Kandi May Be Sweet, but It's No Tesla

Shares of Kandi Technologies (NASDAQ: KNDI  ) soared 16% yesterday after posting strong financial results. Revenue soared 174% to $40.2 million, fueled primarily by its electric vehicle and electric vehicle parts businesses that now account for 83% of the total revenue. Kandi posted a loss for the period, but it would translate into a profit of roughly $0.04 a share on an adjusted basis.

How did Kandi fare relative to expectations? That's a fair question, but there is no answer. Despite its heady growth, market cap north of $525 million, and average daily trading volume of nearly 3 million shares over the past few months there is still not a single major analyst that has initiated coverage on the Chinese maker of electric vehicles. The lack of coverage naturally makes Kandi volatile around earnings season. 

As a maker of electric cars, investors often refer to Kandi as the Tesla Motors (NASDAQ: TSLA  ) of China. That's not fair to either company. Tesla is the well-entrenched leader of luxury plug-in sedans with vehicles that can top out at six figures. Kandi's flagship car is a lot smaller -- think something along the lines of the Smart fortwo -- and it's primary market is a Zipcar-like auto-sharing operation that it launched in Hangzhou last year.

Kandi's car-sharing platform is a sight to behold. Since real estate in urban strongholds comes at a premium, Kandi operates multilevel garages that use lifts to spit out its vehicles as renters come to claim them. Hangzhou residents pay a little more than $3 an hour for the right to have a temporary vehicle that they can use to go shopping, visit relatives, or anything that they can't normally do on the bicycles and scooters that are the transportation method of choice for folks who can't afford cars. 

Tesla naturally isn't eying that end of the market. Even the more economical Model E sedan that it plans to push out in a couple of years will likely still be priced for the high end of the mainstream market, so don't even start thinking about Teslas as hourly rentals. It's hard to argue with Tesla's strategy given the stock's performance before its recent correction. Elon Musk is this decade's Midas. 

However, Kandi's potential could be even greater given its modest market cap and where it's doing business. China's smog is notorious, and the world's most populous country has made it clear that it wants millions of electric vehicles on the road by 2020. It remains to be seen the exact role Kandi will play in China's push for greener vehicles, but the initial success of its car-sharing business in Hangzhou has started to draw interest in the larger cities of Beijing and Shanghai.

Kandi is also riskier, of course. Beyond China's geopolitical risks, Kandi's early lead in electric vehicle auto sharing could be eventually overtaken by more seasoned automakers. However, let's not get ahead of ourselves. Kandi's still waiting to smoke out major stateside analyst coverage. Until that happens, expect volatility and opportunity to rule the open road.

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Read/Post Comments (5) | Recommend This Article (4)

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  • Report this Comment On May 13, 2014, at 11:53 AM, richen98 wrote:

    Actually TSLA market a lot of smaller than KNDI, how many % of peoples can afford to drive TSLA cars ? this is a smaller market, almost every one afford to drive KNDI's cars this is the market a lot of bigger than TSLA.

  • Report this Comment On May 13, 2014, at 12:29 PM, anindakumars wrote:

    Also importantly, Kandi is a Chinese company. Given the lax regulations in China, I consciously avoid all Chinese companies, no matter how much their growth potential.

  • Report this Comment On May 13, 2014, at 3:16 PM, captainccs wrote:

    About the only thing in common between Tesla and Kandi is that both make battery operated cars. But I ask you, which was the better investment, McDonald's or Outback Steakhouse? WalMart or some high end retailer? There are so many more poor people than rich that Kandi can easily outperform Tesla.

    As for "The lack of coverage naturally makes Kandi volatile around earnings season," analyst coverage generally adds squat to the stock's value and volatility is most welcome as a trading opportunity.

  • Report this Comment On May 13, 2014, at 5:29 PM, richen98 wrote:

    Hangzhou city of population 7.96 million. KNDI

    on Apr. 14 announces plan to launch the public EV sharing system pilot project in Shanghai, population 23,47 million. Contact now and soon to be part of it, Beijing population of more than 20 million, Tianjin 11 million, and ...more, just do the calculation, result of market shares is clear. plus

    China's pollution problem, EV green energy is a must, government is controlling issue of license plate, on this issue EV has it's advantage.

  • Report this Comment On June 11, 2014, at 4:32 PM, Eastbchguy wrote:

    There are two Yahoo groups built by small shareholders to analyze KNDI. I am surprised at the information at the Kandi Yahoo groups. I am long KNDI.

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