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Edited Transcript of KNDI earnings conference call or presentation 10-May-19 12:00pm GMT

Q1 2019 Kandi Technologies Group Inc Earnings Call

JINHUA May 24, 2019 (Thomson StreetEvents) -- Edited Transcript of Kandi Technologies Group Inc earnings conference call or presentation Friday, May 10, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Kewa Luo

* Xiaoming Hu

Kandi Technologies Group, Inc. - Chairman, President & CEO

* Xiaoying Zhu

Kandi Technologies Group, Inc. - Interim CFO

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Conference Call Participants

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* Arthur Porcari

* Marc Guest

* Michael Pfeffer

* Walter Hill

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Presentation

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Operator [1]

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Good day, and welcome to Kandi Technologies First Quarter 2019 Financial Results Call. Today's conference is being recorded. And at this time, I'd like to turn the conference over to Kewa Luo, IR Manager, please go ahead.

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Kewa Luo, [2]

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Thank you, operator. Hello, everyone, and welcome to Kandi Technologies Group Inc. First Quarter 2019 Earnings Conference Call. The company distributed its earnings press release earlier today, and you can find a copy on Kandi's website at www.kandivehicle.com.

With us today are Kandi's founder, Chairman and Chief Executive Officer, Mr. Hu Xiaoming; and Interim Chief Financial Officer, Ms. Zhu Xiaoying. Mr. Hu and Ms. Zhu will deliver prepared remarks followed by a question-and-answer session.

Before we get started I'm going to review the safe harbor statement regarding today's conference call. Please note that the discussions today 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 results may differ materially from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company's annual report on Form 10-K for the fiscal year ended December 31, 2018, and in other documents filed with the U.S. Securities and Exchange Commission. Kandi does not assume any obligation to update any forward-looking statements except as required under applicable law.

As a reminder, this conference call is being recorded. In addition, an audio webcast of this conference will be available on Kandi's Investor Relations website.

I will now turn the call over to Kandi's founder, Chairman and CEO, Mr. Hu Xiaoming.

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [3]

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(foreign language)

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Kewa Luo, [4]

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[Interpreted] Okay. Hello, ladies and gentlemen. Thank you for joining our First Quarter 2019 Earnings Conference Call.

Total revenues in the first quarter increased 116.8%, which represents an incredible year-over-year growth. However, the Chinese government's national subsidy policy adjustment during the first quarter, coupled with the JV Company's pending restructuring, which is taking place in the first quarter -- which is taking place in order to maximize the JV Company's ability to grow into a prominent company has resulted in our modifying the JV Company's business development plan with respect to its integration into Geely under Geely's management as a primary shareholder. This transition period has directly impacted production and sales, causing a loss for the JV Company. Despite this transitional period, the JV Company has made many meaningful advances in the first quarter.

In the beginning of the year, Kandi Jiangsu received approval notice from Jiangsu Development and Reform Commission with respect to Kandi Jiangsu's application to add new capacity of 50,000 pure-electric vehicle project which we have prepared for 2 years. This approval gives Kandi Jiangsu a license to build a factory for EV manufacturing. In April, a team of EV industry experts from the Ministry of Industry and Information Technology came to conduct an on-site technical review, and we are currently anticipating approval. If the approval arrives, Kandi JV will qualify for dual production license as they recognize automobile production and sale enterprise.

Additionally, Kandi has taken advantage of every available opportunity to get into the online ride-hailing market by signing cooperative agreements with several major industry players, such as Zhejiang Ruibo; Caocao Zhuan Che, China Resources, Zhejiang; and Didi Chuxing to provide government-accredited EVs. We strongly believe that car sharing is a promising area with significant room for growth. And that the company's continued efforts in laying the foundations for supplying government-accredited EVs to drive sales growth will allow us to regain our position as the leading electric vehicle products manufacturer in the market. Furthermore, the JV Company will be able to achieve faster growth with Geely's corporate resources and the branding profile. While the restructuring reduces Kandi's equity stake in the JV Company to 22%, we believe that the value of Kandi's 22 equity -- 22% equity ownership in the JV Company following the restructuring will far exceed Kandi's original 50% equity in the future.

Now I would like to turn the call to our Chief Financial Officer, Ms. Zhu Xiaoming, to give you more details on our financial highlights. After that, I will take the questions. Thank you.

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Xiaoying Zhu, Kandi Technologies Group, Inc. - Interim CFO [5]

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(foreign language)

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Kewa Luo, [6]

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[Interpreted] Thank you, Mr. Hu. Hello, everyone on the call. Now I would like to provide a brief overview of our financial results for the first quarter 2019. Please note that all numbers I will discuss today are in U.S. dollars, unless otherwise noted.

First, let me walk you through the first quarter financial results in 2019. Total net revenues for the first quarter of 2019 were $18.1 million, an increase of $9.7 million or 116.8% from $8.3 million in 2018. The increase in revenues was due to an increase in sales of both EV parts and off-road vehicles during this quarter.

EV part sales were approximately $12.8 million in the first quarter of 2019, accounting for 70% of our total net revenues, an increase of $6.4 million or 100.4% from $6.4 million compared to 2018.

Revenues from sales of off-road vehicles were $5.3 million in the first quarter, accounting for approximately 29.3% of our total net revenue, an increase of $3.3 million or 169.8% compared to the same period of 2018. The increase in revenue from off-road vehicles was largely due to additional sales from SC Autosports, which became our wholly owned subsidiary in the U.S. in July 2018.

Our cost of goods sold was $14.9 million during the first quarter, an increase of $7.9 million or 113.6% from $7 million in the same quarter of 2018. The increase was primarily due to the corresponding increase in sales.

Gross profit in the first quarter was $3.1 million, an increase of $1.8 million or 133% from $1.3 million for the same period last year. Gross margin in the first quarter increased to 17.4% from 16.1% in the first quarter of 2018. The increase in gross margin was due to the higher gross margin from SC Autosports off-road vehicle sales.

Total operating expenses in the first quarter were $3.2 million, increased 188.5% compared with $1.1 million in the same quarter of 2018. The increase in total operating expenses was primarily due to the increased general and administrative, which was $2.4 million this quarter compared with $0.4 million in the same quarter last year, largely due to increased operation costs such as depreciation of fixed assets after Hainan facility has begun its official production.

GAAP net loss in the first quarter was $4.4 million or $0.09 loss per fully diluted share compared with GAAP net income of $3.7 million or $0.07 earnings per fully diluted share in the same quarter of 2018. The decrease was primarily attributable to the increase in the share of loss of the JV Company compared to the same period of last year. The JV Company's first quarter's net loss was $20 million and last year in the same period was net income of $1 million.

Non-GAAP net loss in the first quarter was $4.5 million compared with non-GAAP net loss of $0.6 million in the same quarter of 2018. Non-GAAP loss per share was approximately $0.09 per fully diluted share for the first quarter of 2019 compared with non-GAAP adjusted loss per share of $0.01 per fully diluted share for the same quarter of 2018.

Let me touch on the JV's financials now. For the first quarter of 2019, the JV Company's net sales were $1.3 million. Gross loss was $0.02 million and net loss was $20.2 million. During the first quarter of 2019, the JV Company didn't sell any EV products due to the transitional period.

Kandi's investments in the JV Company are accounted for under the equity method of accounting since loan to equity conversion in the JV Company was completed at the end of this quarter and the equity transfer has not been completed as of March 31, 2019. Kandi recorded 50% of the JV Company's loss of $10.1 million for this quarter. After eliminating intra-entity profits and losses, Kandi's share of the JV Company's after-tax loss was $9.9 million for the first quarter of 2019.

Next, I will review the company's cash flow.

For the first quarter of 2019, cash used in operating activities was approximately 14.1 -- $14.0 million as compared to cash used in operating activities of approximately $1.1 million for the same period last year. The major operating activity that used the cash for first quarter of 2019 was an increase in other receivables and other assets of approximately $14.3 million and an increase of accounts receivable of $18 million. Meanwhile, the major operating activities that provided cash for first quarter of 2019 were an increase of accounts payable of approximately $22.6 million.

For the first quarter of 2019, cash used in investing activities was $0.3 million as compared to cash used in investing activities of $3 million -- $3.9 million for the same period last year. The major investing activities that used cash for first quarter of 2019 was $0.3 million in purchases of company property.

For the first quarter of 2019, cash used in financing activities was 0 as compared to cash used in financing activities of $3.1 million for the same period last year. The major financing activities that provided cash for the first quarter of 2019 were proceeds from short-term bank loans of approximately $2.8 million. The major financing activities that used cash for the first quarter of 2019 were approximately $2.8 million of repayments of short-term bank loan.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll take the first question from Arthur Porcari from Corporate Strategies Inc.

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Arthur Porcari, [2]

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Mr. Hu, great quarter, especially since we had some problems with the car sales shifting over to the -- well, not a problem, but shifting over to the new vehicles. But I've got a kind of extended-type question, multipart here. But I want to first kind of lay some groundwork here. On March 25, Mr. Hu announced in regards to restructuring of the JV equity as a fantastic move, shifting control of the 77.9% to Li Shufu's Geely Holdings. As a long-time follower of Kandi, I fully agree with Mr. Hu's excitement.

From a market point of view, though, to have China's unquestionable top automaker and second-wealthiest member of the government's National People's Congress representing the Kandi JV from the control position should have equated as if in the U.S. to a control shift to an Elon Musk type. But obviously, at least for now, it has not. With this transaction, Li Shufu has now shown total commitment by tripling his cash investment in JV to over $317 million in just the past year. To put this in perspective, excluding only his $1.5 billion to buy Volvo, his Kandi JV investment has now surpassed by over $110 million as total cash investment in London Black Cab Company; Lotus, Malaysia's top auto company; Proton; ZhiDou; Daimler's Smart Car; and even the $3 million he first put up in 1997 to buy Geely Auto. Go ahead and pass that on to Mr. Hu right now, and I've got one more thing and some questions.

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Kewa Luo, [3]

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(foreign language)

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Arthur Porcari, [4]

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Okay. This is quite a show of confidence in the future of the JV by Li Shufu. While Kandi will receive over $1.50 a share in cash, which should put it in pretty excellent financial condition, though I guess we have not received any of that yet from the looks of the 10-Q. But at that time, the market didn't agree with Mr. Hu and punished the stock severely over the news. So I've got a series of 4 short -- fairly short questions here. Can Mr. Hu tell the shareholders in his own words why he feels this was so strong a deal for Kandi, that 2 days later, he personally increased his open market purchase to over 700,000 shares by adding another 137,552 in the open market?

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Kewa Luo, [5]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [6]

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(foreign language)

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Kewa Luo, [7]

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[Interpreted] Thank you for your question. Regarding your question, I'd like to share that as the renewable energy vehicle industry is gradually developing and given the nation's increasing support, both transitional car manufacturers and new innovative car manufacturers are all moving into the renewable energy vehicle manufacturing sector. Therefore, the competition in this market will be extremely, extremely intense. In the past 2 years, the renewable energy auto industry has been going through a reshuffling. And manufacturers' capabilities and branding must distinguish one another to survive.

In order to bring the JV Company back to its position as a leader in the sector, having Geely in charge will be the best option. And clearly, capital investment in the JV Company is a strong indicator of Geely's confidence in strengthening and growing the JV Company's business. It is evident to us that Kandi's 22% equity in the JV revenue will far exceed Kandi's original 50% ownership. Therefore, I think this equity restructuring is the biggest achievement so far this year. Additionally, like you said, I bought more than 130,000 shares of Kandi in the open market to show my support and confidence in the company in view of our stock being seriously undervalued.

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Arthur Porcari, [8]

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Okay. Is Kandi is still going to be the main supplier of batteries and parts to the JV, and can you tell us what parts are included?

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Kewa Luo, [9]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [10]

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(foreign language)

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Kewa Luo, [11]

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[Interpreted] According to the joint venture agreement, Kandi is definitely a major supplier with -- already under the same conditions.

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Arthur Porcari, [12]

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Okay. And by the way, how about additional -- I noticed in the last few quarters that the mix has been starting to spread out. Are we finally starting to sell parts to other companies?

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Kewa Luo, [13]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [14]

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(foreign language)

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Kewa Luo, [15]

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[Interpreted] That will be the case. But going forward, we will gradually also sell the parts to other companies.

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Arthur Porcari, [16]

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Okay. Then this has to do with the bullet #3 on the press release that came out on the restructuring. Why was this transaction with Kandi done at registered capital level? And is it a good assumption to say that the 2-year potential buyback at Kandi has an option to regain the interest from the JV, from Li Shufu for Kandi's shares. What percent would Kandi may be allowed to buyback? Do we know that yet?

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Kewa Luo, [17]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [18]

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(foreign language)

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Kewa Luo, [19]

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[Interpreted] Well, you asked 2 questions. First is, I think it is very positive news that Geely is willing to accept JV based on the registered capital valuation. Because relying on JV's own development past, we no longer feel any advantages in such competitive market. Imagine that if we continue this path, with the industry reshuffling, then the JV Company probably will be -- become less valuable. So I think actually it's the best option that Geely is willing to accept the JV based on the registered capital level. Secondly, taking into account both parties' aligned vision in collaboration during this -- the equity restructuring. The 2 parties agreed to jointly explore the optional purchasing a portion of the JV Company equity held by Geely in the form of issuing new shares within 2 years after the equity transfer. And regarding in Geely becoming a significant shareholder of Kandi Technologies, these items -- item was actually agreed upon based on the 2 parties thorough discussions. It's not necessarily will be executed. Whether or not to execute it in -- within 2 years will depend on the extent to which -- such move will help maximize Kandi Technologies' shareholders value at that time. If by then, it's not going to be a great deal for Kandi shareholders, then we're not necessarily going to do it.

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Arthur Porcari, [20]

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Okay. The -- since Mr. Hu mentioned it again over here, but reminded us about his buying shares, is he thinking about buying any more shares? Or maybe, with the extra $76 million coming into the company over the next quarter or so, what's the chance that the company might buy back some shares?

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Kewa Luo, [21]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [22]

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(foreign language)

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Kewa Luo, [23]

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[Interpreted] Actually, we have already hosted our Board meeting. And because right now it's a quiet period, we cannot do -- announce anything related to a buyback. But approximately next Tuesday, we will announce what we're going doing regarding to that.

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Operator [24]

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The next question comes from [Ted Schwartz], private investor.

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Unidentified Participant, [25]

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With that visit from the MIIT people, has the joint venture now completed all of its necessary requirements to get the dual license? And if so, when does Mr. Hu expect he'll be able to announce that they finally got it?

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Kewa Luo, [26]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [27]

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(foreign language)

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Kewa Luo, [28]

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[Interpreted] First of all, the first license that we received that we have prepared for 2 years. And for the second one, we have completed all the application process, but this is going to be approved by the MIIT. And we believe that it's going to be -- pretty soon in the near future that we should hear from them regarding the approval.

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [29]

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(foreign language)

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Kewa Luo, [30]

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[Interpreted] Once we receive this approval, we will announce the news immediately [Mr. Hu added].

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Operator [31]

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Next question comes from Mike Pfeffer from Oppenheimer.

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Michael Pfeffer, [32]

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How does Mr. Hu feel about his 20,000 unit forecast for this year? And is 75,000 to 100,000 units a realistic total goal for this year plus next year? And then I have one more quick question.

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Kewa Luo, [33]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [34]

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(foreign language)

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Kewa Luo, [35]

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[Interpreted] Right now, the management team is refining the business plan and objective after the JV Company restructuring. So until the plan is finalized, I think today, I cannot share any detailed information. But however, once the restructuring is complete, we will have more updated objectives I can share. But in my opinion, with Geely's management, I don't think it's going to be bad. It will be even better than what we used to be.

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Michael Pfeffer, [36]

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And there's one more question. In early 2017, it was reported in the 2016 10-K that Kandi had been approached by Jinwa, a government agency, to acquire Kandi's legacy facility for around USD 160 million. While Mr. Hu said in the last quarter call he was in no hurry to sell it. Has its value increased over the past years -- past 2 years? And if so, how much?

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Kewa Luo, [37]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [38]

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(foreign language)

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Kewa Luo, [39]

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[Interpreted] First of all, the -- this land actually right now is becoming more and more valuable. It's considered to be the best zoning by the government. So I think the more delays, the better it's going to become for us. And I cannot make the initiation and I need to wait for the government officials come to talk to me. And once in a while, they do come to us to speak with me, but it hasn't really officially discussed on this matter. So I do believe that sooner or later, this land needs to be taken back by the government, so this will be a great deal. And on the cash front, we're going to receive money from the JV restructuring. And additionally, the subsidy payments are going to arrive soon too, so we shouldn't have any cash flow problems.

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Operator [40]

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The next question comes from [Michael Fairnow] from Focus Tech Investments.

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Unidentified Analyst, [41]

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According to your current press release, you clearly focused on the joint ventures on the ride-sharing services and that's further confirmed by the 2 agreements that have previously been announced, one for 300,000 EVs over 5 years, which I believe will total about $7 billion in revenues for China's largest ride-hailing service. And at the other one for 20,000 vehicles over 3 years for a Geely wholly owned subsidiary, which I understand is a white-glove ride-hailing service. In the last conference call, you talked about the requirement because of the government accreditation that it would -- the cars will be the K23 and in the development K8B. I actually have a 2-part question. The first part is, can you expand on the pricing of the K23 and K8B and when they will be likely put into production? And also any other similar cars that are in production?

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Kewa Luo, [42]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [43]

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(foreign language)

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Kewa Luo, [44]

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[Interpreted] Since the beginning of the year, the JV Company has done a great deal of groundwork for entering the online ride-hailing market. The model K23 is the model that the online ride-hailing vehicle specifications of the Chinese government. The expected price is around RMB 100,000. The model K23 we will start its trial operation in Hangzhou in the near future. And the model K8 also met the requirements of online ride-hailing as the high-end vehicle and is scheduled to launched in the market at the end of this year, with an expected price of around RMB 140,000. Going forward, it's anticipated ideally, together with the JV Company we'll develop new models, including some features like autonomous driving to meet the demand of the car-share market.

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Unidentified Analyst, [45]

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And kind of additional follow-up. On the 2 joint venture agreements that have previously been announced, can you give us some guidance on how -- because that totals 300,000 for 5 years and 20,000 for 3 years, can you give us some guidance on how much will be delivered this year for those 2 agreements? And also can we expect announcements of similar agreements during this calendar year? If not, when would you expect that to happen? And just a final note, when you get a final agreement on the restructuring of the joint venture, could we possibly expect a conference call to further expand on the detail of this major restructuring?

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Kewa Luo, [46]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [47]

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(foreign language)

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Xiaoying Zhu, Kandi Technologies Group, Inc. - Interim CFO [48]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [49]

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(foreign language)

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Kewa Luo, [50]

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[Interpreted] Okay. First of all, Ms. Zhu is emphasizing that right now, we're still in the process of refining the business plan for the JV Company. So I really cannot share much right now since after restructuring, it's going to be under Geely's control. But once we have the restructuring finished and the finalized version of the business plan, we will share with the market. I don't think it's necessary that we're going to host a conference call, but certainly, I will share the plan with the market and the shareholders.

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Operator [51]

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Your next question comes from [Carl Scherer] from [Review] Consulting.

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Unidentified Analyst, [52]

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Let me state first my original interest in Kandi comes from the joint venture with China's State Grid to install the quick battery exchange as a nationwide standard for recharging electric vehicles. So I was really interested that you are reviving this -- the 300,000 EV program, this -- the government-sponsored ride-hailing program. So could you tell us if the new QBX is similar to the old one, this robotic arms on each side, sliding out the old battery and the new one in? Or is the model different? And then has the company put out any videos of the QBX working with the new electric vehicle generation? Is there also a mobile version of the QBX as was the case with the old one? And if so will that also be available in the U.S. models? And then I have an additional question?

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Kewa Luo, [53]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [54]

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(foreign language)

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Kewa Luo, [55]

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I think probably he's disconnected. But what he has said so far is Jinhua An Kao and his partner are actually developing a new automatic battery exchange equipment. It is expected to start its trial operation of this new equipment in the second quarter. And after it is officially launched, we believe that it will increase battery power and efficiency and largely reduce the labor cost. And this equipment will be also sold to the battery exchange companies too.

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Unidentified Analyst, [56]

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,

I see. So I'm assuming Kandi's subsidiary, Jinhua An Kao is involved in QBX. Just what it is they sell and who they sell it to?

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Kewa Luo, [57]

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Okay. Hang on, I think Mr. Hu is disconnected. Operator? (foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [58]

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(foreign language)

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Kewa Luo, [59]

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[Interpreted] Okay. So right now actually it's An Kao -- Jinhua An Kao to be in charge in developing the new QBX equipment. And they are also going to be in charge of selling the equipment to others. For example, the agreement we signed with China Resources Zhejiang when -- if they need the equipment, that will be sold by Jinhua An Kao.

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Unidentified Analyst, [60]

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I see. So I have one more question still. As many others mystified by the joint venture share count and the rate in the filing that you posted then that you have a prearrangement that after some time, Kandi can regain its original share in the joint venture for a stock exchange with Kandi Technologies Group shares. So I'm wondering will that exchange happen based on the price -- on the share price of Kandi? Or is it a prearranged percentage of Kandi's shares that will automatically transfer into -- back into the Geely joint venture? Could you give us some color on that?

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Kewa Luo, [61]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [62]

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(foreign language)

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Kewa Luo, [63]

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[Interpreted] I have discussed this earlier on the call, but I want to emphasize one more time that this is actually an open option. It's not necessarily have to be done exactly. And in terms of the term of the buying back the equity, we're depending on the situation then. And if it's not for the best interest of the Kandi Technologies shareholders, I wouldn't do it. And so by then, the 2 parties still have opportunity to discuss whether it is the best option. So I think it will solely depending on what is good for Kandi.

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Operator [64]

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The next question comes from Walter Hill from Carty & Company.

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Walter Hill, [65]

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From the last conference call, Mr. Hu said, okay, right now, there are K23, K22 and EX 3 are presently in production. And in March we have plans of 300 K23 sets of EV parts for production at the Hainan facility. So if we plan to have these 300 sets of EV parts produced this month, so the sales probably will happen next month. My questions are, were the 300 new K23 sets produced in March and sold in April as expected and to who were they sold? And since Kandi still owns the Hainan facility, how does that affect Kandi's revenues?

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Kewa Luo, [66]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [67]

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(foreign language)

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Kewa Luo, [68]

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[Interpreted] Well, the original plan was to finish the production of these 300 K23 sets of EV parts by March. And they are actually -- sold them -- sell them to the JV Company gradually. But due to the JV Company's restructuring occurring sometime in the second half of March, so JV Company right now is working on redefining its business plan. And however, like I just said, the Hainan factory has already started to ship some sets of the EV parts to the JV Company.

Because Hainan is still 100% owned to Kandi, so every sales that occurs, the revenue will be belonging to Kandi.

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Operator [69]

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The next question comes from [Jack Cronin], a private investor.

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Unidentified Participant, [70]

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Can Mr. Hu give us an update on the U.S. sales initiative? Basically, I have 2 questions. The first question, as stated on the last conference call, are we still on track to have 50 to 100 cars sent to the U.S. by the end of this month? And will the U.S. EX3 be able to achieve a speed of at least 75 miles per hour with a range of 200 miles and have the fast-charge feature? And will the K23 and K8 be considered for future U.S. sales?

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Kewa Luo, [71]

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Okay, Thank you, for the question. (foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [72]

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(foreign language)

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Kewa Luo, [73]

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[Interpreted] Yes, we do still have the same plan that we are going to send 50 vehicles to the United States in the very near future. And the model EX3 has a driving range of 300 kilometers, which is about 186 miles and a top speed of 120 kilometers per hour, roughly 80 miles per hour. And for the product safety reasons, we are not planning on installing the fast-charge feature. In terms of the K23 and K8, we do have plan to ship a K23 prototype to the U.S. However, for K8 which is specifically developed for the Chinese online ride-hailing market as the high-end car, so K8 is not planning on exporting to the U.S.

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Unidentified Participant, [74]

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And my second question is, I have heard that the export cars will be made in a Kandi-owned Hainan facility due to its immediate proximity to the international shipping port. If this is true, how will Kandi be booking these export sales as higher-value products or only as parts?

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Kewa Luo, [75]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [76]

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(foreign language)

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Kewa Luo, [77]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [78]

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(foreign language)

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Kewa Luo, [79]

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[Interpreted] Well, we're still -- Mr. Hu is saying that we're still discussing other available options, comparing which port options will give us the most cost-efficient -- effective way, especially with the trade war going on, there is still a lot items to think about, whether it's better to sell as the high-value products or only parts. So we are waiting for the final conclusion.

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Operator [80]

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Your next question comes from [Frank Blatterman] from -- a private investor.

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Unidentified Participant, [81]

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If I remember correctly, the introduction of the K22 was initially delayed about 1 year due to its being redesigned to meet European standards. My first question of 2, have subsequent models, such as the K23, K27, EX3 and the yet to be released K8, been designed to meet these standards also?

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Kewa Luo, [82]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [83]

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(foreign language)

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Kewa Luo, [84]

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[Interpreted] Our EV products for the K22 and EX3 have been redesigned and are in a process of being verified. And they are -- once it's done, they are going to be shipped to the U.S. and start the trial sales. But other products like K27 and K8, since they are not designed to be sold in the U.S., so these ones are not being redesigned.

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Unidentified Participant, [85]

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Kewa, I was specifically asking about the European standards. Do these particular models meet the European standards?

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Kewa Luo, [86]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [87]

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(foreign language)

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Kewa Luo, [88]

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(foreign language) Yes, the K22 and EX3 are also meeting the standard -- European standards.

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Unidentified Participant, [89]

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Okay. And my second question, in light of the TRC delays in paying the old subsidies, it seems to me that exports should be getting a priority at this time as when we export to other countries, we don't have to subsidize the subsidies and basically sell at a temporary loss. So therefore, are export plans in place or being considered for Europe and other Southeast Asia countries at this time?

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Kewa Luo, [90]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [91]

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(foreign language)

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Kewa Luo, [92]

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[Interpreted] As for now, we want to focusing our energy on developing the U.S. market first. And the management team will take it into consideration based on how we do in the U.S.

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Operator [93]

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The next question comes from [Li Gau], also a private investor.

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Unidentified Participant, [94]

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I have 2 questions. The first one is fairly simple. It is about the subsidy payment. So the China media reported the MIIT finally approved subsidy payment for 2015 and 2016 in April. So from the list -- from the approved list, the total amount for Kandi JV was around $130 million. Could Mr. Hu confirm this is accurate? If so, when do you expect it to be received and announced? (foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [95]

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(foreign language)

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Kewa Luo, [96]

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[Interpreted] Mr. Hu is saying he really appreciate that you're following our news closely. The subsidy amount from sales in 2015 and '16, that JV Company should receive is about RMB 742.8 million. And subsidy preallocating amount from sales in 2017 and '18 is about RMB 131.8 million. So altogether, the total amount is about RMB 874.6 million. And translating it to U.S. dollars is about $130 million. So what you said is almost correct, if just ignoring the numbers. And the payment right now was already sent to the Jinhua Finance Bureau from the National Finance Department. And now it's waiting for the distribution. And if everything goes right, it should arrive next week, but I cannot guarantee the timing since this is totally out of our hands, it's depending on the government's schedule.

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Unidentified Participant, [97]

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So I would like to reaffirm. So Mr. Hu said the money from the central government has arrived at the Jinhua local agency or this...

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Kewa Luo, [98]

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Finance Bureau. On May...

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Unidentified Participant, [99]

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On May 5, yes.

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Unidentified Participant, [100]

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That's great news. (foreign language) When you receive the money, so will any of this cash be used to pay down the $70 million in debt the JV Company owes to Kandi? (foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [101]

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(foreign language)

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Kewa Luo, [102]

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[Interpreted] If the JV Company receives the money, it'll pay most of the outstanding debt only to Kandi. It should be.

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Unidentified Participant, [103]

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My second question is related -- actually, I'd ask -- when I follow the conference call, I got a point, Mr. Hu, at one point, mentioned after the JV reorg, local government is going to invest almost 100 -- or RMB 10 billion in the JV Company. So -- but I think this point was lost in translation. Could Mr. Hu reconfirm that at this point, if I heard that correctly? (foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [104]

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(foreign language)

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Kewa Luo, [105]

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You like to say that or do you want me to translate it?

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Unidentified Participant, [106]

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I think Mr. Hu does mention that after the JV reorg -- the Geely is going to invest about RMB 10 billion in the newly reorg-ed JV Company. A big chunk of that money -- okay, a big chunk of that money will come from the local government -- from the local government support but (inaudible) how much is from where -- it depends. So all in all, Geely is going to invest a lot of money into the newly reorg-ed JV Company.

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Operator [107]

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Your next question comes from [William Northup], a private investor.

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Unidentified Participant, [108]

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I don't have anything to ask. Everything's been covered. Thank you.

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Kewa Luo, [109]

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Thank you. (foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [110]

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(foreign language)

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Kewa Luo, [111]

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[Interpreted] Operator, if we do not have any additional question, we can close up.

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Operator [112]

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We do have a question from [Bob Jackson], a private investor.

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Unidentified Participant, [113]

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Thank you, very much, my questions also have been answered.

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Kewa Luo, [114]

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Thank you. (foreign language)

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Operator [115]

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There is one more question in the queue from Marc Guest from Synergence Ventures Corp.

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Marc Guest, [116]

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It seems that ride sharing is important to Mr. Hu's vision for the future, and I'd like to confirm that this is shared by Li Shufu. If it is, I wish Mr. Hu would elaborate a little bit on the potential that he sees in the ride-sharing market in China as well as globally. The value of Kandi's stock on the market, Mr. Hu has shared that it has been frustrating to him in the past. And when I take a look at the ride-sharing statistics on Didi Chuxing, we're looking at a company in the United States, just to couch it, Uber has 5 million ride-sharing drivers. In China, it's very hard for the U.S. mind to recognize the value of just this individual ride-sharing deal. But is it possible that Mr. Hu has not shared with the U.S. investor that there are 31 million drivers that drive for Didi Chuxing? And with this new agreement for the financing, is it not very possible? I look at -- is it not possible that this is a major potential, well beyond the 300,000 cars over 5 years? That's the first part of my question.

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Kewa Luo, [117]

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Are you basically saying that there's anything Mr. Hu hasn't shared with you that the contract with Didi will be more than 300,000 EVs, giving us 31 million drivers they have -- they right now have in the China market?

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Marc Guest, [118]

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Yes, they have 300,000 drivers. The government is requiring that this is the car that's going to be used. The alliance is going to be building their cars primarily with Kandi. It's going to be financed and set up properly. There's 31 million drivers already working for Didi Chuxing that would be replacing into these cars. Could we not see a little elaboration from Mr. Hu on where this -- where he sees this market for ridesharing evolving. And his plan for Kandi. I'm sorry, go ahead.

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Kewa Luo, [119]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [120]

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(foreign language)

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Kewa Luo, [121]

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[Interpreted] I hear that you are asking 2 questions from what you just said. First, both Li Shufu and I have great confidence and hope in ride-hailing -- online ride-hailing market in China. And especially giving out the environment and the transportation constraints in China, nowadays, a lot of people they prefer riding the online ride-hailing services other than driving their own residential cars because simply that just they going to pay more for parking and the traffic is just very frustrating. Therefore, there's going to be a market full of potentials going forward. And secondly, even though there are 31 million drivers on the Didi platform, but I do believe that things need to take step-by-step. You cannot take the whole pie at once. And with the collaboration with the alliance that we are going to provide 300,000 EVs within 5 years, I think that's already great contract for us. If we can achieve that, it's another milestone for us. And we think it's better to take time to do what we can and step-by-step.

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Marc Guest, [122]

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I understand and appreciate that. Last quarter, we found out, at the conference call, and I appreciate that Kandi really likes to share their color at the conference call. Last quarter, we found out that there was a new model, and we found it out at the conference call. In this conference call, we've found that you are moving a little stronger into the self-driving and that is a vision for your future. I would like to ask Mr. Hu to open up a little bit about any of these issues that he feels that the U.S. investors should be aware of.

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Kewa Luo, [123]

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You mean self-driving, meaning autonomous driving feature?

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Marc Guest, [124]

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I mean, we've found out things. It's for me to hear that we have $130 million coming in from the payments that was owed for 2015 and '16. And then for me to know that there's another $140 million or $150 million that is owed by the government for 2017 and -- '16 and '17, excuse me.

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Kewa Luo, [125]

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So altogether, actually, I'm sorry -- actually, it's altogether from '15, '16, '17, '18, altogether it's $130 million in total, U.S. dollars.

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Marc Guest, [126]

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So it's only -- isn't this just for the first 2 years' repayment?

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Kewa Luo, [127]

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No, no, no. For the first 3 -- let me just reemphasize. For the '15, '16, the total subsidy payment JV should receive is RMB 742 million (sic) [RMB 742.8 million]. And the preallocating amount that JV is going to receive for '17 and '18 is, let me see, RMB 131.8 million. So together, it's RMB 874.6 million. So approximately USD 130 million. This is for -- from '15 to '18.

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Marc Guest, [128]

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I see, Kewa. Well, the question that I'm asking at this point is, is there any other vision that Mr. Hu would like to share of things that he feels makes -- are we going -- look, Mr. Hu has been regarded in the past as the father of the electric car in publications. The company does not tout its strengths. The company owns 4 factories with substantive value. It's quite conceivable that Mr. Hu would feel that the value of the company is vastly understated. But when we've given a substantive amount of the JV to Geely, it would be helpful for us to have more color from Mr. Hu on these conference calls for why he feels that's such a strong play. We feel we're in the launch seat of a rocket. And I just want to have a little more color from Mr. Hu of what we should look forward to as investors under this new restructuring.

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Kewa Luo, [129]

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Okay. Okay. (foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [130]

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(foreign language)

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Kewa Luo, [131]

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[Interpreted] Well, I do think that after the JV restructuring, I will be less involved in JV's daily operation. It will be taken over by Geely and which will be definitely a very positive thing and -- especially with the sufficient cash flow. For me, Hainan is still going to be under Kandi. So what I'm going to focus on is to really focus on the R&D, to focus on our cash -- car-share market and also spend more energy on the technology side of the EV, for example, the autonomous driving, the flying car. And I do hope that Kandi Technologies in the future will become a high-tech EV company, and that's my vision.

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Marc Guest, [132]

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I very much appreciate Mr. Hu's sharing of that and his history in this industry. I would love to suggest that it become a little bit more prominent in your publication that he spent many years in this industry, and I just wanted to express my respect.

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Kewa Luo, [133]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [134]

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(foreign language)

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Kewa Luo, [135]

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[Interpreted] Operator, are we done with all questions?

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Operator [136]

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We have a follow-up question from [Frank Blatterman], a private investor.

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Unidentified Participant, [137]

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When is carbon credit expected to start? And will these credits be sold on the open market or used by Geely to offset its ICE business requirements?

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Kewa Luo, [138]

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I'm sorry, Frank, can you repeat one more time? You are skipping a little bit.

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Unidentified Participant, [139]

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Okay. When is carbon credit trading expected to start? And will these credits be sold on the open market or used by Geely to offset its ICE business requirements?

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Kewa Luo, [140]

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(foreign language)

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [141]

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(foreign language)

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Kewa Luo, [142]

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[Interpreted] Well, this again is still under discussion. We haven't seen any final decision coming out from the government. So I cannot comment anymore. But if this is finalized, I do believe that it's going to be for JV, it's not going to have anything to do with Geely and their business.

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Operator [143]

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There are no further questions. I turn it back to our speakers today for any additional or closing remarks.

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Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [144]

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(foreign language)

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Kewa Luo, [145]

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[Interpreted] Thank you, ladies and gentlemen, for attending today's meeting. On behalf of the Board of Directors and the management team of Kandi Technologies Group, I would like to reaffirm our commitment we will we continue to work diligently to maximize shareholder value by focusing on building our EV business strategically and our car-share business while delivering strong operational results. And thank you, again, for your understanding and support. We look forward to talking with you at the next meeting. If you have any additional questions, please don't hesitate to contact our Investor Relations department. Thank you, goodbye.

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Operator [146]

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Ladies and gentlemen, this concludes today's call. Thank you, for your participation. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]