Kandi Technologies, a Chinese manufacturer and seller of Electric Vehicles (EV), announced today that it has received the first national subsidy payment of approximately US$32M. The payment covers sales of over 3000 EVs between the second half of 2013 and over 1000 EVs in Q1 2014. KNDI shares are up over 5% on this news.
As an anti-pollution policy, the Chinese government will be supplying subsidies towards an EV push to have 5M cars by 2020. Pollution has become a widespread concern in China, so the innovation of an EV car share program (watch here for more info) that Kandi has undertaken will be sustained by regulatory bodies at least until self sufficiency. This is a similar approach the US government took with Tesla.
Receiving the first payment is validation for Kandi as it shows that the company has the support of the national Chinese government. The company expects to announce a local subsidy, from the city of Hangzhou, which would provide additional funds.
Impact on Operations
Based in China, investors are suspicious of Kandi operations, given the failure of other Chinese public companies. These worries were magnified when the company filed a $300M shelf offering late June. Though this could indicate that dilution may be coming, it is not a sure thing as sometimes it’s insurance to be able to raise more funds, if necessary.
Kandi ended Q1 with approximately ~20M in cash. With an additional $16M (since it’s a 50/50 joint venture) from the subsidy payment and a quarterly burn of $5M, Kandi’s cash balance is expected to be around $30M. Having $30M in the bank should minimize any dilutive risk in the near future.
For investors that are willing to take on the additional risk of investing in a Chinese company, today’s news is definitely positive for Kandi’s development.