Good morning and welcome to Kandi Technologies First Quarter 2023 Financial Results Conference Call. All participants will be in a listen-only mode. Please note that this event is being recorded. I would now like to turn the conference over to Kewa Luo, IR, Director. 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 first quarter 2023. Earlier today, we issued a press release covering the results. You can find a press release on the conference website as well as from newswire services. On the call with me today are Mr. Xiao Ming Hu, Chairman of the Board; Dr. Xueqin Dong, Chief Executive Officer; and Mr. Alan Lim, Chief Financial Officer. Dr. Dong will deliver prepared remarks in Chinese, which I will then translate. After that, we will have a Q&A session. Before we continue, please note that today's discussion 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 public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please note that unless otherwise stated, all figures mentioned during the call are in U.S. dollars. With that, let me now turn the call over to our CEO, Xueqin Dong. Go ahead, Dr. Dong.

Hello everyone. I'm the CEO of Kandi Technologies. My name is Xueqin Dong. Welcome to today's conference call. Our first quarter revenue of 22.9 million was down slightly from one year ago due to the strategic shift in business focus. Over 90% of the revenue was attributed to steadily increasing sales of our off-road vehicles and associated parts, which nearly doubled year-over-year. The higher margins of off-road vehicles boosted overall gross margin. Thanks to the strong growth process, we achieved positive net income for the quarter, a significant improvement from the loss experienced last year. Incorporating fully electric off-road vehicles into our product line not only aligns with our values of environmental sustainability and social responsibility but also positions us as a leader in the industry. Therefore we are confident that our focus on this market will benefit us in the future. Our strong balance sheet and financial position put us in a unique position to capitalize on opportunities in this market, and we are excited about the potential for growth. Looking ahead, we are committed to delivering innovative and sustainable solutions to meet the evolving needs of our customers and the market. Now we will move on to the Q&A session. Chairman Hu and I will answer your questions. And Ms. Kewa and Mr. Alan will provide translation for English questions. Please go ahead and ask your questions. If you have any questions and asking questions, feel free to ask the operator.

Thank you. Our first question is from Mark McLaughlin, a private investor. Please go ahead.

Hi, good morning. I'm Mark McLaughlin from a family office in Jacksonville, Florida. First, thank you, Mr. Hu, for providing some guidance for 2023, specifically regarding the expected sales of golf carts, which are projected to be between 20,000 and 25,000 units. While this information wasn't included in the official press release, you mentioned on the year-end 2022 conference call that you anticipate selling approximately 20,000 to 25,000 golf carts in the U.S. market this year due to increased collaboration with Lowe's. That’s a strong statement, but it raises the question of why we haven’t seen this announced publicly. To clarify, selling 20,000 to 25,000 units would signify a fourfold increase in golf cart sales compared to 2022, which would generate revenues estimated between $125 million and $150 million. Additionally, based on Kandi data for Q1, it looks like you've already shipped 6,500 units, which aligns with the higher end of your forecast. My question is, do you have any updated guidance for Q2 and the rest of the year? I have a few other questions as well, if I may.

So thank you for your question. So our estimated sales for Q2 are roughly around 6,000 pieces of the golf carts and for the half-year 2023 we expect there will be sales of roughly 10,000 pieces of the golf carts.

How many pieces were sold in Q1 according to your press release today?

So for the first quarter of 2023, roughly around 3,000 pieces of the golf carts were sold.

Another key point that deserves a press release was that Kandi was able to close on a new contract directly with Lowe's and to bypass the middleman, Coleman. A few questions looking at Lowe's website for a search of Kandi products, some 16 items show up under golf carts in the Kandi brand, which seemed to be the two-seat utility golf cart with dump bed and winch and the six-passenger golf carts, which by the way are showing available at Lowe's with both the AGM lead acid for $12,999 and the lithium batteries for $1,000 more. The more conventional four-passenger Kandi carts still show up under Coleman on the Lowe’s sites with the AGM lead acid batteries. Question, did management give more detail as to how Kandi was able to secure this deal direct and where does this leave Kandi’s relationship with Coleman, and what is the likelihood Lowe's will pick up new Kandi products other than golf carts?

So as for your concerning questions at present under the brand of Coleman, there is only one golf cart available in the market, which is a four-seat lead acid battery model. As for the consideration, primarily the price and the gross profit. However, to Lowe's, they hope to become a leader and occupy more market in the field of the outdoor recreation electric vehicles. So Lowe's offset we at Kandi can provide more diversified products to help them achieve this goal. And because of the highly diversification of our products, we can customize the product for our customers Coleman according to their needs. And yes, there is no conflict for us to supply our products to Lowe's. So this year, it's likely that you will see more Kandi products in the Lowe's market.

Thank you for your answer. The Kandi America website has introduced a new heavy-duty utility vehicle priced at $13,999 under the EV section, called The Cowboy e10K, which is a robust lithium-powered vehicle. It seems ideal for Lowe's customers, but we haven't communicated this yet. Do you foresee Lowe's also adopting this Cowboy line, and why aren't we publicizing our strengths?

So Lowe's is well aware of our new product development. So yes, they know about our new model, the Cowboy e10K. And I believe that Lowe's is also considering this product. In the meantime, we have plans to promote this product to other retail and chain stores to increase our sales channels.

And what about more visibility from the company in terms of putting out press releases introducing all this great news to the investing public, which I'm sure would be exceedingly interested in this great company?

Yes, so based on our development and our operations, we will release the news in a timely manner.

But we haven't released anything about Lowe's and the development of selling to them directly, correct? And will we soon so people can realize this development?

So well, actually, at the moment we are in the early stage of the cooperation with Lowe's. It's not like we're not going to disclose the news. However, we would like to consolidate and get our fundamentals done and wait until the cooperation becomes a more massive volume, then will disclose accordingly. Our strategy is always to get things done first, then we release the news accordingly when it's fresh and becomes more mature.

Yes, I appreciate that answer. In any meal, there's always an appetizer. And to that end, perhaps you could put something out there relatively soon.

Thank you for your suggestion.

Now when we go back to your numbers, the unit guidance for 2023 as given on the year-end 2022 conference call, the unit guidance for golf carts alone was 20,000 to 25,000 pieces. And is that for golf carts alone via Lowe's, I take it, what about all vehicle units from the K32 to golf carts to the Cowboy, what is the total unit projection?

So yes, first of all, for your question, the estimate of sales of 20,000 to 25,000 pieces of the sales only indicates for the model, the golf carts. It doesn't include any other UTV such as the K32 or the e10K. In the meantime, we try to spend our sales channels to consolidate our resources, hopefully, we can have better sales this year.

And how soon does Kandi expect to get the K32 pickup truck approved for sale under the farm truck rules as mentioned on the last conference call?

So actually, we have taken all the approvals necessary for the launch of the K32 in the U.S. market. We estimate there will be roughly 200 pieces of the K32 in this year, but then it's ready to be launched in the U.S. market.

That's very good news. I have to commend management's skills, noting a significant increase in gross margins from 19.8% in 2021 to $30 million in sales to $22.6 million in 2022, and $71 million in sales. The larger number this year and an increased gross margin are impressive, especially considering the substantial inflationary rise in the supply chain, shipping, and transportation costs. The most important question is, when you consider these additional product offerings alongside the golf carts, what do you anticipate this year's approximate revenues, gross profits, and margins will be on a low end for all product offerings? Thank you.

So due to our gradual advancement of our strategic adjustments, right, we believe that the revenue this year will definitely increase significantly. And then the gross margin will be roughly around the same level as Q1 of this year.

I really appreciate your patience and I have a great deal of respect for your skills, your management, and I congratulate you.

Thank you very much.

Thank you. Operator, next.

Thank you. Our next question is from Kan Nau, a private investor. Please go ahead. Mr. Kan, your line has been unmuted. You can go ahead with your question. Since there is no response from the participant, I would like to request that we move to the next question.

Sure.

Our next question is from the line of Mike Pfeffer from Oppenheimer. Please go ahead.

Good morning. Thanks for taking my question, which has to do with Kandi's new emerging lithium battery business. From the 10-K, it seems that this is another hot sector for Kandi. The company reported battery sales in 2021 of only $4.5 million with a 10.8% margin. This impressively jumped fivefold to $24 million in 2022. However, the gross margin went down to 4.6%. From what I can get out of the 10-K, it appears that almost all of last year's battery sales were sold to third parties, which in the current competitive environment in lithium vehicle batteries in China squeezes the margins. However, this year, as can be seen by Lowe's now offering a lithium battery option for Kandi golf carts in the U.S., one would think Kandi's margins would increase significantly as would likely be reflected in total battery sales. If you could just pass that on, and I'll ask three brief questions please.

Go ahead.

Am I correct in my assumption that last year's battery sales went to third parties?

So for the past year 2022, it's true that primarily our lithium-ion sales were sold to third-party customers. We're going to have more demand from our own in-house sales this year. So of course, in this case, it will not be reflected on the consolidated sales on the financial statements. So you will see a decrease in the sales in the lithium-ion cells sector because there will be more demand from our own in-house transactions.

Thank you. And so is Kandi batteries only lithium and is it the goal to have all the company's vehicles powered by its own lithium batteries?

Yes. So basically, we're going to develop a direction of adopting lithium-ion cells.

And then could you give us a forward look at what the company is expecting from the battery division this quarter and full year? And that's all from me. Thank you.

During the past year due to the surge in raw material prices for the lithium-ion and other cell materials in our China market, it caused all the uncertainty in the market, which hurt the demand and our sales. From the fourth quarter of last year until April of this year, our battery sector was in a state of net loss. At present, the domestic market, the China market raw material prices for batteries are on an increasing trend. So hopefully, it will have a positive impact on the market and we hope our sales will improve.

Thank you.

Thank you.

Our next question is from the line of Walter Hill from Carty & Co. Please go ahead.

Thank you. My question comes under two topics. The first has to do with the opening comment Mr. Hu made on a prior conference call, specifically he said, 'we will constantly launch new products in the electric vehicle business to gain share and create more value for our shareholders.' I have questions in two related topics. First, while there was no company press release as previously mentioned on the new hefty off-road vehicle, the Kandi Cowboy e10 selling for $13,900, which have recently appeared on the Kandi website with no publicity available to shareholders, are there any other major surprises like the Cowboy on the near horizon?

Okay. Thank you.

So our new model, the e10K UTV is a pure electric model developed to tackle a 500cc market. We have started mass production of this model since April this year, then it will be sold to the retail store of Lowe's and other dealer channels. So whether there will be major surprises like we have for the Cowboy depends on the market direction. We believe that this model will be very competitive in the market.

My second topic is regarding to the Haiku 100,000 capacity EV manufacturing facility designed and built by Kandi a few years ago. At that time, it appeared Kandi was going to produce most of its own fleet of EVs. Questions on the topic are, A) what vehicles and/or parts specifically are being manufactured or assembled in this facility? B) How many units of various vehicles were built in this facility in 2022 and what are your expectations for units you expect to be built this year? C) Does Kandi also make its chassis and body parts in this facility or is it just vehicle assembly? And D) do you attribute this facility's close proximity to only a mile or two from the export shipping port of Haiku as a major reason Kandi was able to have such a great year in China in 2022 while 90% of the China manufacturers have a bad or terrible year due to supply chain and transportation problems?

As for your first question, so basically, the company's electric vehicles including the initial vehicle components and then the off-highway vehicles like low-speed vehicles, the pure electric utility vehicles, those the top cohorts, the ADB, UTVs as well as the component of our electric vehicle K23, are all produced and manufactured in our facilities. So as far as the second question, during 2022, our Hainan plant mainly produced golf carts with more than 10,000 pieces. More than certain parts of the K23 electric vehicle package and the K33 product have also been manufactured during last year. This year, we expect that the production for the golf cart product will be roughly 20,000 to 25,000 pieces, and then there will also be 200 pieces for the K32 UTVs. As for the K23 EV package, we expect there will be a small amount to be manufactured as well. Our Hainan plant, the facility, is actually a comprehensive production site that includes all four major processes of car manufacturing including stamping, welding, painting, and then the final assembly of the vehicles' components. And as for your last question, the export shipping costs in Haikou is close to our facilities. That's not the major reason that we are able to have a great year during 2022. Indeed, the capacity of the exports in Haikou is relatively small; it doesn't meet our full-year needs. During the past year of 2022, roughly 50% of our products were shipped from the Shenzhen port. So hopefully, that can address your question.

Thank you, yeah. That answers my question. Thank you.

Thank you. Our next question is from the line of Arthur Porcari with Corporate Strategies. Please go ahead.

Good morning all. Sorry, I've got a sore throat over here, so I'll do the best I can here. I want to end with some questions on reported Q1 numbers, which we just saw. But first, I want to make a few points to management. For years, Kandi's investors have suffered in the stock market. I know it sounds like a broken record, but I will repeat it again, not because of business failure, quite contrary, as a NASDAQ EV first mover a dozen years ago in the global EV sector, Kandi survived against all odds where there's a 90% likelihood any undercapitalized will fail or be bought out. However, Kandi not only survived these 14 years but finds itself today in some parallel universe where this debt-free company stock is trading around $3, about $1 off its all-time low and 85% below its $22.50 all-time high, which was I think, in 2014. It's also trading at a discount to $3.21 cash, a 45% discount to the $5.25 book value. And all of this at a time when Kandi is now rapidly growing with its e-golf cart business at Lowe's and others as well. While 90% of tech stocks, particularly in the EV sector, are seeing significant business, clearly this has to change. Pass that part on to Mr. Hu, please, or whoever.

Go ahead.

Okay. Well, as we know, Kandi has never used an actual full-service, sell-side brokerage or investment banking firm to raise any money. But in turn, that just means Kandi has no accredited analysts applying to give comfort to funds. So they avoid the stocks; what is the company going to do, if anything, to try to attract Wall Street analysts? Not putting out press releases is not the solution? That's question one.

Okay.

First of all, thank you very much for your concern and support for our company. Of course, we appreciate your suggestions. In recent years, due to the orderly competition in the China electric vehicle market, we have been forced to make some very difficult strategic adjustments in order to survive. Well, in the end, I think the capital market needs data to support. We always adopt the model of excellence, so our goal is always to enhance our fundamentals, ourselves. So you can tell that from this quarter finally we can turn our net deficit, from net loss to net income in this current quarter. So hopefully, with our stronger fundamentals, better performance in terms of the managed shares, and then our revenue, this kind of data can be recognized by the market and also by analysts. So then they will come back to us and our company. So yes, basically, our goal is to open the momentum stronger and better.

There's been a noticeable absence of significant press releases. In the last year, we've issued two, whereas previously Kandi would release around 30 or 40 when their focus was solely on China. Recently, Kandi has introduced three new vehicles priced between $10,000 and $15,000 without any accompanying press releases since the last conference call. I asked Hu why these U.S.-based vehicles weren't announced, and she explained that the responsibility for such announcements lies with Kandi America, not the parent company. Kandi America is using its own PR firm for this purpose. While this may seem unreasonable, this policy needs to be revised. Issuing press releases in the U.S. is crucial, especially when over 75% of your product sales come from high-ticket items there, as it could significantly boost sales. Imagine where Tesla's stock would be if they disregarded sharing updates and new products with their shareholders. They wouldn't even be in business, as they rely on this method instead of traditional advertising or dealerships. Please make sure to relay this message.

Thanks again for your concern and advice. Again, usually we take the strategy and the motto of fewer words and many deeds in terms of our operations and that's our promotion. But then we definitely will take your advice into consideration in our upcoming plan, and yes, we will try to fine-tune.

Okay. Let me just kind of wrap it up here with a few questions, it has to do with the numbers that just came out today. We mentioned on the last conference call about this import key software that's available to I guess those of us who are members or subscribe to it. They're pretty good about carrying all the shipments back and forth, what's going through internationally through containers. According to their software that tracks the global movements in the international tanker shipping sector, Kandi exported some 6,600 vehicles to include 5,900 golf carts and 700 LSEVs in Q1, which would put it on par to reach the high end of Mr. Hu's 25,000 unit guidance for the year.

I'm sorry, can you slow down with the number you said 6,600? Yes, yes.

6,600 vehicles were showing up as being golf carts. Now maybe that's mislabeled when we put them in containers, but I think you have to be pretty honest about that. And some 700 LSEVs. So in Q1, I would put them on par to reach the high end of Mr. Hu's 25,000 guidance for the year and I have more to add?

Keep going.

Okay. And let's see here. It would seem that the revenues would be higher and that we only reported $22 million this quarter in total revenues, what we seem to have done about the same according to import key about the same number of vehicles, 14,000 to 15,000 total. Now I guess, what we really need to know is with the company showing such high margins to start with, we've been told that Kandi's goal is to provide almost all the drivetrain parts and batteries, the numbers should be increasing overall for total revenues. With even now Kandi batteries appeared in the U.S. vehicles. So if we take an average retail price of say $10,000 per unit, how much is Kandi grossing off this? And what is the time frame between shipments to the U.S. and anticipated sales to retailers? Want me to do that again?

Alan, did you get the part?

Yes, that would be great if you can come again to the question.

It seems that we have shipped nearly 15,000 units over the past two years, based on import data to the United States. In the last two quarters, I believe we shipped around 14,000 to 15,000 units just in the last quarter of last year and the first quarter of this year. However, we have only booked about 10,000 units so far, or possibly fewer since the total doesn't break that down. I'm curious, if the average retail price is $10,000 per unit, what would that generate for Kandi?

Okay.

So well, when you talk about competitive data of the import and our sales, of course, there is some kind of lag time because we recognize ourselves based on the revenue recognition methodologies for the U.S. GAAP. And of course, there will be some timing difference between the sales and then the export to the U.S. market.

Can you clarify whether it's a 90-day period plus an additional 90 days or 60 days? Also, if the retail price is $10,000, what are we actually selling it for, like $3,000, $4,000, or $5,000, that would ultimately be recorded as revenue?

So as for your question, it really depends on the actual sales. There's no really standard timeframe. It depends on how we fulfill our terms and how we can meet the requirements to recognize the revenue. So it depends on how the transaction gets closed in the U.S. So that's dependent on how like 30 days or 60 days the export and the sales. So again, we recognize all the sales based on the U.S. GAAP requirement. And so to make sure the numbers are fairly presented. As for the margin, roughly for each piece of the golf cart model, roughly over 30% of the gross margins for each piece of the golf carts.

That's an incredible number. I mean, that's great. That's an incredible number. If you do 25,000 golf carts alone this year and if you can somehow get $5,000 per cart, that's $125 million with a 30% margin. Anyway, the last question has to do with could you address the drop in lithium battery cells and expectations for this division in the balance of the year?

There are two main reasons for the decrease in sales of lithium-ion cells. Firstly, there is uncertainty in the Chinese market. Last year, the price of raw materials for the batteries increased significantly, leading to uncertainty and further reduced demand for cells in China. Secondly, we are integrating more of our lithium-ion cells into our own products, such as golf carts, which is classified as intercompany sales. We have not recognized those in our consolidated financials because they are eliminated in that context. Essentially, we report those sales according to U.S. GAAP, and certain intercompany transactions will not be shown separately.

Okay. I know I said that was the last question, but I have one more comment. Is it unreasonable to expect revenues of $150 million to $200 million this year, considering just the golf carts overall?

Are you asking, are we expecting $150 million to $200 million in revenue forecasting for this whole year?

Right.

Including everything, right?

So for our forecast, we believe that there will be roughly $150 million, even more, the top line with the $200 million of the USD sales for this year. I think we can achieve that goal.

Fantastic. One last thing. It's been nine years since we've had a Shareholders Day in the United States with Mr. Hu and management, I think we're due for another one. What's your thoughts on that?

So our plan is once the transition proceeds and becomes stronger, then we will come to the U.S. market to meet with all the investors.

Sounds like you're already almost there. If you can do $150 million to $200 million, this should be a record all time for the company and with great margins.

Yes, we'll do our best.

Just an observation. Thank you very much and hey, we did a great job on getting this new product line in. Please, some press releases, let the public know, it will help your dealers, it will help everybody. They'll sell more vehicles. Shareholders want to go buy one maybe, the more shareholders we can bring in. But thank you very much.

Thank you very much.

Thank you. That was the last question for our question-and-answer session. I would like to turn the conference back over to Kewa Luo, IR Director, for any closing remarks.

Thank you again for attending today's conference call. If you have any additional questions, feel free to contact our IR consultant or via e-mail to contact me directly. We look forward to updating you on our next earnings call. This concludes our call for today. Thank you. You may now all disconnect.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.