Categories Consumer, Earnings Call Transcripts

Kandi Technologies Group Inc (NASDAQ: KNDI) Q1 2020 Earnings Call Transcript

KNDI Earnings Call - Final Transcript

Kandi Technologies Group Inc (KNDI) Q1 2020 earnings call dated Jun. 05, 2020

Corporate Participants:

Kewa Luo — Manager of Investor Relations

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

Xiaoying Zhu — Investor Relations

Analysts:

Harold Garberry — Private Investor — Analyst

Arthur Porcari — Corporate Strategies — Analyst

Michael T. Fearnow — Focus Tech Investments Inc. — Analyst

Mark Miller — Private Investor — Analyst

Michael Pfeffer — Oppenheimer & Co. Inc. — Analyst

Kahnau Mark — Swiss Liquid Future AG — Analyst

Terry William Mclemore — Scf Securities, Inc. — Analyst

John Cronan — Private Investor — Analyst

Presentation:

Operator

Greetings. Welcome to the Kandi Technologies First Quarter 2020 Financial Results Call. [Operator Instructions] Please note that this conference is being recorded.

At this time, I’ll turn the conference over to Kewa Luo. Kewa, you may now begin.

Kewa Luo — Manager of Investor Relations

Thank you, operator. Hi, everyone. Welcome to Kandi Technologies Group First Quarter 2020 Earnings Conference Call. The company released the results earlier today, and the press release is available on Kandi’s website at www.kandivehicle.com.

With us today are Mr. Hu Xiaoming, Kandi’s Founder, Chairman and Chief Executive Officer; and Mr. Ming Lim, Chief Financial Officer. Mr. Hu will deliver prepared remarks, followed by a question-and-answer session.

Before we get started, please note that today’s discussion will often contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties, as such, the company’s results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company’s public filings with the SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law.

As a reminder, this conference call is being recorded. In addition, our audio webcasting of this conference will be available on Kandi’s Investor Relations website.

I will now turn the call over to Kandi’s Founder, Chairman and CEO, Mr. Hu Xiaoming.

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Thank you, Kewa, and hello, everyone. Welcome. Thank you for joining us on the call today. As you all know, the COVID crisis impacted business in China and around the world in the first quarter. You should not be surprised that our revenue was down as country-wide shutdown reduced our production as well as consumer demand. Conditions seem to be improving right now. Demand is slowly recovering, and we are back to work and gradually ramping production.

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Even with this setback in the first half of this year, we are optimistic about the prospect of Kandi in our industry. Let me briefly tell you why.

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

First of all, there are better government support policies. I am, as the inventor of the vehicle/battery separation battery swapping model for pure electric vehicles, I am extremely gratified to our industry’s regulators shift from rejecting battery swapping to fully embracing it. Recently, several important national ministries just published a joint paper about battery swapping. The paper discusses how the government will promote this technology with many supporting policies. We have been a pioneer in battery swap and our Jinhua Ankao subsidiary produces one of the best intelligent automated swap systems in our industry. Other support is coming at the local level. Our factory in Hainan is poised to benefit from the government there building a free trade port. Just this week, the government have published a detailed plan outlining 60 supporting policies.

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

The second reason for optimism is new market opportunities. As COVID broke out, we worked hard to find new opportunities that leverage our technology expertise. We have conducted market research and one that stands out is powertrain for electric scooters and self-balancing hoverboards. This is a market perfect for our electric motors and battery packs, and it is quite large, 10 million units a year and growing. We have modified our products for this market and came to agreement to cooperate with one of the leaders in this market, Hangzhou Chic. Depending on how things develop, we may merge our motor and battery subsidiaries, Yongkang Scrou and Jinhua Ankao, into one single specialized powertrain technology company and evaluate the possibilities of raising growth capital in China.

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

The final reason for optimism is the positive long-term outlook for electric vehicles. Electric vehicles are here to stay. Countries around the world are embracing EVs for their positive environmental impact. By operating this — in this market for many, many years, we are very well positioned to benefit. Our affiliate company, Fengsheng, is ramping its new Maple model. We are developing our junior platform for third, fourth city rideshare program, which will drive huge volumes of vehicles over time. And we are entering U.S. market with consumer-friendly EVs at a very reasonable price.

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Let’s now turn to questions. Operator, please proceed.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Harold Garberry [Phonetic], a private investor.

Harold Garberry — Private Investor — Analyst

Okay. My question.

Kewa Luo — Manager of Investor Relations

Hello.

Harold Garberry — Private Investor — Analyst

Yes. Okay. There’s a lot of negative publicity about U.S. listing of China companies that are not in the Public Company Accounting Oversight Board, the PCAOB, compliance. While the U.S. had been saber-rattling for over 10 years threatening to delist these companies, in the past nothing has happened. But not so this time. Can Mr. Hu take some time to explain why Kandi shareholders do not have to be concerned about delisting due to both its structure and now PCAOB registered, thanks to Kandi’s recent auditor change.

Kewa Luo — Manager of Investor Relations

And thank you for your questions. [Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Our shareholders should be less concerned of the issues about because very simply two things: First of all, Kandi is a U.S. company. Second, we changed our new auditor, Marcum B&P (sic) [Marcum BP] last year around third quarter. And Marcun B&P is subject to the inspection by PCAOB, including its working paper.

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

Thank you.

Kewa Luo — Manager of Investor Relations

Thank you.

Operator

Our next question is from the line of Arthur Porcari with Corporate Strategies. Please proceed with your question.

Arthur Porcari — Corporate Strategies — Analyst

Good morning, Mr. Hu and Kewa. Mr. Hu, hopefully your health has been good and family as well. My comments, for background in questions, are primarily about the little-known and understood former Geely-Kandi JV, now called Fengsheng, which you only just barely mentioned. Since you didn’t cover it that extensively, I’m going to feel like I have to ask a few more questions because this is a subject that’s been receiving rave reviews all over the China media, including Kandi by name over just the past few weeks. So going I’m to have to be a little more expansive than I originally expected to be. Can you tell that to Mr. Hu, and then I’ll go on.

Kewa Luo — Manager of Investor Relations

Sure. [Foreign Speech] Please go on.

Arthur Porcari — Corporate Strategies — Analyst

Okay. For those not aware, a short Fengsheng background first. It’s 22% owned by Kandi, controlled and managed by Geely Holdings, Daimler’s largest shareholder and the world’s largest privately held automaker. In just the auto segment alone, Geely Holding owns eight global labels to include Volvo, Lotus, Proton and four others, all of this wholly owned exclusively by China’s sixth wealthiest man, Li Shufu.

As mentioned, recently, Kandi, through Fensheng, has received a lot of very positive press really in China as it has now begun selling its first EV under the Fengsheng Maple brand, a compact SUV named the Maple 30X. And with the second, up to seven passenger EV, the Maple 60V, was approved just last week by the government. Its expected to go on sale in Q3 of this year. You want to pass that on to him?

Kewa Luo — Manager of Investor Relations

Sure. [Foreign Speech] Please go on.

Arthur Porcari — Corporate Strategies — Analyst

The media reports that both are EV clones of two of Geely Auto’s top-selling gas cars, the Vision X3 and the Jiaji. While the 60V, which went on sale — goes on that’s the bigger car. Goes on sale in Q3 has not been priced yet, the 30X that went on sale in May after subsidies can be purchased for an amazing USD9,000 to USD10,000, depending on the model version, with incredible features usually only seen on mid- to high-end EVs, as the media has reported. Could you pass that on to him?

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Arthur Porcari — Corporate Strategies — Analyst

Okay. Also, reported by Fengsheng in the media of their — very heavily, with the schedule of 12 additional EVs to include a sports car and truck between now and 2024. This seems to be a hidden asset that U.S. investors are not paying attention to re Kandi. First, can Mr. Hu give us his take on this recent reporting? And what potential he sees for Kandi with this Fengshing investment? Then I have a few shorter questions.

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

As you know, ever since the joint venture is over, after the assets transfer, it’s going to be over controlled, managed by Geely mostly. And Geely has a very extensive business plan for growing the Fengsheng to dominate the market share in the EV market. And for their first EV model, 30X, their goal is to taking the market share, that’s why the price is very affordable. But the second car, 60V, this is based on their gasoline-powered car, 7-seated model. However, once it’s going to be modified to be the EV, it’s going to be turned to the five seated. Therefore, the car inside is really comfortable, and this is going to be mainly targeting the ridesharing market. And we believe that going forward, in the next few years, Fengsheng is going to release many very nice, high-performance, high standard EVs. But by then, I’m sure the company will keep the market updated as the information is available.

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Arthur Porcari — Corporate Strategies — Analyst

Okay. That’s a good answer. Actually, that covered a little bit of my — rest of my next question. Okay, so let’s see. On the last conference call, Mr. Hu told us that Kandi would likely not try to compete for parts business on the first low — on this first low-price EVs, the 30X, which would also not be used for the QBX due to its short wheel base disqualifies it from ride hailing. Does he expect the new larger 60V, which, as he has now said, is being prepared for the ride-hailing program, to use Kandi’s QBX or possibly also to use the Kandi batteries parts as well? And does he have any idea what price range the new Maple 60V EV will be in?

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

We are still in the process of evaluating the quick battery swap system for 60V. And the price for the vehicle is still confidential at the present.

Arthur Porcari — Corporate Strategies — Analyst

Okay. That’s fair. So it looks like we have a good — we’re competing for the QBX, is what you’re saying, for the 60V.

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

We actually — [Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

The battery swapping is actually — right now, we are in discussion with them trying to evaluate this about the model and the method of the battery swapping. As you know, for new battery swapping, the battery exchange is exchanged underneath of the car, on the bottom. But for Kandi’s model, it’s exchanged on the side — from side to replace the new vehicle with the old one. But I believe that our car is the most advanced and very user-friendly in China even in the world. And right now, government also very acknowledged this kind of matter. So we are confident that this is going to have a very good future.

Arthur Porcari — Corporate Strategies — Analyst

I understand. So this — because that’s a remodel of an existing gas-powered car, it would take — they’re debating whether they can do the modifications to use the side slide pan that Kandi has the patent on. So I see what’s going on there.

Okay, last question. Twice in the past four months, it was reported that Fensheng expected to sell some 30,000 units this year. Considering Geely Auto sold over 140,000 units of the gas-powered sister car of the 30X, the Vision X3 just last year. Does Mr. Hu think Fengsheng can still reach its 30,000 goal in spite of the COVID-19 slowdown? And with the 60V, which is much larger coming next quarter, could that be the EV Kandi reported last year that the JV would deliver 20,000 EVs to Cao Cao Geely’s white-glove ride-hailing company?

Kewa Luo — Manager of Investor Relations

All right. I’m sorry, can you repeat those questions a second time? Yes.

Arthur Porcari — Corporate Strategies — Analyst

Okay. I’ll repeat it again. Twice in the last four months, it was reported that Fengsheng expected to sell some 30,000 units this year. Considering that Geely Auto…

Kewa Luo — Manager of Investor Relations

30,000 of 30x?

Arthur Porcari — Corporate Strategies — Analyst

It just said units at the time. We didn’t know what the car was.

Kewa Luo — Manager of Investor Relations

Okay.

Arthur Porcari — Corporate Strategies — Analyst

Okay. So expect to sell 30,000 units this year. Considering that Geely Auto sold over 140,000 units of the 30X’s gas-powered sister car, the Vision X3 last year, does Mr. Hu think Fengsheng can still reach its 30,000 goal for the X3 in spite of the COVID-19 slowdown? Ask him that part first, then I’ll ask the second part.

Kewa Luo — Manager of Investor Relations

Okay. [Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

I have — I want to say that I have seen their sales team is working hard to get this target achieved. However, I do believe that the pandemic is still not fully contained, so there was still a certain impact in the market. So I will say they are still trying to achieve that goal.

Arthur Porcari — Corporate Strategies — Analyst

Okay. And the second part of my question was — has to do with the 60V, which is much larger. It’s coming next quarter. Could that be the EV that Kandi reported last year that the JV would deliver 20,000 EVs to Cao Cao, Geely’s white-glove ride-hailing company? Remember, last year, we announced that Geely was going to take 20,000 of the cars from the JV. This is before it became Fengsheng. And is this going to be because they’re going to start moving over?

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

[Foreign Speech]4

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Okay. Actually, when we were releasing the news last year about the cooperation with Cao Cao Zhuan Che, there was a different car that we were going to be using. However, the 60V has a better performance. I expect that this is going to be deployed to their Cao Cao Zhuan Che program.

Arthur Porcari — Corporate Strategies — Analyst

Okay. Well, I said that was the last question. Just one little side question. I’m curious why, last week the company announced they received $34 million as a down payment on the $76 million payment for Jinhua. I’m curious why that wasn’t even brought up as one of the features, even though it’s a subsequent event, because it didn’t show up in this quarter’s numbers. But why we didn’t put that in the press release or even in Mr. Hu’s opening statement? Just a point of [Indecipherable]

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoying Zhu — Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Xiaoying Zhu — Investor Relations

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

[Foreign Speech] Okay. So 10-Q is not released yet, but we do have that mentioned in the 10-Q filing. And — but in news, we didn’t mention it because Ms. Zhu is saying that is already released in last week’s press release. And therefore, we did include that just in the recent development in the 10-Q.

Arthur Porcari — Corporate Strategies — Analyst

One last question. When does he think it will close, officially close?

Kewa Luo — Manager of Investor Relations

Officially close of the land purchase.

Arthur Porcari — Corporate Strategies — Analyst

The sale of the JV. Close — we report it as being closed on our book.

Kewa Luo — Manager of Investor Relations

Wait, Arthur, the question before, did you ask it was the money that received from the Jinhua land, right?

Arthur Porcari — Corporate Strategies — Analyst

We got the first payment — we got a payment for $34 million, but that wasn’t reported yet.

Kewa Luo — Manager of Investor Relations

No, no, sorry, sorry.

Arthur Porcari — Corporate Strategies — Analyst

At some quarter, we’re going to report the numbers for our books. When do you expect that to happen?

Kewa Luo — Manager of Investor Relations

I’m sorry. Can I clarify. The question you asked before was about the $34 million which we received from Geely, not the Jinhua…

Arthur Porcari — Corporate Strategies — Analyst

Did I say JV? I’m sorry, I meant the Jinhua.

Kewa Luo — Manager of Investor Relations

Oh, Jinhua. Right, right, right. So right now — but right now, you’re asking about Geely, when this was…

Arthur Porcari — Corporate Strategies — Analyst

No, no. Right now, I’m asking about Jinhua. When does he expect that to close?

Kewa Luo — Manager of Investor Relations

The land purchase.

Arthur Porcari — Corporate Strategies — Analyst

To put it on our books for our earnings numbers.

Kewa Luo — Manager of Investor Relations

Okay. [Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Mr. Hu is saying that the first payment will be reflected on this quarter’s — the quarter that we just released. It’s going to be reflected in this book.

Xiaoying Zhu — Investor Relations

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Our — Emily just emphasized that since we received the money in May, so it’s not going to be reflected on the book. But however, we did mention that in the 10-Q.

Arthur Porcari — Corporate Strategies — Analyst

I realize that’s in the second quarter. All right. That’s enough. Thank you very much, Mr. Hu. Stay healthy.

Kewa Luo — Manager of Investor Relations

Thank you.

Arthur Porcari — Corporate Strategies — Analyst

Thank you. Bye-bye.

Operator

Next question is from the line of Michael Fearnow with Focus Tech. Please proceed with you question.

Michael T. Fearnow — Focus Tech Investments Inc. — Analyst

Yes, thank you. My question relates to a little more detail with your Jinhua Ankao battery — quick battery exchange. [Indecipherable] will be completed totally in-house with all Kandi parts and technology? Or will they have to get part from — part of the assembly from outside suppliers?

Kewa Luo — Manager of Investor Relations

Hello? Can you say one more time? You’re a little bit skipping in the beginning. Hello?

Michael T. Fearnow — Focus Tech Investments Inc. — Analyst

Hello?

Kewa Luo — Manager of Investor Relations

Yes, I am sorry, can you repeat one more time? You’re a little bit skipping in the beginning.

Michael T. Fearnow — Focus Tech Investments Inc. — Analyst

My question relates around your Jinhua Ankao quick battery exchange technology. Will your battery packs be completed totally by Kandi or its subsidiaries? Or will they need to source from outside suppliers for a portion of the battery packs.

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Kewa Luo — Manager of Investor Relations

Okay. [Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

It is manufactured within our Jinhua facility.

Michael T. Fearnow — Focus Tech Investments Inc. — Analyst

Okay. And it seems like you’re taking advantage of significant business opportunity in these scooters and battery packs. Can Mr. Hu give some more guidance on further consolidations that are talked about in the press release as to when they might actually be completed?

Kewa Luo — Manager of Investor Relations

I’m sorry, can you repeat one more time?

Michael T. Fearnow — Focus Tech Investments Inc. — Analyst

In today’s press release, we talk about the opportunities for the battery packs and consolidation with the other Kandi subsidiary into a single subsidiary and the further consolidation was announced for supply distribution company. Can Mr. Hu give us some guidance on when these consolidations might be completed?

Kewa Luo — Manager of Investor Relations

Okay. Okay. [Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

The reason I like to have these two subsidiaries to merge into one specialized powertrain technology company because one is specializing in the battery pack, the other one is specializing in the powertrain. I think it’s a great combination to put two together. But we already started work this year. However, depending on how this progress, and we still need to evaluate the possibility whether we can raise money in China. So it’s still very early to estimate when.

Michael T. Fearnow — Focus Tech Investments Inc. — Analyst

Just one final question. In the electric scooters, there’s been some discussion about having Walmart as a sale, distributor in the U.S. Can Mr. Hu give any color or guidance on that opportunity?

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Well, last year, we signed this contract with DGL to provide the production of the powertrain for the scooters, self-balancing scooters. We see a lot of potential in this market because we utilize the battery for the EV, which has a very high quality. And — but because of the pandemic, this contract has been delayed. If the pandemic is contained, we think the contract will be continue and to complete in this year.

And also, I’d like to point it out is that we realize that the hoverboard, which is a balancing scooter, has a lot of potentials. Every year, there are tens million on that in sales, and the number is still growing. And this industry is heavily protected by patent, and that’s how we start to discuss with Hangzhou Chic and we like to utilize our expertise from two subsidiaries, Ankao and Yongkang Scrou to combine their resources and expertise together to become the supplier of — in this industry. And so one thing is the market is very large. Second is the patent. And to emphasize that, Chic — the Hangzhou Chic company that we right now are working on elaboration — collaboration, they have about 598 patents in this sector. So we think that this market is huge for us to go into.

Michael T. Fearnow — Focus Tech Investments Inc. — Analyst

Thank you.

Kewa Luo — Manager of Investor Relations

Thank you.

Operator

The next question comes from the line of Mark Miller [Phonetic], a private investor. Please proceed with your questions.

Michael T. Fearnow — Focus Tech Investments Inc. — Analyst

Hi, thanks. I think you covered it. I was going to ask about this — what the previous question was. But did I hear that you said the $77 million contract that was announced last year — or $71 million that is going to be completed in this year?

Kewa Luo — Manager of Investor Relations

Yes. Mr. Hu saying if — it has been delayed because of the pandemic. But if the pandemic is being contained, we think that this can be completed this year. [Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Yes, yes, he confirms that if pandemic being controlled, the rest of the contract, $71 million, will be completed, hopefully.

Mark Miller — Private Investor — Analyst

Okay, good. Just one more here. Again, I guess following up. Does Kandi make the motors and the battery packs for these units?

Kewa Luo — Manager of Investor Relations

For the hoverboard?

Mark Miller — Private Investor — Analyst

Yes.

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Yes.

Mark Miller — Private Investor — Analyst

Are those patented?

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Mr. Hu is saying that battery is certified but does not have patents. Powertrain systems don’t have — powertrain either. But the hoverboard and the balancing scooter, these products have patents.

Mark Miller — Private Investor — Analyst

Okay, thanks for taking my questions and stay well, and keep up the good work.

Kewa Luo — Manager of Investor Relations

Thank you very much.

Operator

The next question is from the line of Michael Pfeffer with Oppenheimer. Please proceed with your questions.

Michael Pfeffer — Oppenheimer & Co. Inc. — Analyst

Hi, thanks for taking my questions. Regarding SC Autosports and EV sales in the U.S., is it safe to assume the 25% tariff is making it very hard to compete with the likes of the new EV Mini, a popular global brand, which has been priced at the same MSRP or USD29,500 as the unknown Kandi K23? And if so, what does Kandi have planned to address this?

Kewa Luo — Manager of Investor Relations

Thank you for your question. [Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

I do think we have a lot of potential advantages because, first of all, we all — our cars are qualified for a full USD7,500 federal tax credit, which you can, of course, look up on the website. And second of all, our EV got approved for the importation registration in the U.S.A. by NHTSA. And we may think about assembling the EVs in the U.S. to reduce some costs, but we’re still playing with some ideas. We will keep the market informed.

Michael Pfeffer — Oppenheimer & Co. Inc. — Analyst

Just another question or two. How are off-road vehicle sales holding up in the second quarter? And what are the expectations?

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

It’s really surprising, but in a very good way that this year, the off-road vehicle sales is extremely good. So we expect that it’s going to double last year sales.

Michael Pfeffer — Oppenheimer & Co. Inc. — Analyst

Great. And then what type of arrangement do we have with Jinpeng in also selling their K27 or other products in the U.S.? And lastly, any new updates on the Jinpeng relationship, which might include using their massive international dealer network to export Kandi EVs?

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

You asked two questions. First, our cooperation with Jinpeng is mainly in two aspects: The first is joining produce model K27, and the second is the cooperation together in domestic ride-sharing market. I do believe that both things are progressing well, even though it is impacted by the pandemic, but I think it’s still on the right track going. And for K27, I estimate probably by the month end — end of this month, if everything goes smoothly, we will start shipping the cars to the U.S.

Michael Pfeffer — Oppenheimer & Co. Inc. — Analyst

Thanks a lot.

Kewa Luo — Manager of Investor Relations

Thank you.

Operator

Your next question is from the line of Mark Kahnau with Swiss Liquid Future. Please proceed with you question.

Kahnau Mark — Swiss Liquid Future AG — Analyst

I have a few questions here. Just an intro for these questions. From a recent PR, it appears in the 300,000 government-accredited third and fourth tier city, ride-hailing using Kandi EVs, like the K23 and quick battery exchange, had begun a trial mode before the virus hit late last year in Yongkang. This was a partnership with Jinpeng and Ruibo. In a recent published alphaDIRECT interview, Mr. Hu gave a very clear explanation of the partners’ backgrounds, the partnership in general and its unique business model along with the responsibilities of each partner as well as how each will get paid. For the sake of many shareholders who are on this call or will read the transcript who have not seen that interview, can Mr. Hu share with us what he said on the interview? And when he finish, I have a few more questions.

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

[Foreign Speech] Ride-sharing vehicle alliance is actually a tri-party alliance. Ruibo is currently the largest swap battery ride-sharing company in China with state-approved online ride-sharing platform license. Jinpeng has more than 2,000 dealer resources in Tier 3 and Tier 4 cities nationwide. Therefore, Kandi will use its experience and influence in this field to promote the formation of the compliant ride-sharing alliance. Jinhua will utilize its dealer resources to support the growth of the alliance, and Ruibo will be responsible for operations of the ride-sharing project. The compliant ride-sharing alliance is composed of pure electric vehicle manufacturer, ride-sharing operator and operating platform, energy supplier, which is the battery swap and swapping and drivers. The profit certainly come from all parties of the — from this industry trend. This is to say, pure electric vehicle manufacturers generates profits from car sales. Ride-sharing operator and operating platform generate profits from rent and platform usage fees, energy suppliers generate profit from battery swapping and the drivers generate income from their daily operations. That’s pretty much what I said in the interview.

Also Read:  CenturyLink Inc  (NYSE: CTL) Q1 2020 Earnings Call Transcript

Kahnau Mark — Swiss Liquid Future AG — Analyst

Okay. Very good. And now here are a few more questions. How is the Yongkang City trial going on? And when does he expect new cities to be added?

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

You actually need a license in order to do the trial operation. And all the licenses that are required for the trial is already approved for Yongkang. So the operators — operations have not truly started again due to the pandemic. There are many dealers in the Tier 3, Tier 4 cities wanting to join the alliance. After Yongkang starts operations and once the pandemic is well controlled, we are going to hold off-line meetings with dealers from Tier 3 and Tier 4 cities to sort out the new cities to be added. By then, I will keep everyone informed on how many new cities will be added.

Kahnau Mark — Swiss Liquid Future AG — Analyst

Okay. Very good. In addition to the K23, which was still primarily for ride hailing, does Kandi have a second priority EV expected for release this year? If so, even if nothing specific for now, can you at least give us some idea of the size and the sale price?

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

We are going to upgrade the original K23 model this year, but now there’s no new model to be launched.

Kahnau Mark — Swiss Liquid Future AG — Analyst

Okay. On the last CC, Mr. Hu said that due to COVID-19 virus, the government was temporarily discouraging to release of ride hailing. Assuming this temporary block has been lifted, have we already added new cities? And if so, how many of — and when would you expect first sale?

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Most of these questions I will be answering in the question A, but like I said, actually, right now, the pandemic is still not fully contained. We still need to be — have the temperature check whenever we’re going into public and leaving the public places and we still have to practice social distancing. And the large convention, any group meetings are still not encouraged to be hosted. Therefore, we — what we can do right now is that doing all the preparation work. And hopefully, once the pandemic is fully contained, we are going to move forward quickly. By then, I will certainly report on the progress we have made and including how many cities and the plans we are going to have to move forward.

Kahnau Mark — Swiss Liquid Future AG — Analyst

Okay. And then I have a last question. Well, can we be selling the K23 or other EVs to consumers in China? And if so, what sales network will you be using?

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

The K23 model is going to — only going to be used for the ride-sharing program in China as of now. And this car, at the same time, will also be sold in America. Therefore, we are not using the — any third-party or any sales channel to sell the K23, just our internal sales team. And once this is being deployed, I expect the sales volume for K23 going to be huge. And in America, we will conduct sales through SC dealers sales channel.

Kahnau Mark — Swiss Liquid Future AG — Analyst

Okay, very good. Thank you for taking my questions, and look forward for the rest of the year.

Kewa Luo — Manager of Investor Relations

Thank you very much.

Operator

The next question is from the line of Terry McLemore with Scf Securities. Please proceed with your questions.

Terry William Mclemore — Scf Securities, Inc. — Analyst

Thank you for taking my call. I have a couple of questions about — continuing on Art’s question about the Jinhua facility. Where are we right now in our current facility? Like how close are we to exiting it and turning it over and being fully paid? And then the second part of that would be, what’s the new facility like? How big will it? How much will it cost? And what will we produce there?

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

So the new land plot right now is being leveled by the government. And we are expecting this to be delivered to us into full construction in July 2020. The new land plot will occupy approximately 100 acres, but the construction area will be equivalent to the old factory, which is about 100,000 square meters, because the old factory buildings were all single-story buildings, whereas the new factory buildings will be 4-story buildings. And so the construction period is planned to be about six to eight months. We will move in immediately after factory buildings are fully completed, and we’ll produce — it will produce existing products and probably some intelligent mobility release products as well. And also, I’d like to mention that it’s still going to be our home base headquarters for Kandi.

Terry William Mclemore — Scf Securities, Inc. — Analyst

The new headquarters for Kandi? Okay.

Kewa Luo — Manager of Investor Relations

Yes. Then.

Terry William Mclemore — Scf Securities, Inc. — Analyst

Okay. One other question, kind of on a different subject regarding Geely and the transfer — equity transfer agreement, where Geely may still owe Kandi some $30 million. The balance has been paid off. How much is outstanding? And when do you expect Kandi to be paid in full? And does Kandi still hold debt to it by the JV or prior EV part sales? And if so, how much of it — when do you expect Kandi to receive it?

Kewa Luo — Manager of Investor Relations

Thank you. [Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

The equity transfer to Geely should generate RMB 516 million. As of right now, we have received RMB 330 million, and the remaining balance is RMB 186 million. And as of the first quarter this year, the receivables from the joint venture is totaling RMB 128 million. And I have to say one more time, because the pandemic, everything has been delayed. And so we — but we have been keeping the discussions with Geely. Hopefully, the remaining balance will be paid.

And another thing is that the subsidy, we have heard from some government news that they will start in paying. So once starting paying, I think the account — the receivable will also be paying quickly after that. But if you want to ask exactly time, it’s really hard to predict.

Terry William Mclemore — Scf Securities, Inc. — Analyst

I totally understand. Thank you very much for taking my questions.

Kewa Luo — Manager of Investor Relations

Thank you.

Operator

The next question is from the line of John Cronan [Phonetic], with — a private investor. Please proceed with your questions.

John Cronan — Private Investor — Analyst

I have several questions. The first one is, what is a conservative estimate of the number of EV cars that Kandi will actually sell in 2020 in China?

And the next question, why is it we seem to be in the correct price segment, and with the impact of COVID and now presumably have access to Geely distribution and marketing, why does Kandi consistently sell less cars than most of the competitors? Is it because of design problems, the margin? What is holding up sales? And can we expect things to change as of May 2020? And will the rest of the year see accelerating sales, such as NIO, Geely, BYD and Tesla?

Kewa Luo — Manager of Investor Relations

[Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Yes, the joint venture — we used to have joint venture to sell cars, but I have to say our EVs, compared to most of those EV in the market, is not as competitive as other EV offerings. However, once the joint venture being managed by Geely, they have completely changed their product portfolios. And right now, they have a very high standard, nice design and great performance EVs, and I believe that it’s going to change everything in — the EV sales going to be ramping up going forward.

John Cronan — Private Investor — Analyst

Okay. Do you have an exact number of the EVs, a conservative guess on how many you’re going to be selling in 2020?

Kewa Luo — Manager of Investor Relations

Are you asking Fengsheng, our joint — our affiliate company EV sales target this year?

John Cronan — Private Investor — Analyst

Yes, just Kandi EV sales.

Kewa Luo — Manager of Investor Relations

Kandi EV. [Foreign Speech]

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

I would estimate Kandi 23 will have about 2,000 EV sales for this year, only K23, this doesn’t include K27.

John Cronan — Private Investor — Analyst

Okay. Thank you very much, and stay well.

Kewa Luo — Manager of Investor Relations

Thank you.

Operator

Thank you. At this time, we’ve reached the end of our question-and-answer session. Now I’ll hand the floor back to management for closing remarks.

Xiaoming Hu — Chairman of the Board, President and Chief Executive Officer

[Foreign Speech]

Kewa Luo — Manager of Investor Relations

Thank you, ladies and gentlemen, for attending today’s call. On behalf of the Board of Directors and management team of Kandi Technologies Group, I would like to reaffirm our commitment. We will continue to work diligently to maximize shareholder value by focusing on growing our EV business and delivering strong operational results. Thank you very much for your support. We look forward to talking with you in the next call. If you have any additional questions you haven’t had a chance to ask, please don’t hesitate to contact our Investor Relations department. Thank you. Goodbye.

Operator

[Operator Closing Remarks]

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