By M. Marin
We are initiating coverage of Kandi Technologies, Inc. (NASDAQ:KNDI), which is positioned to benefit from transitions in mobility, we believe, as China and other governments encourage consumer adoption of green automotive solutions to reduce growing roadway congestion and pollution and, at the same time, consumer interest increases as EV performance improves. The company is working to change mobility through its line of electric vehicles (EVs), battery swapping model and ride-share focus. Global EV sales are growing and China, the company’s home market, has been among the fastest growing EV markets in the world. Moreover, China recently extended EV subsidies and tax exemptions to promote EV adoption amid rising concerns about deteriorating air quality.
In the U.S., KNDI’s wholly-owned Dallas-based subsidiary, SC Autosports, has a national sales presence that KNDI intends to leverage to grow sales of EVs and vehicle parts. In February 2020, KNDI also began accepting dealer applications to sell Kandi EVs in the U.S. KNDI’’s recently introduced EV models, the K23 and K27, are among the most affordable on the market. The company has already received deposits for 700 pre-ordered vehicles and anticipates pre-orders to grow substantially, with delivery anticipated to begin in 4Q20.
Chinese regulators also look to ride-share as one solution to expand affordable transportation options. China is the world’s largest ride share market. KNDI is focused on this high growth sector, with its ride-share program also designed to leverage its battery swapping technology that enables drivers to swap a charge-depleted battery for a fresh one and eliminate downtime. In the U.S., the absence of common standards across different automotive and EV battery manufacturers has been a challenge to battery swapping, but China’s interest in promoting ride sharing and battery swapping technology implies government support and creation of uniform standards that are expected to facilitate the roll-out of battery swapping technology. Earlier this week, the company announced that it has established a wholly-owned subsidiary, China Battery Exchange Technology Co., for its battery swapping services in order to monetize its many patents in addressing battery swap systems and also to enable strategic investment in a range of areas related to EV batteries.
The company also has a stake in Fengsheng Automotive, an affiliated company that is owned together with Geely Automobile Holdings, China’s largest non-state owned automaker. Fengsheng Automotive’s new Maple 60V EV was recently approved for purchase subsidies by China’s Ministry of Industry and Information Technology.
We believe the company’s current share price does not fully reflect the fundamental value of KNDI’s products and prospects. We believe KNDI shares represent an option on management’s ability to execute its strategy and benefit from the anticipated growth of these key mobility niches.
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