Good day and welcome to Kandi Technologies Second Quarter 2019 Financial Results Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Kewa Luo, IR Manager. Please go ahead..

Thank you, Jenny. Hello, everyone, and welcome to Kandi Technologies Group Inc.’s Second Quarter 2019 Earnings Conference Call. The company distributed its earnings press release earlier today and you can find a copy on Kandi’s website at www.kandivehicle.com. With us today are Kandi’s Founder, Chairman and Chief Executive Officer, Mr.

Hu Xiaoming; and Interim Chief Financial Officer, Ms. Zhu Xiaoming. Mr. Hu and Ms. Zhu will deliver prepared remarks followed by a question-and-answer session. Before we get started, I’m going to review the Safe Harbor statement regarding today’s conference call.

Please note that the discussions today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties, as such; the company’s results may differ materially from the views expressed today.

Further information regarding these and other risks and uncertainties are included in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and in other documents filed with the U.S. Securities and Exchange Commission.

Kandi does not assume any obligation to update any forward-looking statements except as required under applicable law. As a reminder, this conference call is being recorded. In addition, an audio webcast of this conference will be available on Kandi’s Investor Relations website.

I will now turn the call over to Kandi’s Founder, Chairman and Chief Executive Officer, Mr. Hu Xiaoming..

[Foreign Language] Hello, everyone. Thank you for joining our second quarter 2019 earnings conference call. Due to the suggestions I have received from a lot of shareholders, I’d like to make some changes to our conference call as the information we have already disclosed in the news and 10-Q, I’m going to skip those, including the CFO’s remarks.

So this way, I can leave more time to talk about some new comments that we haven’t talked about in the news and leave more time for the shareholders to ask questions.

[Foreign Language] The second quarter is still not very satisfying, because of the JV Company’s pending restructuring, this caused to the loss of the JV Company, which resulted in Kandi’s overall loss.

However, Kandi’s traditional business, such as EV parts and off-road vehicle sales, I believe that they have achieved very good results during this quarter. [Foreign Language] In the first half, because of the restructuring of joint venture of the resolved Geely as becoming the controlling shareholder with about 78% equity stake in the joint venture.

So, Geely has started with business plan refining and updating all our – all the JV’s EV models to accommodate the new subsidy policy that government has come up with, if we continue to produce and sell the original models, and it’s the results going to we are losing more money.

So, that’s why right now, we are still out of stage of refining the business plan for the JV company. So, from now on, we are going to have a completely new EV lines that are going to be utilized Geely’s technology, their supply chain system and to come up a new product.

[Foreign Language] One model we’re going to launch is that going to have a more advanced technology; however, the costs are going to be 30% reduced compared to the old model. [Foreign Language] This model is close to the launch and I believe it has a lot of advantages in terms of price and performance and technology.

[Foreign Language] So that’s why, I said in my comments, in the news we leased on Wednesday, that with the new products are going to be launched, I believe JV Company will be able to achieve exciting future growth on the Geely’s leadership.

[Foreign Language] So, this is the obstacles that JV has been going through and I’d like to share with you about updates with JV’s recent developments. [Foreign Language] Additionally, we have finally received the dual production license. And once we get that, I believe we’re going to get additional support from local government.

[Foreign Language] Besides what’s happening at JV, our transitional business, off-road vehicles also going through some changes too.

[Foreign Language] For example, the UTV, let you to produce that only has a few functions such like store, some products, but right now, based on the younger generations demand, we’re going to have a UTV upgraded to have such as air conditioning and other features. So, we’re also going to upgrade that UTV models to meet the market demands.

[Foreign Language] And also one more thing, I mean, very excited to update you. It’s about that risk chance. That’s something we’re always passionate about, but however, and it was a seminar hosted on July 31 that the seminar is about exchange batteries.

[Foreign Language] In the seminar, the speakers, once again, acknowledging the importance of quick battery exchange. And that in the past two years, the quick battery exchange received alarms on standing, but right now, they finally came to realize that how important is this and how efficient is going to be working for EVs.

So, going forward, this is going to be our laid of great foundation for our EVs development, such as our collaboration with Ankou, I believe this is a very good news for us. [Foreign Language] That’s all I have for today. And I will leave the rest of the time for our shareholders to ask questions. And then I can share more with you in detail.

Operator, we can start to take some questions..

Thank you. [Operator Instructions] And we will hear first from Michael Fairnow of Focus Tech Investments..

Yes. Good morning and I enjoy your type of conference from all that you’re now doing. And my question relates to the press about the recent slowdown in China’s overall and to some extent, expecting auto sales, it seems in this kind of an environment that the ride share like Didi and Cao Cao, would greatly benefit. So, when Mr.

Hu gave us his input as to how it will affect Kandi going forward? Thank you..

I’m sorry, Mike, can you repeat your question? Just repeat your question part?.

Yes. It relates to the slowdown in overall business in China and affected to some extent auto sales in China that that would benefit the ridesharing services such as Didi and Cao Cao, if that is so, would Mr.

Hu give us his input and how it should affect Kandi’s business going forward?.

[Foreign Language].

[Foreign Language].

Yes. The market has been having reduced policies, subsidy policies to support the EVs recently in this year. That’s why I mentioned earlier that if we continue to produce and sell the own EV models, we’re going to continue to lose money.

But however, the new models, we are developing together with the Geely as gone to reduce at least 30% cost and have more features, technologies that we can offer and including the online ride-hailing market. That’s going to help us to gain more market share to surviving this kind of slowing down market..

Well, thank you. And again, I appreciate the new format of the conference call..

All right. Thank you. [Foreign Language].

And we’ll go to our next question from Mike Pfeffer of Oppenheimer. Sir, your line is open. Please go ahead. Mr. Pfeffer, your line is open, perhaps you’re on mute. Hello. We’re not able to hear you. If you’re on mute, please press the mute function, so that we can hear you. With no response on the line, we’ll have to move to our next question.

At this time, we’ll move to Walter Hill with Carty & Company..

Thank you. Since we have explained the Q2 2019 10-Q yet, based on last quarter filing, Kandi had just under $160 million in short-term liabilities and $198 million in total liabilities reported. This already is way down from $217 million in Q3 of 2018.

Assuming the JV pays back the $65 million in-house Kandi, Li Shufu and Geely pays the balance of some $63 million is still house Kandi for the purchase of the 22% interest in the JV. Kandi’s total liabilities were dropped under $70 million; I guess the book value of some $240 million for debt-to-equity ratio of less than 0.3.

Totally ridiculous for current market cap of only around $260 million. And this does not even take into consideration the additional $160 million to $200 million sales value of Kandi’s legacy Jinwa facility, which has only some $7.8 million in debt against it.

As grossly undervalued its Kandi is, why wouldn’t Kandi consider selling the Jinwa facility and then increase the buyback to a $100 million or more of its outstanding shares in the open market, which by the way would increase Mr. Hu’s ownership back to above 50%..

Thanks for your question. [Foreign Language].

[Foreign Language].

First of all, I will appreciate that how closely you follow up Kandi? I can tell from the numbers that you are very familiar with our financial side. I really appreciate that. Of course, our current market cap is extremely undervalued by the market.

I think that is also due to this outstanding debt exchange in the past years and JV structuring and our own performance. That’s why, right now, we are going through all these business refining and we believe that once we upgrade our business to meet the new market condition and to improve our internal operational results.

We will be able to regain market recognition and the markets have eventually returned to the reasonable range. The company’s buyback shares are also showing the company’s confidence in the company’s future. So for that, we are very confident that we’re going to achieve all these..

[Foreign Language].

Also, I’d like to add on regarding to Jinwa facility, because right now, I don’t really need a cash urgently. So, I’m not rushing to selling that part. However, but I believe the longer – the longer – the more value is going to become, yes, that’s all..

Thank you..

Thank you..

And we’ll hear next from Li Gao, a Private Investor..

Good evening, Mr. Hu and good morning, Kewa. So, I have three questions, which should be short line? So, the first one is about the license, the Kandi does receive from MIIT. It was excellent to see Kandi JV, finally being awarded its long overdue manufacturing actually from MIIT to the longtime holders of Kandi this is an exciting inflection point.

We have waited over – we have waited over five years for the sake of new investors. Could Mr. Hu please explain why do you aware of the only 14 EV maker, which does not include Tesla or Neil also in more than 200 perspective EV makers in all of China to receive this award is still big for Kandi. [Foreign Language].

[Foreign Language].

Hi, Li Gao.

do you like me to translate or you want to translate?.

No, you go ahead please..

Okay. So, Mr. Hu, saying that, to Kandi has waited for five years to receive the dual production license. But for himself, he actually has waited for 30 years to receive this license. It’s really, really valuable. And in terms of – what kind of benefit, Kandi go into receive after having the dual production license there are a couple of things.

First, again, in the past, so we were – we were accused about battery exchange and the government came up with a lot of them standing on this kind of business model and it’s certainly impacted Kandi JV to received approval for the license. That’s where it has been delaying for this long time. But right now, this, finally got cleared.

Second of all, as everyone know, in the past, that JV company as producing and selling – was producing and selling EVs through Geely’s license. So now was the JV has its own license, the longer need to rely on Geely’s license. And this is a big step forward.

Thirdly, after the license is received, the Jiangsu, Kandi Jiangsu going to – definitely going to receive a lot of support from the local government. And in fact that Jiangsu’s license is the first that, received in [indiscernible]. So, this definitely a big deal.

Li Gao, mentioned that, out of the 200 manufacturers there were only, about dozen, about 14 EV makers got a license. But I have to say that those 200 car manufacturers, most of them are transitional car makers. But however, these, over dozens of maker – car makers, they are EV makers. So we are, I think about 17 manufacturers to receive this.

And I believe there will be one more to be approved. After that, I think, they won’t be no more dual production license will be granted to an EV produce – EV manufacturers. So indeed this is very valuable. And I really appreciate this investors closely following up and support to Kandi.

And, right now we do have the money and we also have the license, I think what’s comes next is execution that’s why I keep saying that I’m very excited that JV going to under Geely’s leadership was there resources and technologies and they’re – their network the Kandi’s JV going to have a very good future..

[Foreign Language].

Also I like to mention that, the moment we received the final documents about the approval of the production license.

I got very emotional even has tears in my eyes, but I really couldn’t believe that once the press release were now the market didn’t really react the way that we were hoping for and for that I’m kind of disappointed and just the joke homicide..

So, I follow-up on this question. We long time ago that the shareholders follow the license of very closely, especially there some value added to the company. So we understand many Chinese EV start ups has formed joint venture bought out to some old car companies, which has the production license.

For example, I wait just from the acquired [indiscernible]. So Mr. Hu, what’s the kind of value you think these license alone added to in JV company? [Foreign Language].

[Foreign Language].

I think it’s very hard to evaluate the license itself. how much value is in dollars going to be added to, while you mentioned the transaction, it’s completed, then it seems that however for us, I think I at least asked a couple of folks to our current value..

So, another question is about Mr. Hu mentioning on the last conference, actually needs to also just mention us to receive the license and also after the JV reorganization local government we are JV Kandi, JV with lot of more support.

You mentioned a number about something close to $10 billion R&D in investment or some kinds of cash and I don’t know what’s kind of far from the government. So, if I heard that correctly a buyback number Mr. Hu clarify this. So, what kind of support from local government after the manufacturing license? [Foreign Language].

[Foreign Language].

The government didn’t indicate in much detail – much more detail. So, once we have received the support either in payment or anything else, we will update the market accordingly..

Finally, a very quick question about the new car Mr. Hu mentioned that in the last conference and just now? So, is this the car we did a 30% cost reduction and very competitive on the market in the K8, you mentioned in the last conference, if it is, when we will have that to be ready for sale. [Foreign Language].

[Foreign Language].

It’s not on K8 you ask, it’s going to be a brand-new car by utilize Geely’s technology will be advanced in overall features. I estimate that it’s going to come out at the end of the year. But at this moment, I cannot release any more details..

Thank you very much, Mr. Hu. That’s all from me, Kewa..

[Foreign Language] Thank you. We can take our next question..

And we’ll go next to Arthur Porcari of Corporate Strategies Inc. please go ahead. your line is open..

Okay. Thank you very much. So, I really do like this new format you’ve created right now. So, that’s true, as long-term holders can be may have find and we hit an inflection point after 10 years.

As far as getting it here, I get that a little bit, but I’m going to revisit and update a little late in the year end 2018, and the Q1 2019 conference calls mainly have this year’s JV in sales part along with Kandi’s Jinhua An Kao subsidiary with batteries exchange unit as Mr.

Hu talked about earlier and its relationship with the 300,000 government-accredited EV program Kandi has announced. But I also want to congratulate Mr. Hu, he is almost understated that I’m glad he mentioned about the meeting that was held just last week [indiscernible] is Kandi really set the people was really the inherent battery exchange.

That’s why Mr. Hu was so happy about it.

He invented and then turned it over to Kandi, the first patent to quick battery exchange, which was originally approved by the MIIT is one of the only three months some nine years ago that was approved for global use in China, but it was kind of overrun by all the conventional manufacturers, who were sticking batteries and every bumper and fender and everywhere else.

And it did acquaintance so easily to quick battery exchange. So that reason seemed to have got tabled for a number of years. So, Mr. Hu always had at his feelings that this was going to work. So, when they had that meeting last week, he also understated the fact that he was also quoted in all the articles to cover the media in China last week.

As it really is the father of this type of technology, which is almost going to be mandatory as I’ll talk about in the moment for a quick battery exchange or ride-hailing in particular. Go ahead and tell that to Mr. Hu right now..

[Foreign Language] Go ahead, Art..

in the year-end conference call, Mr. Hu said, and I "management team hopes the JV to achieve its projected goals of producing and selling 20,000 EVs in 2019". Mr. Hu made this surprise forecast in March while being fully aware of the upcoming restructuring with Geely holdings and leadership.

So, at that time and the company had already announced that it was upgrading its business model to the much broader ride-hailing market as shown by its signed agreements with Ruibo and China giants, which is China resources in Didi Chuxing for 300,000 EVs over five years along with an additional 20,000 EVs to Geely’s high-end EV Unicorn Cao Cao over three years.

Is it unreasonable to assume with the recent approval of the ride-hailing K23 and I’d like him to talk a little bit more about the K23 that we still have a shot at the strong second half pushed towards achieving the 20,000 park target that was originally management built for 2019. And I have a follow-up and a couple more questions there..

[Foreign Language].

[Foreign Language].

I want to mention that the EV model I talked about earlier and it’s going to really going to be the turning points for the company, because it’s going to reduce the cost and regain the market share pretty long. but right now, I cannot say much till the car is launched regarding to a 20,000, EV goal.

I think probably it’ll not be able to realize this year since I was still on the stage of finding this model in a product..

A follow-up on that question then, the K23, it was approved recently and that was the heading part, we understand it. And I think Kandi had itself some $45 million to develop. What is the status of the K23? And then I still have more buying that..

[Foreign Language].

[Foreign Language].

For the K23 is also going through the upgrading and you realize Geely’s technology, because right now, what K23 has in the supply cost is still very high. So, we are going to articulating that model as well. And there were another EV model that right now is going through the developing stage. The Hainan is the one that was going to export to the U.S.

and that one also we’re aiming to reduce at least 30% cost. So, yes, the Hainan facility right now is also going through a dramatic change to upgrading all our products..

Yes. A little more follow-up on that. The Hainan facility, we understand is still owned by KNDI, as Kandi, not the JV. in the past conference call, I think Mr. Hu mentioned something along the lines of whatever is made in that facility basically would be revenues derived exclusively to Kandi, but run through the JV.

is that correct?.

Are you asking right now – are you asking whether Hainan is under Kandi whether it’s advanced through by Geely, right?.

Yes.

Anything you licensed under Geely, anything that’s made in Hainan, whether it’d be products or SKDs or products, that’s revenues all to Kandi, is that still correct?.

[Foreign Language].

[Foreign Language].

Correct..

Great, okay. In the past, this goes back – I want to touch right now on the media – in the past conference call, Mr. Hu also stated that ride-hailing EVs would be expected to do some 8,000 kilometers per month or about 266 kilometers per day. That’s ride-hailing now, like Didi Chuxing or Cao Cao.

If that’s the case, considering the cities seem would have to be driven at least two shifts per day making, they put battery change, almost mandatory for a ride-hailing EV due to recharging times based on Kandi’s QBX used in car share doing much fewer kilometers per day each EV, it would – in the old days, this was back when we had the car share.

We’d take four batteries; two in the car and two in the charging rack.

But now with these much higher rates expected some ride-haling, would it be more realistic to assume that each car would have to have as many as six batteries; two in the car, four in the charging rack?.

[Foreign Language].

[Foreign Language].

Now, we are planning on launching EV models with a driving range of over 300 kilometers to the online ride-hailing market.

therefore, one shift will be enough for the online ride-hailing, because it’s not going exceed 300 kilometers and I mean, once shift for the online ride-hailing will not exceed 300 kilometers and two shifts per day will be good to go.

therefore, because each battery only needs six hours to charge and each day can charge four times, and as long as the battery exchange, the company’s equipped battery with its 1 versus 0.3 kind of ratio. In fact, there’s 0.25 ratio, but however, we give or take. So, it’s 1 versus 0.3 ratio, issue would be operating normally..

Okay. In Kandi, first we’ll provide all those parts and the batteries continued.

That’s correct?.

You mean – a decrement part to high-end battery, is that what you’re asking?.

Yes. I’m asking that as it’s been in the past, Kandi will still be the provider of all the batteries, the initial ones that are with the car and the ones that would be in the charging racks. Kandi will be….

[Foreign Language].

[Foreign Language].

Yes. We are not only supplying the battery, also supplying the battery, Kandi equipment, which is totally automatic system each year battery exchange only takes 10 seconds..

10 seconds. Okay. All right. I’m going to go back, then touches on my next last point here. And this has to do with his comment earlier about Jinhua An Kao. Kandi purchased Jinhua An Kao for some 30 million plus in December 2017, considering Mr.

Hu in Kandi, we’re already experts, which is the QDX field as we said earlier, being the first introduced QDX when its own government approved system back in 2010. Jinhua An Kao must have an exceptional system to have Kandi give up its own patented technology and pay so much to this new technology.

How much will Jinhua An Kao be selling each system for and how many slaps per day can each system deliver?.

Okay. [Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language].

Okay. Art, I want to correct myself for last question’s answer, it actually takes 90 seconds to change the batteries, not 10 seconds. Sorry, to answer your question for this one that Mr. Hu is saying that the battery exchange technology is just constantly upgrading and changing.

So, in-house system is also very advanced that they have one, which is a fully automatic of power chain system, which the prices not exceed $800,000. So, which is very comparative and based on, what do you have, it’s going to cost her like over $1 million.

So, we believe that what – has is very competitive and this only takes about 90 seconds to change the battery pack each time. So, you can kind of talk to how many times can it can change..

Well, $800,000 to $1 million is much higher than I was expecting and the $300,000 ride-hailing program like the existing contract agreement that we have with China resources, the 76 largest corporation in the world according to Fortune, where they’re going to be responsible, as I said earlier in acquiring these systems to be used in the $300,000 accredited system, about how many of these units would he anticipate we could be selling just for $300,000?.

[Foreign Language].

[Foreign Language].

Mr. Hu is saying that right now, it’s hard to estimate. the program is going to last for five years. So, as go as demand and we are going to update you as we go forward..

Okay. Well, a lot of surprises in this call and yes, again, the new format is great and it does apparently really show the shareholders that there is a change happening in Kandi and something that Mr. Hu deserves and I think so to the shareholders thanking very much on behalf of all of our long-term holders..

[Foreign Language].

And we’ll hear next from Mike Pfeffer with Oppenheimer..

Hello. Thanks for taking my question. regarding the $20 million company share buyback, is this being done as a more complex 10b5-1 plan, which would allow purchases with no blackout, but can take several months to implement or just a conventional share buyback with pre-earnings blackout periods. And then I have a couple other questions..

[Foreign Language].

[Foreign Language].

like you said, in fact the procedures for the share buyback are quite complicated. And especially, that we have to open accounts and we’ll have to get approval for the forms to transfer to overseas. it takes a long time, but however, the preliminary preparation work has been pretty much down.

So, we have engaged with other professional brokerage firm to design a share buyback plan and we are anticipating to start buying back the stock in next week hopefully and the plan is still the same..

Okay. I guess, so I assume what you’re saying it’s not a 10b5-1 plan, but maybe, you could just get an answer on that. And secondly, do you expect to complete the $20 million stock purchase by year-end? And lastly, will mr. Hu continue to add to his $4 million in Kandi market purchases? Thank you very much..

[Foreign Language].

[Foreign Language].

First, whether or not it’s 10b5-1 plan, I cannot confirm with you this is going to be handled by the brokerage firm and before it’s finalized, I cannot comment on that. Second of all, like we said in the press release, we’re going to buy back up to 20 million shares from the open market.

So, it depends – depending on the market condition in terms of whether or not I personally go – going to buy back shares. This also depends if the markets still undervalue our stock, necessarily point, I will buy back.

But once again, once I have – if I buy back, there will be a form 4 release, but right now, I cannot guarantee whether or not I’m going to buy back shares, personally..

Thanks..

Hello..

And at this time, I will turn the call back over to the management team for any additional or closing remarks..

[Foreign Language].

thank you ladies and gentlemen for attending today’s meeting. I’m very glad that our new format of the conference call is very welcomed by our shareholders and new investors. We are going to do this next time as well, that save time from reading the inflammation down, we already disclosed in the filings and the news.

So, we have more time to interact with our shareholders to answer more questions. If you have any additional questions, please don’t hesitate to contact our investor relations and we look forward to speaking with you again, in next quarter. Goodbye..

That does conclude the call. We would like to thank everyone for your participation. You may now disconnect..