Positive developments continue to pile on for Kandi Technologies and investors of the electric car maker are seeing the rewards. Thus far in July, the company stock is up 20% on supportive news out of the Chinese government and demand for Kandi’s electric vehicles.
Chinese Government Enforcing Electric Vehicles
To fight pollution and cut energy use, the Chinese government announced that it is aiming to have electric vehicles make 30% of vehicle purchases. This latest move came after the government announced it will waive a 10% purchase tax on new-energy vehicles (including EVs). These Chinese aspirations validate two points. Pollution has become a serious concern and that the government is supporting the implementation of electric vehicles. Both indicate that demand of electric vehicles is on the rise.
Last week, Kandi received the first national subsidy payment of approximately US$32M, covering EV sales for 2H 2013 & Q1 2014. The company expects to announce a local subsidy, from the city of Hangzhou, which would provide additional funds. Though the Chinese governing bodies are making ambitious claims, they are acting on their word. This will only drive demand for Kandi’s EVs.
Having support of the Chinese government is reassuring for Kandi’s investors as it de-risks the company’s operations to a certain extent. Critics argue that Kandi’s survival depends solely on government subsidy, however when looking back, this is a similar approach the US government took with Tesla. As you know, Tesla has become a self sufficient company. Once the training wheels come off, Kandi will also follow the same route.
Kandi Showing Early Signs of Increased Demand
Today, Kandi announced that sales from its joint venture increased 238% from the prior quarter. 4,114 Kandi brand electric vehicles were sold in 2Q 2014 (up from the Q1 figure of 1,215). To compare, Kandi sold 4,694 EVs in all of 2013, which generated $46.6M in revenue. Kandi expects to report its second quarter results on August 11, 2014. Going by these figures though, I would not be surprised to see Kandi match its 2013 revenue figure in only the second quarter of 2014. KNDI stock was up nearly 20% on this news so it seems the street has raised its expectations for the Chinese electric vehicle maker.
Catalysts Should Continue Short Squeeze
Kandi has nearly 25% of its float sold short, so these positive developments are certainly driving short sellers to cover. I see this continuing especially if earnings surprise on August 11th, which early figures indicate they will.
In addition, on July 11th, Kandi held its first Supplier Conference where the company unveiled “Urban Beauty” their new EV model (picture below)