After spending close to 100 hours researching, developing and publishing a lengthy two part article matching the similarities between China-based NASDAQ Kandi Technologies (NASDAQ:KNDI) and Tesla Motors (NASDAQ:TSLA), including KNDI's new 50-50 JV partner China's #1 passenger car maker Geely Auto (OTCPK:GELYF), I have come to realize that TSLA should also be a natural partner for Geely in China. Contrary to my normally lengthy articles, I am keeping this article very short and referencing interested investors to my recent two articles which heavily cover all three companies and their controlling shareholders. (Geely is extensively covered in Part 2):
- Kandi Vs. Tesla Wall Street Match-Up Revisited: Exceptional EV Business Execution From Both Part 1
- Kandi Technologies Vs. Tesla: Wall Street EV Match-Up Revisited Part 2
Why Geely and TSLA are a "Natural" as JV partners.
- The founders/chairmen of all three companies are self-made entrepreneurs who can totally dictate the direction of their independent international public companies. A cross relationship can only help each Company's stock market exposure.
- TSLA's Chairman Musk has already announced his serious interest in entering the "highly political" China Market. Geely can open a lot of early doors. As a long standing member of both of China's primary political arms, the National People's Congress (NPC) and Chinese People's Political Consultative Conference (CPPCC), Geely's Chairman Li Shufu's political clout and EV advocacy is strong. Geely, on the other hand, would likely gain U.S. government respect by giving further security to U.S. politicians who still "question" the DOE loan to TSLA.
- Geely's chairman has made it quite clear he wants U.S. exposure, even if it is exclusively for EVs (as proven by his almost buying control of Fisker last month, but then backing out.) While KNDI is Chinese, it certainly has roots in the U.S. as well.
- While gaining its #1 passenger car position in China, Geely's has achieved this position in a very short time through building moderately priced cars for the middle class. It now has the KNDI JV to cover the lower end consumer, but needs a high-end entrée to gain total automaker respect in China. TSLA with its notoriety and International exposure would be perfect.
- TSLA will, at least for some years out, have plenty of excess auto manufacturing capacity in its Fremont CA. Nummi Plant, should Geely get to a point of manufacturing in the U.S.
- The cost to TSLA's doing business in China could be considerably reduced as Geely has close to 1000 dealerships in China, which could showcase and service TSLA's EVs.
As you can see by just these few but important synergies between Geely and TSLA, paring up makes much more sense than with other China automaker (most are at least partially state owned).
While likely not a direct party to the proposed Geely/TSLA JV envisioned above, KNDI's contribution as innovative leader in China due to its patented PRC endorsed Quick Battery Exchange (QBEX) technology, if only collaterally, would also cumulatively add to mutual profile growth in EVs in China.
Since I submitted my Part 2 to Seeking Alpha last week, KNDI confirmed in a U.S. press release that it did receive an initial order for 2000 of its mini-EVs from Sinopoly Battery (00729.HK), a multi-billion Hong Kong-based company who's largest outside shareholder is Li Ka-Shing. Li Ka-Shing is ranked #8 on the recent Forbes Wealthiest and considered the wealthiest man in Asia. Yesterday it was announced that Li Ka-Shing, who bought his initial position in Sinopoly last year in the open market, has just added to his ownership by investing in a Sinopoly private placement. As you can see from the article linked below, the decision to increase his stake was directly attributable to the addition of Sinopoly in the 20,000 EV leasing program for Hangzhou China, whose cars are expected to all be KNDI's EVs. While KNDI is not mentioned by name in this article, when paired with the Sinopoly press release on April 19 naming KNDI as the EV manufacturer along with KNDI's U.S. confirmation press release on April 23, it is clear that KNDI is the EV provider. What is also interesting in the article is apparently Li Ka-Shing's interest in making this investment is not Sinopoly's battery business, but instead, the recently announced Hangzhou leasing program.
Curiously, as you can see by reading the whole article, both TSLA and BYD (OTCPK:BYDDF) (Warren Buffett's China Investment) are mentioned though not involved in any direct way. BYD only mentioned in the vein of Li Ka-Shing being to Sinopoly as Buffet is to BYD. Re. TSLA, here is the last paragraph in the article (TSLA shareholders should love this.):
"In addition, the U.S. electric car manufacturer Tesla Company's share price has once again reaching record highs. More Analysts pointed out that Tesla's common stock in the 18 months hit a high of $ 100 per share, and hit $ 200 a share in the next five years."
The inclusion of TSLA in this China article, which has no relation to this deal, further confirms my comment above that TSLA stock does have a high profile in China, which could collaterally enhance Geely's popularity should they decide to have a JV.
Below is the Sinopoly announcement with some pertinent paragraphs extracted and pasted here.
2013-05-02 02:40:48 Source: Daily News
… An announcement the company will cost about 80 million yuan to purchase 2,000 electric vehicles engaged in the leasing business, and the other announcement is Li Ka-shing and its Foundation HK $ 220 million in private placement, the stake further expanded to 15.68%..."
…April 21, SINOPOLYBATTERY announced that the company has formally entered… the EV leasing business, and has purchased 2,000 electric vehicles for the Group. It will focus on the Hangzhou Municipal Government "pilot project" to promote the private rental of electric vehicles.
…It pointed out that SINOPOLYBATTERY's entry into the electric car rental business, will promote the use and development of electric vehicles, thereby creating more demand for the Company's lithium batteries and related products. It is also reported that the purchase of these electric vehicles by SINOPOLYBATTERY will provide not less than 100 million yuan in new purchase orders for the company.
To further solidify and expand SINOPOLYBATTERY's introduction into the EV marketplace for its "poly battery", it announced that a private placement of HK $ 264 million, $.22 per share, of which Li Ka-shing and its two funds together invested $ 220 million. His equity ratio stake in SINOPOLYBATTERY rose to 15.68%. These monies will be utilized for organizational and set-up cost for the leasing company, operational costs, and expanded EV battery manufacturing facilities.
It is no accident that Li Ka-shing and SINOPOLYBATTERY are utilizing the Hangzhou EV "pilot project" for the launching of its leasing company. And, it's also no accident that Kandi Technologies is the provider of the projects 20,000 unit EV initial order.
In this regard, the executive director of the SINOPOLYBATTERY Xie Yin pointed out that Li Ka-shing is not interested in the battery manufacturing, but the company is working with its subsidiary company to discuss cooperation, does not rule out future cooperation in battery downstream…
While my main personal interest is in KNDI, my overall interest is in seeing the proliferation of EVs worldwide. I clearly stated in my prior articles I see no way KNDI and TSLA could be a competing threat to each other and would be ecstatic to see the above become reality.
Disclosure: I am long KNDI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.