Is This the New Tesla?

Shares of China's Kandi Technologies (NASDAQ: KNDI  ) soared 36% yesterday on news that China had approved the company's first electric sedan.

If you had never heard of Kandi until yesterday's pop, you're not alone. This is a small company that makes smaller electric vehicles, go karts, ATVs, and even tricycles in China's Zhejiang province. Revenue in its latest quarter grew just 2% to only $14.7 million. It is profitable, and that's a good thing, but let's not kid ourselves here. The only reason that Kandi charged higher yesterday -- on a whopping 18.7 million shares of trading volume -- is that Tesla Motors (NASDAQ: TSLA  ) shares have nearly tripled over the past three months.

It's easy to sell Kandi as the Tesla of China, even though reality paints a far different picture.

Kandi has teamed up with car manufacturer Geely Automotive to parlay its electric vehicle know-how into passenger cars, and the first full-sized sedan -- JL7001BEV -- has been approved by China's Ministry of Industry and Information Technology.

That's great news, but would anyone really care if Tesla wasn't so hot these days?

After all, we still don't know if China will warm up to electric cars and overcome the "range anxiety" of the niche. We don't know how many people will be able to afford the electric cars that are substantially more expensive to make than vehicles with internal combustion engines.

The need is there. Anyone that saw the smog-filled panoramas during the Beijing Olympics can attest to the desire for cleaner cars on the crowded roadways. However, we still don't know if it will work. More importantly, we don't know if Kandi and Geely will form the cool company in this field.

Tesla isn't the only company making electric cars in the U.S. these days. Most of the leading automakers now have some skin in the game, even though the early adopters haven't fared nearly as well.

General Motors (NYSE: GM  ) is rejoining the S&P 500 -- likely tomorrow -- as a testament to its revival, but it's certainly not the handiwork of its plug-in Chevy Volt. GM has had to idle production of the costly Volt a couple of times as demand failed to keep up with supply. Even offering ridiculous lease deals didn't allow GM to live up to its original goal of moving 60,000 Volts last year. GM sold just 1,607 Volt cars last month, less than it sold a year earlier.

GM is actually one of the lucky ones. Fisker Automotive is teetering on bankruptcy.

There may very well be some legitimate reasons to buy Kandi, especially for its growing and profitable business that is currently in place. However, there are so many things that would have to go right for Kandi with this new electric sedan to truly earn the "Tesla of China" crown that it's little more than a dangerous speculation until the fervor settles down.

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Read/Post Comments (13) | Recommend This Article (5)

Comments from our Foolish Readers

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  • Report this Comment On June 06, 2013, at 10:29 AM, mmang1 wrote:

    I suggest you dig a little deeper into KNDI by reading both the bullish and bearish articles on seeking alpha before writing such a piece. There is also a plethora of information on the private yahoo board (disclosure: mostly bullish). Looking forward to a more in depth review by you after you've seen what many people have been sitting on for years.

  • Report this Comment On June 06, 2013, at 10:34 AM, AjitC wrote:

    Anybody can slap a battery to a cheap brush DC electric motor, add a car body... and presto! Actually a Chinese toy manufacturer can do it too. Nothing but a fancy golf cart. The LEAF is the same thing. More suitable for the retirement communities in Florida or limited urban environments. Try driving on the 610 Loop in Houston, TX. They will not make one round, and it they are unlucky, get rear ended.

  • Report this Comment On June 06, 2013, at 11:00 AM, TSelanne wrote:

    ^^ That was a nice way of saying this article is written from an extremely uneducated perspective. A 6th grader could do better.

    ""but let's not kid ourselves here. The only reason that Kandi charged higher yesterday is that Tesla Motors (NASDAQ: TSLA ) shares have nearly tripled over the past three months.""

    Really?!? If you really believe that, let's see some analysis of how/why/when TSLA has previously impacted the price movements of KNDI. I mean come on..... reading this article felt like being a spectator listening to a horrible singer on stage, you're embarrassed for them and just hope it will end as soon as possible.

  • Report this Comment On June 06, 2013, at 11:12 AM, middlenamefrank wrote:

    I suspect the Chinese market may be considerably more open-minded to the electric vehicle market, with much less "range anxiety". I think "range anxiety" is an artifact of the US's existing car market -- we're just used to the idea of driving all day, refilling as needed. We balk at the idea we won't be able to do that, regardless how seldom we do it in actuality.

    But the average Chinese person doesn't yet HAVE a car, so they don't have the preconceptions we have, and will understand the range limitation for what it is -- a range limitation and nothing more.

  • Report this Comment On June 06, 2013, at 12:07 PM, Connelky wrote:

    Before any one takes this company seriously, go to their website and look at their cars. Fastest one goes 25mph.

  • Report this Comment On June 06, 2013, at 1:00 PM, corstrat wrote:

    Do you realize how moronic you sound with this condescending trash? By your own admission, you hadn't even heard of KNDI before yesterday, yet here you are today being an "expert" on why KNDI's stock went up or traded so many shares.

    KNDI was trading long before TSLA, and at considerably higher prices than today. They will earn at least ten times more per share than TSLA this year and will likely sell more EV's than TSLA this year, yet TSLA has a fully diluted market cap of over $14 Billion. Kandi's Market cap is only 1% of TSLA's. Can TSLA still go up from here? You bet it can. And so will KNDI.

    Are TSLA shareholders also buying KNDI. Yes the smart one are, as you can see from comments on some of my recent KNDI Seeking Alpha articles. Why, because they took more than a day to do some DD on KNDI.

    There are fools and there are Motley Fools. From this article, you don't deserve to be in the second category, so obviously you are in the first.

    Arthur Porcari

  • Report this Comment On June 06, 2013, at 1:06 PM, corstrat wrote:

    Connelky- Looks like you fit in the first category of fools as well. While KNDI does not make high speed EV's, all of their EV's can do a minimum of 40 mph up to 52mph. The reason Geely wanted to partner up with KNDI was to provide inexpensive EV's for the 700 million city dwellers in China. The top speed in most China cities is 35 mph.

    But the 25 mph you are referring to is the maximum speed allowed in the US for their LSEV's. Each of these cars have a governor to restrict the speed to 25mph.

  • Report this Comment On June 06, 2013, at 2:20 PM, captainccs wrote:

    >>>Kandi as the Tesla of China<<<

    No, Kandi is NOT the Tesla of anywhere. It is much more than that! ;)

  • Report this Comment On June 06, 2013, at 3:40 PM, CSIHawaii wrote:

    First you need to get facts, then you have to think, then you can write. You skipped the first 2 steps. You are totally devoid of any real knowledge and unfit to give commentary on Kandi.

  • Report this Comment On June 06, 2013, at 10:22 PM, Connelky wrote:

    A lot of companies have tried to take a bottom up approach to get electric vehicles on the road and I yet to see one succeed. Zap, coda, aptera, those are some if the better known ones. They all do the same technique too. They cannot afford to crash test the car so they either govern it to 25 or 35, or they give it three wheels and call it a motorcycle.

    I don't know a lot about this company but many have tried exactly what they are trying to do and failed. Tesla has bought time with its technique, and it might just work out. Tesla can now afford to design and optimize a high quality, highly refined mass market car for 1 to 2 years, then make a killing on it. These other companies have tried to get mass market on their first go around, and it's always the same problem, they are just charging a little bit too much for people to take the plunge. Tesla targeted well off people who are more prepared to take a little risk.

  • Report this Comment On June 08, 2013, at 10:49 AM, ontenterhooks wrote:

    I am just sitting here ( on my Kandi shares), shaking my head and smiling. I have to agree with the already well articulated critics of the poor research in this article. I can't do any better, so I will just continue to hold. Go Kandi!

  • Report this Comment On June 28, 2013, at 2:10 PM, RRobertsmith wrote:

    china will steal the tech and kick telsa back to cali, same as google....(remember google in china?!)

  • Report this Comment On July 27, 2013, at 7:09 AM, captainccs wrote:

    Connelky wrote:

    I don't know a lot about this company but many have tried exactly what they are trying to do and failed.

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

    I have to agree with you, you know very little about Kandi. If Kandi were following the footsteps of failed EV wannabes, I would not touch it with a 20 foot pole but Kandi is doing things very differently and they are targeting a very distinct market: Chinese urban middle class. This market eliminates both range and speed anxiety. But there is much more to their business model like battery ownership and battery swapping vs. charging.

    As long as you look at Kandi from an American point of view you'll miss the potential. Kandi EVs are designed for the Chinese urban middle class. Look at Kandi from that perspective to appreciate the business. Anyone comparing Kandi to Tesla is missing the mark by light years.

    Denny Schlesinger

     

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