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Kandi Technologies Charging Ahead in the Electric Vehicles Market

21 Oct Kandi Technologies Charging Ahead in the Electric Vehicles Market

Kandi Technologies Group Inc (NASDAQ: KNDI), a Company engaged in the development and manufacturing of vehicular products, announced that it has successfully executed a purchase framework agreement with DGL Group Inc, Wal-Mart’s largest supplier of electric self-balancing scooters under intelligent transportation product category.  The agreement dated September 22, 2019, was executed through its wholly-owned subsidiary Zhejiang Kandi Vehicles Co., Ltd, starting with the delivery of the initial batch of 1,232 electric scooters and 37,755 electric self-balancing scooters on October 11, 2019 as per a Company statement.

Kandi formed a joint venture with Geely Group, one of China’s leading automaker in 2013, to develop and commercialize pure electric vehicle products. Kandi holds 22% in the Joint venture, while Geely and its affiliates own 78 percent of the Company, which has now emerged as one of the pioneers at the forefront of the EV revolution in China.

Mr. Hu Xiaoming, Chairman and Chief Executive Officer of Kandi commented,

“The quick delivery of these vehicles shows the Company’s strong capability of producing intelligent electric transportation products leveraging its expertise in manufacturing off-road vehicles.”

Kandi Technologies Group (NASDAQ: KNDI)

Market Cap: $276.77M; Current Share Price: 5.24 USDChart
Data by YCharts

The International Energy Agency predicts that the Electronic Vehicles which stand at 3 million today will grow to 125 million by 2030. The Global Electric Vehicle market is all set to compete with the internal combustion engine (ICE) vehicles in the next five year, accounting for one out of every five cars sold by 2030, according to Seth Goldstein, an analyst and chair of Morningstar’s (NASDAQ: MORN) electric vehicle committee. The growth of this industry is a result of the initiatives by governments around the world, in the form of tax rebates, grants, and subsidies for adoption of renewable and more environment friendly options for transportation. Unlike conventional vehicle which can only replenish their fuel at specific public locations, Electric vehicles can be charged at home or commercial charging stations.

However, the limitation of sufficient charging capacity to cover long distances discourages the use of these vehicles. There is an increased focus on research and development activities, especially in the passenger car sector, to improve infrastructure and supply equipment and establish EV chargers at easily accessible public places, to allow long distance travel as well. Range anxiety which acts as the biggest impediment for the market at present, will soon be a thing of the past, with Companies racing to develop connectivity modules.

The demand for electric vehicles will also bolster the demand for ancillary industries such as engine components, electronics for propulsion systems, battery optimization and torque transfer devices. In fact the demand for lithium, which is a crucial component of energy storage in transportation batteries, is likely to quadruple over the next decade according to Seth Goldstein.

A report by McKinsey estimates that by 2025, there will be more than 350 EV models introduced into the market, with ranges of 200 miles. However a lack of charging infrastructure could hamper the growth in the market. The report also highlights the fact that besides price and driving range, lack of access to charging stations is the third most serious barrier to EV. However there have been a gradual decline in prices and improvement in driving range and companies are making a concerted effort to provide the requisite charging infrastructure. Furthermore the total energy demand for electric vehicles in China, United States and European Union alone will reach 280 billion kilowatt-hours by 2030.

Image Source: Mckiney

There has been an increasing interest in EV’s owing to environmental concerns, which has prompted leading automobile makers such as BMW, Daimler, Ford, and Volkswagen to announce an investment plan for deployment of 400 charging sites across Europe, in addition to investing approximately $90 billion in electric vehicles, according to a report by Reuters.

Volkswagen is planning to produce 1 million electric vehicles by 2025, with over 70 new all electric models, and invest nearly $50 billion in electrification through 2023. Not to be left behind Companies such as Ford have committed to investing $11 billion by 2023, while General Motors plans to roll out 20 fully electric models by 2023, a testimony to the potential of this market.

Kandi is one of China’s Top 500 mechanical companies and a member of China Renewable Energy Auto Association. Besides electric vehicles (EV’s) the Company also manufactures all-terrain vehicles (ATVs), battery packs, automobile motors, controllers for electric vehicles, and air-conditioning systems. However it has now shifted its focus to electric vehicles and intends to maintain its leadership position in the pure EV market. Kandi has various subsidiaries such as Jinhua Kandi New Energy Vehicle Co., Ltd, Yongkang Scrou Electric Co., Ltd, Kandi Electric Vehicles (Hainan) Co. Ltd, and a 50% ownership interest in Kandi Electric Vehicles Group Co., Ltd according to the Company.

Image Source: Company

The Companies numerous product offerings include Electric Car, Tendency, Tricycles and Farmer Cars. The Company has signed a supply contract with SC Autosports for its initial 2000 model K23 at the EV model K23 Launch Conference in Garland, Texas. The Companies signed the agreement on October 1, 2019 for a total contract value of about $32 million. The first 200 vehicles are due for delivery by the end of 2019. Its foray into the U.S market was marked by the Company receiving eligibility for up to $7,500.00 in tax credits  from the Internal Revenue Service, which the Company is passing on to its buyers.

As per its second quarter financial results, Kandi reported a 506.9% increase in revenues from sales of off-road vehicles, from $0.8 million in 2018 to $5.2 million for the second quarter of 2019. Total revenues also saw an increase 47.6% from $16.4 million in 2018 to $24.1 million in the second quarter of 2019. The Company has reported cash and cash equivalents of $5.2 million as of June 30, 2019.

Risk Assessment  

  • The Electric Vehicles industry is still at a nascent stage in many countries, this provides an excellent opportunity for growth and expansion, as there is an increasing demand for environmental friendly alternatives and renewable energy sources.
  • The Electric Vehicle segment as a whole is seeing increasing support and encouragement in form of incentives, subsidies, rebates and concessions from governments and regulatory authorities worldwide. This provides a favorable environment for growth and development for all participants of the industry.
  • Lack of adequate infrastructure is a major cause for concern for the industry’s growth. There is a rise in research and development effort, as well as collaborations to advance the infrastructure and framework, for not only EV vehicles but various ancillary industries related to it such as components, charging services etc,
  • A decrease in battery costs has led to the decrease in the prices of EV vehicles, thereby improving their adoption; however they still remain more expensive than gas fueled vehicles, which may act as an impediment to their wide scale acceptance. However industry analysts predict a drastic fall in the price of batteries in the future leading to more affordable electric vehicles.
  • The charging infrastructure, a prerequisite for the growth and adaptation of EV’s, especially those that offer commercial direct current fast chargers (DCFC) for rapid refueling in public locations, are not economically profitable, owing to high capital costs and low utilization rates due to steeper pricing. However an increasing demand for EV’s will lead to profitability and make it a viable alternative to ICE.
  • The successful adoption of EV is primarily dependant on access to easy to use and affordable charging infrastructure. The target group, which is the average customer who now drives a fuel-based vehicle, will have to be convinced of being able to ride his EV without the fear of the process of charging being more complicated, time-consuming and non-reliable.
  •  Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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