Why Kandi Technologies Group Inc. Stock Popped

Is this meaningful or just another movement?

Jeremy Bowman
Jeremy Bowman
Jul 21, 2014 at 3:38PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of China-based electric-car maker Kandi Technologies Group (NASDAQ:KNDI) gained as much as 13% on some beneficial tax news.

So what: A Chinese newspaper reported that electric cars made outside China would not benefit from an important tax break, as a key sales tax on China-made EVs will be waived from Sept. 1 until the end of 2017 on domestically made electric vehicles. Kandi was aware of the tax break, but the news today is that the benefit will not be granted to outside EV makers. 

Now what: China is already the world's biggest auto market, so it figures to one day also be the biggest EV market. Other EV manufacturers have been angling to make the world's No. 2 economy an important revenue stream, but the tax break definitely gives Kandi an advantage over foreign competition. The move is typical of the Chinese state economy that often provides advantages to companies within the nation's borders. Kandi approached a 52-week high on the report, and the company also received good news last week, when EV sales from its joint venture more than doubled sequentially in its last quarter. Kandi is certainly a risky play, but with a market cap under $1 billion, it could easily become a multibagger if electric vehicles take off in China.