Kandi Technologies Group, Inc. (KNDI) Q4 2018 Earnings Conference Call Transcript
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Kandi Technologies Group, Inc. (NASDAQ: KNDI)
Q4 2018 Earnings Conference Call
March 15, 2019, 8:00 a.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, good day, and welcome to the Kandi Technologies Full-Year 2018 Financial Results Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kewa Luo, IR Manager. Please go ahead.
Kewa Luo -- Investor Relations Manager
Thank you, operator. Hello, everyone, and welcome to Kandi Technologies Group Inc's full-year 2018 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 discussions today will contain forward-looking statements made under the Safe Harbor provisions of the US 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 31st 2018, and in other documents filed with US Securities 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, a 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.
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Hello, ladies and gentlemen and all friends, thank you for joining our full-year 2018 earnings conference call.
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Kandi has experienced challenges over the past few years due to the confusion surrounding the reusable battery exchange model. However, Kandi has been working diligently to overcome the downturn and obstacles to resolve these issues. Early on in 2018, we prepared a three-year plan for 2018 through 2020 based on our company's and the industry's situation. 2018 was to be the year of survival, 2019 of revival, and 2020 will be the year of prosperity. Through our hard work in 2018, we rebuilt and refined our practices, and as a result, we are very pleased with our financial performance. In 2018, our total revenue was up 9.4% to $112 million; while pre-tax income was $2.1 million compared to a loss of $31.6 million in 2017. In 2019, we plan to continue this upwards momentum, and further refine our business model and execution plan to forge new opportunities moving forward in the following ways.
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(Foreign language)
Kewa Luo -- Investor Relations Manager
First, the management team hopes the JV Company to achieve its projected goals of producing and selling 20,000 EVs in 2019. Second, the Company is expecting to obtain the approval of its application for a manufacturing license from the Ministry of Industry and Information Technology to become an official EV manufacturing enterprise with "dual production licenses." Third, following the US National Highway Traffic Safety Administration's approval of certain Kandi EV models for importation and registration in the US, Kandi EV models are now eligible for up to $7,500 in federal tax credits in 2019 and 2020. To capitalize on the opportunity presented by the NHTSA's approval, we are in the process of preparing a strategic sales plan for the debut of Kandi EV models in the American market later this year. Fourth, the car share program (or Micro Public Transportation) has been upgraded to an online ride-hailing business model in China, which is expected to open up a broader market for Kandi electric vehicles. Finally, the Company is evaluating for the optimal time to restructure the JV Company's equity in order to unlock the shareholder value of the JV Company. We are dedicated in taking full advantage of the milestones we have reached thus far, achieving stronger business results in 2019, as well as maximizing our long-term shareholders' investments.
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Now I will turn the call to our Chief Financial Officer, Ms. Zhu Xiaoying, to give you more details on our financial highlights. After that, I will take the questions. Thank you.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Hello, everyone, my name is Zhu Xiaoying. Now, I would like to provide a brief overview of our financial results for the full-year 2018. Please note that all numbers I will discuss today are in US dollars, unless otherwise noted.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
First, let me walk you through the full year financial results in 2018.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Total net revenues in 2018 were $112.4 million, a increase of $9.6 million or 9.4% from $102.8 million in 2017. The increase in revenues was mainly due to a increase in sales of off-road vehicles during 2018.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
EV parts sales were approximately $99.1 million in 2018, accounting for 88.1% of our total net revenues, a increase of $1.7 million or 1.8% from $97.4 million compared to 2017.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Revenue from sales of off-road vehicles was $13.2 million in 2018, a increase of $7.9 million or 144.8% compared with $5.4 million in 2017. The increase in revenue from off-road vehicles was largely due to the additional sales from SC Autosports, which became our wholly owned subsidiary in the US in July 2018.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Our cost of goods sold in 2018 was $92.2 million, a increase of $3.7 million or 4.2% from $88.5 million in 2017. The change was primarily due to the corresponding increase in sales from 2018.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Gross profit in 2018 was $20.2 million, a increase of $5.9 million or 41.2% from $14.3 million in 2017. Gross margin in 2018 increased to 18% from 14% in 2017. The increase of gross margin was due to the higher gross margin from off-road vehicles sales of SC Autosports as well as increased gross margin from sales of battery packs.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Total operating expenses in 2018 were $21.9 million, a decrease of 45.9% from $40.4 million during 2017. The decrease in total operating expenses was due to the largely decreased research and development expenses in 2018.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
GAAP net loss in 2018 was $5.7 million or $0.11 loss per fully diluted share compared with GAAP net loss of $28.3 million or $0.59 loss per fully diluted share in 2017. The decreased in net loss was primarily attributable to the increased gross profit, the decrease in R&D expenses, and the increased government grants the Company received this year.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Income before income tax in 2018 was $2.1 million compared to loss of before income tax of $31.6 million in 2017. The increased income tax expense is many due to the $6.0 million valuation allowance of Hainan facility's deferred tax assets, because of three-year accumulated loss in its construction period. After other income tax adjustments, the income tax expense in 2018 was $7.8 million.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Non-GAAP net loss in 2018 was $8.8 million compared with non-GAAP net loss of $23.2 million in 2017. Non-GAAP loss per share was approximately $0.17 per fully diluted share for the full year of 2018 compared with non-GAAP adjusted loss per share of $0.48 per fully diluted share for the full year of 2017.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Let me touch on the JV's financials now.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
For the full-year 2018, the JV Company's net sales were $122.5 million, gross loss was $17.7 million and net loss was $36.3 million.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
During 2018, the JV Company sold a total of 10,259 units of EV products, as compared to a total of 11,437 units sold in 2017.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Kandi's investments in the JV Company are accounted for under the equity method of accounting, as Kandi has a 50% ownership interest in the JV Company. As a result, Kandi recorded 50% of the JV Company's loss for $18.2 million for the full-year 2018. After eliminating intra-entity profits and losses, Kandi's share of the after tax loss of the JV Company was $17.9 million for the full-year 2018.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Next, I will review the company's cash flow.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
In 2018, cash provided in operating activities was $13.6 million, as compared to cash used in operating activities of $3.2 million in 2017. The major operating activities that provided cash for 2018 are increase of accounts payable and increase of other payables and accrued liabilities. The major operating activities that used the cash for 2018 was a increase in receivables from the JV Company and a increase of accounts receivables.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Cash used in investing activities for 2018 was $0.95 million, as compared to cash derived from investing activities of $2.71 million for 2017. During the year of 2018, the major investing activity that used cash was the acquisition of Jinhua An Kao net of cash received in the amount of $3.56 million.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Cash used in financing activities for 2018 was $5.3 million as compared to cash used in financing activities of $9.81 million in 2017. The major financing activities that provided cash for 2018 were proceeds from notes payable of $54.35 million and proceeds from short-term bank loans of $32.50 million. The major financing activities that used cash for 2018 were $58.59 million of repayments of note payables and $33.26 million of repayments of short-term bank loans.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Operator, we are ready to take some questions.
Questions and Answers:
Operator
Thank you. (Operator Instructions). We will now take our first question from Ted Schwartz. Please go ahead.
Ted Schwartz -- TAS Associates -- Analyst
I notice that you're having an income tax expense of $7.7 million, whereas both the Joint Venture and Kandi itself showed a loss. I don't understand where that $7.7 million income tax expense came in. Could you explain that?
Kewa Luo -- Investor Relations Manager
I'm sorry, can you just repeat one more time, your phone is a little skipping.
Ted Schwartz -- TAS Associates -- Analyst
Pardon me.
Kewa Luo -- Investor Relations Manager
Hello, would you please repeat your question one more time. Your phone is little skipping.
Ted Schwartz -- TAS Associates -- Analyst
I don't understand how there could be a $7.7 million income tax expense when both the Joint Venture and Kandi showed a loss.
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Okay. This actually is not the income tax that we paid, but however, has to be accounted as expense in our financial statements. But most of the part is due to the $6 million valuation allowance of Hainan facility deferred tax asset because the Hainan facility's bringing accumulated loss in its construction period and the rest of $1.7 million is from other subsidiaries who is profitable, altogether $7.7 million was accounted for the income tax expenses.
Ted Schwartz -- TAS Associates -- Analyst
What models of cars are there presently -- are presently in production (multiple speakers) the 22s, the 27, the EX3, and what about the K23 in Hainan?
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
(foreign language) Okay, right now, there are K23, K22 and EX3 are presently in production and in March, we have plans of 300 K23 stacked up EV parts for the production in Hainan facility.
Ted Schwartz -- TAS Associates -- Analyst
Would you be producing and selling in Hainan in March?
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Right now, since we still rely on Geely 's manufacturing license, so it's going to be sales of the EV part sets.
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
So if we plan to have these 300 sets of EV parts produced this month, so the sales probably will happen next month.
Ted Schwartz -- TAS Associates -- Analyst
All right, thank you very much. Not sure I understand it, but Kewa, thank you, take the next question.
Kewa Luo -- Investor Relations Manager
Thank you. Operator, we can take next question.
Operator
Thank you. Our next question comes from Frank Vladermann. Please go ahead.
Frank Vladermann -- -- Analyst
Yes, and good morning. Can you hear me OK?
Kewa Luo -- Investor Relations Manager
Yes, go ahead.
Frank Vladermann -- -- Analyst
Okay. I have a question involving carbon credits trading. I believe that carbon credit trading maybe an important source of revenue for the Joint Venture going forward. Can you give us a present status of this program? How is this being looked at and implemented in China or has that not yet been fully decided?
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Carbon credit trading policy is still in the planning stages. We don't know the details of the benefits until the policy is released. We have heard a lot of news regarding to it, but we haven't seen any final policy that being released.
Frank Vladermann -- -- Analyst
Okay, very good. Thank you very much. I may have another question later. Please take the next questioner.
Kewa Luo -- Investor Relations Manager
Thank you.
Operator
We will now take our next question from Li Ghou (ph). Please go ahead.
Li Ghou -- -- Analyst
Good evening to Hu and good morning Kewa. My question is about the 2019, the production and sales. So what was basic (inaudible) for the 2019 car production and sales. Is it because of the subsidy delay or it is something else, it is something else, then what's the steps the company is going to do to resolve this issue, if this was the subsidy delay, do you have a transfer in when the subsidy might get to be paid? (foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Due to the changes in the subsidy policy, also the delay in the payment, sales will definitely be affected. As for now, the subsidies from 2015 and 2016 already in the process of clearing and we anticipate that we're going to receive this part of the subsidy payment very soon. And we're also being told that the subsidy from 2017 and 2018 will be start clearing and start paying very soon as well. And so the Company is seeking breakthroughs in the government credit online ride-haling vehicle market and in the US, we have been doing a lot of work and we believe that 2019 we're going to have very promising result.
Li Ghou -- -- Analyst
I have another question. This is about the cars being produced. So Mr. Hu just mentioned that the cars are being produced mostly K22, K27, and EX3. So where are they produced now? (foreign language)
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Li Ghou -- -- Analyst
Actually, I heard some news. Cars are being moved to be produced in Rugao. Is there any particular reason and what is your plan for the plant in Shanghai factor or somewhere else? (foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Li Ghou -- -- Analyst
Thank you.
Kewa Luo -- Investor Relations Manager
Let me translate what Mr. Hu just said. First of all, the first question, where are K27, K22 and EX3 being produced? The answer is, all these cars are being produced at Jiangsu Rugao. So the gentleman is asking why we produce all these cars at one location on the Jiangsu Rugao instead of spread out them in different locations, for example, in Shanghai? And Mr. Hu's answer is, because we used to rely on Geely's manufacturing license, but however, right now, Rugao already has the production license. So Rugao can produce all these vehicles at one location to save the cost and also to centralize all the production at one place.
In the past, we used to produce K10 at Zhejiang factory and K11 at Shanghai, but since right now we don't have a lot of volume, so we centralized everything at the Jiangsu Rugao and some -- for some K23 EV parts, we do separate in Hainan.
Li Ghou -- -- Analyst
I have one more question, I think the management needs to clarify to the Western investors who are often confused by the process, actually, I am super clear about that, this is just for clarification. So people are really confused about that process of the manufacturing licence approval. Currently, Kandi has the approval from the NDRC, the National Development and Reform Commission, so -- and as Mr. Hu just mentioned, we are waiting for the speculative approval from MIIT. So when do you expect that to happen? (foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Li Ghou -- -- Analyst
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Li Ghou -- -- Analyst
(foreign language)
Kewa Luo -- Investor Relations Manager
Okay. Sure. So -- and this question is regarding to the dual production license that we mentioned earlier and Mr. Hu would like to further clarify what this means to us and we believe there has been some confusion regarding the approval of this license issued by the Development and Reform Commission and actually the NDRC approved Enterprise to build the factory, so that's the first license. And the next step is the acceptance of the factory by the Ministry of Industry and Information Technology. As a result, once MIIT approves the company and the company factory will be able to produce the cars. And that's the second license. And together, it's called dual production license that company is applying. And usually there are three steps, which is the car has to be included in the -- include in the directory, in order to be registered in China to be able to be driven on the road. So basically those are three steps in order for you sell the car and then the car will be finally available in the market.
And this is the same procedure for all the manufacturers in China, and for Kandi, we have already sent our application for getting the MIIT approval in the beginning of March and we expect to hear from them in the beginning of April.
Li Ghou -- -- Analyst
Thank you, Kewa. Thank you, Mr. Hu.
Kewa Luo -- Investor Relations Manager
Thank you.
Operator
We will now take our next question from John DeStefano (ph). Please go ahead.
John DeStefano -- -- Analyst
Good evening. My question is in regard to export to the United States of the K22 and EX3. My understanding from what I gathered from your opening and what I read in the press release is that approval is still pending for sale in California. So if that is correct, are dealerships in place ready to go in California, once the approval has been obtained? And what ports do you expect to export the automobiles to, in California in the US?
And my understanding (multiple speakers) excuse me, my understanding, also is from your opening that you plan to export these automobiles to the US later this year, is that correct?
Kewa Luo -- Investor Relations Manager
Let me translate first.
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
These two models can be sold in the US nationwide, so it's not just in California, so there was no any awaiting application to be -- not waiting any application in California. Right now, we're in the process of forming a sales force team and the company anticipates that we're going to import 50 EVs to 100 EVs by the end of May.
With regards to which ports will be used for importing vehicles into the US, I think the US sales team is working on it to choose the most cost efficient one.
John DeStefano -- -- Analyst
Okay. Thank you very much.
Kewa Luo -- Investor Relations Manager
Thank you.
Operator
We will now take our next question from Mike Pfeffer from Oppenheimer. Please go ahead. Mr Pfeffer, your line is now open. Please go ahead.
It appears he may have stepped away from his headset. We will now take our next question from Beth Mozan (ph). Please go ahead.
Beth Mozan -- -- Analyst
I understand that the K23 is going to be designed for the ride-hailing business. Has the Hainan factory started meaningful production? And if not, can you let me know when it might start and the reason?
And second part, have there been discussions with Hainan about their emulating the RMB730 million low interest loan program as is in place with Jiangsu province?
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
We have already planned 300 K23 sets of EV parts for production in March at Hainan factory. In regarding to the discussions with the government about the supply chain finance support program, there haven't been any discussions yet because in Hainan, we are just producing the parts, but in Jiangsu Rugao, we already started producing the EVs.
Beth Mozan -- -- Analyst
Thank you.
Kewa Luo -- Investor Relations Manager
Thank you.
We will now take our next question from Steve Miller. Please go ahead.
Steve Miller -- -- Analyst
Thank you. Two related questions. For 2019 this year, what are you anticipating to be the revenue for the JV and Kandi from the 300,000 EV framework agreement and the 20,000 EV co-operation agreement that were announced earlier this year?
And related to that. I understand there is the 20,000-kilometer requirement to be reached by vehicles in the car share program before you can apply for subsidy payment. Is that going to negatively affect the JV's ability to produce these vehicles? That's it.
Kewa Luo -- Investor Relations Manager
So first question is about -- on the revenue for JV, right? The second question is whether the 20,000 kilometers mileage will be the requirement for the ride-hailing program?
Steve Miller -- -- Analyst
My first question, I guess is, what revenues are you anticipating from both agreements? And then the second question is whatever cars that are sold in connection with those agreements, do they have to comply with that 20,000-kilometer requirement in order to be able -- for you guys to be able to apply for the subsidy payment?
Kewa Luo -- Investor Relations Manager
Okay, thank you. (foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
This contract was signed in order to serve the implementation of the 300,000 government credit Online Ride-Hailing Vehicle Alliance program. We expect the program to begin in April. I don't think there will be any impact on the 20,000 kilometers requirement for the subsidy because each vehicle that is used for Online Ride-Hailing service usually runs 8,000 kilometers per month on average. So in three months, they will be well exceed the 20,000-kilometer requirement.
Operator
We will now take our next question from Mark Kahnau from Swiss Liquid Future. Please go ahead.
Mark Kahnau -- Swiss Liquid Future -- Analyst
Yes, good morning, hello, and good evening, everybody. It seems to me that for the first nine months, the JV was effectively breakeven, Kandi wrote off only $43,000, but by the end of the year, there was an after-tax loss of $17.8 million. That means for me the Joint Venture must have written off about $35 million in the fourth quarter, is that correct? And if it's correct, for what reason?
Kewa Luo -- Investor Relations Manager
I'm sorry, can you just say slowly one more time, so I can translate?
Mark Kahnau -- Swiss Liquid Future -- Analyst
Through the first nine months of the year, the Joint Venture effectively was breakeven, that's what -- that we could read in the figures. Kandi wrote off $43,000 by the year end, share of loss after-tax of the joint venture was $17.8 million. But that means to me that the Joint Venture must have written off $35 million in the fourth quarter. Is this correct and if it's correct, for what reason?
Kewa Luo -- Investor Relations Manager
Okay (foreign language)
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Okay. Okay. This is due to, in Q4, there is RMB160 million research -- R&D expenses for JV in Q4.
Mark Kahnau -- Swiss Liquid Future -- Analyst
Okay, I get that. Okay, very good, that's it from me for today.
Kewa Luo -- Investor Relations Manager
Okay, thank you.
Operator
We will now take our next question from Harris Goldman. Please go ahead.
Harris Goldman -- -- Analyst
Hello, it's been a long time since I talked to Mr. Hu. We made the trip -- I organized the trip in 2014 when we were having quite a few detractors saying that we never existed. And of course, we proved that wrong. Anyway, my question is, I'm a little confused and need a little clarification regarding the guidance for this year. I see in Mr. Hu's statement, we're projecting 20,000 units. Now my confusion is, we have a framework agreement for 300,000 over five years and we have the other 20,000 on accredited units. Is Mr. Hu taking a very conservative stance regarding JV production this year? Or would he provide a clarification on why he's only guiding to 20,000 units?
Kewa Luo -- Investor Relations Manager
Okay. (foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Well, as I mentioned earlier, that for 2018, we are glad that we were able to survive and for 2019, we want to look forward to do a revival. So in this year, even though we have these contracts laid out, for 300,000 EV contract, we are the primary provider, so we don't want to over promise the market and under deliver and for this year, we want to take one thing at one step and laid out the groundwork for more growth going forward. So -- and additionally, we also want to focus on the quality of our products and be able to deliver better results going forward.
Harris Goldman -- -- Analyst
Okay. So if I understand, this is a very conservative guidance this year because from what I've heard and what I've read, yes, this will be a revival year, but we can reasonably expect, if we receive the subsidies because that's been our problem, it appears to me that we've experienced all along. We were -- we have basically been subsidizing the subsidies and that has curtailed our production and sale. So therefore, from what I'm hearing now from Mr. Hu, I'm much more optimistic about this revival year than what was said earlier in terms of a 20,000 unit guidance for this year. Okay, that's it. Thank you.
Kewa Luo -- Investor Relations Manager
Thank you.
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Mr. Hu says, thank you, we'll work hard to deliver good business results. We can take next question.
Operator
We will now take our next question from Mike Pfeffer from Oppenheimer. Please go ahead.
Mike Pfeffer -- Oppenheimer -- Analyst
Hi, thanks for taking my question. The press release titled, Kandi Pure Electric Vehicles Project Received Approval, was confusing to many in the US, particularly, when mentioned along with approval for 50,000 EVs in Rugao. Even a Bloomberg reporter was confused and said you, Mr. Hu, said it was approval to build a facility in Rugao where Kandi JV already had one.
Can you confirm for all that this is the license we have waited several years for allowing Kandi to now make and sell its own EVs as well as for others? And secondly, what is the significance of the 50,000 number in the press release? Thank you.
Kewa Luo -- Investor Relations Manager
Okay. Can you -- OK, I've got your question.
(foreign language)
Zhu Xiaoying -- Interim Chief Financial Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Thank you for your question. I want to once again clarify, which I also discussed earlier on the call. With regarding to the manufacturing license, there are actually three steps in total. First is approval from National Development and Reform Commission that they approved the company to build the factory, which is what we received earlier and what we announced. And the next step is acceptance of the factory by the Ministry of Industry and Information Technology, and once we get approval from MIIT, then the factory is entitled to produce cars. And as a result, this is so-called dual production license, and once this has been obtained, the company will be able to not just build a factory and the factory will be able to produce the vehicles. And the first step is the MIIT will have to approve that model to be able to register. And we think that by -- in April, we should be able to get all these steps ready and by then we will make announcements.
The next question is that you asked about 50,000 units that we mentioned in the press release. So when you apply to the NDRC for the license to build a factory, you have to include your capacity in the factory you're building and you have to at least achieve 80% of capacity in order to build another location factory. So for example, we applied 50,000 capacity for this factory, we can go over that number to produce there 100,000. But if we want to build another factory in a different location, we have to at least achieve 80% of 50,000, which is 40,000. So we just -- it's a number that you give in your application. So with that, I hope I clarified what you have just asked.
Mike Pfeffer -- Oppenheimer -- Analyst
Thank you.
Operator
We will now take our next question from Arthur Porcari from Corporate Strategies. Please go ahead.
Arthur Porcari -- Corporate Strategies -- Analyst
Thank you, Mr. Hu, congratulations and thanks for all shareholders in your year of improvement of 2018 to 2019. And based on public announcements, sounds like an incredible start for the 2019 forward, long awaited breakout witnessed by amazing string of announcements just since January 4th. Interesting side note based on just today's numbers. So it appears that Kandi itself would have had a pre-tax profit of almost $20 million for the full year where if not for having to consolidate that $17.8 million share of the JV R&D loss in the fourth quarter, as a prior caller said, the JV was actually at breakeven through the the first three quarters, just an observation, which you can address in a moment, if you want to.
With this said, I'd like to address an expanded series of questions, mostly limited to two major areas announced. More on the five-year 300,000 EV for the China Resources ride-hailing program. I mean, the five-year 300,000 -- and the three-year 20,000 EV Cao Cao ride-hailing program. Then I want to wrap it up and to see how the JV expects to finance the cost to deliver this potential $5 billion to $6 billion worth of EVs over the next five years? I pass that on to Mr. Hu and I'll then ask the questions.
Kewa Luo -- Investor Relations Manager
Hi, Arthur, can you repeat what you asked in the first part about the JV? Would you just --
Arthur Porcari -- Corporate Strategies -- Analyst
Okay. What I was -- OK, no, I was just saying that this is an add-on because of the numbers with which I'm saying this, but I said this is a side observation. I don't think we were expecting the $35 million, $36 million fourth quarter writedown in the JV for all that onetime R&D expense, which caused Kandi to actually take an additional $17.8 million loss in the fourth quarter. Without that, it seems like the Kandi's pre-tax profit, which was already at over $2 million, if they add that back in, we would have almost $20 million for Kandi itself. I realized that this shows how well Kandi itself is performing independently of the JV. That's the only point I wanted to make, OK? And do you need me to repeat the rest of it or do you have the rest of it?
Kewa Luo -- Investor Relations Manager
Okay, I do. (foreign language)
Go ahead with your question.
Arthur Porcari -- Corporate Strategies -- Analyst
Okay. First question is, after 20,000 Cao Cao puts an all-EV ride-hailing program, from what I understand, so it's good to see that this China unicorn, which is a high-end ride club Uber-like chauffeur EV ride-hailing program, currently has 30,000 high-end Geely and Volvo EVs, and this was put together by Kandi's JV partner, Li Shufu and his Geely Holdings. In the Kandi announcement, it states that the "parties have agreed to collaborate in exploring new and innovative models for an online ride-hailing business with their combined resources and market advantage." Now the question is, does this mean Kandi will be developing new EV models over and above what we already have to fulfill get into this high-end program or will the EX3 get released, K23 be used, and will the quick battery exchange be used with Cao Cao as well?
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Mr. Hu is saying now there are a lot of questions, so I will just go one by one.
First, the 300,000 cars signed with Alliance, which is going to be serving for all these online ride-hailing platforms, not just on the Cao Cao Zhuan Che platform, going to be, for example, Didi or other platform. And this is going to be initiated by our company joint venture.
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Because there's requirement for the wheel base that required by the ride-hailing services, so the EX3's wheel base is not meeting the requirement. Therefore, we are going to launch the K23 and the other developing car is called K8, B-class, which is the high-end car, for the online ride-hailing platform.
Arthur Porcari -- Corporate Strategies -- Analyst
And Kandi is going to be developing that new K8, or Kandi JV?
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Yeah, together with Geely and the Joint Venture.
Arthur Porcari -- Corporate Strategies -- Analyst
That's breaking news. Okay, let me move on, to the 300,000 EV program, five-year announcement. Now this was quite a stunning announcement though it had seemed to have no effect on the stock at the time. Potential to the Kandi JV for this over the life of it could exceed $5 billion and as the JV primary parts and battery provider, maybe an additional $2 billion directly to Kandi. I based this on the assumption that the required battery exchange feature addressed in the announcement is the Kandi owned and patented QBX, which requires four battery packs instead of two as for the consumer plug-in versions. So I have two questions, short questions that have to do with this. Based on this quote from the announcement, "the JV Company will be the primary vehicle supplier in the accredited vehicle alliance." Can we assume that all of the 300,000 EVs, which have the quick battery exchange feature will come -- will have to have the quick battery exchange feature, and if true, likely all the EVs will then be Kandi provided?
And the second question is, how many current service station locations does China Resources have across the 25 provinces in China and are they still growing? And will the quick battery exchange locations to be exclusive for the Alliance members or will they also future be used for any Kandi EV which has quick battery exchange feature?
Kewa Luo -- Investor Relations Manager
Okay. (foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Okay. Let me try to cover all the information Mr. Hu just provided. First of all, Kandi will surely be the primary EV provider in the Alliance in providing the EV and the battery. And the China Resources (Zhejiang) they used to -- they have many locations throughout China, and at this point, I don't know -- I don't have a number how many they have, but however, we think that since these locations always are providing the gasoline to the vehicles, and based on the demand of the electric vehicles, some of them may also going to be available for the battery exchange and giving a strategic partnering with them and they are going to be in charge of investment and operations of all these Credit Vehicle Alliance -- Vehicle battery exchange business, but the specific detail plan of building required services sites will be depending on the demand from the Credit Vehicle in the Alliance program and I think this is going to be gradually delivered within five years and the quick battery exchange feature will surely be used for all these future Kandi EVs.
Arthur Porcari -- Corporate Strategies -- Analyst
Okay, good. Certainly looking at only about $18,000 a car, I would think $5 billion is probably a conservative number, then. Anyway let's press on here, to get into my next section a little bit here, has to do with financing. Just a short comment first, since Cao Cao is controlled by a Kandi JV (inaudible) 50% partner, China Resources the alliance with the government enterprise, the credibility factor toward the buyer following through on these deals would seem to be quite high, but to rapidly address these projects alone, I would think that Kandi would require the JV to have at least $1 billion in cash to get started. So far, our partner of the JV has not raised any outside equity since formation. So as evidenced on how the hot EV market is in China recently discovered, the 7 China EV unicorn start-ups, each less than three years old, and only two to include DL have not sold any EVs to date, as negatively -- I'm sorry, two have sold, the other five have not. As negatively compared to the Kandi JV, none of them have any stage of licenses, not even first stage and only one has a facility. Yet together they've raised over RMB80 billion or $11.6 billion or between $1 billion to $3.4 billion each and to give a total perceived value to all these, a $24 billion. This is as early as 2016 that Kandi JV has publicly announced its intention to go public likely in China. This subject has again come up with positive company response in recent conference call. Go ahead and translate all that for Mr. Hu so far, then I will get into the question.
Kewa Luo -- Investor Relations Manager
Okay.
(foreign language)
Go ahead, as I have summarized what you just said.
Arthur Porcari -- Corporate Strategies -- Analyst
Okay, fine. The three-year old NIO with much less infrastructure and hard assets than the five-year old Kandi five-year old Kandi JV recently came public in the US with a $7 billion market cap after raising $2.4 billion private equity in China, would it be reasonable to assume that the Kandi JV could quickly raise maybe $200 million private equity in China at about a $2 billion cap and then follow-up with maybe another $0.5 billion raised at a $3 billion cap, (inaudible) the last part of the press release, which you put in today.
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
I think I want to answer in two parts. First, you mentioned a lot of development at NIO, I want to say that NIO's business, we really don't need to compare NIO with Kandi, and for now, it's not time yet for Kandi to discuss JV Company's evaluation. Secondly, for JV Company, what you have plan, like I mentioned earlier in my remarks that the JV Company's management is working on evaluate for the optimal time to restructure the JV Company's equity in order to unlock the shareholder value of the JV Company. Once we have significant progress, we will update the market at the proper time.
Arthur Porcari -- Corporate Strategies -- Analyst
Okay and then get down to my last question here. It would seem to me without -- before I even hit the question, with Kandi's $380 million market cap, market is saying, Kandi is worth a zero and the JV is only worth around $700 million, I would think that Mr. Hu would argue with that and that's why he's talking about unlocking the value of the JV, but when you divide it by two or whatever you can get a real value what Kandi should be trading at. But with that said, the last question has to do with the IPO venue. In the past, as I assume that IPO is route they might want to go -- in the past, the announced intention was to bring the JV public in China. However, China, Asia listings require three consecutive years of positive earnings. It's recently been announced with much excitement that the new Shanghai Tech Board similar to NASDAQ will start trading later this year without the earnings requirement. Could the JV consider this new listing for an actual IPO or would the company consider bringing in the JV public even in the United States?
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
I think, whether it is Shanghai Tech Board or in the US, I think these all can be possible and right now still too early to discuss. But once we have made a decision, we will report to the market.
Arthur Porcari -- Corporate Strategies -- Analyst
Excellent. I really appreciate Mr. Hu's patience with long series of questions. But considering that Kandi had less than a $400 million market cap, and 50% partner and without a doubt the largest in the EV agreement and in the 300,000 car agreement announced in China by any EV maker needed some expanded discussion. And again thank Mr. Hu very much and look forward to -- once again beating beating his forecast by at least 35% to 40% as he did a few years back when he used to give forecast. Thank you.
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Thank you. Thank you.
Arthur Porcari -- Corporate Strategies -- Analyst
I'm done.
Operator
We now have a follow-up question from Frank Vladermann. Please go ahead.
Frank Vladermann -- -- Analyst
Well, thank you. I have three extremely important questions. First question, does this factory need a separate approval from both the NDRC and MIIT or only the MIIT?
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Yes, we're just waiting for the approval from MIIT and matter of fact, they are already working on approving our application, it's already in the process.
Frank Vladermann -- -- Analyst
Well, yes, but will that approval cover all the factories or does each each factory require separate MIIT approval?
Kewa Luo -- Investor Relations Manager
Are you asking whether the approval going to cover all our factories in different locations?
Frank Vladermann -- -- Analyst
Yes, that is correct.
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
This only approve Jiangsu Rugao factory, but when Jiangsu Rugao factory has it, that means that the Joint Venture has the manufacturing license.
Frank Vladermann -- -- Analyst
Okay, thank you. Now second question, will the K8 be equipped with the quick battery exchange feature?
Kewa Luo -- Investor Relations Manager
I'm sorry, will be the Kandi exchange -- what feature?
Frank Vladermann -- -- Analyst
Will the K8 be equipped with the quick battery exchange?
Kewa Luo -- Investor Relations Manager
Okay.
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Yes, they all do have the quick battery exchange feature.
Frank Vladermann -- -- Analyst
Okay, third, very quick question, then I'm done. Is the joint venture now an officially recognized company in the eyes of the PRC, since we have the NDRC license?
Kewa Luo -- Investor Relations Manager
Whatever JV is?
Frank Vladermann -- -- Analyst
Is it now an official company in the eyes of the PRC?
Kewa Luo -- Investor Relations Manager
What do you mean, the Joint Venture?
Frank Vladermann -- -- Analyst
Yes, the Joint Venture is recognized with a license by the NDRC, does this make the joint venture an official company in the viewpoint of the People's Republic of China Government?
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
So, since I have to wait for the dual production license to be received, that will be considered as the official EV company with the production capability.
Frank Vladermann -- -- Analyst
Thank you for taking my questions.
Kewa Luo -- Investor Relations Manager
Thank you.
Operator
This concludes today's question-and-answer session. I would now like to hand the call back to our hosts for any additional or closing remarks.
Kewa Luo -- Investor Relations Manager
(foreign language)
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
(foreign language)
Kewa Luo -- Investor Relations Manager
Thank you, ladies and gentlemen for attending today's meeting. On behalf of Board of Directors and management team at Kandi Technologies Group Inc., I would like to reaffirm our commitment that we'll continue to work diligently to maximize shareholder 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 again in next meeting. If you have any additional questions, please don't hesitate to contact our Investor Relations person. Goodbye.
Operator
Ladies and gentlemen, this concludes today's call. Thank you for your participation, you may now disconnect.
Duration: 107 minutes
Call participants:
Kewa Luo -- Investor Relations Manager
Hu Xiaoming -- Founder, Chairman and Chief Executive Officer
Zhu Xiaoying -- Interim Chief Financial Officer
Ted Schwartz -- TAS Associates -- Analyst
Frank Vladermann -- -- Analyst
Li Ghou -- -- Analyst
John DeStefano -- -- Analyst
Beth Mozan -- -- Analyst
Steve Miller -- -- Analyst
Mark Kahnau -- Swiss Liquid Future -- Analyst
Harris Goldman -- -- Analyst
Mike Pfeffer -- Oppenheimer -- Analyst
Arthur Porcari -- Corporate Strategies -- Analyst
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