Kandi Technologies Group, Inc. Q3 FY2024 Earnings Call

Greetings, and welcome to the Kandi Technologies Third Quarter 2024 Financial Results Call. All participants are currently in a listen-only mode, and a question-and-answer session will take place after the formal presentation. This conference is being recorded. I will now hand it over to Kewa Luo, Investor Relations Manager for Kandi Technologies. Thank you. You may begin.

Thank you, operator. Hello, everyone. Thank you all for joining us on today's conference call to discuss Kandi's results for the third quarter 2024. Earlier today, we issued a press release covering those results. You can find the press release on the company's website as well as from 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 statement, 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. Joining us are Dr. Xueqin Dong, our newly appointed Chairman of the Board; Mr. Feng Chen, our new Chief Executive Officer; and Mr. Alan Lim, our Chief Financial Officer. Mr. Chen will deliver his prepared remarks in Chinese, which I will translate afterward. Following that, we will have a Q&A session, where our Chairman, Dr. Dong, will also participate. With that, let me now turn the call over to our CEO, Mr. Feng Chen. Go ahead, Mr. Chen.

Good day, everyone, and thank you for joining us. I'm Feng Chen, the newly appointed CEO of Kandi Technologies Group. Before we discuss our Q3 results, I want to express my gratitude to our Board for their trust and acknowledge the hard work of our team and the leadership of my predecessors, which has positioned Kandi for the opportunities ahead. It is an honor to lead this company as we work together to overcome challenges and unlock new growth. This year, our revenue experienced a temporary decline due to changes in the sales model for our fully electric off-road vehicles. Our revenue for the third quarter was $29.9 million, down from $36.4 million in the same period of the previous year, while total revenue for the first nine months was $89.8 million, reflecting a 5.7% decrease year-over-year. The off-road vehicles and associated parts continued to be our main revenue source in Q3, contributing $27.5 million, a 9.2% decline compared to the same quarter last year; revenue from these segments for the first nine months also decreased by 1% to $81.5 million. To address these challenges, our new management team has crafted a detailed growth plan for 2025 to 2029, which has received Board approval and aligns with our current strategy. With disciplined execution, we are optimistic that all business segments are well positioned for stronger growth and new opportunities. The all-electric off-road vehicle segment has significant potential for Kandi. Over recent years, we have built a solid foundation by advancing our technology, expanding our product offerings, and enhancing our market presence. Our golf carts and other models are highly competitive and well-received by consumers. Collaborations with key clients like Lowe's have helped expand our reach, and the recent launch of our NFL-branded golf carts, featuring all 32 NFL teams and available exclusively at Lowe's, has elevated the Kandi brand. Moving forward, we will continue to leverage technological innovation, enhance our product lineup, and strengthen our distribution network to increase our market share. Amidst the complexities of the current global economy, we remain aware of the pressures from trade tensions. Our growth plan for 2025 to 2029 includes proactive measures such as establishing U.S.-based production lines for golf carts, utility vehicles, and lithium batteries. These facilities will enable faster deliveries, better after-sales support, and closer proximity to key North American markets. Simultaneously, we will expand internationally, targeting growth in Southeast Asia, the Middle East, Europe, and other regions, backed by a competitive and diversified product portfolio. Even as we adapt to international market changes, we are focused on growth in China. We aim to target the fast-growing smart mobility sector, which is rapidly gaining traction among Chinese consumers, and we intend to establish a strong presence there. Additionally, we will utilize our expertise in manufacturing battery swapping equipment and operating battery swapping services to support major providers in China. Our objective is to position Kandi as a leading supplier and operator in China's battery swapping market to facilitate further growth. Building on the opportunities ahead, our robust financial position gives us the resources and stability necessary for future growth. With $260 million in assets such as cash, cash equivalents, restricted cash, short-term investments, and certificates of deposit as of September 30, 2024, we are well-prepared to pursue our strategic objectives. Our share repurchase program, which has already repurchased 1,480,786 shares at an average price of $2.49, reflects our confidence in the company's future. As we move forward, we will focus on effective execution and robust strategies to support steady growth and enhance shareholder value. With a clear plan and a strong foundation, we are ready to navigate challenges and make progress toward our goals. Now, we will transition to the Q&A session. Alongside Chairman Dr. Xueqin Dong, I will be answering your questions. Ms. Kewa and Mr. Alan Lim will assist with translation. Please feel free to ask your questions.

Operator, please go ahead. Thank you.

Thank you. Our first question comes from Mike Pfeffer with Oppenheimer & Company. Please proceed with your question.

Thanks for taking my questions. A few weeks ago, you had the back to back press releases on the same day announcing the generational restructuring of the Kandi C-suite and Board of Directors. And the second one was titled 'Kandi Technologies' Board approves several major initiatives and new management's '25 to 2029 projected growth plan.' For a dozen years, shareholders have been asking management to accept the norm of the vast majorities of the U.S. NASDAQ-listed companies and begin giving guidance as well as longer-term forecasts, both integral if a company has any hopes of attracting accredited stock analysts. The five-year detailed forecast, particularly with the disclosure of previously unknown five additional profit centers, was a pleasant surprise. Maybe you could translate that and I'll continue please.

Please go ahead.

Okay. Regarding analyst, Kandi has never had sell-side analyst support, primarily due to never having used a retail broker investment banking group to raise money. The three prior financings since inception were done using a single independent investment banker, who retained two to three transactional brokers. The difference is that sell-side analysts work for brokers that sell stocks and stock ideas to clients. Transactional brokers buy blocks of newly registered stock for their accounts usually to cover prior short sales and a discount to the market. They mainly make their money by covering the original short as in most cases they take a large chunk of the three-plus-year stock purchase warrants that they use. Maybe you could just translate that, please?

The company has retained two to three transactional brokers. The difference is that sell-side analysts work for brokers that sell stocks and stock ideas to clients. Transactional brokers buy blocks of newly registered stock for their accounts, usually to cover prior short sales, and at a discount to the market. They primarily earn their profits by covering the original short, as in most cases they take a significant portion of the three-plus-year stock purchase warrants that they utilize.

Okay. The fact that you put out a five-year forecast is comforting to analysts, brokers, clients, savvy investors compared to only one year if a company misses its guidance, the first year, the analyst doesn't and investors are not too concerned and look forward to the next year. With this background a few questions.

Please go ahead.

Okay. So, in that you put out this five-year forecast without giving quarter to quarter and full year revenues and earnings guidance, it creates suspicion that the longer-term guidance is just pure guess. Is it the company's intention to give full year guidance for full year 2024 and subsequently for Q1 2025 and the full year?

In your five-year forecast, the absence of quarter-to-quarter and full-year revenue and earnings guidance raises doubts about the reliability of the long-term outlook. Will the company provide full-year guidance for 2024 and then for Q1 2025 and the full year?

Thank you for your questions. The projected growth plan for 2025 to 2029, developed by the new management, was based on thorough research and extensive internal discussions. We considered various factors, including the external economic environment and market conditions, while also leveraging our strengths and existing resources. This plan reflects our management team's confidence in the company's strategic direction and aims to clarify both our short-term and long-term goals for the 2025 to 2029 period. We strive to present this plan as transparently as possible. Regarding the guidance for the first quarter of 2025 and the entire year, we will provide that information in due course based on the company's progress and our assessments. Thank you.

I'd just like to add, in addition to earnings and revenue guidance, investors would receive a wealth if the company would also announce off-road vehicle unit delivery guidance or at least breakout unit sales each quarter in the earnings announcement. And that information was usually historically published in 8-K and 10-K. Anyway, thanks for your time.

Thank you. I’d just like to add that in addition to earnings and revenue guidance, it would be beneficial for investors if the company announced off-road vehicle unit delivery guidance or at least broke out unit sales each quarter in the earnings announcement. This information was historically published in the 8-K and 10-K reports. Anyway, thanks for your time.

Thanks for your questions. We will disclose such information in a timely manner based on the company's development and our assessment. Thank you.

Thank you. Our next question comes from the line of Arthur Porcari with Corporate Strategies Incorporated. Please proceed with your question.

Thank you. Before my questions, I want to welcome the new management and also thank Mr. Hu for his 17-year retirement as Chairman of the Board and his 20 years of service and leadership at Kandi, contributing significantly to the all-electric vehicle industry in China. Moving on to current business, next month Kandi will hold its Annual Shareholders Meeting for 2023. The proxy materials for 2023 have started to arrive. While most issues are standard, one in particular stands out. Management is asking shareholders to vote to authorize an additional 10 million shares to replenish its 15-year stock option plan, as the previous 2008 plan has been fully activated. Employee stock options are typically issued and approved by shareholders as a reward for exceptional performance, which often relates to stock appreciation in a public company. My first question is whether management truly expects any shareholders to willingly support a potential 12% increase in shares while the stock is trading at its 15-year low, having decreased 94% from its all-time high? I can assure you that shareholders will not be pleased, especially since the company's product distribution base is at an all-time high and expanding rapidly, along with the company being in its strongest cash and fundamental position ever. This disconnect can only be attributed to management, not operationally, as they are doing well in that regard, but in the management of a NASDAQ public company. Kewa, I apologize for leaving you with so much. Hopefully, you can address it. Those are my questions.

Shareholders will likely be dissatisfied, especially given that the company's product distribution base is at an all-time high and expanding quickly, while the company is in its strongest cash and fundamental position yet. This disconnect can only be attributed to management, not operations, as they are doing well in that area, but rather to the public company management of a NASDAQ-listed firm. I'm sorry for overwhelming you with that, Kewa. I hope you can address it. Those are my questions.

Over the past three conference calls, I and other market professionals have raised this issue, but we've only received a response of 'We will look into it,' with no further follow-up. I hope the new management will take more notice because there is a solution to this problem, especially considering Kandi has $260 million in cash and only $25 million in short-term debt, with assets likely worth significantly more than the book value of $5 a share, given the depreciation of their $300 million facilities. Essentially, since you've already addressed many questions in your opening, which I appreciate as it's a change from the usual format, I would like to share some of the areas where I have questions.

Well, book value is $5 a share, but assets are worth probably 50% more than that because of the depreciation of the $300 million in facilities that they have. Basically, what I'm going to do here since you've answered a lot of questions in the opening, which I congratulate you on, that's new. Usually, the opening goes right into questions and we don't get an overview from management. We got it this time, so that's great. Go ahead and tell him that. Now, I'll go into some of the question areas.

Okay. Well, a lot of this is going to be basically just informational purposes one more time because like I said, a lot of questions were answered, but I'll try to make this quick. For the past three years investor conference call, the issue was raised that Kandi should take advantage of this selling at massive discounts, I should say, for the past three conference calls, discounts the cash and book value by filing an stock tender for at least 10 million shares. The price initially discussed on the prior calls was put in around the $3 area. On each occasion, the response by management has been, 'We'll look at that,' but nothing further. If management wants to fix this and send a signal to Wall Street, do the right thing and create a win-win-win for all loyal but severely penalized shareholders and incentive for all shareholders to be in favor of the management stock option request. Go ahead and pass that on.

We have a stock tender for at least 10 million shares. The price initially discussed in previous calls was around the $3 mark. Each time, management has responded with, 'We'll look at that,' but there has been no further action. If management wants to address this and signal to Wall Street, they should take the right steps to create a favorable situation for all loyal shareholders who have been adversely affected, while also providing an incentive for all shareholders to support the management stock option request. Please relay that message.

The benefit for shareholders would be a rapid increase in stock price and enhanced visibility in Wall Street, which would highlight Kandi's undervaluation through a significant jump in stock percentage, demonstrating to new investors how undervalued the company is. Additionally, if the company wants to move forward, it's worth considering passing that message along.

The win for the shareholders would be an immediate double in stock price appreciation plus free Wall Street publicity, which will highlight the undervaluation of Kandi with a significant stock percentage increase, demonstrating to new investors just how undervalued Kandi truly is. Secondly, for the company, would you like to pass that on?

Okay. And finally for management and the company, if the company buys back 10 million shares, then the 10 million auction they're requesting would initially show a 12% reduction in the issued outstanding that will ultimately flatten out to no more shares than we have today.

The stock's percentage increase highlights how undervalued Kandi is to new investors. Additionally, if the company buys back 10 million shares, that initial action would result in a 12% decrease in the issued outstanding shares, eventually stabilizing at the same number of shares as we currently have.

So, my really only question out of all this was, will the company finally pay attention to the ways of Wall Street? It seems like that's what they've forgotten in this company. We've been here for 17 years, undervalued the whole time. And so, my question is, will they finally pay attention to Wall Street and get U.S. advisors? And I don't mean Patrick Ho, I'm sorry to say, get U.S. advisors who can help them along that line. I can give them some advice as well. And I've been with the company 17 years, as you well know, and 51 years as a Wall Street professional. That's my question, and that's all I have to say.

It seems like that’s what they’ve overlooked in this company. We’ve been here for 17 years, undervalued the whole time. My question is whether they will finally pay attention to Wall Street and engage U.S. advisors. I’m not referring to Patrick Ho; I mean hiring U.S. advisors who can assist them in that regard. I can offer some advice too. As you know, I have been with the company for 17 years and have 51 years of experience in Wall Street. That’s my question, and that’s all I want to say.

Thank you for your input and insights. We will address your questions comprehensively. Firstly, the equity incentive plan is crucial for us to attract, retain, and motivate our exceptional employees. By combining the share buyback program with the equity incentive plan, we aim to balance the interests of both shareholders and the company, ensuring a rational equity structure and optimizing the number of outstanding shares. We recognize that shareholder concerns regarding dilution are valid and will strive to balance these elements to maximize shareholder value. Regarding the tender offer or share buyback program you mentioned, we understand many investors and shareholders expect this. Management has noted in the past that we will carefully evaluate the potential for share buybacks and repurchases, as these need to align with market conditions, our long-term development strategy, and capital efficiency. We are not dismissing this suggestion but are thoroughly assessing the best solution. Currently, we are exercising caution with our investments to ensure long-term returns for our shareholders. As for our future actions, we will aim to proceed in a manner that benefits both the company and its shareholders, which may include a share buyback, provided it aligns with our financial health and market conditions. Thank you.

Actually, I have one last comment. I'm pleased to hear that Mr. Hu was involved in that call. But seriously, it doesn't get any cheaper than this. I've been in this business for 51 years, and I've never seen the stock drop to this level. It represents 40% of the cash we have, and we're not a company that is going out of business. I hope you will consider my advice to discuss this situation further outside of the conference call. I can introduce you to people who can help with this. I hope you will take that advice. There’s no reason for this stock to be trading at a 15-year low while other stocks are closer to their all-time highs. Thank you.

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

Thank you. Our next question comes from Frank Blatterman, a private investor. Please go ahead with your question.

Yeah. And a good evening to those in China. My question is, is there anything in the contract that dissolves the joint venture between Kandi and Geely that prohibits Kandi from entering the electric car business now or in the future? That's my question.

Thank you. Operator, we are ready to take the next question. Our next question comes from the line of Frank Blatterman, private investor. Please proceed with your question. Yeah. And a good evening to those in China. My question is, is there anything in the contract that dissolves the joint venture between Kandi and Geely that prohibits Kandi from entering the electric car business now or in the future? That's my question.

There's no such clause.

Thank you very much.

Thank you. Our next question comes from Steve Miller, a private investor. Please proceed with your question.

Good morning, Kewa. The bulk of my questions deal with your two October press releases and I'll sort of work my way through those with questions. In your October press release, you made reference to autonomous driving technologies and projected that China's ride-hailing market is expected to experience significant growth. You then said that Kandi will expand its presence within the smart mobility business industry, a phrase I know you included again in today's press release, by your plan to acquire an established company and, excuse my pronunciation, Hangzhou Honghu. Do you want to go ahead and translate that?

I'm sorry. Yeah. I'm sorry. Please say one more time. You referenced the press release that we issued in October, right?

Yeah. You issued two press releases in October. They made reference to autonomous driving technologies, and also ride hailing, et cetera. And you basically said in those press releases that they would be facilitated by your acquisition of Hangzhou Honghu.

Please go ahead.

So, first of all, regarding our potential target, Hangzhou Honghu, the car-hailing platform, the company is currently in the due diligence phase to gain a better understanding of this target. The progress is going smoothly, but there is no written agreement or contract in place at this time. Therefore, we do not have much information to share at the moment. Thank you.

Okay, Alan. In the October press releases, you mentioned that Kandi's business would be related to autonomous driving and ride-hailing. Is that correct?

In the October press releases, you mentioned that Kandi's business would be related to autonomous and ride-hailing. Is that correct?

To address your question, that's correct. We have a plan in place for the pilot and then the car-hailing platform businesses.

In those press releases, you provided projections for what you call your Smart Mobility Solutions business, and it went from annual revenue projected of $24.37 million in 2025 to a higher number by 2029. And so, I guess my question is, what exactly is the business that Kandi will be involved in that will be generating those revenues and profits that you mentioned in those releases? And can you provide greater color how you arrived at those numbers considering that currently you have none of that business?

In your recent press releases, you mentioned projections for your Smart Mobility Solutions business, predicting annual revenue of $24.37 million by 2025, with an increase expected by 2029. Can you clarify what specific business Kandi will be engaged in to achieve these revenues and profits? Additionally, could you elaborate on how you calculated these figures, especially given that you currently do not have any operations in that area?

The Smart Mobility Solutions business plan includes maps, a smart dispatching system, customer service support, resource integration, operation management, and driver management. It offers a comprehensive technology and operational service for commuting and transportation companies. To date, Honghu has assisted nearly hundreds of transportation companies across more than 200 cities nationwide, processing over a million orders daily and supporting millions of drivers in their work. By managing everything from driver screening to itinerary guarantees, it ensures the safety and reliability of transportation services.

And what is the status of the Honghu acquisition?

Honghu has served nearly hundreds of transportation companies covering more than 200 cities across the country, processing millions of orders every day and assisting millions of drivers. By addressing everything from driver screening to itinerary guarantee, it ensures the safety and reliability of transportation services. What is the status of the Honghu acquisition?

I believe we addressed that question earlier. Currently, we are in the due diligence phase for the Honghu target. The process is progressing smoothly, but at this time, there is no written document or contract finalized. Therefore, we cannot provide any further details. Thank you.

Why have we seen no information about the purchase in the media or even statements from Honghu that they've even agreed to be acquired or will have anything to do with Kandi?

We are currently in the due diligence phase for the target, Honghu. The process is progressing well, but we do not have a signed document or contract at this time. Therefore, we are unable to provide any additional information. Thank you.

Currently, as we are in the due diligence phase, there is a quiet period for both parties. This is why there hasn't been much information released about the deal.

Okay. And then, did you indicate that until a purchase does go forward, there's currently no other contractual relationship between Kandi and Honghu?

Currently, since our due diligence is being processed, it's a quiet period for both sides. So that's why neither side has disclosed too much information about this deal.

Yes, your understanding is correct.

Okay. And then, in one of the October press releases, you said Kandi will be focusing on expanding two main business lines, electric off-road vehicles and lithium battery production in North America, Europe, and at least you said Southeast Asia. From what I've read about lithium batteries, technology is quickly changing. What gives you the confidence that you can compete with others on lithium battery production that you can develop new technology especially with larger companies with greater resources that have research and development?

You mentioned that Kandi will concentrate on expanding two primary business areas: electric off-road vehicles and lithium battery production in North America, Europe, and Southeast Asia. Given the rapid advancements in lithium battery technology, what assures you that you can compete in lithium battery production and innovate new technology, particularly against larger companies with more resources for research and development?

We don't think that will pose a significant problem for us for two reasons. First, we have a strong supply chain in China that allows us to maintain our production schedule effectively. Secondly, our products are competitive in the U.S. market against other major brands. Additionally, we have made progress in markets outside the U.S., including Europe and Southeast Asia. Therefore, we are confident that our sales and production operations will proceed smoothly without major issues.

Your press release said that in 2025, you plan to invest $100 million in the U.S. to establish a lithium battery manufacturing and battery pack facility. Will you be exporting those products out of the United States to other locations around the world?

Our sales and production are expected to proceed without any major issues as we have also begun operations in the European and Southeast Asia regions. Regarding your question about our investment plan for 2025, we intend to invest $100 million in the U.S. to set up a lithium battery manufacturing and battery pack facility. We will be exploring the possibility of exporting those products to various locations worldwide.

Regarding the battery factory, we plan to invest in the U.S. Our main objective is to serve the North American market due to our requirements and other sales. Therefore, for other areas in the U.S. and North America, our primary strategy is to provide those products using battery packs produced in China.

Okay. And then, over the years, your battery swap revenues have been minimal to say the least. We've heard of no alliances that Kandi has with major car manufacturers or ride-hailing firms anywhere. Yet in your October press release, you gave projections of sales as well as revenues and stated that Kandi aims to establish itself as a strategic supplier and a leading force in this sector. Do you want to go ahead and translate that, Kewa?

Okay. Go ahead.

Okay. So, my fellow shareholders are asking what makes you think that your battery swap business is going to suddenly change when it hasn't in the past? What are your projections based on? What are we not seeing or being told?

My fellow shareholders are asking what makes you think that your battery swap business is going to suddenly change when it hasn't in the past? What are your projections based on? What are we not seeing or being told?

So, first of all, our company Kandi has been involved in the battery swap business for a long time. We have accumulated a lot of experience, knowledge, and patents over the years. We believe that now is a good time to enter the market because battery costs have been gradually dropping over the past few years. In China, several cities, including Chongqing and other major cities, have started implementing the battery swap process. We are also in contact with leading companies in this field. We believe that we will capture a significant market share in the upcoming years based on our expectations, analysis, experience in the market, and discussions with peers. Thank you.

Is the 300,000 government-accredited ride-hailing program in China from four years ago that you were involved with, is that still alive? Is it a factor in your projections? Isn't that going to expire in 2025?

We believe that we will secure a significant market share in the coming years based on our expectations, market analysis, and discussions with peers. Thank you. Is the 300,000 government-accredited ride-hailing program in China that you were involved with four years ago still active? Does it impact your projections? Will it not expire in 2025?

Our upcoming business operations and model will align with our projected goals from 2025 to 2029. Please stay tuned for further updates and developments. Thank you.

Okay. And is the battery swap business going to stay in China, and will the units be customizable for a wide variety of different manufactured vehicles?

So, primarily our upcoming business operation and model will follow our projected goal plans from 2025 to 2029. Please stay tuned for any further updates or developments. Thank you.

Our battery swap business is currently in high demand in China. We are focusing on companies that operate battery swap services rather than automobile manufacturers. This is our primary strategy for the battery swap model.

Okay. And then, in one of the October press releases, you had given revenue and sales projections for your off-road electric vehicles, which shareholders were glad to see after so many years of not being willing to divulge that kind of information. And on average, it seems like your revenues or your projections are conservative that they mainly average around $6,000 per vehicle, but you're still able to keep a 30% margin. Does that sound about right?

In one of the October press releases, you provided revenue and sales projections for your off-road electric vehicles, which shareholders appreciated after a long period of not sharing that information. It appears that your revenue forecasts are generally conservative, averaging around $6,000 per vehicle, while you still maintain a 30% margin. Is that accurate?

The revenue projection is quite conservative. The average price of $6,000 reflects the product mix of both high-end and low-end models, making it an average price. Additionally, we expect to achieve an average gross profit margin of 30%. Thank you.

Okay. And those projections for those off-road electric vehicles, I assume that is worldwide and not only in the U.S.?

The revenue projection is somewhat conservative. The average price of $6,000 comes from a mix of high-end and low-end models, making $6,000 an average price. Additionally, we expect to achieve an average gross profit margin of 30%. Thank you. And those projections for the off-road electric vehicles are indeed for the global market, not just the U.S.?

The figures we mentioned are for total overall sales, not just focused on the U.S. market, but globally.

Okay. And then finally, again from your October press release, you had indicated that you plan to invest $30 million in 2025 to establish a production line in the U.S. for various off-road vehicles, et cetera. Do you plan to build that from scratch or do you plan to lease the facility and then customize it?

The figures we mentioned are for total global sales, not just limited to the U.S. market.

Our preliminary plan for the site location will be in the Dallas region of Texas, but the final decision will depend on various factors such as local government policies, infrastructure, labor costs, and more. Currently, we do not have a concrete setup plan, and we will make an announcement once it is finalized based on careful management evaluation. Thank you.

Okay. And until that facility is ready, will all U.S. production be handled by your partner Hartford in Taiwan?

The setup around the Dallas region in Texas will depend on several factors including the local government's policy report, infrastructure, labor costs, and more. Currently, we do not have a solid plan, and once management completes its careful evaluation, we will make an announcement after it is finalized. Thank you. As for your question, until that facility is ready, all U.S. production will be managed by our partner Hartford in Taiwan.

Once our U.S. site is finalized, we will evaluate cost, policies, infrastructure, supply chain, and logistics from both our locations in Hartford, Taiwan, and Texas.

My question is about the potential tariffs on vehicles made in China, including golf carts. Previously, you mentioned that 90% of golf carts were produced by Kandi in China. Now that I see that Kandi is manufacturing off-road vehicles in Taiwan, I want to know if they are producing that 90% or if they are sourcing the parts from China.

Question is based on the potential tariffs on vehicles made in China, including golf carts. On prior earnings calls, it was mentioned that 90% of the golf carts are produced by Kandi in China. Now that I see from a recent press release that Taiwan is manufacturing Kandi off-road vehicles, I'm curious if they are responsible for producing that 90% or if they are sourcing those parts from China.

So, our process flow right now is basically around 40% done at Hartford and the rest is handled by Kandi, including our facilities in China.

So, my basic question is, can you assure shareholders and potential investors that the planning you've done regarding the arrangement with Hartford and Taiwan, pending the completion of the facility in the U.S., will not be significantly impacted if additional tariffs are imposed and that these tariffs won't negatively affect your business going forward?

So, my basic question is, can you assure shareholders and potential investors that the planning you've done today regarding the arrangement with Hartford and Taiwan, pending the completion of the facility in the U.S., will not be significantly affected by any potential additional tariffs that may be imposed in the future?

Yes. To address the current concern, we are aware that certain products are significantly affected by tariffs. We will collaborate with Hartford in Taiwan to alleviate this issue. Additionally, once our facilities and production line in the U.S. are established in the future, we will be able to increase production on the U.S. side as well. Essentially...

Okay. Great. Okay. And then, according to my own due diligence, and feel free to correct me if I'm in error, Hartford, your partner in Taiwan, has exported one shipment of golf carts and that was back on August 13th. The last shipment of golf carts from Kandi Electric Vehicle Hainan Company arrived on October 20th. The last Twitter post from either of Kandi's Twitter sites was on October 29th. Do you want to go ahead and translate that, Kewa?

I just want to get this right. You asked that based on your due diligence, you saw the last shipment from Hartford to the US was in August 13. And then, from Kandi, you saw shipments from August 20. And on the Twitter, you saw there is a shipment coming on October 29. Is that...

No. Let me try again. So, Hartford has sent one shipment to the U.S., and that was on August 13th. Okay. And then, the last shipments from China, from Kandi Electric Vehicle Hainan Company, who sends most of your golf carts, those arrived on October 20th. Kewa Luo: Okay. Just go ahead and... And then, the last Twitter post from either of Kandi's Twitter sites was on October 29th. Today is, what, November 18th. So, go ahead and translate that first.

Yes. Please continue.

So, my first question is, why has there been only one shipment from Hartford and that was over two months ago?

Yes. Please go ahead.

The shipment you mentioned is for trial production that was sent from Hartford to the U.S. At that time, the tariff policy had not been finalized and imposed until late September. This shipment was solely for trial purposes, as it involves multiple rounds of assessment regarding quality control, compliance, and various other factors. That’s why there was only one shipment from Taiwan to the U.S. in August. Once production in Hartford is optimized and regulated, more shipments will follow from Hartford to the U.S. in the future.

Okay. And then, U.S. imports apparently have paused because the last one was back on October 20th. Are sales in the U.S. being made from your existing inventory in the U.S.?

There was only one shipment we received from Taiwan to the U.S. in August due to various factors. Once production in Hartford is better optimized and regulated, we will be able to carry out more shipments from Hartford to the U.S. in the future. Are sales in the U.S. being made from your existing inventory in the U.S.?

So, the shipment you mentioned is currently in progress, and the sales of that specific product are ongoing along with our other products in inventory.

I'm sorry, I don't understand. So...

Basically, the sales of that shipment is underway.

Okay. And speaking of existing inventory, last year, I know you had a fairly high inventory that you reported. Can you give us any kind of an update on where your inventory levels are at the moment?

The sales of that shipment are currently in progress along with our other products in inventory.

For information on inventory levels, it would be best to refer to the financial statements we included in the earnings release of the 6-K, as they provide the accurate details. Thank you.

Okay. And can you give us a status update on the proposed Kandi America spin-off IPO? Can you basically tell us what are the factors that are keeping it from going forward today? What needs to happen?

For the inventory levels, I recommend referring to the financial statements included in the earnings release of the 6-K, as they will provide the most accurate information. Thank you.

The related process is ongoing based on market conditions and the company's development. Further disclosure will be provided in accordance with SEC regulations and requirements. Thank you.

Okay. Has Kandi filed any complaint with the SEC, FINRA, or the NASDAQ with regard to trading of its stock?

Wait. Say one more time about FINRA and NASDAQ about trading?

Has the company filed any complaint with the SEC, FINRA, or the NASDAQ with regard to trading of its stock?

Okay. We're trying to understand why you believe the company should file a complaint with the FINRA, SEC, and NASDAQ.

I don't know. I suppose I don't have much of a life, but I watch your stock trade daily, and the service seems quite unusual with the stock sitting at $1.20. Anyway, let me ask one or two more questions and then I'll be finished. Previously, when discussing international expansion for your off-road products, Mr. Hu would typically respond as if you were just testing the waters in different regions. Can you provide any guidance or additional details regarding your business plan for international expansion? Recently, some shareholders, including myself, have noticed increased activity in South Africa and the UK. I would like to know how you plan to approach your expansion in Southeast Asia, particularly in Thailand, the EU, and other regions.

Could you provide guidance or more details about your business plan for international expansion? We've observed increased activity in South Africa and the UK recently, and I would like to know more about how you plan to approach your expansion in Southeast Asia, as well as in Thailand, the EU, and other locations.

We have actually started some trial sites in Europe, including the UK, Germany, Austria, Switzerland, Montenegro, Slovenia, Romania, and the Netherlands. We also have some activities in parts of Southeast Asia. We expect that there will be a certain sales volume generated next year.

Okay. And finally, I understand that now that you're in BVI that there is no requirement that any officers or directors report purchases of Kandi shares. The stock traded last week as low as $1.20. There is no indication of any insider buying for the past several years, including this year. To the Kandi company folks on this call and listening to this call, is $1.20 not low enough to entice you to make an insider buy? What kind of a message do you think that sends to shareholders that insiders seem to have no interest to buy Kandi shares under $2, as low as $1.20?

There is no requirement for any officers or directors to report purchases of Kandi shares. The stock traded as low as $1.20 last week. There has been no indication of insider buying for the past several years, including this year. To the Kandi company representatives on this call and those listening, does $1.20 not present a low enough opportunity for you to consider making an insider buy? What message do you think this sends to shareholders when insiders appear to show no interest in buying Kandi shares at prices under $2, going as low as $1.20?

The company is still working on the stock buyback program as planned and is setting up another upcoming program, but the process is still underway.

Yeah, I'm not talking about the company buyback program, I'm talking about insider buying.

The company is still working on the stock buyback program as planned and we are setting up another upcoming program, but the process is still underway.

The plan we mentioned is specifically focused on the buyback strategy being implemented by management and insiders. This initiative is currently in progress.

Great. Thank you very much. Appreciate it. Thank you for taking my questions.

Thank you.

Thank you. Our next question comes from John Ritter, a private investor. Please proceed with your question.

Hello. Thank you for taking my questions. I have a statement to make, and then, Kewa, you can translate, and then I'll get into a couple of questions, not many. As management is aware, the stock is at $1.25 and it's been trading at a new 15-year low. Virtually every day, it's been hitting the new low. Yet, it is by far the strongest fundamental position, both in sales growth potential and cash and overall financial condition it's ever been. The stock has been trading under cash value for the last three quarters. Now, it's at less than 40% of cash value and 25% shareholder equity. As discussed on the last conference call, the replacement value of Kandi's multiple facilities in China alone, though carried on the books only at a depreciated $92 million would be over $300 million, which if liquidated, would raise the book value to about $7 a share. Since the announcement of the new management team, the stock has dropped another 22%. Yeah, Kewa?

Go ahead.

So, what is management's opinion as to why the stock has dropped so low? And please don't tell me it's just market forces. What is your opinion? Why do you think the stock is trading now today another 15-year low, especially since you published such an incredibly bullish five-year forecast just six weeks ago?

What is management's opinion as to why the stock has dropped so low? And please don't tell me it's just market forces. What is your opinion? Why do you think the stock is trading at another 15-year low, especially since you published such an incredibly bullish five-year forecast just six weeks ago?

Well, there are many factors that will influence the stock price. For instance, the outcome of the U.S. election has increased tensions in the international trade market. Additionally, the capital market reflects these uncertainties, which can lead to what is known as the pricing effect. Consequently, these factors have already been incorporated into the stock price, and at times, the sentiment appears quite pessimistic. This is why the company's stock price is significantly undervalued at this time.

So, to someone who watches the stock relatively closely, it seems quite clear that a multimillion share seller, ignorant of how stocks trade in the U.S., has really destroyed the morale and buying enthusiasm of U.S. investors for this stock. Since there are only two reported holders of multimillion share positions, that being Mr. Hu and Olen Rice, and they're certainly not selling because they would have to report sales, plus they're involved in the company. So therefore, any selling is likely coming from Chinese holders who have received shares totaling between $5 million and $10 million, mainly through Kandi acquisitions of their companies going back a decade. And since the company has an active 10b-5 share purchase program, has there been any effort to contact these suspected large sellers with a single bid to buy their whole block? Because there's no restriction under 10b-5 for negotiated block purchases.

Any selling is likely coming from Chinese holders who have received shares totaling between $5 million and $10 million, mainly through Kandi acquisitions of their companies going back a decade. Since the company has an active 10b-5 share purchase program, has there been any effort to contact these suspected large sellers with a single bid to buy their whole block? Because there's no restriction under 10b-5 for negotiated block purchases.

We currently do not have that information available and are unsure about its source, so we have no comments on that. However, if there are any further developments in the market, we will try to obtain that information to have a better understanding of the stock market's progression.

Okay. So, with the share repurchase program currently in place, in the third quarter, you purchased 58,000 shares. Right now, the stock being what it is, is there some reason that you're not purchasing more? Are you waiting for the stock to go lower to get an even better price? Because this is insanity. What you want to be efficient with your capital, then don't you think you ought to be buying as much as you could possibly get at this price? And then, my other question is, what price range does management feel the stock should be trading in? If it's not $1 to $1.25, where do you all think it should be trading at?

Given the current stock situation, is there a reason you aren't buying more? Are you waiting for a lower price to get a better deal? It seems like an opportunity to be efficient with your capital, so shouldn't you be purchasing as much as possible at this price? Also, what price range does management believe the stock should be trading in? If it's not between $1 and $1.25, what price do you think it should be?

We believe that the stock price is significantly undervalued. However, we cannot comment on the current minimum price issue. Thank you.

Okay. I get that, but you're certainly in a position to accelerate the buyback. I think you all need to take real seriously how demoralized your shareholder base is and start taking some actions to rectify this problem. That's all I've got to say. Thank you.

Operator, we can take the next question.

Thank you. Our next question comes from the line of Steve Silver with Argus Research. Please proceed with your question.

Hi, and thanks for taking the questions. On last quarter's call, a lot was made about the excitement and the momentum about the launch of the golf carts through Lowe's. I'm just curious as to whether there's been any feedback about the market reception to that launch, given the fact that it's now a couple of months out. Just maybe if sales of the Lowe's partnership have met expectations so far? Thank you.

Hi, and thanks for taking the questions. On last quarter's call, a lot was made about the excitement and the momentum about the launch of the golf carts through Lowe's. I'm just curious as to whether there's been any feedback about the market reception to that launch, given the fact that it's now a couple of months out. Just maybe if sales of the Lowe's partnership have met expectations so far? Thank you.

The reception for the NFL product in the market has been quite positive, and we are collaborating effectively with Lowe's on this initiative. Thank you.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to management for any final comments.

Thank you again for joining today's conference call. If you have any further questions, please don't hesitate to contact our IR consultant, gary@blueshirtgroup.co, or you can contact us 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. You may now disconnect your lines. This concludes today's call.