Why Kandi Technologies
Group, Inc. Stock Jumped
Kandi Technologies’ stock pops
Kandi Technologies stock is up 14% today after it announced
second-quarter EV sales.
• EV sales in the second quarter were up 238% sequentially to 4,114
• These sales come from a 50-50 joint venture with Shanghai Maple
Guorun Automobile Co., Ltd.
• This is a preliminary result; full earnings will be reported on Aug.
EV sales picking up in China
This is another sign that EV
sales are picking up in
• Management pointed to
success in the company’s
carshare rental program in
Hangzhou as well a new
group leasing model that
has customers paying
monthly for 1-3 years for a
vehicle, insurance, and
Follows another pop last week
Kandi Technologies’ stock jumped last week after the same JV
received a $38.1 million subsidy from the Chinese central
government for producing 3,000 vehicles.
• Subsidy payments from the government are often delayed,
although Kandi’s management hopes payments are more regular
under new rules proposed by the Ministries of Finance, Science and
Technology, and industry and IT.
• The City of Hangzhou is also expected to announce a subsidy policy
for EVs soon.
A long-term trend in China
With smog choking many
Chinese cities the
government has incentive
to get more people to
drive EVs. Kandi is an early
mover who has built an
innovative business model
Will profits grow in 2014?
Kandi Technologies is still in the early phase of growth, and has a lot
of potential this year:
• Profit from the EV JV in the first quarter was just $1.7 million.
• Reliance on subsidies from central and local governments has to be
• Investors should also be concerned about the cost and distraction
of an SEC investigation that began in November to whether
management manipulated the stock and committed fraud.
• Profits will likely grow given EV sales growth but that’s assuming
subsidy payments are made on a regular basis and not delayed, like
they were last year.
What to do now…
Kandi has a lot of growth potential but the SEC investigation and
reliance on subsidies from the Chinese government has to be a huge
• Many Chinese companies in emerging industries like battery
technology, EVs, and solar have shown flashes of strong results only
to be mismanaged or passed by higher quality companies.
• These same risks exist for Kandi, and with Tesla Motors and major
global automakers eyeing China’s market, there’s competitive risk as
• The risks outweigh the potential rewards -- potential investors
should consider sitting on the sidelines to watch this stock.
What does the future of the
automobile look like? Technology
may redefine what we think of driving.