Kandi Technologies Group, Inc. (NASDAQ:KNDI) Q2 2024 Earnings Call Transcript

Kandi Technologies Group, Inc. (NASDAQ:KNDI) Q2 2024 Earnings Call Transcript August 16, 2024

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

Kewa Luo: Thank you. Hello, everyone. Thank you all for joining us today’s conference call to discuss Kandi’s results for the second quarter 2024. Earlier today, we issued a press release covering the results. You can find the press release from the Newswire Services. Please note that today’s discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the Company’s actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the Company’s public filings with the SEC.

The Company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Additionally, unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars. Before we continue, I would like to introduce the team joining me on today’s call. We have Mr. Xiaoming Hu, Chairman of the Board; Dr. Xueqin Dong, Chief Executive Officer; Mr. Alan Lim, Chief Financial Officer; and for the first time on our call, Mr. Johnny Tai, CEO of Kandi America and Ms. Olen Rice, CEO of Northern Group. Dr. Dong will deliver his prepared remarks in Chinese, which I will then translate. Following that, we will have a Q&A session with Chairman Hu, Johnny and Olen and CEO to answer. Now, let us start with brief greetings from each of our executives.

Xiaoming Hu: [Foreign Language] Hello. This is Hu Xiaoming. Thank you for joining us today.

Xueqin Dong: [Foreign Language] Hello, everyone. I’m Xueqin Dong. I’m pleased to share our progress with you shortly today.

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

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

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

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

Xueqin Dong: [Foreign Language] Again, welcome to today’s conference call. We are pleased to report that Kandi Technologies continued its strong growth trajectory in the second quarter of 2024. We achieved total revenue of $39.1 million up 8.9% from $36 million in the same period of 2023. The primary growth driver was our all-electric off-road vehicles and associated parts with sales revenue increasing by 11.3% to $34.7 million. [Foreign Language] We made significant progress in our U.S. market expansion with the launch of new product lines, injecting new energy into the market. Additionally, through our exclusive partnership with Lowe’s, the officially licensed NFL team golf carts will be launched in the U.S. starting from the end of August.

This showcases our innovation and offers fans an eco-friendly way to show their team pride. [Foreign Language] Our financial position remains strong with cash and cash equivalents, restricted cash, short-term investments, and certificates of deposit totaling $219.6 million as of June 30, 2024. We actively executed our share repurchase program, buying back $673,896 shares at an average price of $2.25 per share, reflecting our confidence in the Company’s future and our commitment to enhancing shareholder value. [Foreign Language] On the global front, we made significant strides, including securing EEC certification for our 10-K all-electric UTV, paving the way for entry into the European Union market. In parallel, we have also opened up new markets for Kandi products in Asia, further expanding our international market share.

Looking ahead, we remain focused on expanding our product portfolio and the market presence, particularly in the U.S. and European markets, driving future growth through continued product innovation and market expansion. [Foreign Language] Now, we will move on to the Q&A session. Together with Chairman Hu Xiaoming, Johnny Tai, CEO of Kandi America and Olen Rice, CEO of Northern Group. I will answer your questions. Ms. Kewa and Mr. Alan Lim will provide translation for English questions. Please go ahead and ask your questions. Operator, please go ahead.

Operator: Thank you. [Operator Instructions] Thank you. And, our first question will be from the line of Joe Kramer with Private Investor. Please proceed with your question.

Q&A Session

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

Kewa Luo: [Foreign Language]

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

Kewa Luo: [Foreign Language]

Xueqin Dong: [Foreign Language] 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&D, and we are conducting the market research. According to the information available, the global automotive starter battery market sales reached, the RMB 153 billion in 2023 and is expected to reach RMB 206 billion by 2030 with a compound annual growth rate of roughly 3.3%. Thank you.

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

Kewa Luo: [Foreign Language]

Xueqin Dong: [Foreign Language] 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 water sports category, and there’ll be more product description and details in the future. The so called competitive pure electric off high rate vehicles mentioned in the press release refers to the newest generation of, like, the UTV, ATV, go cart, and the golf cart models, whereas the water sports 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.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 vehicle. Thank you.

Joe Kramer: Thank you. And, the next question is, what is the difference between the e10K Innovator and the e10K 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 to 10] (ph) scale gas trike motorcycle very similar to the Polaris Spyder. Two wheels in the front, one in the back. It would seem that it could be a big seller for older biker or one of these. Any thoughts about Kandi bringing an electric trike version out, and any new vehicles expected to be released this year? Go ahead.

Kewa Luo: [Foreign Language] I’m sorry. Can you repeat your second question about Lucky T9?

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

Kewa Luo: No. No. The second question you said as the high-end vehicle, Lucky T9.

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

Kewa Luo: Okay. Thank you. [Foreign Language]

Xueqin Dong: [Foreign Language] 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 two 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 out-stored style and is tailored, for hunters and off-road vehicle users. Our goal is to expand the market, for various retail assets. And, in that addition, Cowboy is mainly sold in Lowe’s, whereas the Innovator will be sold in Cosco in the near future.

Thank you. [Foreign Language] So this product, as you may know, is outdoor sports trike. The market is really for those the outdoor and the sports fan in the market. Thank you. [Foreign Language] 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-dated vehicles that match the target in the customer’s segment market. Right now, we focus on the leisure, outdoor, off-highway vehicle. Thank you.

Joe Kramer: Thank you very much.

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

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

Kewa Luo: [Foreign Language] Go ahead.

Mark Cannell: Okay. On the last conference call, a discussion came up about Kandi targeting to spin-off as a separate NASDAQ company its U.S. subsidiary, Kandi America, later this year. There was discussion that the most Kandi could spin-off and maintain full rights of consolidation of financials is just under 20%. But to make this possible, due to the NASDAQ requirements of a minimum price per share of $4 and $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 first day of trading. What was suggested on the last call was for the Company to just do a simple 10 million share tender offer at $3.50 a share, $1.50 on a book value, costing no more than 50% of Kandi’s cash.

This announcement would call for an immediate increase in bids due to of the traders bidding at least $3 to $3.40 against the $3.50 tender price, which is still well under the $5 book value. But each share bought under the book value will increase the remaining book value per share by the difference between the purchase price and the book value. So, if the non-selling holder gained $150 million to $15 million in book value for each 1 million plus share purchase, it alone would be a great win. The response to this question on the last conference call from the CEO was, thank you for your suggestion, and we will appreciate that. We will take it in consideration and evaluate and react properly. But remember, at the time that this was set, this can be trading at $3.

So, is this even more, now this is even more important and there will come my questions now.

Kewa Luo: Thank you. [Foreign Language] Go ahead with your questions.

Mark Cannell: 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 three years than buying Kandi stock at a 30% discount to book value?

Kewa Luo: [Foreign Language]

Xueqin Dong: [Foreign Language] 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.

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

Kewa Luo: [Foreign Language]

Xueqin Dong: [Foreign Language] So, we are considering the potential deal listing for Kandi America. But due to the SEC regulations, we are not allowed to discuss too much about this matter. Thank you for understanding.

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

Kewa Luo: [Foreign Language]

Xueqin Dong: 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.

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

Kewa Luo: [Foreign Language]

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

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

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

Olen Rice: Yes. I was unmuting. You guys hear me?

Johnny Tai: Yes.

Olen Rice: Okay. 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, in a position where we’ve got a lot of everyone is excited about. NFL, and obviously, so, we’ve got a plan. It’s a three 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 [we put] (ph) a hard number on it right now, I would have a very hard time putting the hard number. There are certainly very high expectations among all three, is involved. Johnny, if you feel better about a specific, happy to do that, but I just don’t know that number yet. We do have we do have very high expectations and impact, Kandi is a company. I’ll stop there.

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

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

Kewa Luo: [Foreign Language] 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.

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

Kewa Luo: Thank you. [Foreign Language]

Xueqin Dong: [Foreign Language] So, we actually are considering, example, our production line in the U.S. in the future. It’s definitely in our plan. So, the collaboration with Taiwan is one of our strategy and we may not disclose too much about that in this call. Thank you.

Steve Miller: Alright. I’m quite active understatement on social media, especially regarding Kandi. And there seems to be a campaign against Kandi by detractors on a lot of Internet chat boards claiming that Kandi is nothing more than a reseller of private labeling of its array of golf carts and various UTVs, ATVs, go-karts, 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 it’s in house capabilities. Kewa, do you want to go ahead and translate that?

Kewa Luo: [Foreign Language]. Go ahead, Steve.

Steve Miller: Okay. Thank you. So, we all know obviously that Kandi stock is extremely undervalued, especially even though it’s a highly integrated major manufacturer. So, a few conference calls back, a question was asked as to what percentage of the cost of a typical Kandi vehicle, for lack of a better term, such as a golf 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 that’s my two questions.

Kewa Luo: Okay. [Foreign Language].

Steve Miller: Thank you. I got three 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? 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?

Kewa Luo: Okay. [Foreign Language].

Xueqin Dong: [Foreign Language]. So, first of all, the Kandi’s Hainan base mainly produces the golf cart and other series of the motors. Our Jinhua base mainly produces the UTV, ATVs, the beach cart and other series of the motors. Our Yongkang base mainly produces the motor and electronic control products and the parts, whereas our Jiangxi base mainly produces delivery batteries and battery pack products. Overall, Kandi has production capacity of more than 100,000 various types of vehicles and related parts. Thank you. [Foreign Language]. And by the way, it’s correct that our own manufacturing rate of the Kandi product does exceed 90%. Thank you.

Steve Miller: 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 US dollars that someone would need to invest to replicate all of your facilities and equipment?

Kewa Luo: Hi. Do you mean, just any one of facilities or all of the facilities we are going to replicate in the US?

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

Kewa Luo: [Foreign Language].

Xiaoming Hu: [Foreign Language]. So, it seems from the dramatic standpoint, it’s not quite feasible to replicate the whole facility from China to US, although we are considering to have assembling polyester lines in US in the future, whereas the total overall budget, it’s hard for us to tell now, and we have to look at some other detail on financial analysis report. Thank you.

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

Alan Lim: It is. Yes, it is.

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

Kewa Luo: Thank you. [Foreign Language].

Xueqin Dong: [Foreign Language]. Thank you for your suggestions and feedback. They are very constructive. We have actually been working on already adjusted 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 Brasher with Cleantech Investments. Please proceed with your questions.

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

Kewa Luo: [Foreign Language]. Please continue.

Fred Brasher: 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 location, along with Aruba, Curacao, Dominique Republic, and Dubai, and even now in the EU market. Go ahead, Kewa.

Kewa Luo: [Foreign Language]. Continue, please.

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

Kewa Luo: [Foreign Language].

Xueqin Dong: [Foreign Language]. So apart from our US 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.

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

Kewa Luo: You mean internationally outside of US?

Fred Brasher: Multistore chains. Big chains. Big companies. Big stores.

Kewa Luo: I mean outside of US.

Fred Brasher: Yes. For international.

Kewa Luo: [Foreign Language].

Xiaoming Hu: [Foreign Language]. So, in U.S., we do work with those the large scalable retail sort of 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.

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

Kewa Luo: [Foreign Language].

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

Fred Brasher: Okay. Thank you. That’s all. Thank you.

Kewa Luo: Thank you. Next question please.

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

Arthur Porcari: Thank you. Well, I’m really happy to see that Johnny and Olen are on board here, someone who’s been involved in Kandi since the very beginning. I also had the honor of being invited to come visit back in, I think, 2020 or ‘21 whenever the K-23 appeared, I guess, be the first shareholder ever had a chance to test drive it. And I was very impressed with the time and kind of disappointed it never had a chance to go, but I can’t blame you guys for it. What I can give you, though, is a lot of credit for what’s happened since then. And I’m really happy to see Olen has joined you, Johnny. He sounds like a very capable partner and somebody to marshal our assets as investors. Anyway, let me get back to my original piece.

I wasn’t expecting you here, but look forward to maybe taking that short drive up to Dallas and visit you all again soon. It’d be maybe be that one too one time. Okay. Anyway, Kandi have us have an incredible relationship with Lowe’s based on Lowe’s seemingly unending support and trust with Kandi. Aside from the fact, Lowe’s picked up Kandi two years ago to launch their newest highest cost item in their system only a few months after Kandi first entered the US golf cart arena. However, initially, it was through marketing veteran Coleman with he only had one branded cart line back then. In less than a year, Lowe’s has totally dumped Coleman out of the picture, went directly to Kandi, picked up Kandi’s own branded golf carts, the industry’s youngest brand, and as their sole golf cart supplier, and exclusively now 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.

Kewa Luo: Okay. [Foreign Language]. Please continue.

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

Kewa Luo: [Foreign Language]. Please go ahead.

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

Kewa Luo: [Foreign Language].

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

Arthur Porcari: Okay. Is Lowe’s planning on including actual golf carts and or fixed passenger carts? I asked that question after recently visiting a Galveston, each 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.

Kewa Luo: [Foreign Language].

Olen Rice: Yes. So, I can answer this as well. We are currently a supplier to Lowe’s with six passenger carts in a limited store count, a couple of 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 the real estate they have available and what products make sense on their floor.

Arthur Porcari: Well, that wasn’t quite my question. My question was specifically had to do with the NFL. Again, you can imagine the Galveston cart rental company over there would love to have some, I hate to say it, cowboys too, but Texans carts to go ahead and rent people go up and down the seawall. And as far as the golf cart, 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. It’s 4p all forward facing seats, but it’s not really golf compatible. And yet the sport of golf and sport of football seem to have some sort of a relationship over here more so than most other, sports as you well know. So that was the basis of that question, actually.

Olen Rice: 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 via Lowe’s because of the relationship. So, I’m not sure if that answers your question totally, but that’s our situation today.

Arthur Porcari: But is it something that you might have an interest in doing or presenting to Lowe’s to maybe have that or would be just too difficult to rekey? It seems like basically, you’re putting a wrap on an existing product that we already have and putting a logo embroidered into the headrest and getting maybe a couple of $1,000 more for the equivalent. It would just seem like it go hand in hand and didn’t know whether that’d 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.

Olen Rice: I 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.

Arthur Porcari: Sure. As we just discovered, this is a three year deal, which makes it that much more exciting. I’m sure it does for you as well. Anyway, on the last conference call, management responded to a target question originally asked on the conference call in 2022 confirming it still had a high end goal of possibly achieving as much as a $500 million in revenues for 2025. But I suspect that number certainly would have gotten lower now, but, still pretty impressive number because of the economy in general. But that’s a long way from a $120 million or maybe $200 million, $210 million we’ll do this year. Anyway, let’s see. Lowe’s, well, I’m just looking at some notes I have over here. Oh, one other point I wanted to bring to your attention.

I guess you’re probably aware of this, but they do, as I mentioned, actually have about 80 different variations of your golf carts on Lowe’s website. Of course, you’re exclusive in Lowe’s. I’m talking about in general. But what’s interesting is there are several hundreds of 5 star of the rating system, on these golf carts. I know you’re aware or not, but you got an overall 4.5 plus rating if you add in all those all the various different Kandi provided products, which is pretty phenomenal and speaks very highly to at least the thought that customers that have been buying the vehicles through Lowe’s, and that’s a real feather in y’all’s cap. But, anyway, go ahead and pass that on.

Kewa Luo: But what’s your question, Art?

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

Kewa Luo: Let me let me translate what you have said so far. [Foreign Language]. Continue with your question if you have any.

Arthur Porcari: 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 we got the right answer for it or the answer that was understandable. Had to do with the total valuation of all of Kandi’s facilities if they had to be replicated. Well, I remember for a fact that Kandi built from scratch the Hainan facility, which has the 100,000 capacity. And that was, I believe, four, five years ago, and that was done for about $200 million by itself. Subsequent to that, I knew they sold the old facility and built a brand new facility in Jinhua. And I guess that’s where they’re making your off road products. So, it would seem to me that the value of all those facilities, which if they had to be replicated today, would certainly be in excess of $300 million, maybe a bigger number than that. Am I wrong?

Kewa Luo: You mean $300 million what?

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

Kewa Luo: Let me let me ask. [Foreign Language]

Xueqin Dong: [Foreign Language] It’s very hard for us to tell at the moment because that involves too many parts 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.

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

Kewa Luo: [Foreign Language]

Xueqin Dong: [Foreign Language] So, just to answer your question, if we will indicate the whole exactly same scale, same thing from China to U.S., it will be even higher than $300 million. 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. It just replicate the whole exact same thing, whole scale, whole same procedures in U.S. because it just doesn’t work that way. Yes. But then, yes, that’s our conclusion for that. Thank you.

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

Kewa Luo: Alan. [Foreign Language]

Alan Lim: [Foreign Language]

Xueqin Dong: [Foreign Language] So, in order to address your question again, you asked whether you will cost more than $300 million, right? Long story short, yes, if we do exactly something. But just in the reality, we may not do it that way because, again, it’s not how it works in the production in the cycle. But, yes, in order to answer your question, yes, it will be even more than that.

Arthur Porcari: That’s what I was asking.

Alan Lim: Just for information.

Arthur Porcari: 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 a dollar a share under cash in the stock market. 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 [Kandi] (ph) project that virtually any golf cart country in the world would be trying to get right now, which you have with the NFL/Lowe’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 Olen is the second, I believe, is the second largest shareholder in the company now. And, if I’m not mistaken, I think one year ago, he did a deal at, what, $3.30 a share. 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 Kandi America was brought on board, the stock went up to $19 a share just based on that. And then, they were doing $10 million in revenue. This year, you’re probably going to do a $150 million in revenues, just Kandi America portion, or more.

And, so that’s just my final comment here. If anybody wants to comment on it, I’d appreciate it. But if not, we should have a great third quarter 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 third quarter, and, maybe I’m wrong if anybody wants to address that or not. Anyway, thank you.

Kewa Luo: Thank you for your remarks. [Foreign Language] Operator, let’s, and that’s all

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

Kewa Luo: Thank you again for joining today’s conference call. If you have any further questions, please, don’t hesitate to contact our IR consultant at gary@blueshirtgroup.co or you can contact us directly 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.

Operator: Thank you for your participation.