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China-based Kandi Technologies is primarily involved in the business of electric vehicles, all-terrain vehicles, and go-karts. According to the company’s CEO, Hu Xiaoming, the demand for EVs is on the rise and the Chinese government’s policy, which waives a 10% sales tax off EVs till 2017, is a welcome step in that direction. EV sales have been rapidly escalating over the past few years, with the company selling 3,568 units in the fourth quarter of 2013.
Kandi has successfully implemented a car-share program called “Hangzhou Public EV Sharing System,” and is also expanding its group-leasing model.
The positive revenue growth, however, failed to extend to the company’s bottom-line. The company had revenues of $94.5 million in 2013, 46.5% higher than the previous year. Due to SGA expenses that were 249.6% higher SGA, net income actually decreased 449.5% year-over-year (YoY). The situation worsened in the first quarter of 2014: revenues declined 20.5%, and net income fell 3.8%.
Earlier this year, the company was subject to an SEC investigation. This was in response to a 2011 Sharesleuth investigation, which challenged the company’s claim of selling more than 3,700 EVs between 2009 and 2010. Kandi chose to back its numbers at that point; however, a footnote in its 2012 annual report affirmed that more than half its cars sold in 2010 were gas-powered and not electric.
The company is expected to announce second-quarter earnings on August 11. While the growth in EV sales from the previous quarter is a positive indication, its overall impact on the company’s earnings for the quarter remains to be seen.