Tesla Motors (NASDAQ:TSLA) apparently continues to struggle in China. Reports out of China over the weekend find the fast-growing producer of high-end electric sedans scaling back on its workforce in the world's most populous nation.
China's Economic Observer reported on Sunday that Tesla will be letting go 180 of its 600 employees, or 30% of its workforce. A Tesla spokesman confirmed to various news outlets that it was scaling back in China, without specifying the actual number of layoffs. He did tell Bloomberg that its local sales team would be the hardest-hit of the departments, shedding roughly half of its workforce.
Tesla's struggles in China aren't new. CEO and Tony Stark incarnate Elon Musk dropped a bombshell during January's Automotive News World Congress, warning that sales in China weren't living up to initial expectations. Tesla's only selling hundreds of cars a month in the mammoth country. Musk blames the market's lukewarm reception to misperceptions when it comes to charging requirements for electric vehicles, which in a nutshell is the same "range anxiety" that has kept the success of all-electric cars in this country in check. Tesla's response has been to aggressively build out a global network of charging stations, but that's an investment that will take time before it reshapes perceptions worldwide.
Kandi from a stranger
It's against this backdrop that Kandi Technologies Group (NASDAQ:KNDI) is trying to make a run at the other end of the market. Unlike Tesla's Model S -- which starts in the six figures in China after accounting for VAT, shipping, and custom duties and taxes -- Kandi's much smaller vehicles aim at the lower end of the market.
Another factor working to Kandi's advantage is that China's government is offering up juicy incentives to buyers of electric vehicles made by local companies. China's smog is notorious, and it has made populating its roads with green-energy vehicles a priority. There are fat national and local government subsidies to be had, and in Shanghai the purchase of an electric vehicle comes with a free license plate, which can often fetch five figures when issued to traditional gas-powered cars in an auction.
One more thing working in Kandi's favor beyond the low prices of its cars and favorable government subsidies for Chinese companies is that most of its business these days stems from car-sharing systems that it operates as part of a joint venture with Geely Automotive. Drivers pay a little more than $3 an hour to rent the compact Kandi cars, leaving the "range anxiety" of the charges to the operators of the auto-sharing program.
There's no shortage of naysayers, even though the quantity of Kandi's stock sold short has shrunk to its lowest point since last summer. Kandi was able to alleviate one potential roadblock, announcing last month that a formal SEC investigation that began 15 months earlier was drawing to a close, with the regulatory agency's Enforcement Division recommending that the SEC take no action against Kandi.
Mark Cuban-backed Sharesleuth.com has been critical of Kandi in the past, calling into question the authenticity of its sales figures. However, its last bearish missive came late last year. It has yet to update its position since the SEC investigation lost steam.
For now, Kandi is growing faster than Tesla, though neither company is a slouch on the accelerator. Revenue at Tesla and Kandi soared 60% and 167%, respectively, through the first nine months of last year. Tesla wound up seeing its revenue climb 59%, and Kandi should be posting fresh financials soon. Kandi is a lot smaller with far more to prove, but it's apparently in a position to take advantage of the circumstances that are weighing on Tesla in China at a time when the country is trying to drum up demand for electric rides.