Kandi Technologies Group (NASDAQ:KNDI) is a differentiated EV manufacturer out of China that has a surprisingly long history in the U.S. Kandi was actually the first Chinese EV maker to list on the U.S. stock markets. You may be surprised to learn that this happened all the way back in 2007.
It exported its first EV to the U.S., the Coco, in 2008. That car could actually be purchased in Oklahoma for under $1,000 during that time due to federal credits and a state rebate.
Although Kandi wasn’t a success in the U.S., and the Coco little more than a quirky anecdote, Kandi did exceed 70,000 cumulative vehicle sales in China by 2018.
Now though, the company is attempting to re-establish itself by re-entering the U.S. market with its K23 and K27 models.
Although Kandi sells vehicles in both China and the U.S., this article focuses on U.S. operations alone. Results of China operations aren’t going to factor into U.S. share prices. Investors interested in KNDI stock are interested in Kandi America, which launched in 2020.
Kandi America has market attention currently because of the interest surrounding all things EVs. EV interest may have waned of late, but investors are on the lookout for news of potential plays. Kandi America is just that with its K23 and K27 models.
The K23 and K27 models each have two variants: the NEV (neighborhood electric vehicle) and a passenger car version. The only differences between the model variants being the battery size and range with the neighborhood versions having ranges of 80 to 116 miles. The passenger models give drivers approximately 59 and 110 miles of range, respectively.
So, these vehicles are clearly aimed at consumers looking for EVs to serve short commutes. And they’re also aimed at price conscious consumers as well. The K27 model can dip below $10,000 with tax credits. The K23 comes in under $20,000 after similar credits.
Kandi recently released its full-year 2020 results. The company saw revenues decrease to $76.9 million in 2020, from $135.7 million in 2019. EV parts sales were a much bigger contributor to those $76.9 million in revenues than EV products like the K23 and K27.
Kandi Technologies sold $40.6 million of EV parts throughout 2020. However, it sold a much more modest $700,000 worth of EVs. In fact, Kandi sold $29.8 million in off-road vehicles, outpacing EV products by 42x.
The end result was a net loss of $10.4 million during 2020, an increase from the $7.2 million loss it recorded in 2019.
The takeaway here is two-fold. First, Kandi is moving in the wrong direction. The company does at least deserve some benefit of the doubt given the pandemic and the state of the economy. But second, and perhaps more important is the fact that Kandi Technologies is touting itself as an EV company. Based on revenues it is more of an EV parts supplier/off-road vehicle hybrid.
That should worry investors who are primarily being fed the idea that KNDI stock is a play on the emergence of EVs.
Another area of concern for shareholders and potential investors is the $160 million raised via direct offerings in November. There’s every chance that dilution is in play.
The Bottom Line on KNDI Stock
I’d stay far away from KNDI stock now. The company can hardly even be considered an EV option given its paltry sales in the EV category. My firm impression is that it was attempting to pivot back into the U.S. market, which it never gained traction in in the first place.
The company wanted to take advantage of the EV wave but simply didn’t have a viable business model. It did, however, manage to squeeze $160 million from the markets via two direct offerings.
I can’t imagine anyone wants to buy into Kandi now given all of that information.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.