Kandi Technologies Group Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 16, 2024

There are 10 speakers on the call.

Operator

Greetings. Welcome to Kandi Technologies Second Quarter 20 24 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.

Operator

At this time, I'll now turn the conference over to Qi Hua Liu. Qi Hua, you may begin.

Speaker 1

Thank you. Hello, everyone. Thank you all for joining us today's conference call to discuss Kandi's results for the Q2 2024. Earlier today, we issued a press release covering the results. You can find the press release from the newswire services.

Speaker 1

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.

Speaker 1

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.

Speaker 1

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 Doctor. Xueqing Dong, Chief Executive Officer Mr. Allen Lin, Chief Financial Officer and for the first time on our call, Mr.

Speaker 1

Johnny Cai, CEO of Kandi America and Ms. Olin Rice, CEO of Northern Group. Doctor. Dong will deliver his prepared remarks in Chinese, which I will then translate. Following that, we will have a Q and A session with Chairman Hu, Johnny and Olin and CEO to answer.

Speaker 1

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 Xueqing Dong.

Speaker 1

I'm pleased to share our progress with you shortly today.

Speaker 2

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

Speaker 3

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

Speaker 4

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

Speaker 1

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

Speaker 1

Again, welcome to today's conference call. We are pleased to report that Kandi Technologies continued its strong growth trajectory in the Q2 of 2024. We achieved total revenue of $39,100,000 up 8.9% from $36,000,000 in the same period of 2023. The primary growth driver was all was our all electric off road vehicles and associated parts, with sales revenue increasing by 11.3% to $34,700,000. We made significant progress in our U.

Speaker 1

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.

Speaker 1

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 $219,600,000 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 ks all electric UTV, paving the way for entry into the European Union market. In parallel, we have also opened up new markets for candy products in Asia, further expanding our international market share.

Speaker 1

Looking ahead, we remain focused on expanding our product portfolio and the 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 and A session. Together with Chairman Hu Xiaoming Johnny Cai, CEO of Kandi America and Owen Rice, CEO of Northern Group.

Speaker 1

I will answer your questions. Ms. Kiwa and Ms. Allen Ling will provide translation for English questions. Please go ahead and ask your questions.

Speaker 1

Operator, please go ahead.

Speaker 5

Thank you.

Operator

And our first question will be from the line of Joel Kramer with Private Investor. Please proceed with your question.

Speaker 6

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, Kayla.

Speaker 1

Thank you.

Speaker 6

And from an outside article, we now see that a second version of the side by side E-ten ks cowboy called the Innovator E-ten ks 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.

Speaker 2

Okay. The starter battery refers to the particular battery used to start a vehicle. We are still in the rather early stage of the R and D, and we are conducting the market research. According to the information available, the global automotive starter battery market sales reached the RMB163 1,000,000,000 in 2023 and is expected to reach RMB 206 1,000,000,000 by 2,030 with a compound annual growth rate of roughly 3.3%. Thank you.

Speaker 6

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 3A along with the AA lithium batteries? And can these batteries use any size compatible charger or must it be a specific branded charger, candy charger?

Speaker 1

Okay.

Speaker 2

So first of all, let me answer the first question. The models you mentioned, those are related to our upcoming products in the future that we are still under development. We expanded into the UTV and motorsports category, and there will be more product description and details in the future. The so called the competitive pure electric off highway vehicles mentioned in the press release refer to the newest generation of like the UTV, ATV, go kart and the golf cart models, whereas the watersports products refer to the innovative single passenger electric jet ski? And then as for the second question, so basically we launched the AA batteries to test the feasibility of the U.

Speaker 2

S. Market. We have some actual initial success and we consider launching the AAA batteries in the future. As for when to launch the AAA batteries, it depends on how well the AA batteries performs in the market. Our AA batteries are compatible with other chargers and they are not limited to only the Kandi branded chargers of vehicles.

Speaker 2

Thank you.

Speaker 6

Thank you. And the next question is, what is the difference between the E-ten Innovator and the intake E-ten Cowboy? And when would you expect them to be cleared for sale in Texas? As a high end of Kandi's products at $19,000 what market does the Lucky 9 address? And lastly, several years ago, Kandi had a 9 10 scale gas trike motorcycle very similar to the Polaris Spyder, 2 wheels in the front, 1 in the back.

Speaker 6

It was seen that it could be a big seller for older biker wannabes. Any thoughts about Kandi bringing an electric trike version out? And any new vehicles expected to be released this year? Go ahead.

Speaker 1

I'm sorry, can you repeat your second question about Lucky T9?

Speaker 6

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

Speaker 1

No, no. The second question you said as the high end vehicle, Lucky P9.

Speaker 6

Yes, high end Kandi's products at $19,000 What market does the Lucky 9 address?

Speaker 1

Okay. Thank you.

Speaker 2

So as for the question between the Innovator and Cowboy, from the product specification perspective, they are pretty much on the same tier. It's just the 2 models, they are in different style length or outlook. And in order to target different customer groups. And that's pretty much the crux of it. The Innovator, as you may know, has a more fashionable appearance and tends to attract the community with the better outlook, whereas the Cowboy has a more outsourced style and is tailored for hunters and off road vehicle users.

Speaker 2

Our goal is to expand the market for various retail assets. And in that addition, Power Boy is mainly sold in Lowe's, whereas the Innovator will be sold in Costco in the near future. Thank you. So this product, p9, as you may know, is outdoor sports strike. The market is really for those the outdoor and the sports fan in the

Speaker 4

market. Thank you.

Speaker 2

As for the models you mentioned in the past, those are the old model in our line and we keep innovating and for those more up to date vehicles that match the target in the customers segment market. Right now, we focus on the leisure, outdoor, off highway vehicle. Thank you.

Speaker 5

Thank you very much.

Operator

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

Speaker 7

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 1000000 shares in position and an 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 can be trading at a 40% discount to cash, 65% discount to book value and at a 13 years low price.

Speaker 7

Kira, could you just go ahead?

Speaker 1

Go ahead.

Speaker 7

Okay. On the last conference call, a discussion came up about Candy targeting to spin off as a separate NASDAQ company its U. S. Subsidiary Candy America later this year. There was discussion that the most Candy could spin off and maintain full rights of consolidation of financials is just under 20%.

Speaker 7

But to make this possible, due to the NASDAQ requirements of a minimum price per share of $4.50 million market cap, Kandi itself would have to have at least $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 1st day of trading. What was suggested on the last call was for the company to just do a simple $10,000,000 share tender offer at $3.50 a share, $1.50 on the bulk value, costing no more than 50% of Kandi's cash. This announcement would call for an immediate increase in bids due to arbitrageurs bidding at least $3 to 3.40 dollars 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 gain €150,000,000 to €15,000,000 in book value for each €1,000,000 plus share purchase, it alone would be a great win.

Speaker 7

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 in consideration and evaluate and react properly. But remember, at the time that this was set, this can be trading at $3 So do this so is this even more now this is even more important. And there will come my questions now.

Speaker 1

Thank you. Go ahead with your questions.

Speaker 7

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 any other investment or use of cash better than spending 15% of Kandi average cash position held over the past few years than buying Kandi stock at a 30% discount to book value?

Speaker 2

We understand that our stock is seriously and significantly undervalued and we are increasing our budget in the marketing and advertising to promote our brand. Hopefully, it can attract more American investors. Thank you.

Speaker 7

Okay. Does management still want to spin off Candy America? And if so, does it have any better idea how to get Candy 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 a little bit of figures and this and that. So there was no big impact with this marketing in the stock price.

Speaker 2

So we are considering the potential deal listing for Canvie America. But due to the SEC regulations, we are not allowed to discuss too much about this matter. Thank you for understanding.

Speaker 7

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 half port?

Speaker 7

Clearly, as I expect has plenty 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 1st paragraph of the Monday announcement, meets all necessary manufacturing standards, regulatory requirements and local content thresholds for the both U. S. And production in Taiwan? Or Candy is going to need all this current excess capacity to make and deliver enough product to reach its 2025 goal of 500,000,000 dollars revenue, which is it or is there any other reason?

Speaker 2

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.

Speaker 7

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.

Speaker 7

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 a very good insight for the future figures as a guidance.

Speaker 1

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

Speaker 7

Yes, of course. I mean, if you're signing such a deal, Lowe's as well as Candy, they must have some idea how many UTVs of this kind could be brought to the market or sold or being sold, because Candy 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.

Speaker 3

Okay. Very good question. And I think I'm going to answer that first and then I will invite my colleague in our Olin to weigh in as well. Yes, we do have like a discussion, regular meeting with Loews to discuss what the market looks like. And we understand the market is quite challenging right now with all the economic climate such as inflation.

Speaker 3

So I think that we carefully review the market and then also we determine how many stores, how many inventory we would like to bring in. So I think that's we still have a lot of discussion going on with Loews. And Olin, would you like to weigh in?

Speaker 4

Olin? Yes, I was unmuting. You guys hear me?

Speaker 5

Yes. Okay.

Speaker 4

Yes. So to Johnny's point, we are in weekly several times a week conversations with the Lowe's team. So as it relates specifically to the NFL, we're in a position where we've got a lot of everyone excited about. The NFL, Post and obviously, our team at the end. So we've got a plan.

Speaker 4

It's a 3 year long plan. That's the extent of the contract at this point. And so we've got we are going down a path that would be in the market. To put a hard number on it right now, I would have a very hard time putting the hard There are certainly very high expectations among all three parties involved. Johnny, if you feel better about a specific number, happy to do that.

Speaker 4

But I just don't know that number yet. We do have very high expectations to impact, so Kandi is a company. I'll stop there.

Speaker 3

Well, thank you, Olin. I think you are a little bit breaking up. But I think I want to make a direction. The NFL we have, we are licensed to sell it on the golf carts. It's not a UTV.

Speaker 3

So right now, it's actually available to older on lowes.com. So I think, yes, I agree with what Olin mentioned. Thank you for your question.

Speaker 7

Okay. Then that's it for me. Just yes. Okay. For 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.

Speaker 7

And these two things often don't match together. I think when it comes to 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 for what reason ever. So I would say one could a 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 and Kandi can do, then the stock price could go significantly higher from the current position. Thank you for taking my questions.

Speaker 1

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

Operator

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

Speaker 8

Good morning, Kiwa. 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, contemplate spinning off Kandi America to be an independent publicly traded company?

Speaker 1

Thank you.

Speaker 2

So we actually are considering example our production line in the future. Is definitely in our plan. So the collaboration with Taiwan is one of our biggest strategy and we may not disclose too much about that in this call.

Speaker 9

Thank you.

Speaker 8

All right. 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, other off road electric vehicles and even lithium batteries made by other manufacturers. As long time 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. Hewai, do you want to go ahead and translate that?

Speaker 1

Okay.

Speaker 8

So we all know obviously that candy 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 candy vehicle for lack of a better term such as a golf court 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 I'll get to my 2 questions.

Speaker 9

Okay.

Speaker 8

Thank you. And I've got 3 quick related questions. Was that 90% response accurate? And if so, can you briefly tell us for the record about each of Kandi's owned various facilities, specifically where they are located? What kind of products are made in each facility?

Speaker 8

And also, can you comment about the current percent of capacity being used in each facility and the maximum annual capacity available at each facility?

Speaker 2

So first of all, the Kandi's Hainan base mainly produces the golf cart and other series of the models. Our Jinhua base mainly produces the UTV, ATVs, the beach cars and other series of the motors. Our Yonggang base mainly produces the motor and electronic control products and the products, whereas our Jiangxi base mainly produces 23 batteries and battery pack products. Overall, Kandi has an annual production capacity of more than 100,000 various types of vehicles and related parts. Thank you.

Speaker 2

And by the way, it's correct that our own manufacturing rate of the Kandi products does exceed 90%. Thank you.

Speaker 8

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?

Speaker 1

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

Speaker 8

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 Canyon 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?

Speaker 2

So it seems from the pragmatic standpoint, it's not quite feasible to replicate the whole our facilities from China to U. S. Although we are considering to have assembly part of that line in U. S. In the future.

Speaker 2

Whereas the total overall budget, it's hard for us to tell us now and we have to look at some other detail on financial and non GAAP report. Thank you.

Speaker 8

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 Canny versus products acquired from outside is 90% still an accurate percentage? It is. Yes, it is.

Speaker 8

Okay. Percentage?

Speaker 2

It is. Yes, it is. Okay. And then my last question is,

Speaker 8

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 my 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 candy 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 exists, 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.

Speaker 8

Thank you.

Speaker 1

Thank you.

Speaker 2

Thank you for your suggestions and feedback. They are very constructive. We have actually been working on already adjusted in the most of those items. And of course, we will further improve them to make them more accessible to our investors. Thank you.

Operator

Thank you. Our next question is from the line of Fred Proxter with CleanTech Investments. Please proceed with your questions. Good morning.

Speaker 9

With the existing outlets in North America, which we know include Lowe's, 2,500 outlets Walmart, 4,500 outlets Campers World Costco Canada, 108 Outlets National Big Box Stores along with PV MartAce Hardware Canada 200 outlets, all but Lowe's added in the past year with a baby of 1,000 independent outlets with unfortunately little announcement from the company. You want to start that, Kiera?

Speaker 1

Please continue.

Speaker 9

Just since the last conference call, it appears from sources several new international outlets have been opening to include a very impressive, which we talked about, the Southeast Asia Thailand's location along with Aruba, Curacao, Dominican Republic and Dubai and even now in the EU market. Go ahead, Kila, queue and then my questions. Okay. My question is outside of the U. S.

Speaker 9

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.

Speaker 2

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

Speaker 9

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

Speaker 1

You mean internationally outside of U. S, any

Speaker 9

Multi store chains, big chains, big companies, big stores.

Speaker 1

Outside of U. S?

Speaker 9

Yes, for international growth.

Speaker 2

So in U. S, we do work with those the large scalable retail chain. However, in other countries like the European countries, we actually tend to work with the distributors instead. And so that's our plan for now. Thank you.

Speaker 9

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

Speaker 3

Okay. Hey, Fred, nice to meet you. Thank you for your question. So for NFA right now, our plan is only available on lowes.com. We do have some discussion with Lowe's to expand to their stores.

Speaker 3

However, I think they have to look at their space availability and we know the holiday season is coming up. So there real estate is quite busy right now. So but right now, it's available on lowes.com.

Speaker 4

Thank you.

Speaker 9

Okay. Thank you. That's all. Thank you.

Speaker 1

Thank you. Next question please.

Operator

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

Speaker 5

Thank you. Well, I'm really happy to see that Johnny and Owen 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 K23 appeared, I guess, being the 1st shareholder that ever had a chance to test drive it. And I was very impressed with the time, kind of disappointed that 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.

Speaker 5

And I'm really happy to see Olin 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 and maybe meet all of them too one time. Okay.

Speaker 5

Anyway, Candy have us have an incredible relationship with Lowe's based on Lowe's seemingly unending support and trust of Candy. Aside from the fact Lowe's picked up Candy 2 years ago to launch their newest highest cost item in their system only a few months after Candy first entered the U. S. Golf cart arena. However, initially it was through marketing better in Coleman with only had one branded cart line back then.

Speaker 5

In less than a year, Lowe's has totally dumped Coleman out of the picture, went directly to picked up Kandi's own branded golf carts, the industry's youngest brand and as their sole golf cart supplier and exclusively now show 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.

Speaker 1

Please continue.

Speaker 5

Okay. Bear with me a second here. The key thing is with the narrative and then I have a few questions. Then just a few months later, Lowe's pays $100,000,000 to renew and expand its 4 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.

Speaker 5

Coincidentally, this is the largest single big ticket item that Lowe's 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 pick the new kid candy and stake their reputation on it, plus they put up that $100,000,000 Go ahead and pass that on and I have some questions.

Speaker 1

Please go ahead.

Speaker 3

Okay. And again, appropriate that you have

Speaker 5

Nolan 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 3 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 Candy?

Speaker 5

And Olin probably the appropriate person to ask that question too.

Speaker 4

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 high level of trust that we've developed with that team.

Speaker 5

Okay. Is Lowe's planning on including actual golf carts and or 6 passenger carts? I asked that question after recently visiting a Galveston Beach Car 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.

Speaker 4

Yes. So I can answer this as well. We are currently a supplier to loans with 6 passenger cars in a limited store count, a couple of 100 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 their the real estate they have available and what products make sense on their floor.

Speaker 5

Well, that wasn't quite my question. My question was specifically had to do with the NFL. Again, you can imagine the Galveston car rental company over there would love to have some, I hate to say it, cowboys too, but Texans carts to go ahead and rent the people go up and down the seawall. And as far as the golf cart, of course, is 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.

Speaker 5

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 basis of that question actually.

Speaker 4

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

Speaker 5

But is it something that you might have an interest in doing or presenting to those 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 $1,000 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.

Speaker 4

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.

Speaker 5

Sure. As we just discovered, this is a 3 year deal, which makes it that much more exciting. I'm sure it does for you as well. Anyway, on the last conference call, the management responded to a targeted question originally asked on the conference call in 2022, confirming it still had a high end goal of possibly achieving as much as a $500,000,000 in revenues for 2025. But I suspect that number certainly would have gotten lower now, but still pretty aggressive number because of the economy in general.

Speaker 5

But that's a long way from $120,000,000 or maybe $200,000,000 $210,000,000 we'll do this year. Anyway, let's see, Lowe's, I'm just looking at some notes I have over here. 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.

Speaker 5

I'm talking about in general. But what's interesting is there are several hundreds of 5 star of the rating system on these golf carts. I know you're aware or not, but you've got an overall 4.5 plus rating if you add in all those, all the various different candy provided products, which is pretty phenomenal and speaks very highly to the at least the thought that the customers that have been buying the vehicles through Lowe's and that's a real feather in your cap. But anyway, go ahead and pass that on.

Speaker 1

But what's your question, Art?

Speaker 5

Okay. Okay. Well, that really wasn't a question. I guess that was more of a comment that I had here and Olin kind of asked the first part.

Speaker 3

Let me see, I think we have

Speaker 5

1 or 2 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 as a separate entity, wouldn't it be wise to bring the CEO and perhaps Olin on the call in the future? But you all did that, so there you go. Okay.

Speaker 5

Let's see.

Speaker 1

Hang on. Let me translate what you have said so far. Okay. Continue with your question, if you have any.

Speaker 5

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.

Speaker 5

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 Hanim facility, which has the 100,000 capacity. And that was, I believe, 4, 5 years ago, and that was done for about $200,000,000 by itself. Subsequent to that, I knew they bought a they sold it at the old facility and built a brand new facility in Jinhua. And I guess that's where they're making your off road products.

Speaker 5

So it would seem to me that the value of all those facilities, which if if it had to be replicated today, would certainly be in excess of $300,000,000 maybe a bigger number than that. Am I wrong?

Speaker 1

You mean $300,000,000 what?

Speaker 5

Okay. Originally, the original Hanan facility was built for around $200,000,000 by Kandi 4 or 5 years ago. And the new facility we have in Jinhua, which is I guess there are 2 of 4 or 5 facilities in various cities are making vehicles, where I believe they're making the cowboy. I don't know what that cost, but maybe another $100,000,000 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 $300,000,000 or higher.

Speaker 5

And am I wrong on that or what?

Speaker 1

Let me ask.

Speaker 2

It's very hard for us to tell at the moment because that involved too many products like the supply chain, the scale and other factors. But then we would like to think of that step by step. So that's our plan and consideration. Thank you.

Speaker 5

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 $300,000,000 if you had to rebuild the whole thing again?

Speaker 2

So just to answer your question, if we will dedicate the whole exactly same scale, same thing from China to U. S, it will be even higher than $300,000,000 But then again, it involves a lot of different factors when you do the manufacturing like the supply chain and other factors. It doesn't make sense economically if you just replicate the whole exact same thing, whole scale, whole same procedures in U. S. Because it just doesn't work that way.

Speaker 2

Yes, but then, yes, that's our conclusion for that. Thank you.

Speaker 5

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 is being accused by the people on the Internet of farming out the building. If we had to just replicate it in China, what would that value? What would it cost the company to replicate just the facilities in China? Forget about importing.

Speaker 2

So in order to address your question again, you asked whether you will cost more than $300,000,000 right? Long story short, yes, if we do exactly something. But just in the reality, we we may not do it that way because again, it's not how it works in the production in the cycle. But yes, to answer your question, yes, it will be even more than that. That's what I was Just for information.

Speaker 5

Okay. Very good. Okay. Well, I guess last comment I have here more of a comment than anything else. I have to admit, been in this business 51 years, never seen anything quite like this one where you have a company where a stock is trading well under over $1 a share under cash in the stock market.

Speaker 5

It has got very little debt as a book value, it's trading $3 or whatever it is or more under book value. And you just landed probably the cherry project that virtually any golf cart country in the world would be trying to get right now, which you have with the NFLLowe's, plus you have a sponsor like Lowe's and you got Walmart, you got the Kemper's World, you got all these others and the stock is sitting down here. You got to do something about getting the stock price up. I know even Olin is the 2nd, I believe, is the 2nd largest shareholder in the company now. And if I'm not mistaken, I think 1 year ago, he did a deal at about $3.30 a share.

Speaker 5

You can't be too happy with that either. So we got to do something. And I think the only thing you can do in the United States is you got to do something very definitive. And if normal circumstances doing a deal with Lowe's would take any other stock up to $10 a share, we know this stock can actually do that because right after Candy America was brought on board, the stock went up to $19 a share just based on that. And then they were doing $10,000,000 in revenues.

Speaker 5

This year, you're probably going to do $150,000,000 in revenues, just Candy America portion or more. And so that's just my final comment here. And if anybody wants to comment on it, I'd appreciate it. But if not, we should have a great Q3 now because I guess you haven't done no revenues have shown up yet because you're starting now in August from the Lowe's golf cart, I mean, NFL program. So I would think we're going to have a great Q3 and maybe I'm wrong if anybody wants to address that, I'll address that or not.

Speaker 5

Anyway, thank you.

Speaker 1

Thank you for your remarks. Operator, that's all.

Speaker 5

Thank you. I'll turn

Operator

the call back to management for any closing remarks.

Speaker 1

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 garyblueshirtgroup.co or you can contact us directly at irkandygroup.com. We look forward to updating you on our next earnings call. This concludes our call for today. Thank you very much.

Speaker 1

You may now all disconnect.

Operator

Thank you for your participation.

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Earnings Conference Call
Kandi Technologies Group Q2 2024
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