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While Hurricane Sandy and the election provided strong political cover for renewed talk about CO2 and climate, recent developments in weather and climate science have conspired to slow the push for significant action. Congressional hearings are uncovering doubt from all sides about how much warming CO2 may actually cause. And as there is ongoing research at CERN and other quarters eyeing cosmic rays as the primary culprit in climate change, governments are announcing their intention to reduce clean energy subsidies over time.

Yet, tens of billions of dollars have been poured into alternative energy schemes over the past few years, with some of those investments- A123, Solyndra, Ener1, Fisker, etc.- leading to failed companies. But that amount of money is bound to create some advancements, and as I suggested there would be in this article on solar, there are companies striving to compete based on cost-parity in a post-subsidy world. While nowhere near out of the woods (as evidenced by an 8% drop in share price this morning), Tesla (NASDAQ:TSLA) has achieved break-even, a major accomplishment for a new car company, while striving to reach mass-market pricing.

Kandi Technologies Group (NASDAQ:KNDI) is similarly poised to succeed in a post-AGW-panic world. This Chinese Electric Vehicle manufacturer starts with a major advantage- they are profitable. Moreover, their history of- and overhead for- manufacturing smaller, low-cost vehicles like go-carts and ATVs, fits in nicely with the needs of a Chinese market with huge potential. Over 100 million Chinese ride electric bicycles, and one would have to believe their increasing standard of living will drive many of them to want to escape the elements, especially on important trips where showing up rain-soaked or sweaty is not an option. Kandi has also developed and patented a method for swapping batteries instead of requiring a wait to recharge them, critical for use cases like taxis or urban rental vehicles, with a side benefit of providing grid storage.

But Kandi's major advantage is found in its relationships. First, with local governments like Hangzhou, who last year announced intent to purchase 20,000 EVs- more vehicles than Tesla will likely sell this year. Second with the central planning authorities in Beijing, not unimportant in a country still transitioning from Communism. Third, and perhaps most importantly, with Zhejiang Geely Holding Group, who owns the largest private automobile manufacturer in China, Geely. A 50:50 $160M Joint Venture, Zhejiang Kandi Electric Vehicles Co., Ltd. between Kandi and ZGHG's Shanghai Maple Guorun, to pursue Electric Vehicles in the Chinese mainland, with press reports of capacity for 100,000 EV components.

And even though climate change will likely not drive significant action, pollution and the drive for efficiency likely will. China's governments, central and local, are being pushed to address these issues, and new subsidies have been and will be announced this year. But the writing on the wall is clear- they will be phased out over the next few years.

At $3.75 a share, the KNDI's market cap is approximately $120M, tiny compared to the market caps of other vehicle manufacturers such as Tesla (TSLA) at $10B and Tata Motors (NYSE:TTM) at 17B. Should their volumes increase to even half the 100,000 capacity announced, 50,000 cars, and should all of that go through the JV, figure an increase in profits on the order of $100M. Take half those profits to KNDI's bottom line- $50M- and with a multiplier of 20, reasonable for what would be a strong growth company, the resulting valuation of $1B would price KNDI stock above $35.

Consider that this could happen within the next two years without an obvious need for more capital due to the JV and consider the upside in a country of 1.6 billion people- not to mention billions more around the world currently living on $2 a day or less (but working their way up the economic ladder); the potential makes 50,000 vehicles per year look anemic. This potential (some would use the word enormous) makes KNDI an attractive investment option as long as there are no showstoppers. And a great deal of investigation has gone into this company looking for showstoppers, with none found. There have been valid concerns over RTO profits and misclassification errors, but no smoking guns indicating anything amiss one wouldn't expect from an aggressive, capitalist, and significantly regulated, entity, with all indications being that the revenues and profits reported have been accurate.

So the upside for KNDI is quite large while the downside risk at this point looks quite manageable, and it does not require believing in CO2-driven warming, let alone climate disaster. Just knowing that there are a lot of people on Earth who want affordable, flexible, comfortable transportation is enough.

Source: As Global Warming Momentum Slows, Is Kandi Ready To Soar?