Kandi Technologies Group, Inc. Q2 FY2024 Earnings Call

Greetings. Welcome to Kandi Technologies Second Quarter 2024 Financial Results Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. At this time, I’ll now turn the conference over to Kewa Luo. Kewa, you may begin.

Thank you. Hello, everyone. Thank you all for joining us for today’s conference call to discuss Kandi’s results for the second quarter 2024. Earlier today, we issued a press release covering the results. You can find the press release from the Newswire Services. 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. Additionally, unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars. Before we continue, I would like to introduce the team joining me on today’s call. We have Mr. Xiaoming Hu, Chairman of the Board; Dr. Xueqin Dong, Chief Executive Officer; Mr. Alan Lim, Chief Financial Officer; and for the first time on our call, Mr. Johnny Tai, CEO of Kandi America, and Ms. Olen Rice, CEO of Northern Group. Dr. Dong will deliver his prepared remarks in Chinese, which I will then translate. Following that, we will have a Q&A session with Chairman Hu, Johnny, and Olen, our CEOs, to answer your questions. Now, let us start with brief greetings from each of our executives.

Hello. This is Hu Xiaoming. Thank you for joining us today.

Hello, everyone. I’m Xueqin Dong. I’m pleased to share our progress with you shortly today.

Good morning, everyone, and hello, everyone. This is Alan Lim. Thank you for joining us.

Hi, everyone. It’s Johnny. Good to be here with you.

Good morning, everyone. This is Olen, and I’m excited to join the discussion today for the very first time.

Thanks, everyone. With that, let me now turn the call over to our CEO, Dr. Xueqin Dong, to share our Q2 performance. Dr. Dong, please go ahead.

Again, welcome to today’s conference call. We are pleased to report that Kandi Technologies continued its strong growth trajectory in the second quarter of 2024. We achieved total revenue of $39.1 million, up 8.9% from $36 million in the same period of 2023. The primary growth driver was our all-electric off-road vehicles and associated parts, with sales revenue increasing by 11.3% to $34.7 million. We made significant progress in our U.S. market expansion with the launch of new product lines, injecting new energy into the market. Additionally, through our exclusive partnership with Lowe’s, the officially licensed NFL team golf carts will be launched in the U.S. starting from the end of August. This showcases our innovation and offers fans an eco-friendly way to show their team pride. Our financial position remains strong, with cash and cash equivalents, restricted cash, short-term investments, and certificates of deposit totaling $219.6 million as of June 30, 2024. We actively executed our share repurchase program, buying back $673,896 shares at an average price of $2.25 per share, reflecting our confidence in the Company’s future and our commitment to enhancing shareholder value. On the global front, we made significant strides, including securing EEC certification for our 10-K all-electric UTV, paving the way for entry into the European Union market. In parallel, we have also opened up new markets for Kandi products in Asia, further expanding our international market share. Looking ahead, we remain focused on expanding our product portfolio and market presence, particularly in the U.S. and European markets, driving future growth through continued product innovation and market expansion. Now, we will move on to the Q&A session. Together with Chairman Hu Xiaoming, Johnny Tai, CEO of Kandi America, and Olen Rice, CEO of Northern Group, I will answer your questions. Ms. Kewa and Mr. Alan Lim will provide translation for English questions. Please go ahead and ask your questions. Operator, please go ahead.

Thank you. Our first question will be from Joe Kramer with Private Investor. Please proceed with your question.

Thank you. This is regarding new products. On the Q1 PR, the CEO stated moving forward, we will launch new starter batteries as well as a variety of more competitive all-electric off-road vehicle products and electric water sports products. Also, from a press release, we learned of Kandi now selling its own branded lithium AA rechargeable batteries. Go ahead, Kewa.

Thank you. This is regarding new products. In the Q1 press release, the CEO indicated that we will be introducing new starter batteries and a range of more competitive all-electric off-road vehicle products and electric water sports products. Additionally, a recent press release revealed that Kandi is now offering its own branded lithium AA rechargeable batteries. Go ahead, Kewa.

And from an outside article, we now see that a second version of the side-by-side e10K-Cowboy called the Innovator e10K along with the new $19,000 electric off-road vehicle called the Lucky 9. A few questions I have to ask. First, could you please explain what starter batteries are and how big the market could be? Go ahead.

Kandi is now selling its own branded lithium AA rechargeable batteries. I have a few questions. First, could you please explain what starter batteries are and how large the market could be?

The starter battery refers to the specific battery used to start a vehicle. We are still in the early stages of research and development, as well as market research. Based on the available information, global automotive starter battery market sales reached RMB 153 billion in 2023 and are projected to grow to RMB 206 billion by 2030, with an approximate compound annual growth rate of 3.3%. Thank you.

The next two other questions. What would be the competitive all-electric off-road vehicle and the water sports product from the press release? And will Kandi soon be offering AAA along with the AA lithium batteries? And, can these batteries use any size compatible charger, or must it be a specific branded charger, Kandi charger? Go ahead.

What would be the competitive all-electric off-road vehicle and the water sports product from the press release? Will Kandi soon be offering AAA along with the AA lithium batteries? Can these batteries use any size compatible charger, or must it be a specific branded charger, a Kandi charger? Go ahead.

First of all, let me address the initial question. The models you referred to are connected to our future product offerings that are still in development. We have expanded into the UTV and water sports categories, and further product descriptions and details will be provided later. The competitive pure electric off-highway vehicles mentioned in the press release refer to the latest generation of UTVs, ATVs, go-karts, and golf carts, while the water sports products include an innovative single passenger electric Jet Ski. Regarding the second question, we launched AA batteries to evaluate their market potential in the U.S. and have seen some initial success. We are considering the launch of AAA batteries in the future, depending on how well the AA batteries perform. Our AA batteries are compatible with various chargers and are not restricted to Kandi branded chargers only. Thank you.

Thank you. The next question is about the differences between the e10K Innovator and e10K Cowboy, and when we might see them available for sale in Texas. Regarding the Lucky 9, which is priced at $19,000, what market is it targeting? Additionally, several years ago, Kandi had a scale gas trike motorcycle that resembled the Polaris Spyder, featuring two wheels in the front and one in the back. This could appeal to older bikers. Do you have any plans for Kandi to introduce an electric trike version, and are there any new vehicles expected to be released this year? Please share your thoughts.

I’m sorry. Can you repeat your second question about Lucky 9?

Yes. The gas trike, is that you had that years ago in your line. It was similar to the Polaris Spyder.

No. No. The second question you said as the high-end vehicle, Lucky 9.

Yes. High-end Kandi’s products at $19,000. What market does the Lucky 9 address?

Okay. Thank you.

So, regarding the comparison between the Innovator and the Cowboy, from a product specification standpoint, they are in the same category. The difference lies in their styles, lengths, and appearances. Each model is designed to appeal to different customer segments. The Innovator has a more stylish look and tends to attract consumers looking for a more fashionable option, while the Cowboy features a more rugged design aimed at hunters and off-road enthusiasts. Our objective is to broaden our market for various retail outlets. The Cowboy is primarily available at Lowe’s, while the Innovator will be offered at Costco soon. Thank you. This product is an outdoor sports trike targeted at outdoor and sports enthusiasts. Thank you. The models you referred to earlier are older versions in our lineup as we continue to innovate and develop newer models that align with our target customer base. Currently, we are focusing on leisure, outdoor, and off-highway vehicles. Thank you.

Thank you very much.

Our next question is from the line of Mark Cannell, a Private Investor. Please proceed with your question.

Yes. Good morning, everyone. Let me introduce myself for a short time here. I’m a Swiss-based independent Wealth Management broker for 30 years, and I’ve been in Kenya with several million shares in position and multiyear participation in these conference calls. I could never comprehend, let alone expect to see the NASDAQ stock in such a strong and timely position as Kandi, trading at a 40% discount to cash, 65% discount to book value, and at a 13-year low price. Kewa, could you please go ahead? Kewa?

Go ahead.

Okay. On the last conference call, a discussion came up about Kandi targeting to spin-off as a separate NASDAQ company its U.S. subsidiary, Kandi America, later this year. There was discussion that the most Kandi could spin-off and maintain full rights of consolidation of financials is just under 20%. But to make this possible, due to the NASDAQ requirements of a minimum price per share of $4 and a $50 million market cap, Kandi itself would have to have at least a $4-plus price per share to meet NASDAQ listing requirements for the subsidiary, but higher to assure the IPO doesn’t go down on the first day of trading. What was suggested on the last call was for the Company to just do a simple 10 million share tender offer at $3.50 a share, $1.50 on a book value, costing no more than 50% of Kandi’s cash. This announcement would call for an immediate increase in bids due to traders bidding at least $3 to $3.40 against the $3.50 tender price, which is still well under the $5 book value. But each share bought under the book value will increase the remaining book value per share by the difference between the purchase price and the book value. So, if the non-selling holder gained $150 million to $15 million in book value for each 1 million-plus share purchase, it alone would be a great win. The response to this question on the last conference call from the CEO was, thank you for your suggestion, and we will appreciate that. We will take it into consideration and evaluate and react properly. But remember, at the time that this was set, this can be trading at $3. So, is this even more, now this is even more important and there will come my questions now.

Thank you. Please go ahead with your questions.

On Wednesday, Kandi’s stock opened at $1.66 a share, the lowest price it had traded in the past 14 years. Does management know of any other investment or use of cash better than spending 15% of Kandi's average cash position held over the past three years than buying Kandi stock at a 30% discount to book value?

Thank you. Go ahead with your questions. On Wednesday, Kandi’s stock opened at $1.66 a share, the lowest price it had traded in the past 14 years. Does management know of any other investment or use of cash better than spending 15% of Kandi's average cash position held over the past three years than buying Kandi stock at a 30% discount to book value?

We recognize that our stock is significantly undervalued. Therefore, we are increasing our marketing and advertising budget to enhance our brand presence. We hope this will attract more American investors. Thank you.

Okay. Does management still want to spin-off Kandi America? And if so, does it have any better idea how to get Kandi's stock price up to the price very quickly to assist this execution of the spin-off besides the marketing you just mentioned because in the past, there was already a lot of PRs and marketing. There was listing little bit of figures and did that. So, there was no big impact with this marketing on the stock price?

Thank you, Mark Cannell, Private Investor. Does management still intend to spin off Kandi America? If so, do they have a clearer strategy to quickly raise Kandi's stock price to facilitate this spin-off, apart from the marketing efforts previously mentioned? In the past, despite numerous PRs and marketing initiatives, there was little effect on the stock price.

We are considering the potential deal listing for Kandi America. However, due to SEC regulations, we cannot discuss this matter in detail. Thank you for your understanding.

Okay. Thank you for this information. So, that means in my view that you’re considering and you have a quiet period for that. That’s very good. Can you tell us a little bit more about the Monday announcement of the manufacturing agreement with Taiwan-based Hartford? Clearly, Kandi has plenty of excess manufacturing capacity in-house and normally would not need to add significant capacity right now. So, either this deal is being done as inferred in the first paragraph of the Monday announcement meets all necessary manufacturing standards regulatory requirements and local content thresholds for both the U.S. and production in Taiwan, or Kandi is going to need all this current excess capacity to make and deliver enough product to reach its 2025 goal of $500 million in revenue, which is it or is there any other reason?

This deal is either being conducted in accordance with the manufacturing standards, regulatory requirements, and local content thresholds for both the U.S. and production in Taiwan, or Kandi will require all this current excess capacity to produce and deliver enough product to achieve its 2025 revenue goal of $500 million. Which is it, or is there another reason?

So, expanding to Taiwan is a strategic move for us to enhance our supply chain. The main purpose is to add value to our existing products and further enhance and strengthen our market competitiveness. Thank you.

Okay. I understand. And, as my last question is, in this report today, you mentioned the Lowe’s deal, which is quite important for you as a Company. Maybe now specifically to the U.S. management team, has there been any discussions about the size of this deal? So, how many UTVs or whatsoever and how many years this is going to be in the market this deal, that could give us very good insight for the future figures as a guidance?

Thank you. I understand. My last question is about the Lowe’s deal mentioned in today's report, which is significant for the company. Specifically, for the U.S. management team, have there been any discussions about the size of this deal? How many UTVs or whatever is involved, and how many years will this deal be on the market? This information could provide valuable insight for future guidance.

We are going to have our CEO of Kandi America, Johnny, to answer your question. But, if you can be more specific about what you like to know, that would be really good.

Oh, yes. Of course. I mean, if you’re signing such a deal, Lowe’s and Kandi, they must have some idea how many UTVs of this kind could be brought to the market or sold or being sold because Kandi has to be prepared production-wise and Lowe’s has to be prepared distribution-wise. So, I would think that there must have been some discussions about how many UTVs of these special NFL licensed UTVs could be sold or the market is willing to accept?

Okay. Very good question. And, I think I’m going to answer that first, and then I will invite my colleague and Olen to weigh in as well. Yes. We do have, like, a discussion, regular meeting with Lowe’s to discuss what the market looks like. And, we understand the market is quite challenging right now with all economic climate such as the inflation. So, I think that we carefully review the market, and then also we determine how many stores, how much inventory we would like to bring in. So, I think that’s, we still have a lot of discussion going on with Lowe’s. And, Olen, would you like to weigh in? Olen?

Yes. I was unmuting. You guys hear me?

Yes.

We are having frequent conversations with the Lowe’s team. Regarding the NFL, there is a strong enthusiasm, and we have a three-year plan in place based on our current contract. At this time, it's difficult to provide a specific financial estimate, but there are high expectations from all parties involved. If you have more detailed inquiries, I'm open to discussing them, but I don’t have exact figures yet. We do have substantial expectations that will impact Kandi as a company.

Well, thank you, Olen. I think you are a little bit breaking up. But, I think I want to make a correction. It’s the NFL we have; we are licensed to sell from the golf carts. It’s not a UTV. So, right now, it’s actually available to order on Lowe’s that come. So, I think, yes, I agree with what Olen mentioned. Thank you for your question.

Okay. Then, that’s it for me. Just, yes. Okay. So, just my last remarks for management, especially in China, is there’s a good company, that’s one side, and there’s a good stock price. And, these two things often don’t match together. I think when it comes to the company, the management has done a terrific job over the last years to get the company afloat and to strike good deals and to bring the company where it is today. But, when it comes to the stock price, I must say that they are a little bit lagging behind what for whatever reason. So, I would say one could little bit concentrate now a little bit also on the stock price for the shareholders and to make the stock a little bit in the public view that there’s more attention about Kandi and what Kandi can provide, Kandi can do, then the stock price could go significantly higher from the current position. Thank you for taking my questions.

Thank you. Operator, we’re ready to take the next question.

The next question is from the line of Steve Miller, a Private Investor. Please proceed with your question.

Good morning, Kewa. You said in your press release today that the United States is your primary market and that the increased freight shipping expense from China to service your expanding customer base was the reason for the biggest increase in your selling and distribution expense. Although, I can guess as to the reasons for your recently announced partnership with Hartford Industries in Taiwan for manufacturing, why don’t you have manufacturing facilities in your primary market, the United States, especially as you contemplate spinning-off Kandi America to be an independent publicly traded company?

Thank you.

So, we are actually considering our production line in the U.S. for the future. It’s definitely part of our plan. The collaboration with Taiwan is one of our strategies, and we may not disclose too much about that in this call. Thank you.

Alright. I’m quite active understatement on social media, especially regarding Kandi. And there seems to be a campaign against Kandi by detractors on a lot of Internet chat boards claiming that Kandi is nothing more than a reseller of private labeling of its array of golf carts and various UTVs, ATVs, go-karts, and other off-road electric vehicles, and even lithium batteries made by other manufacturers. As longtime Kandi followers are aware, this is a false narrative, but easy for detractors to say since Kandi does not have a high-profile corporate website in English that showcases its in-house capabilities. Kewa, do you want to go ahead and translate that?

Go ahead, Steve.

Okay. Thank you. So, we all know obviously that Kandi stock is extremely undervalued, especially even though it’s a highly integrated major manufacturer. So, a few conference calls back, a question was asked as to what percentage of the cost of a typical Kandi vehicle, for lack of a better term, such as a golf cart, was actually manufactured by Kandi in its own multiple state-of-the-art facilities throughout whatever cities in China and now Taiwan. I believe at the time, you said that a short management reply was somewhere around 90%. Could you go ahead and translate that? And that’s my two questions.

Okay.

Kandi’s Hainan base mainly produces golf carts and other types of motors. Our Jinhua base primarily manufactures UTVs, ATVs, beach carts, and additional motor series. The Yongkang base focuses on motor and electronic control products and their parts, while our Jiangxi base is responsible for producing delivery batteries and battery pack products. In total, Kandi has the capacity to produce over 100,000 different vehicle types and related parts. Additionally, it is accurate that we manufacture more than 90% of Kandi products in-house. Thank you.

Out of curiosity, I don’t know if this is possible, if one was to go and do a total replacement of your facilities and equipment. Do you have any estimate of what the total cost would be in U.S. dollars that someone would need to invest to replicate all of your facilities and equipment?

Hi. Do you mean, just any one of the facilities or all of the facilities we are going to replicate in the U.S.?

All of your facilities. I’m just trying to get a sense of what it would take if some third party came in and wanted to do what Kandi is currently doing. What kind of cost would it be to them to replicate all of your current facilities and equipment without regard to where they’re located?

What would it take for a third party to replicate all of your current facilities and equipment, regardless of their locations?

It seems that from a dramatic perspective, replicating the entire facility from China to the U.S. is not quite feasible. However, we are considering setting up polyester assembly lines in the U.S. in the future. As for the total overall budget, it's difficult for us to provide an estimate at this time, and we need to review additional detailed financial analysis reports. Thank you.

Okay. And, Alan, I’m not sure if we broke up or I just didn’t understand. That 90% number back from your previous answer in terms of what percent of a typical, like a golf cart is actually made by Kandi versus products acquired from outside, is 90% still an accurate percentage?

It is. Yes, it is.

Okay. And then my last question is, your China-based website quite frankly seems to be outdated in that its images and videos are still heavy on EV autos and trucks. What about updating that site? And on all of your websites, and this is related to the previous questions, can you at least create a PowerPoint presentation on your state-of-the-art manufacturing facilities and capacity? So, people who have questions about Kandi and in terms of how much you’re actually manufacturing versus how much you’re obtaining from third parties and then putting on your label exist, I think that would be actually quite helpful and counteract some of the claims out in social media. And that’s all I’ve got. Thank you.

Thank you.

Thank you for your suggestions and feedback. They are very constructive. We have already been working on adjusting most of those items. Of course, we will continue to improve them to make them more accessible to our investors. Thank you.

Thank you. Our next question is from the line of Fred Brasher with Cleantech Investments. Please proceed with your questions.

Good morning. With the existing outlets in North America, which we know include Lowe’s, 2500 outlets; Walmart, 4500 outlets; Amazon; Campers World; Costco Canada, 108 outlets; National Big Box Stores along with Peavey Mart/ACE Hardware Canada, 200 outlets. All but Lowe’s added in the past year with maybe 1,000 independent outlets with, unfortunately, little announcement from the company. You want to start that Kewa?

Please continue.

Just since the last conference call, it appears from sources that several new international outlets have been opening, to include a very impressive, which we talked about, the Southeast Asia Thailand location, along with Aruba, Curacao, Dominican Republic, and Dubai, and even now in the EU market. Go ahead, Kewa.

Please continue.

Okay. My question is outside of the US and Canada, actually, how many international locations have been opened and are soon to be opened? In other words, just a number, or a close number. That’s my first question.

My question is outside of the US and Canada, actually, how many international locations have been opened and are soon to be opened? In other words, just a number, or a close number. That’s my first question.

So apart from our US and Canada market, we are also exploring the European and Southeast Asia markets. We are currently working in more than a dozen countries for travel sales. Thank you.

My second question, in your travels, have any multi-store chains been targeted for international growth? In other words, large store chains like Walmart and Lowe’s? Thank you.

You mean internationally outside of US?

Multi-store chains. Big chains. Big companies. Big stores.

We are currently exploring the European and Southeast Asia markets and working in more than a dozen countries for travel sales. Thank you. Have any multi-store chains been targeted for international growth, such as large store chains like Walmart and Lowe’s? Thank you. Do you mean internationally outside of the US? Multi-store chains, big chains, big companies, and big stores.

In the U.S., we collaborate with large scalable retail chains. However, in European countries, we generally work with distributors instead. That is our current plan. Thank you.

Okay. Thank you very much. I have a quick question for Johnny, if we could. How many of those stores does he expect the NFL cards to be involved with?

In the U.S., we collaborate with large scalable retail chains. However, in European countries, we generally work with distributors instead. That is our current strategy. Thank you.

Okay. Hey, Fred, nice to meet you. Thank you for your question. So, for NFL right now, our plan is only available on Lowes.com. We do have some discussions with Lowe’s to expand to their stores. However, I think they have to look at their space availability, and we know the holiday season is coming up. So, their real estate is quite busy right now. So, right now, it’s available on Lowes.com. Thank you.

Okay. Thank you. That’s all. Thank you.

Thank you. Next question, please.

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

Thank you. Well, I’m really happy to see that Johnny and Olen are on board here, someone who’s been involved in Kandi since the very beginning. I also had the honor of being invited to come visit back in, I think, 2020 or ‘21 whenever the K-23 appeared, I guess, be the first shareholder ever had a chance to test drive it. And I was very impressed with the time and kind of disappointed it never had a chance to go, but I can’t blame you guys for it. What I can give you, though, is a lot of credit for what’s happened since then. And I’m really happy to see Olen has joined you, Johnny. He sounds like a very capable partner and somebody to marshal our assets as investors. Anyway, let me get back to my original piece. I wasn’t expecting you here, but look forward to maybe taking that short drive up to Dallas and visit you all again soon. It’d be maybe that one too one time. Okay. Anyway, Kandi have us have an incredible relationship with Lowe’s based on Lowe’s seemingly unending support and trust with Kandi. Aside from the fact, Lowe’s picked up Kandi two years ago to launch their newest highest cost item in their system only a few months after Kandi first entered the US golf cart arena. However, initially, it was through marketing veteran Coleman with he only had one branded cart line back then. In less than a year, Lowe’s has totally dumped Coleman out of the picture, went directly to Kandi, picked up Kandi’s own branded golf carts, the industry’s youngest brand, and as their sole golf cart supplier, and exclusively now shows more than 80 variations of Kandi carts on their web portal. Just checked that the other day. Just amazing. Go ahead and pass that on.

Okay. Please continue.

Okay. Bear with me a second here. They can handle it with the narrative, and then I have a few questions. Then just a few months later, Lowe’s pays $100 million to renew and expand its four-year relationship for the sole exclusive rights to become the official Lowe’s home team sponsor to the National Football League. And for the first time, Lowe’s adds golf carts to their NFL sponsorship inventory. Coincidentally, this is the largest single big-ticket item that Lowe sells nationwide by a double. But instead of bringing in any one of the more seasoned golf cart makers who would love to have had this account, they took what most would think was a risk to their reputation and picked the new kid Kandi and staked their reputation on it. Plus, they put up that $100 million. Go ahead and pass that on, and I have some questions.

Please go ahead.

Okay. And again, appropriate that you have Olen on board for the rest of my questions here. In management’s opinion, why did Lowe’s pick Kandi? And does Kandi’s, well you already said that, extends for the full remaining three years of the Lowe’s NFL agreement. That part, I think you already agreed it does. But in your opinion, why did Lowe’s pick Kandi? And Olen probably the appropriate person to ask that question to.

Please go ahead. Okay. And again, appropriate that you have Olen on board for the rest of my questions here. In management’s opinion, why did Lowe’s pick Kandi? And does Kandi’s agreement extend for the full remaining three years of the Lowe’s NFL agreement? That part, I think you already agreed it does. But in your opinion, why did Lowe’s pick Kandi? And Olen is probably the appropriate person to ask that question to.

Yes. So, thanks for the question. Obviously, Lowe’s, like any of the major mass retailers, has a very rigorous vetting process for vendor selection and product selection. And so over the course of that short window of time that you referred to, we become one of the key partners in the outdoor recreational space, particularly in the electric side of that space. And I think that a lot of that’s due to our quality and the value proposition and a high level of trust that we’ve developed with that team.

Okay. Is Lowe’s planning on including actual golf carts and or fixed passenger carts? I asked that question after recently visiting a Galveston cart rental business and a golf course who would be happy, both in cases, to buy a fleet of NFL cars even if they had to buy them from Lowe’s to put them in the rental pool.

Given the recent visit to a Galveston cart rental business and a golf course, I would like to know if Lowe's is considering offering actual golf carts or fixed passenger carts, as both would be interested in purchasing a fleet of NFL cars for their rental pool, even if they had to buy them from Lowe's.

Yes. So, I can answer this as well. We are currently a supplier to Lowe’s with six-passenger carts in a limited store count, a couple of hundred doors. We also have a very robust business with them online for that product along with a number of other categories that perform well online. And as far as future Lowe’s commitments to product offering, particularly on the floor, that’s something that I wouldn’t want to comment on because that’s kind of always evolving process for these major retailers as they look at the real estate they have available and what products make sense on their floor.

Well, that wasn’t quite my question. My question was specifically had to do with the NFL. Again, you can imagine the Galveston cart rental company over there would love to have some, I hate to say it, Cowboys too, but Texans carts to go ahead and rent people go up and down the seawall. And as far as the golf cart is concerned, of course, it’s concerned, they think it’d be quite interesting to have actual golf carts where you put the golf bags in the back. I mean, this model that you have right now is a beautiful model. It’s 4p all forward-facing seats, but it’s not really golf compatible. And yet the sport of golf and sport of football seem to have some sort of a relationship over here more so than most other sports as you well know. So, that was the basis of that question, actually.

Yes. Okay. If I understand your question, I mean, right now the agreement is around 4p card, and any NFL products that are obviously going to be marketed via Lowe’s because of the relationship. So, I’m not sure if that answers your question totally, but that’s our situation today.

But is it something that you might have an interest in doing or presenting to Lowe’s to maybe have that or would be just too difficult to rekey? It seems like basically, you’re putting a wrap on an existing product that we already have and putting a logo embroidered into the headrest and getting maybe a couple of thousand dollars more for the equivalent. It would just seem like it go hand in hand and didn’t know whether that had been in the discussion yet. But if not, maybe it’s something worthwhile discussing. That doesn’t require a response unless you want to respond to it.

Listen. I’ll say this. We obviously are interested in expanding as success with the program dictates. So, I think that everything could be on the table. But at this point, we’re so early into the program. I think we’re going to play with the 4p, and then I’m sure that there will be conversations if this is tremendously successful.

Sure. As we just discovered, this is a three-year deal, which makes it that much more exciting. I’m sure it does for you as well. Anyway, on the last conference call, management responded to a target question originally asked on the conference call in 2022 confirming it still had a high-end goal of possibly achieving as much as $500 million in revenues for 2025. But I suspect that number certainly would have gotten lower now, but still pretty impressive number because of the economy in general. But that’s a long way from a $120 million or maybe $200 million, $210 million we’ll do this year. Anyway, let’s see. Lowe’s, well, I’m just looking at some notes I have over here. Oh, one other point I wanted to bring to your attention. I guess you’re probably aware of this, but they do, as I mentioned, actually have about 80 different variations of your golf carts on Lowe’s website. Of course, you’re exclusive in Lowe’s. I’m talking about in general. But what’s interesting is there are several hundreds of 5-star ratings on these golf carts. I know you’re aware or not, but you got an overall 4.5 plus rating if you add in all those various different Kandi provided products, which is pretty phenomenal and speaks very highly to at least the thought that customers that have been buying the vehicles through Lowe’s, and that’s a real feather in y’all’s cap. But, anyway, go ahead and pass that on.

But what’s your question, Art?

Well, that really wasn’t a question. I guess that was more of a comment that I had here and Olen kind of answered the first part. Let me see. I think we have one or two more items here. It is kind of from prior things that were said. One of the questions I had was since Kandi is going to spin off Kandi Americas, a special separate entity, wouldn’t it be wise to bring the CEO and perhaps Olen on the call in the future? But you all did that, so there you go. Okay. Let’s see.

Let me clarify what you have mentioned so far. Please proceed with your question if you have one.

Yes. Okay. Just a couple of more light ones over here. This is a follow-up on a question that somebody else asked over here. I’m never sure we got the right answer for it or the answer that was understandable. Had to do with the total valuation of all of Kandi’s facilities if they had to be replicated. Well, I remember for a fact that Kandi built from scratch the Hainan facility, which has the 100,000 capacity. And that was, I believe, four, five years ago, and that was done for about $200 million by itself. Subsequent to that, I knew they sold the old facility and built a brand new facility in Jinhua. And I guess that’s where they’re making your off-road products. So, it would seem to me that the value of all those facilities, which if they had to be replicated today, would certainly be in excess of $300 million, maybe a bigger number than that. Am I wrong?

You mean $300 million what?

Okay. The original Hainan facility was built for around $200 million by Kandi four or five years ago. And the new facility we have in Jinhua, and which is, I guess, there are two or four or five facilities in various cities making vehicles, where I believe they’re making the Cowboy. I don’t know what that cost, but maybe another $100 million or so. So, my comment was when the question was asked about what the cost would be to rebuild that type of manufacturing capacity that we have, it would seem to me that number would be at least $300 million or higher. And, am I wrong on that or what?

Let me ask.

It’s very difficult for us to determine right now due to the various factors involved, such as supply chain and scale, among others. However, we prefer to approach this step by step, which is our plan and consideration. Thank you.

So, what you’re not even willing to commit to the fact that the original cost of the facilities without taking all that other consideration? Well, I guess my question basically is, is it worth at least $300 million if you had to rebuild the whole thing again?

The moment involves too many parts like the supply chain, the scale, and other factors. We want to approach that step by step as part of our plan and consideration. Thank you. Arthur Porcari|Corporate Strategies|So, are you not willing to commit to the idea that the original cost of the facilities doesn't take all those other factors into account? My question is whether it would be worth at least $300 million if you had to rebuild everything.

To address your question, if we were to replicate everything exactly from China to the U.S., the cost would exceed $300 million. However, that scenario involves numerous factors in manufacturing, such as the supply chain, which makes it economically unfeasible. That's our conclusion on this matter. Thank you.

That was never my question. My question is the existing facilities that we have in China that are making all these vehicles that we are being, the company’s being accused by the people on the Internet of farming out their building. If we had to just replicate them in China, what would that value, what would it cost the company to replicate just the facilities in China? Forget about importing.

That was never my question. My question is about the existing facilities we have in China that are producing all these vehicles, which the company is being accused of outsourcing. If we had to replicate them in China, what would be the cost to the company to replicate just the facilities there? Forget about importing.

Thank you. My question is regarding the current facilities we have in China that are producing the vehicles for which the company is facing accusations online about outsourcing production. If we were to replicate these facilities in China, what would be the cost to the company to do so, without considering any import costs?

To answer your question about whether it would cost more than $300 million, the short answer is yes, if we proceed in a certain manner. However, we likely won’t follow that exact approach since it doesn’t align with the production cycle. So, to clarify, yes, it will actually be even more than that.

That’s what I was asking.

Just for information.

Okay. Well, my last comment is more of an observation. After 51 years in this business, I’ve never seen a situation where a company’s stock trades significantly below one dollar per share, despite having ample cash on hand. The company has very little debt and is trading several dollars under its book value. Additionally, you recently secured the Kandi project, a deal that any golf cart company would desire, especially with partnerships like the NFL and Lowe’s. With other significant sponsors like Walmart and the Kemper’s World, it’s surprising to see the stock remains at this level. There needs to be a strategy to increase the stock price. Olen, who I believe is now the second largest shareholder, made an investment a year ago at around $3.30 a share and likely isn’t pleased with that outcome. There’s a need for a clear action plan in the U.S. Typically, a deal with Lowe’s would elevate any other stock to around $10 a share. Our stock has proven it can achieve that, spiking to $19 per share when Kandi America joined, with revenues then at $10 million. This year, the Kandi America segment could bring in around $150 million or more in revenue. That's my final thought. If anyone wants to comment, I’d welcome that. If not, I expect a strong third quarter as revenues from the Lowe’s golf cart and NFL program should start showing up since you began in August. I anticipate we’ll have a great third quarter, but I’d appreciate any thoughts if anyone wants to share. Thank you.

Thank you for your remarks. Operator, let’s wrap it up.

I’ll turn the call back to management for any closing remarks.

Thank you again for joining today’s conference call. If you have any further questions, please don’t hesitate to contact our IR consultant at gary@blueshirtgroup.co or you can contact us directly at ir@kandigroup.com. We look forward to updating you on our next earnings call. This concludes our call for today. Thank you very much. You may now all disconnect.

Thank you for your participation.