Kandi Technologies Group, Inc. Q4 FY2020 Earnings Call

Hello, and welcome to Kandi Technologies Full Year 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Kewa Luo. Please go ahead.

Thank you, operator. Hello, everyone. Thank you for joining us on today's conference call to discuss Kandi’s results for the full year 2020. We issued our press release today covering the results. That press release is available on the company's website at www.kandivehicle.com, as well as from Newswire services. On the call with me today are Mr. Xiaoming Hu, our Founder, Chairman and Chief Executive Officer; and Mr. Alan Lim, our Chief Financial Officer. Mr. Hu will deliver prepared remarks in Chinese, which I will then translate. After that, we will have a question-and-answer session. Before we continue, please note that today's discussions will 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 actual 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 annual report on Form 10-K for the fiscal year ended December 31, 2020, and in other public filings with the SEC. We do 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, an audio webcast of this conference will be available on Kandi's Investor Relations website. Please note that unless otherwise stated all figures mentioned today during the conference call are in U.S. dollars. With that, let me now turn the call over to our CEO, Xiaoming Hu. Go ahead, Mr. Hu.

Hello, welcome everyone and thank you for joining us on the call today. 2020 was a year full of challenges. COVID-19 unexpectedly impacted every corner of the global economy. Most countries fought the virus by implementing quarantines and enforcing curfews. Unfortunately, this caused many companies to operate beyond normal hours and bankrupted numerous small businesses. Kandi quickly responded to the crisis by temporarily closing our facilities, working remotely, and carefully cleaning every day. Although our operations in China restarted by the end of March, many revenue streams were still adversely affected. We experienced several production interruptions due to the multiple waves of the pandemic. However, even in this difficult business environment, we achieved solid sales growth in our off-road vehicles, electric scooters, electric self-balancing scooters, and related parts. You can find more details in our 10-K. In 2020, we actively explored new market opportunities that could leverage our competitive strengths. We decided to pursue product innovation in electric scooters and electric self-balancing scooters, which have a potential global market of tens of millions of units sold each year. We generated revenue in these opportunities by expanding the production of intelligent transportation products that utilize our advantages in electric motors and battery packs. Looking back on this challenging year, we achieved multiple milestones and made progress in our strategic projects. First, we smoothly executed the real estate repurchase agreement with Jinhua Economic and Technological Development Zone, a key element of our Jinhua facility relocation. The development zone agreed to pay us approximately RMB 525 million or US$80 million in three installments. We have received the first two installments, totaling RMB 363 million, or US$55 million. We expect to receive the remaining payment in the second quarter of this year. Our second milestone was the successful trial of our government-accredited pure EV rideshare program over five years. The joint venture platform operator, Zhejiang Ruiheng Technology Company, plans to take delivery of over 3,000 government-compliant EVs in 2021. Gradual delivery is underway, with all those EVs featuring our battery swapping technology. The Chinese government has implemented several favorable policies for manufacturing EVs with battery swap capabilities, including a new subsidy policy. For the first time, battery swapping stations were included in the government's infrastructure construction report. We made significant progress in 2020. For instance, we signed an agreement with the Zhejiang State Grid Electric Vehicle Service Company in October 2020 to strategically incorporate battery exchange into Pure EVs. We believe that the supportive Chinese government policies can aid in the production and sales of our EV parts and battery swap equipment. Our third achievement was in the U.S. market, where we successfully held a virtual launch event in August 2020 to introduce our K23 and K27 EV models. We have received clearance from the United States Environmental Protection Agency for both models. Our current focus is on making modifications to meet Department of Transportation requirements, as well as Federal Motor Vehicle Safety Standards. We are also working on future enhancements tailored for U.S. consumers. In addition to these three milestones, by the end of the year, we signed a Strategic Cooperation Agreement with the Hangzhou Branch of the Agricultural Bank of China, which will provide a line of credit to support our ride-sharing market expansion. With capital from the real estate repurchase agreement and $160 million from the direct placement in November 2020, we are confident that we can fund the R&D necessary to develop new EV models, battery swapping technology, and the ride-sharing program. Before we transition to the Q&A session, I want to highlight that we have recently exited the Fengsheng affiliation by transferring all remaining equity interest. This is significant because we are no longer restricted by the associated non-compete clauses, enabling us to pursue the EV market in China more aggressively. We can now take some questions.

Thank you. We’ll now be conducting a question-and-answer session. Our first question today is coming from Shawn Severson from Water Tower Research. Your line is now live.

Hello, everyone. My first question is about the battery exchange and rideshare initiative. I'm trying to understand exactly how many machines have been sent to the first site? And then a follow-up to that, I guess the second part of that is; what do you plan for selling cars in 2021? And when you look at the rollout of this broader across the Chinese market; is this something that's going to be coming in big chunks, or is this going to be more of an even flow of a rollout? Or will you have kind of large lumpy sales, I guess, is what I’m trying to understand. Will it be something that kind of flows out fairly evenly over the next couple of years?

What are your plans for selling cars in 2021? Looking at the rollout across the Chinese market, do you expect it to happen in large chunks or will it be a more consistent flow? I'm trying to understand if the sales will be distributed evenly over the next couple of years.

What are your plans for selling cars in 2021? Regarding the rollout across the Chinese market, will it happen in large segments, or will it be a more consistent rollout? Are you expecting large fluctuations in sales, or will it be more steady over the next couple of years?

What do you plan for selling cars in 2021? When you consider the rollout across the Chinese market, will it be in large chunks or a more steady flow? I'm trying to understand if sales will be consistent over the next couple of years.

Is the rollout of your cars in the Chinese market going to happen in large batches, or is it expected to be a more consistent flow? Are we looking at potentially large, uneven sales, or will it be a steady distribution over the next couple of years?

Hi, everyone, this is Alan. I'm answering on behalf of the translation from Mr. Hu. As for the question about those smart battery devices. So far, there are three devices that have been released to the market, one being sent to Haikou City, and the other two have been sent to Kaohsiung. As for our plan for this current 2021, there will be 50 devices expected to be distributed during the year. As for our EVs in China, so far we have at least the orders of 3,000 EVs that feature the smart battery swap. It will be released to the market gradually during the year 2021. And as for our trend, we are following the plans on our customers that have the so-called 300,000 EV cars in five years program. And of course, we will follow the suite flow and we will adjust it as necessary, and so far, that’s the plan from our side.

Great. Thank you for that. Just a follow-up question, and regarding the entry into the U.S. market, seems to be a little bit of a delay there, but if I understood you correctly, you said there were some improvements being made for the U.S. market or for U.S. consumers. Could you be a little more specific on what that means? And then also details on when the Dallas HQ will be ready?

Thank you for that. I have a follow-up question regarding the entry into the U.S. market. It seems there's been some delay, but if I understood you correctly, you mentioned that improvements are being made for the U.S. market or U.S. consumers. Could you provide more specific details on what that entails? Additionally, can you share when the Dallas headquarters will be ready?

Thank you for your question. Regarding our entry into the U.S. market, we are experiencing some delays, but improvements are indeed being made for U.S. consumers. I can provide more specifics on that. Additionally, I will give you details on when our Dallas headquarters will be ready.

So as for our update in the U.S. market, after our launch event in August last year, we have been applying all the paperwork and all the work steps to be fully eligible to sell EVs in the U.S. market. So far, we obtained the approval and certification from the EPA. And as for the DOT, there are still some safety requirements that we are trying to meet and satisfy. And mostly, about that crash pad because there will be a requirement for multiple of the crash pad, especially for the safety air bags. The standards for the air bags are different from the U.S. and European markets. That’s why so far what we are doing in the major requirement is to refine our standards for the airbag in order to meet the standards from the DOT. As a matter of fact, there are two pathways that we are working on right now. One is, of course, we are trying to work really hard to meet the safety standards from the DOT as soon as possible. Meanwhile, we have released the EV – the so-called NEV version with the speed limit. Of course, there are fewer requirements for safety like an airbag that have been fulfilled in terms of the requirements, and we've already sold those NEVs in the U.S. market.

Great. Thank you. I'll step back in the queue.

Thank you. Our next question today is coming from M Marin from Zacks. Your line is now live.

Thank you. So can you please provide some additional color on the relationship with the Agricultural Bank? Whether you intend to use that as sort of the model and replicate other relationships to drive growth? And if so, could you give us some sense of timing, how long it took to negotiate that kind of relationship, and in terms of how we should think about that going forward? Thank you.

Thank you. Our next question comes from M Marin from Zacks. Your line is now live. M Marin: Thank you. Can you provide more details about your relationship with the Agricultural Bank? Are you planning to use it as a model to establish similar partnerships for growth? If so, can you offer any insights into the timing of how long it took to negotiate that relationship, and how we should view that moving forward? Thank you.

Thank you. So can you please provide some additional color on the relationship with the Agricultural Bank? Whether you intend to use that as sort of the model and replicate other relationships to drive growth? And if so, could you give us some sense of timing, how long it took to negotiate that kind of relationship, and in terms of how we should think about that going forward? Thank you.

So basically, our strategic cooperation with the Agricultural Bank of China, the so-called ABC, is really from the line of credit. That facilitated the whole ride-sharing program, especially for our so-called 300,000 EVs in the five years program. So when you look at – once we released our EVs to our customer, the riding platform label, the bank will release the credit to fund the purchase of our EVs. The first line of credit, the offer is RMB 500 million, which is roughly around US$76 million. With the current production rate and with all the 3,000 EVs during 2021, this line of credit will be sufficient to meet our needs. And of course, if the production expands, ABC is more than happy to increase the line of credit for us, because this program is designed for facilitating the entire ridesharing program. So basically, we need more resources; ABC will be offering a higher line of credit depending on the production progress. Meanwhile, we are exploring different options from other financial institutions. But I guess right now, the offer from ABC is more than enough for us at the moment.

Okay, thank you.

Thank you. Our next question today is coming from Michael Fearnow from Focus Tech Investments. Your line is now live.

Yes, good morning. I'd like a little clarification on the EV cars in the U.S. The neighborhood cars and the current inventory, is it expected to be sold as neighborhood cars? And if so, will there be any significant price reduction? And then – can you answer that question initially?

Hello, can you say one more time? Your audio was skipping in the beginning.

So, say again, Kewa.

Hi, can you just repeat one more time? You were little skipping from the beginning.

On the inventory that was delivered into the U.S. starting last year, can you give me a sense of how much – how many cars have been delivered? And if those cars will be sold as neighborhood limited range vehicles? And if so, will there be any significant price reduction?

Can you repeat that one more time? Your audio cut out a bit at the start. On the inventory that arrived in the U.S. starting last year, can you tell me how many cars have been delivered? Will those cars be sold as neighborhood limited range vehicles? And if so, will there be a major price cut?

Can you just repeat one more time? You were a little unclear at the beginning. On the inventory that was delivered into the U.S. starting last year, can you give me a sense of how many cars have been delivered? And if those cars will be sold as neighborhood limited range vehicles? And if so, will there be any significant price reduction?

Okay. So as for the NEVs, we have basically started to sell NEVs towards the end of last year. So right now, the amount is not significant. But we have gradually circulated those NEVs to the distributors of our network. So because of the speed and the range, there is some price drop compared to our regular EV version. For the price difference, you can refer to our Kandi American website for more details, and you can basically get the details of our NEV.

As a follow-up, I would like to get a little more information on your quick battery exchange. Do you – has your technology lent itself to individual car ownership? Or is it directly on the fleet market? And if it is for individual ownership, can you discuss your ability to compete with manufacturers such as Geely and Li Motors? And finally, do you expect to ever have quick battery exchange for the U.S. market?

Are you asking whether our EVs are going to sell to individuals or only to the fleet market, right?

That is the first part of the question, correct. And if it’s for individuals, how do you expect to compete with other technologies such as Geely or Li Motors?

Okay.

And then the product market, when do you expect to go under the U.S. at some time?

Ones that have the battery swapping features, right?

Correct. Is that expected to ever enter the U.S. market?

Is that expected to ever enter the U.S. market?

Okay. So far, our models of K23 featuring the smart battery swapping features have been available since August, as the PLC ride-sharing program at the moment. And of course, the Company plans to develop other new models that can cater to the needs of different motor markets. As for the U.S., since the volume of our EVs is not significant and because the geographic density is not conducive, it is quite beneficial from an economic standpoint. Because also the battery exchange conditions and network are not sufficient in the U.S., so so far we don’t have a plan to enter this market with a smart battery swap system.

Thank you. And Kewa, one last point. Last year, there was an announcement that you had signed an underwriting agreement with the quick battery exchange division. Can you give us any update on that agreement?

The geographic density is not favorable, but it is quite advantageous economically. Additionally, the conditions and network for battery exchanges in the U.S. are inadequate, so we currently have no plans to enter this market with a smart battery swap system. Thank you. And Kewa, one last point. Last year, there was an announcement about an underwriting agreement with the quick battery exchange division. Can you provide us with any updates on that agreement?

It is quite beneficial from an economic standpoint. However, the battery exchange conditions and network are not sufficient in the U.S., so we currently do not have plans to enter this market with a smart battery swap system. Thank you. And Kewa, one last point. Last year, there was an announcement about an underwriting agreement with the quick battery exchange division. Can you provide any updates on that agreement?

Okay. So as for our IPO for our subsidiary of the smart battery swap entity, it's been progressing pretty well. We have commissioned three professional firms to evaluate the IPO here, namely the security in Zhejiang Certified Public Accountants and Grandall Law Firm. These are the highly ranked firms in China. So, the work is being done. But as for the general timeline, in PLC to get listed, we estimate it will roughly take two to three years to complete the whole listing.

Thank you.

Thank you. Our next question today is coming from Mike Pfeffer from Oppenheimer. Your line is now live.

Hi, thanks for taking the call. Just following up on that last question about the IPO with the backlog in China for the new STAR exchange, it seems to be taking a much longer time for companies to list in China. You were just saying two years to three years. And since Kandi is, by definition, a U.S. domicile and a listed EV company trading in the U.S., and China EV companies trading in the U.S. have much higher valuations than similar China-listed EV companies. If it’s not too late to change, would management maybe consider or reconsider spinning off a small portion of the subsidiary by way of a tradable stock rights offering to existing Kandi shareholders with the stock purchase rights offering? And maybe a warrant attached additionally, the cost to do this in the U.S. would be negligible, not much more than SEC registration cost and NASDAQ filing fees, you can even bring in the U.S.-based investment banker with the retail clients to underwrite the deal for a small additional cost, which would also give Kandi research analyst. So – and I would think this type of deal could be very positive. It could be similar to a SPAC, much less dilution and much more investor loyalty, but even better, because shareholders will not only have anti-dilution protection under their ability to do the exercise or sell the rights in the open market, but also have priority to buy shares at the IPO price, and even get a warm bonus. My question basically is would Mr. Hu consider doing this in the U.S.?

I believe this type of deal could be very positive. It might resemble a SPAC but with significantly less dilution and greater investor loyalty. Shareholders would benefit from anti-dilution protection through their ability to exercise or sell their rights in the open market, and they would also have first priority to purchase shares at the IPO price, along with receiving a bonus. My question is whether Mr. Hu would consider implementing this in the U.S.

I believe this type of deal could be very beneficial. It might resemble a SPAC, with significantly less dilution and greater investor loyalty, but even more advantageous, as shareholders would not only have anti-dilution protection through their rights to exercise or sell in the open market, but also priority access to purchase shares at the IPO price, along with an additional bonus. My question is whether Mr. Hu would consider implementing this in the U.S.

First of all, thank you for your great suggestions. So basically, right now, after the evaluation from our professional firms engaged in PRC, they believe that the chance to be listed of our smart battery swap unit is very likely in PRC within two to three years. That being said, we also engaged some other professional firms in the U.S. to evaluate the other outcomes, what we can do or could explore in the capital market in the U.S. So definitely, we are considering that pathway as well. At the moment, we may move forward with that, and we will see.

Thanks.

Thank you. Our next question today is coming from Mark Kahnau from Swiss Liquid Future. Your line is now live.

Yes. Hello, everybody. My question would concern the balance produced scooters. Last year's update to shareholders, Mr. Hu said, in terms of the produced balancing scooters should exceed 500,000 in 2020. And we expect sales to exceed 3 million units in 2021. But you gave no value of either of these surprising new orders. However, in September 2019, before the virus shutdown, Kandi made a similar announcement for a new product line, which read Kandi’s wholly owned subsidiary, Zhejiang Kandi Vehicles Co., Ltd. Kandi Vehicles and DGL Group regarding an initial batch of order of 300,000 electric scooters and 500,000 self-electric balancing scooters. Total value of the agreement is expected to be about RMB 500 million, approximately U.S. $70.5 million. This later order would calculate at around $88 per unit. Since the company did not put any value up to the late 2020 orders as it did in the earlier order, an investor might be left to assume the values of were similar to 500,000 units for 2020 could be as much as $44 million. Based on Kandi’s total quarter four sales of $33 million. That assumption would be quite wrong. A few questions to follow up. Did Kandi reach its 500,000 estimates for 2020? And if so, what was the difference between the 2019 units at $88 each and what was sold in 2020? And the second question is the 3 million in 2021 expectations still viable? And if so, is it still at 3 million units? And if so, what is the value of this order? And can you tell us who the major buyer or buyers are in this location?

Thank you for your question.

Thank you for your question.

So basically, first of all, there may be some misunderstanding here because Scrou manufactures the motors for the scooters and balancing scooters but not really the whole scooters per se. During 2020, our Scrou manufacturer sold around 150,000 pieces of motors with a unit price of around RMB 50 to RMB 60 for each motor. During 2021, of course, Scrou plans to produce more than 3 million orders for the balancing vehicles and scooters. Due to the raw material inflation, we intend to raise our unit price by around 50%, up to RMB 60 to RMB 70 for each motor. Currently, we are working with customers that modify that they are primarily from the region of Zhejiang. All those are authorized by the Hangzhou Chic Co, which holds more than 500 patents in terms of the scooters and balancing scooters design and development. Currently, we're working with four to five major manufacturers having set patent authorizations to work on the scooters manufacturing.

Due to inflation, we plan to increase our unit price by approximately 50%, bringing it to between RMB 60 and RMB 70 for each motor. We are presently collaborating with customers mainly from the Zhejiang region. All these efforts are authorized by Hangzhou Chic Co, which has over 500 patents related to the design and development of scooters and balancing scooters. Currently, we are engaged with four to five major manufacturers that have received patent authorizations for scooter manufacturing.

So as for the transaction from DGL, we – in doing larger, we noticed that DGL actually does not get authorized the patent of Hangzhou Chic Co. That is why during 2020 the only manufacturer around motors for over 100,000 pieces with those products. In this year, we are working closely with Hangzhou Chic Co to get all our products authorized under the patent of Hangzhou Chic Co, and we expect there will be a more volume in production compared to last year.

Okay. Thank you. That’s very helpful. Thanks a lot for the answer.

Thank you.

Our next question today is coming from an unknown source. Your line is now live.

Yes, good morning or good evening. And thank you for taking my question. Maybe it's just my line, but due to the heavy electronic interference of on the voice of the CFO, I didn't really catch what he was saying about deployment of the battery – quick battery exchange in China, which is why I would like to reiterate the question and ask how many units are actually deployed and functioning? How many numbers of EVs are being serviced by that? And what do you expect to have in sales for this year? If you could give some color on that?

Sure.

I couldn't hear the CFO clearly due to electronic interference, so I want to repeat my question about the deployment of the battery swap in China. How many units are currently deployed and operational? How many electric vehicles are being serviced by that? What are your sales expectations for this year? If you could provide some details on that?

So during 2021, we expect to release around 50 pieces of the smart battery swap devices in the China market. Meanwhile, we expect to release around 3,000 units of our EV featuring the smart battery swap features in the China market as well.

Yes. And how many of those did you deploy so far?

Are you asking about cars or about QBX?

Both. Apparently, the EVs are being sold for service companies that use the quick battery exchange, isn't it?

Are you asking about cars or about QBX? Both. Apparently, the EVs are being sold for service companies that use the quick battery exchange, isn't it?

Are you asking about cars or about QBX? Both. Apparently, the EVs are being sold for service companies that use the quick battery exchange, isn't it?

So far there are three pieces of the smart battery swap device already circulated to our customers. As for the EVs, there are more than 90 pieces of that K23 featuring the smart battery swap features already deployed to our customers.

That's very helpful. Thank you. Since you had additional income earlier this year from the disposal of your share in Fengshen back to Geely, are you having a significant cash surplus? Are you going to put that to use to start your own EV fleets or quick battery exchange-based customer services?

Thank you for your question. Given the additional income from the sale of our stake in Fengshen back to Geely, we currently have a significant cash surplus. We are considering using these funds to initiate our own electric vehicle fleets or enhance our battery exchange-based customer services.

As for the EVs, there are more than 90 pieces of that K23 featuring the smart battery swap features already deployed to our customers. That's very helpful. Thank you. Since you had additional income earlier this year from the disposal of your share in Fengshen back to Geely, are you having a significant cash surplus? Are you going to put that to use to start your own EV fleets or quick battery exchange-based customer services?

So at the moment, we don't plan to engage in this field of services ourselves. But we, of course, will be involved as part of the service provider of the car riding platform.

Thank you. And since you once had a partnership with China State in one of the largest companies on Earth, which was terminated due to political pressures because the QBX was not opportune at the time. Do you hope to revive this relationship with State Grid at any time and have them deploy your quick battery exchange stations?

Thank you. Since you previously had a partnership with China State, which ended due to political pressures because the timing for QBX was not favorable, do you see a possibility of reviving this relationship with State Grid in the future and having them implement your quick battery exchange stations?

Thank you. Since you previously had a partnership with China State, one of the largest companies in the world, which ended due to political pressures at a time when the quick battery exchange was not favorable, do you hope to restore this relationship with State Grid and have them use your quick battery exchange stations?

So actually, we have started our cooperation with the State Grid as early as 2010. However, due to some policies that were not so supportive at that time, operations have not been resumed later on. In October 2022, our company entered into a strategic agreement with the Zhejiang State Grid Electric Vehicle Service company, which is a subsidiary of the State Grid in the area of battery exchange for pure electric vehicles. Now we are in line with the policy from the government. For example, for the work plan from the government during 2020, the battery swap is part of the area they would like to focus and develop. So we are now in a good timing. Our plan is to set up a model in order to enable the State Grid to develop further. So that's the plan. I mean, our role is to be a pioneer to develop the model, set the design, and it’s up to State Grid to develop further and circulate it throughout the whole of China.

Thank you. Thank you for adding that color. It’s very interesting and good luck for your IPO in Shanghai or maybe as the SPAC in New York. Thank you. I'll go back to the queue.

Thank you.

Thank you. Our final – our last question today is coming from Jim Parker, a private investor. Your line is now live.

Thank you. Good evening. In your announcement today, you noted that R&D funds could be used for the development of a sports car. Could you elaborate on what you mean by sports car? And is that for the Chinese consumer or the U.S. consumer? Is the K22 an example of a sports car or do you have something else in mind? Thank you.

Thank you. Good evening. In your announcement today, you noted that R&D funds could be used for the development of a sports car. Could you elaborate on what you mean by sports car? And is that for the Chinese consumer or the U.S. consumer? Is the K22 an example of a sports car or do you have something else in mind? Thank you.

Thank you. Our last question today is coming from Jim Parker, a private investor. Your line is now live. Jim Parker, Investor: Thank you. Good evening. In your announcement today, you noted that R&D funds could be used for the development of a sports car. Could you elaborate on what you mean by sports car? And is that for the Chinese consumer or the U.S. consumer? Is the K22 an example of a sports car or do you have something else in mind? Thank you. Kewa Luo, Translator:

Okay. So, I mean, the sports car refers to a performance-oriented vehicle that includes dynamic features such as high top speed, and what we are doing now is trying to develop the sports car with the standards of the granular markets, including the U.S. market and the European market. Our target is, at the end, to have our sports car models in all markets, including the China market, the U.S. market, and even the European market is our plan.

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

We are currently focused on developing a sports car that meets the standards of various markets, including those in the U.S. and Europe. Ultimately, our goal is to have our sports car models available in all markets, including China, the U.S., and Europe. Thank you. We have concluded our question-and-answer session, and I will now hand it back to management for any final comments.

Thank you again for attending today's call. Eliminating the non-compete restriction from the Fengsheng affiliation enables us to pursue the EV market more aggressively in China, as well as expanding applications of our expertise in battery swap systems to maximize shareholders' value. With supportive policies from the government and sufficient cash and working capital, we believe the years ahead hold a multitude of opportunities that can deliver strong operating and financial results in the coming quarters. This concludes our call today. Thanks again. You may now disconnect.

Thank you. That does conclude today's teleconference. You may now disconnect your line, and have a wonderful day. We thank you for your participation today.