Chinese electric-vehicle maker Kandi Technologies (NASDAQ:KNDI) reported on Nov. 9 that it lost $566,000 in the third quarter, down from a $2.3 million net profit in the year-ago period, as the Chinese government continued to delay payments of 2015 subsidies to electric-vehicle makers pending an industrywide review.
Kandi Technologies' earnings: The raw numbers
|Metric||Q3 2016||Q3 2015||Change|
|Revenue||$6.4 million||$50.5 million||(87.4)%|
|Gross profit (loss)||$0.7 million||$7.1 million||(90.9)%|
|Net income (loss)||$(0.6 million)||$2.3 million|
What happened with Kandi Technologies in the third quarter
"China's central government preceded a review on the subsidies paid to all the EV manufacturers, which caused the 2015 subsidy payments to remain unpaid industrywide," Kandi CEO Hu Xiaoming said in a statement. "The delay in subsidy payment heavily impacted the JV Company's production and sales, which resulted in a significant decrease in our EV parts sales."
The results were stark. Kandi's total third-quarter revenue of $6.4 million was down 87.4% from $50.5 million in the third quarter of 2015. Electric vehicle (EV) parts sales fell 90.4% to $4.7 million from $49 million a year ago.
Kandi Electric Vehicles Group Company, a 50-50 joint venture between Kandi Technologies and Chinese automaker Geely Automobile Holdings (OTC:GELYF), sold just 184 EV products in the third quarter, down 96.9% from last year.
"Due to the delayed government subsidy payments, we have experienced decreased cash flow in the third quarter of 2016, which inevitably impacted the company's financial performance in this quarter," CFO Wang Cheng said in a statement. "We expect our cash flow and financial position will be improved in the coming quarters once the central government concludes its review and resumes its subsidy payments."
Despite the delayed payments, the joint venture launched an all-new battery-electric vehicle in August. The Global Hawk K17A sedan, pictured above, has a 35-kilowatt motor, a 20 kilowatt-hour battery, a claimed range of 151 kilometers, and a price of 79,800 yuan (about $11,800) after subsidies.
Kandi's CEO: Looking ahead to 2017
Here's what CEO Hu Xiaoming had to say about the subsidy issue and Kandi's prospects in 2017:
Although our financial performance this year has not matched up to our past success, we have accomplished lots of fundamental work for the business growth in year 2017.
First, with the subsidy review in year 2016, after our positive communication with the government, we believe there will be a good outcome soon. There is some misunderstanding with the EV battery exchange model adopted by our end customers to repeatedly and efficiently utilize batteries for the EVs that we manufactured during 2013 and 2014, which was also a challenge to the Company's further development. Taking the opportunity for clarification with government during the subsidy review, we can clear up this barrier and create a good base for future smooth development.
Second, the process of preparing the JV Company to enter into capital markets at the appropriate time and with a strong valuation is on the track as planned; At the same time, we have done lots of work for the JV Company to obtain the vehicles manufacturing license approval in 2017.
Finally, we will introduce two new EV models in 2017. Our new models, carefully designed to best serve market needs, will provide a solid foundation for the fast growth in 2017. In addition, in this quarter, we made a significant progress into developing the countrywide EVs distribution network for direct sales.
Hu said that he is confident that Kandi's products will continue to be eligible for the government subsidies, which will continue through 2020. The company is already preparing for the end of the subsidies.
"Kandi is currently developing the EV products after year 2020, which do not rely solely on subsidy payments and is identifying key areas of focus in which to ensure Kandi's sustained growth and improve Kandi's earnings capabilities," Hu said.