What happened

Shares of Kandi Technologies (KNDI 0.97%) raced out of the gate Monday morning and roared to a 10.6% gain by 12:50 p.m. EDT after the Chinese electric-car maker announced estimate-thumping earnings for its fiscal second quarter 2021.

Analysts had forecast that Kandi would book only $20.8 million in revenues for Q2 and lose $0.18 per share. Instead, Kandi reported this morning that its sales were $29.9 million -- and it earned a $0.54 per-share profit.  

Simple green arrow going up.

Image source: Getty Images.

So what

Kandi grew its sales 54% year over year in Q2, and its profits 900%, and the company experienced a tectonic shift in its business focus, too. Sales of off-road electric vehicles in the quarter declined 17%, and electric car parts sales plunged 46%. Taking up the slack were sales of electric scooters, which surged from just $0.4 million in sales a year ago to $16.5 million in Q2 2021. Luckily for Kandi, scooters seem to be a more profitable business area for the company, and gross profit margins climbed 220 basis points to 20.4%.  

Even that improvement in gross profit margins might not have been enough to put Kandi in the black this quarter without the Chinese government having paid the company to take back its "vacated old factory" in Jinhua. According to Kandi, it was this one-time payment which "primarily" accounted for its $0.54 per-share profit.

Now what

Going forward, Kandi can't count on the Chinese government bailing it out a second time with a timely factory purchase. Instead, management says it will be depending on sales of "affordable short-distance EVs for the China market" and of its new K32 premium Utility Terrain Vehicle -- a 4x4 all-terrain vehicle (ATV) -- to carry the load. In particular, Kandi says it expects to begin selling the K32 in the U.S. by the end of 2021.

Presumably, it's this announcement that's driving Kandi's stock higher today -- this, that is, and also the surprise $0.54 profit.