comes in. The batteries are not sold side-by-side with the SKD's (Semi-Knock Down), which are the "complete sets" of main parts sold to the JV. (below is a description as filed with the SEC a few months ago)
"The Company recognizes revenue from its EV sharing network when it sells the Semi- Knock Down (“SKD”) of an EV, a complete set of the main parts that can be assembled into whole vehicles, to Shanghai Maple Automobile Co., Ltd. (“Maple Auto”). Maple Auto, a 99% owned subsidiary of the Company’s business partner, Geely Automobile Holdings, then assembles the SKD into a complete vehicle and sells it to ZuoZhongYou. Revenue from the subsequent sale of the full vehicle to ZuoZhongYou by Maple Auto is not attributable to the Company".
The batteries are sold independent of the SKD to the JV. It is highly possible, as was the case in Q1, where the batteries that KNDI bought from Wanxiang in Oct. 2013 (before the JV was officially formed) were sold in Q1 to the JV, who in turn sold them to ZZY, but the completed cars (without the batteries installed yet) were not sold by the JV to ZZY until Q2. For that reason, we saw a big jump in revenues with a big drop in Gross Margin and profits in Q1. In Q2 we saw a jump in in JV car sale units but a lower revenue per car since the sales were primarily the car without the battery. In Q3, things started to normalize (at least on a quarter basis) where, while not at the same moment, at least during the quarter, a closer match of Cars to Batteries were delivered and sold. When you try to calculate on a month to month basis, the bifurcation between batteries, SKD and cars becomes even more likely.
