U.S. Markets close in 2 hrs 43 mins

Edited Transcript of KNDI earnings conference call or presentation 12-Nov-19 1:00pm GMT

Q3 2019 Kandi Technologies Group Inc Earnings Call

JINHUA Dec 4, 2019 (Thomson StreetEvents) -- Edited Transcript of Kandi Technologies Group Inc earnings conference call or presentation Tuesday, November 12, 2019 at 1:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Kewa Luo

Kandi Technologies Group, Inc. - Manager of IR

* Xiaoming Hu

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

================================================================================

Conference Call Participants

================================================================================

* Arthur Porcari

Corporate Strategies, Inc. - Senior Consultant of Corporate Strategies

* Michael Pfeffer;Oppenheimer & Co. Inc.;Financial Advisor and Executive Director - Investments

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, and welcome to the Kandi Technologies Third Quarter 2019 Financial Results Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Ms. Kewa Luo, IR Manager. Please go ahead, ma'am.

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [2]

--------------------------------------------------------------------------------

Thank you, operator. Hello, everyone, and welcome to Kandi Technologies Group Third Quarter 2019 Earnings Conference Call. The company distributed its earnings press release earlier today, and you can find a copy of it 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, we -- 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. (foreign language)

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [4]

--------------------------------------------------------------------------------

[Interpreted] Hello to all the attendees. Thank you very much for joining our third quarter 2019 earnings conference call today.

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [5]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [6]

--------------------------------------------------------------------------------

[Interpreted] Since Kandi Vehicles and Geely jointly established the affiliate company, formerly known as the JV Company, the affiliate company has been engaged in manufacturing pure electric vehicles, and the Kandi Vehicles did quite a bit of changes at that time in order to be focusing on supplying EV products to the affiliate company.

At the beginning of this year, the affiliate company made substantial progress in leading the efforts in organizing the Online Ride-sharing service alliance project of offering 300,000 government-accredited vehicles within 5 years. Later in March, to accelerate its growth, we sold part of our equity interest in the affiliate company to Geely to allow Geely to own more controls in the affiliate company and assist this to become a prominent company with the hope that the affiliate company can fully utilize its potentials to accelerate its growth. Although, Kandi Vehicles' equity interest percentage in the affiliate company was reduced to 22%, but we believe that with Geely's help, our profit from the affiliate company after the adoption of the refined and upgraded business plans will far exceed the profits we received when we originally owned 50% equity. I believe everyone will agree on this. Over the past 6 months, the affiliate company has made substantial progress with Geely's help in restructuring and adjusting its business strategies. For now, they have not disclosed any progress yet, but they will release details of the progress in upcoming December.

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [7]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [8]

--------------------------------------------------------------------------------

[Interpreted] Due to the restructuring of the affiliate company, we have adjusted Kandi Vehicles' business model accordingly. After dedicating the past 6 months to adjust Kandi Vehicles' business plan, its business will have the following priority.

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [9]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [10]

--------------------------------------------------------------------------------

[Interpreted] Number one, after Geely Holding took control of the affiliate company, the online ride-sharing service alliance project, which offers 300,000 government-accredited vehicles within 5 years, became conflicted with Geely's [joint venture] program. Due to the fact of this project is very sizable and Kandi has done a lot of work, therefore, Kandi has taken over the online ride-sharing service alliance project and reorganize it to bring in other partners with greater experiences and resources. Currently, the preparation work is going very well. More details of this project will be announced in the near future. Also, this project is expected to drive the sales of the Model K23.

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [11]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [12]

--------------------------------------------------------------------------------

[Interpreted] Number two, further improving the operating management and production ability of the Hainan Facility to capture the opportunity of rising online ride-hailing market and the U.S. market demand.

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [13]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [14]

--------------------------------------------------------------------------------

[Interpreted] Number three, as a EV parts provider continuing to supply batteries, motors and electronic control components to the affiliate company and Hainan Facility.

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [15]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [16]

--------------------------------------------------------------------------------

[Interpreted] Number four, strengthening our relationship with DGL Group U.S.A., while ensuring the growth of the all-terrain vehicles business.

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [17]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [18]

--------------------------------------------------------------------------------

[Interpreted] To all of our shareholders, due to the impact of the affiliate company's equity adjustments, the company's various financial indicators were not satisfactory, but we believe that our refined plan will be more conducive to future developments. We have full confidence in the company's growth in 2020.

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [19]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [20]

--------------------------------------------------------------------------------

[Interpreted] The format of this conference call will be as the same as last conference call. Since we have already released our financial numbers, we will skip the CFO's part to address all the financial numbers, and we will save the time for answering your questions.

Now I can take your questions. Thank you.

Operator, we are ready to take some questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) We will now take our first question from Mr. [Karl Scherer], [Ring Ring Consulting].

--------------------------------------------------------------------------------

Unidentified Analyst, [2]

--------------------------------------------------------------------------------

So on the conference call in early March, Mr. Hu said early on in 2018, we prepared a 3-year plan for 2018 through 2020 based on our companies and the industry situation. 2018 was to be the year of survival, 2019 of revival and 2020 will be the year of prosperity. Since Mr. Hu probably knew about the restructuring with Geely Holdings at that time, does he feel still so strongly about 2020 for Kandi? And if so, does he have any ideas on how to get this closely undervalued Kandi into a year of prosperity story out to Wall Street investors, which means, are you going to step up your marketing efforts and your self-promotion towards professional investors?

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [3]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [4]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [5]

--------------------------------------------------------------------------------

[Interpreted] Although being impacted by the affiliate company's equity restructuring, Kandi Vehicles is still on the right track for growing business, like what I said in the opening remarks. We are confident that the Kandi Vehicles will have a big breakthrough in 2020. In terms of our plan to get the story out to Wall Street investors, we are working on the marketing plan, once it's ready, we will disclose it to the market.

--------------------------------------------------------------------------------

Unidentified Analyst, [6]

--------------------------------------------------------------------------------

Okay. Could I have a follow-on question?

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [7]

--------------------------------------------------------------------------------

Yes, please.

--------------------------------------------------------------------------------

Unidentified Analyst, [8]

--------------------------------------------------------------------------------

I'm still puzzled by the sell back of Kandi shares in the joint venture and the structure of how these shares can be regained again. I'm having 2 completely different readings on it. One reading is Kandi can buy back its share in the joint venture at any given time in the future for the exact same price it sold its shares. Or the other version I'm finding is, Kandi can issue new shares in -- the Kandi incorporated in the KNDI stock and exchange these shares in the Kandi joint venture, which would basically come down to a dilution and basically keep Kandi's portion of the joint venture at the same 20-some percent salvage reading would be correct, please?

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [9]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [11]

--------------------------------------------------------------------------------

[Interpreted] About this, when we signed the restructuring agreement with Geely, one of the terms is reading as the both parties further agreed that within next 2 years, Kandi may purchase a portion of the assets of the JV company or the affiliate company in the form of its shares, resulting the Geely becoming a significant shareholder of the company. And for that, we also need to depend -- decide depending on how the affiliate company is doing in the near future. If the affiliate company has become a large and then we will have to rediscuss the options. So for now, we just cannot make a firm offer on that. But depending on the specific situation of the -- its development and to find the best approach to maximize Kandi's interest and then we will make the decision then. The agreed time frame is 2 years.

--------------------------------------------------------------------------------

Unidentified Analyst, [12]

--------------------------------------------------------------------------------

I see. And what affiliate are we talking about that might gain in value?

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [13]

--------------------------------------------------------------------------------

I'm sorry, say one more time?

--------------------------------------------------------------------------------

Unidentified Analyst, [14]

--------------------------------------------------------------------------------

You mentioned, there was an affiliate company that might gain in value, which would change the valuation of the joint venture, which affiliate would that be?

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [15]

--------------------------------------------------------------------------------

Oh, actually the affiliate company is the JV company. Since right now, we only own 22%, so we cannot call it the joint venture, we have to call it affiliate company.

--------------------------------------------------------------------------------

Unidentified Analyst, [16]

--------------------------------------------------------------------------------

I see. Okay. Semantics. And one more question directly, concerning a statement Mr. Hu made in one of his last conference calls that the new models would be produced to the standard of the European common market, is that still sell with the new models? And would -- what would happen if the European importer of foreign vehicles would approach Mr. Hu, could he directly import the vehicles or would they have to be still modified and altered?

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [17]

--------------------------------------------------------------------------------

Okay. (foreign language)

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [19]

--------------------------------------------------------------------------------

[Interpreted] Mr. Hu is saying that it will be a possibility if the European company come to approach us. However, he thinks that it's going to take a long time. For example, in order to explore the EV to U.S., it takes about a year, but he believes that there will be possibilities.

--------------------------------------------------------------------------------

Unidentified Analyst, [20]

--------------------------------------------------------------------------------

Okay. Thank you for your gracious time, and congratulations for navigating very difficult waters in the automobile sector in China.

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [21]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Operator [22]

--------------------------------------------------------------------------------

We now take our next question from [RL Gabery] from [RL Gabery Investment Company].

--------------------------------------------------------------------------------

Unidentified Analyst, [23]

--------------------------------------------------------------------------------

Kandi holders were forewarned that JV controlling partner, Geely Holdings' Li Shufu, was going to curtail JV EV sale efforts of pre-219 (sic) [pre-2019] models, which did not meet all of the new requirements for the government-accredited programs. We also have had no news on how he is progressing with the new fleet. Can you update us on what new EVs are to -- we are to expect and when will they be released?

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [24]

--------------------------------------------------------------------------------

Thank you. (foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [25]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [26]

--------------------------------------------------------------------------------

[Interpreted] Thank you very much for following up us closely. What you said is correct that the previous models that won't be able to meet the requirement for the ride-hailing market. And the affiliate company has done a lot of work. So the specific information will be released by the affiliate company the upcoming December. By then, you will find out more information.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

We now take our next question from Mike Pfeffer from Oppenheimer.

--------------------------------------------------------------------------------

Michael Pfeffer;Oppenheimer & Co. Inc.;Financial Advisor and Executive Director - Investments, [28]

--------------------------------------------------------------------------------

I have a quick comment, which kind of sets up my 2 questions. So real quickly, in the second quarter 10-Q, Kandi's increase in gross margins was partially attributed to the increased selling price of Kandi 100% owned Jinhua An Kao high-margin charging and exchanging equipment and battery processing business. Yet to date, other than announcing An Kao as Kandi's largest acquisition ever in 2017, we have seen no other mention of the company or its products in a press release. Do you want me to ask my question now? Or do you want to just translate that?

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [29]

--------------------------------------------------------------------------------

I will translate. (foreign language) Go ahead.

--------------------------------------------------------------------------------

Michael Pfeffer;Oppenheimer & Co. Inc.;Financial Advisor and Executive Director - Investments, [30]

--------------------------------------------------------------------------------

Can you -- right, can you please explain just what Jinhua An Kao does with its battery processing that makes it so valuable and most importantly, it's battery exchange, both for internal use by the JV and third-party use?

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [31]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [32]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [33]

--------------------------------------------------------------------------------

[Interpreted] Jinhua An Kao has its own unique pure electric vehicle battery exchange system technology and also plugging power connection pack technology. They also own a number of patents. A couple of days ago, which is on the 10th -- November 10, the fully automated Kandi intelligent battery exchange system developed by Jinhua An Kao has also passed the inspection. And this system is more efficient in terms of time and the money. And this system also ranks among the current top battery exchange equipment, and the company's products can be, of course, used by the third parties as well, and we have included the video of this system on our company's official website.

--------------------------------------------------------------------------------

Michael Pfeffer;Oppenheimer & Co. Inc.;Financial Advisor and Executive Director - Investments, [34]

--------------------------------------------------------------------------------

Okay. And just one other quick one. Is Kandi's side slide patented quick battery exchange being used with Jinhua An Kao's charging units? Or does An Kao have its own technology? And will all new JV EVs come with Kandi's quick battery exchange?

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [35]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [36]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [37]

--------------------------------------------------------------------------------

[Interpreted] Jinhua An Kao is Kandi Vehicles' wholly owned subsidiary. Therefore, certain technologies are definitely used together by both parties. In view of encouragement for using the battery exchanging method, as you know, the quick battery exchange is innovated by me. But in the past, this method was misunderstood by the authorities and it wasn't being promoted. But however, this has been changed. And right now, the national authority is -- are very encouraging the industry to using the battery exchange technologies. Therefore, we believe that the system can not only provide services for our Kandi's vehicle but also play a very positive role in promoting renewable energy vehicles in China. So there will be a very good future for this technology, I believe.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

We now take our next question from Arthur Porcari from Corporate Strategies.

--------------------------------------------------------------------------------

Arthur Porcari, Corporate Strategies, Inc. - Senior Consultant of Corporate Strategies [39]

--------------------------------------------------------------------------------

That was a pleasant quarter, Mr. Hu. Just a -- I got a couple of areas I want to just touch on be relatively short. But based on recent reports in the states, it appears that most China-based auto and EV companies like NIO and even Buffett's BYD, have unexpectedly seen China car sales slowing dramatically in the past 2 quarters, which is causing them to have some major sales projection misses, and even some of the weaker companies going out of business. However, Kandi's partner is showing up in the media, it seems to be leading the pack in China, and it's actually still in the growth mode. So it looks like you pick the right partner. But I've kind of -- just a couple of questions on that area. And then I want to follow up with a little shift to a different area. So why don't you carry that on to Mr. Hu.

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [40]

--------------------------------------------------------------------------------

Thank you. (foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [41]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [42]

--------------------------------------------------------------------------------

[Interpreted] Go ahead.

--------------------------------------------------------------------------------

Arthur Porcari, Corporate Strategies, Inc. - Senior Consultant of Corporate Strategies [43]

--------------------------------------------------------------------------------

Okay. When Mr. Hu negotiated the partial sale with Li Shufu, curiously, did we anticipate this country-wide auto and EV slowdown? And in his opinion, what is causing the industry contraction? Is it temporary? And what is Kandi JV doing to address this?

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [44]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [45]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [46]

--------------------------------------------------------------------------------

[Interpreted] You actually have asked 2 questions, I will answer it one by one. First, I don't think this is a question about the sales slowing down because the industry has reached to a point where the reorganization and the restructuring have become -- have to become necessary. And only the fittest will survive. At present, there are hundreds of large and small automobile factories in China and the production capacity has become seriously oversupplied. In my opinion, under normal circumstances, the number of China's automobile factories should be around 10, and Geely ranks the top. Therefore, I feel firmly believe that letting the affiliate company run by the management of Geely Holdings is definitely a very wise choice.

And the second question you asked, what causing the industry contraction? I think it has many factors, but the primary factors are -- is slow economic growth and the market saturation, and the third is the capacity is oversupplied. However, for the affiliate company managed by Geely, they will have a plan accordingly that they think is going to help the company to growth, and more details will be disclosed in the coming December, like I said earlier.

--------------------------------------------------------------------------------

Arthur Porcari, Corporate Strategies, Inc. - Senior Consultant of Corporate Strategies [47]

--------------------------------------------------------------------------------

Okay. That's -- I'm going to -- one more little question there, and then I'm going to shift to a slightly different subject. Well, it appears then that the decision made last year to concentrate with Geely on the accredited government program, the 300,000 car program in the next 4 or 5 years. It seems to be the smart move to go then because that seems to be a pretty captured marketplace. But again, that's an observation. And if you can ask whether he wants to agree with or not, but really, here's my second question. Can Mr. Hu tell us more about Kandi's decision to enter into the new product lines and its relationship with U.S.-based DGL, the major Walmart buyer for China products? And why the company decided to enter this new product line, excluding exporting the scooters and micro autos? Go ahead and pass on to Mr. Hu, and I'll hit on my question.

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [48]

--------------------------------------------------------------------------------

Okay. (foreign language) Yes, go ahead.

--------------------------------------------------------------------------------

Arthur Porcari, Corporate Strategies, Inc. - Senior Consultant of Corporate Strategies [49]

--------------------------------------------------------------------------------

Okay. And just out of curiosity, I mean, very complementary to Kandi that somebody as big as Walmart, Sam's Club and DGL would have such an interest in this. And I think we were all quite surprised by the $70 million order for 800,000 units over the next 12 months of self-leveling scooters and scooters, which effectively, I think, are hoverboards and scooters. But anyway, what was really surprising was how in 3 weeks the company already delivered -- announced that already delivered 40,000 of the units, 45,000, like $4 million. So I'm curious, between now and year-end, it seems like Christmas-type products between now and year-end. Is it fair to say that maybe as many as half of those would actually be delivered? And again, this is all Kandi's. In case anybody is not aware. That's my question.

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [50]

--------------------------------------------------------------------------------

Also you're asking -- can you repeat the very last part?

--------------------------------------------------------------------------------

Arthur Porcari, Corporate Strategies, Inc. - Senior Consultant of Corporate Strategies [51]

--------------------------------------------------------------------------------

Well, okay. Effectively, let's put it in 3 ways. Let's just say, how did Mr. Hu get involved with this company in such a high level initially for the shift of our business right now, which I think is a good thing. And what type of margins are involved in this product line? Let me -- let's say a smaller one too. What type of margins are involved in it? And are U.S. tariffs affecting this? And for that matter, all our U.S. products for the shift on you there.

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [52]

--------------------------------------------------------------------------------

Okay. But do you still want to ask whether -- you asked earlier, whether we can execute the deals for the rest of the year?

--------------------------------------------------------------------------------

Arthur Porcari, Corporate Strategies, Inc. - Senior Consultant of Corporate Strategies [53]

--------------------------------------------------------------------------------

Yes. Well, at least half the deal over between now and the end of the year since these products seem to be kit Christmas-type products.

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [54]

--------------------------------------------------------------------------------

Okay. Okay, got it. Thank you. (foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [55]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [56]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [57]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [58]

--------------------------------------------------------------------------------

[Interpreted] Okay. Mr. Hu has answered all the questions, I will try to summarize them all. First, he doesn't believe that this move is shift off our focus because we have been doing -- producing these type of products in the past but since there were not enough demand, so we never really had a lot of sales. But however, this time, we were able to -- we introduced to the CEO of DGL, and he came to visit us and realize that we do have this advantage from producing the ATV, UTV. So we decided to partner together. In the past, they have been working with a company in Shenzhen. But right now, since Shenzhen is focusing on high technology, so they also wanted to find a new partner to work together. And we believe this is a great opportunity for us.

And next question is -- and for this contract, we have signed 300,000 and 500,000. I don't think we're going to execute half of this contract within this year. Right now still in a small amount, but we believe, next year we're going to hit the greater number in terms of the number of vehicles we're going to send it to them. And also, for the tariffs, we think it definitely has a certain impact, depending on the outcome of the U.S.-China trade negotiation. If the tariff is reduced, we're going to have a higher profit margin. But for now, the margin is still small since the value is -- volume is still small.

--------------------------------------------------------------------------------

Arthur Porcari, Corporate Strategies, Inc. - Senior Consultant of Corporate Strategies [59]

--------------------------------------------------------------------------------

Okay.

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [60]

--------------------------------------------------------------------------------

Did I cover everything?

--------------------------------------------------------------------------------

Arthur Porcari, Corporate Strategies, Inc. - Senior Consultant of Corporate Strategies [61]

--------------------------------------------------------------------------------

Well, actually, you did. But I think there's one other little area over here as a follow-up after what he said. Does Mr. Hu see the possibility -- I mean, does he see the possibility that Sam's Club and Walmart may one day actually be selling really high-end products like EVs. I mean already, I know they sell $10,000 hunting UTV, I see that in Sam's Club when I walk into Sam's Club in the front door. But does he feel there's going to be an opportunity sometime in the next several years, where, like Walmart, we'll actually be selling autos and electric autos and such? Ask him that question, and then I had several wrap-up questions.

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [62]

--------------------------------------------------------------------------------

Okay. (foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [63]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [64]

--------------------------------------------------------------------------------

[Interpreted] Okay. Mr. Hu is saying that actually from discussion with DGL, they have already have the plan to expand into the EV distribution, but we haven't really got into more details. Mr. Hu believes that in the near future, there will be possibilities for that. And also, he want to mention that these scooters are being manufactured on the products -- the product line of ATV and UTV.

--------------------------------------------------------------------------------

Arthur Porcari, Corporate Strategies, Inc. - Senior Consultant of Corporate Strategies [65]

--------------------------------------------------------------------------------

Okay. That's -- I kind of thought that might be where he was going with this. So effectively, I guess, they're being made right now in the Jinhua facility?

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [66]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Arthur Porcari, Corporate Strategies, Inc. - Senior Consultant of Corporate Strategies [67]

--------------------------------------------------------------------------------

Okay. And here's just the last thing, I wanted to go back to the former subject. After the December reveal by Geely of what he's been doing behind the scenes for the past several months with the JV, will Kandi still be as proactive to keep shareholders aware of all the aspects of the JV? I haven't had chance to look at the new 10-Q to see whether like there's still a breakout and such, but will there be breakouts with the JV still? And then finally, in what format do you anticipate this Geely revealed to be on the JV's progress? Will it just be something announced in China? Will it be a co-release with Geely and Kandi or Geely Holdings and Kandi? How does he see us getting because that news, obviously, could be quite monumental, really for Kandi?

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [68]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [69]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [70]

--------------------------------------------------------------------------------

[Interpreted] It's hard to say for now, but this will be disclosed in accordance with SEC regulations.

--------------------------------------------------------------------------------

Arthur Porcari, Corporate Strategies, Inc. - Senior Consultant of Corporate Strategies [71]

--------------------------------------------------------------------------------

Okay. Well, again, congratulations. Mr. Hu, this was a pleasantly surprising quarter, not so much on the bottom line, but on the overall revenue line. And the fact that he's finally got the debt-to-equity ratio down to a nice reasonable 0.75:1 is very impressive.

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [72]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [73]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [74]

--------------------------------------------------------------------------------

[Interpreted] Thank you.

--------------------------------------------------------------------------------

Operator [75]

--------------------------------------------------------------------------------

We now take our next question from [Lee Gale], private investor.

--------------------------------------------------------------------------------

Unidentified Participant, [76]

--------------------------------------------------------------------------------

I have two questions. The first one is about Jinhua legacy facility. In late 2017, Mr. Hu reported in an SEC filing that government was interested in buying Jinhua for in excess of RMB 1 billion which is about USD 160 million. In spite of Kandi carrying this facility is booked for only RMB 7.7 million. Mr. Hu has told us it is not time to sell since the value keeps rising. Is that still the case? Since the economy in China is slowing down, how can the company unlock this ignored hidden value? (foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [77]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [78]

--------------------------------------------------------------------------------

[Interpreted] I think value is -- it won't be changed much. But however, we cannot take too much initiation because the property will only show its value by waiting for the government to come to us to discuss when we need it. A matter of fact, the government has contact me for further discussion in 2 days. So there's really no real progress. However, we have been keeping contact.

--------------------------------------------------------------------------------

Unidentified Participant, [79]

--------------------------------------------------------------------------------

My next question is about the Hainan facility. Mr. Hu told us he wants to keep the new RMB 250 million Hainan facility for Kandi Technologies. And recently, Hainan was designated by the central government as free trade port, and also Hainan, our local government -- the government announced that it will be the first to ban ICE sale by 2030, I think. Aside from using the facility to meet Kandi EV for exports, does Mr. Hu feel the under the current situation, the facilities where you have significantly increased? (foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [80]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [81]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [82]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [83]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [84]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [85]

--------------------------------------------------------------------------------

(foreign language) [Interpreted] Okay. Regarding to how much value has been increased, it's hard to say. I don't know the accurate number to share with you. But Hainan facility is worth quite a lot of value due to its special status, that's for sure. Kandi 20 -- K23 is model that being made in Hainan, which will be launched in China's online ride-hailing market as well as exporting to the U.S. market.

--------------------------------------------------------------------------------

Unidentified Participant, [86]

--------------------------------------------------------------------------------

So we all know K23 is being produced in Hainan. So do we have any other EV models are being produced or being developed in Hainan? (foreign language)

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [88]

--------------------------------------------------------------------------------

[Interpreted] We do have plan to manufacture other EV model but we haven't started yet. And K23 has been going through a lot of upgrades. And right now, it's -- everything is ready to be launched in the market. And if you remember, before K23 was manufactured under Geely's license. Since Kandi right now has its own production license, so in the future, K23 is going to be under Kandi brand to be launched in the market.

--------------------------------------------------------------------------------

Unidentified Participant, [89]

--------------------------------------------------------------------------------

So I have one follow-up question for Mr. Hu, since he mentioned about the license for K23. For U.S. investors are always confused about the license ownership. So previously, we own 50% of JV. Now we only own 20% of the JV. So how would the license work because now, presumably, the license belongs to JV? And what's the agreement for Kandi Technology, which the owner of K23 to use the license? (foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [90]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Unidentified Participant, [91]

--------------------------------------------------------------------------------

Hello. Kewa, I cannot hear you. I can...

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [92]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [93]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [94]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [95]

--------------------------------------------------------------------------------

[Interpreted] We have agreed on terms in terms of using the license. It's a very similar procedure, like how we used to use Geely's license to produce vehicles for JV. And right now, Kandi also going to use the license of -- from JV to produce the vehicle. Do you have to -- do you get what I'm trying to say?

--------------------------------------------------------------------------------

Unidentified Participant, [96]

--------------------------------------------------------------------------------

Yes, I do.

--------------------------------------------------------------------------------

Operator [97]

--------------------------------------------------------------------------------

Well, at this time, we do not have any further questions at this time.

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [98]

--------------------------------------------------------------------------------

Okay. Thank you. (foreign language)

--------------------------------------------------------------------------------

Xiaoming Hu, Kandi Technologies Group, Inc. - Chairman, President & CEO [99]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Kewa Luo, Kandi Technologies Group, Inc. - Manager of IR [100]

--------------------------------------------------------------------------------

[Interpreted] Thank you, ladies and gentlemen, for attending today's meeting. On behalf of the Board of Directors and management team of Kandi Technologies Group, I would like to reaffirm our commitment. We will continue to work diligently to maximize shareholders' value by focusing on growing our EV business strategically, while delivering strong operational results. Thank you very much for your understanding and support. We look forward to talking with you in the next meeting. If you have any additional questions, please don't hesitate to contact our Investor Relations person. Goodbye.

--------------------------------------------------------------------------------

Operator [101]

--------------------------------------------------------------------------------

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.

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