Kandi Technologies Group (KNDI) CEO Xiaoming Hu on Q1 2020 Results - Earnings Call Transcript
Kandi Technologies Group (NASDAQ:KNDI) Q1 2020 Earnings Conference Call June 5, 2020 8:00 AM ET
Company Participants
Kewa Luo - Investor Relations
Xiaoming Hu - Founder, Chairman and Chief Executive Officer
Ming Lim - Chief Financial Officer
Xiaoying Zhu - Investor Relations
Conference Call Participants
Harold Garberry - Private Investor
Arthur Porcari - Corporate Strategies
Michael Fearnow - Focus Tech
Mark Miller - Private Investor
Michael Pfeffer - Oppenheimer
Mark Kahnau - Swiss Liquid Future
Terry McLemore - Scf Securities
John Cronin - Private Investor
Operator
Greetings. Welcome to the Kandi Technologies First Quarter 2020 Financial Results Call. At this time, all participant lines will be in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded. At this time, I will turn the conference over to Kewa Luo. Kewa, you may now begin.
Kewa Luo
Thank you, operator. Hi, everyone. Welcome to Kandi Technologies Group first quarter 2020 earnings conference call. The company released the results earlier today and the press release is available on Kandi’s website at www.kandivehicle.com.
With us today are Mr. Hu Xiaoming, Kandi’s Founder, Chairman and Chief Executive Officer and Mr. Ming Lim, Chief Financial Officer. Mr. Hu will deliver prepared remarks, followed by a question-and-answer session.
Before we get started, please note that today’s discussion will often 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 be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company’s public filings with the SEC. The company 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, our audio webcasting 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 CEO, Mr. Hu Xiaoming.
Xiaoming Hu
[Foreign Language]
Kewa Luo
Thank you, Kewa, and hello, everyone. Welcome. Thank you for joining us on the call today. As you all know, the COVID crisis impacted business in China and around the world in the first quarter. You should not be surprised that our revenue was down as country-wide shutdown reduced our production as well as consumer demand. Conditions seem to be improving right now. Demand is slowly recovering, and we are back to work and gradually ramping production.
Xiaoming Hu
[Foreign Language]
Kewa Luo
Even with this setback in the first half of this year, we are optimistic about the prospect of Kandi in our industry. Let me briefly tell you why.
Xiaoming Hu
[Foreign Language]
Kewa Luo
First of all, there are better government support policies. I am, as the inventor of the vehicle/battery separation battery swapping model for pure electric vehicles, I am extremely gratified to our industry’s regulators shift from rejecting battery swapping to fully embracing it. Recently, several important national ministries just published a joint paper about battery swapping. The paper discusses how the government will promote this technology with many supporting policies. We have been a pioneer in battery swap and our Jinhua Ankao subsidiary produces one of the best intelligent automated swap systems in our industry. Other support is coming at the local level. Our factory in Hainan is poised to benefit from the government there building a free trade port. Just this week, the government, have published a detailed plan outlining 60 supporting policies.
Xiaoming Hu
[Foreign Language]
Kewa Luo
The second reason for optimism is new market opportunities. As COVID broke out, we worked hard to find new opportunities that leverage our technology expertise. We have conducted market research and one that stands out is powertrain for electric scooters and self-balancing hoverboards. This is a market perfect for our electric motors and battery packs, and it is quite large, 10 million units a year and growing. We have modified our products for this market and came to agreement to cooperate with one of the leaders in this market, Hangzhou Chic. Depending on how things develop, we may merge our motor and battery subsidiaries, Yongkang Scrou and Jinhua Ankao, into one single specialized powertrain technology company and evaluate the possibilities of raising growth capital in China.
Xiaoming Hu
[Foreign Language]
Kewa Luo
The final reason for optimism is the positive long-term outlook for electric vehicles. Electric vehicles are here to stay. Countries around the world are embracing EVs for their positive environmental impact. By operating this – in this market for many, many years, we are very well positioned to benefit. Our affiliate company, Fengsheng, is ramping its new Maple model. We are developing our junior platform for third, fourth city rideshare program, which will drive huge volumes of vehicles over time. And we are entering U.S. market with consumer-friendly EVs at a very reasonable price.
Xiaoming Hu
[Foreign Language]
Kewa Luo
Let’s now turn to questions. Operator, please proceed.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Harold Garberry, a Private Investor.
Harold Garberry
Okay. My question.
Kewa Luo
Hello.
Harold Garberry
Yes, okay. There is a lot of negative publicity about U.S. listing of China companies that are not in the Public Company Accounting Oversight Board, the PCAOB compliance. While the U.S. had been saber-rattling for over 10 years threatening to de-list these companies, in the past nothing has happened, but not so this time. Can Mr. Hu take some time to explain why Kandi shareholders do not have to be concerned about delisting due to both its structure and now PCAOB registered? Thanks to Kandi’s recent auditor change.
Kewa Luo
And thank you for your questions. [Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
Our shareholders should be less concerned of the issues about because very simply two things. First of all, Kandi is a U.S. company. Second, we changed our new auditor, Marcum B&P last year around third quarter. And Marcun B&P is subject to the inspection by PCAOB, including its working paper.
Xiaoming Hu
Thank you.
Kewa Luo
Thank you.
Operator
Our next question is from the line of Arthur Porcari with Corporate Strategies. Please proceed with your question.
Arthur Porcari
Good morning, Mr. Hu and Kewa. Mr. Hu, hopefully your health has been good and family as well. My comments for background in questions are primarily about the little-known and understood former Geely-Kandi JV now called Fengsheng, which you only just barely mentioned. Since you didn’t cover it that extensively, I am going to feel like I have to ask a few more questions, because this is a subject that’s been receiving rave reviews all over the China media, including Kandi by name over just the past few weeks. So I am going to have to be a little more expansive than I originally expected to be. Can you tell that to Mr. Hu and then I’ll go on.
Kewa Luo
Sure. [Foreign Language]. Please go on.
Arthur Porcari
Okay. For those not aware, a short Fengsheng background first. It’s 22% owned by Kandi, controlled and managed by Geely Holdings, Daimler’s largest shareholder and the world’s largest privately held automaker. In just the auto segment alone, Geely Holding owns 8 global labels to include Volvo, Lotus, Proton and four others, all of this wholly owned exclusively by China’s sixth wealthiest man, Li Shufu. As mentioned, recently, Kandi, through Fensheng, has received a lot of very positive press really in China as it has now begun selling its first EV under the Fengsheng Maple brand, a compact SUV named the Maple 30X. And with the second, up to 7 passenger EV, the Maple 60V, was approved just last week by the government. It’s expected to go on sale in Q3 of this year. You want to pass that on to him?
Kewa Luo
Sure. [Foreign Language] Please go on.
Arthur Porcari
The media reports that both are EV clones of two of Geely Auto’s top-selling gas cars, the Vision X3 and the Jiaji. While the 60V, which went on sale – goes on that’s the bigger car. Goes on sale in Q3 has not been priced yet, the 30X that went on sale in May after subsidies can be purchased for an amazing $9,000 to $10,000, depending on the model version, with incredible features usually only seen on mid to high-end EVs, as the media has reported. Could you pass that on to him?
Kewa Luo
[Foreign Language]
Arthur Porcari
Okay. Also, reported by Fengsheng in the media of their – very heavily, with the schedule of 12 additional EVs to include a sports car and truck between now and 2024. This seems to be a hidden asset that U.S. investors are not paying attention to re Kandi. First, can Mr. Hu give us his take on this recent reporting? And what potential he sees for Kandi with this Fengshing investment? Then I have a few shorter questions.
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
As you know, ever since the joint venture is over, after the assets transfer, it’s going to be over controlled, managed by Geely mostly. And Geely has a very extensive business plan for growing the Fengsheng to dominate the market share in the EV market. And for their first EV model, 30X, their goal is to taking the market share, that’s why the price is very affordable. But the second car, 60V, this is based on their gasoline-powered car, 7-seated model. However, once it’s going to be modified to be the EV, it’s going to be turned to the 5 seated. Therefore, the car inside is really comfortable, and this is going to be mainly targeting the ridesharing market. And we believe that going forward, in the next few years, Fengsheng is going to release many very nice, high-performance, high standard EVs. But by then, I’m sure the company will keep the market updated as the information is available.
Arthur Porcari
Okay, that’s a good answer. Actually, that covered a little bit of my – rest of my next question. Okay, so let’s see. On the last conference call, Mr. Hu told us that Kandi would likely not try to compete for parts business on the first low – on this first low-price EVs, the 30X, which would also not be used for the QBX due to its short wheel base disqualifies it from ride hailing. Does he expect the new larger 60V, which, as he has now said, is being prepared for the ride-hailing program, to use Kandi’s QBX or possibly also to use the Kandi batteries parts as well? And does he have any idea what price range the new Maple 60V EV will be in?
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
We are still in the process of evaluating the quick battery swap system for 60V. And the price for the vehicle is still confidential at the present.
Arthur Porcari
Okay. That’s fair. So it looks like we have a good – we’re competing for the QBX, is what you’re saying, for the 60V.
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
We actually [Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
The battery swapping is actually – right now, we are in discussion with them trying to evaluate this about the model and the method of the battery swapping. As you know, for new battery swapping, the battery exchange is exchanged underneath of the car, on the bottom. But for Kandi’s model, it’s exchanged on the side – from side to replace the new vehicle with the old one. But I believe that our car is the most advanced and very user-friendly in China even in the world. And right now, government also very acknowledged this kind of matter. So we are confident that this is going to have a very good future.
Arthur Porcari
I understand. So this – because that’s a remodel of an existing gas-powered car, it would take – they’re debating whether they can do the modifications to use the side slide pan that Kandi has the patent on. So I see what’s going on there. Okay, last question. Twice in the past 4 months, it was reported that Fensheng expected to sell some 30,000 units this year. Considering Geely Auto sold over 140,000 units of the gas-powered sister car of the 30X, the Vision X3 just last year. Does Mr. Hu think Fengsheng can still reach its 30,000 goal in spite of the COVID-19 slowdown? And with the 60V, which is much larger coming next quarter, could that be the EV Kandi reported last year that the JV would deliver 20,000 EVs to Cao Cao Geely’s white-glove ride-hailing company?
Kewa Luo
Alright. I am sorry can you repeat those questions a second time? Yes.
Arthur Porcari
Okay. I will repeat it again. Twice in the last 4 months, it was reported that Fengsheng expected to sell some 30,000 units this year. Considering that Geely Auto...
Kewa Luo
30,000 of 30x?
Arthur Porcari
It just said units at the time. We didn’t know what the car was.
Kewa Luo
Okay.
Arthur Porcari
Okay. So expect to sell 30,000 units this year. Considering that Geely Auto sold over 140,000 units of the 30X’s gas-powered sister car, the Vision X3 last year, does Mr. Hu think Fengsheng can still reach its 30,000 goal for the X3 in spite of the COVID-19 slowdown? Ask him that part first then I will ask the second part.
Kewa Luo
Okay. [Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
I have – I want to say that I have seen their sales team is working hard to get this target achieved. However, I do believe that the pandemic is still not fully contained, so there was still a certain impact in the market. So I will say they are still trying to achieve that goal.
Arthur Porcari
Okay. And the second part of my question was – has to do with the 60V, which is much larger. It’s coming next quarter. Could that be the EV that Kandi reported last year that the JV would deliver 20,000 EVs to Cao Cao, Geely’s white-glove ride-hailing company? Remember, last year, we announced that Geely was going to take 20,000 of the cars from the JV. This is before it became Fengsheng. And is this going to be because they’re going to start moving over?
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
Okay. Actually, when we were releasing the news last year about the cooperation with Cao Cao Zhuan Che, there was a different car that we were going to be using. However, the 60V has a better performance. I expect that this is going to be deployed to their Cao Cao Zhuan Che program.
Arthur Porcari
Okay. Well, I said that was the last question. Just one little side question, I am curious why, last week the company announced they received $34 million as a down payment on the $76 million payment for Jinhua. I’m curious why that wasn’t even brought up as one of the features, even though it’s a subsequent event, because it didn’t show up in this quarter’s numbers. But why we didn’t put that in the press release or even in Mr. Hu’s opening statement? Just a point of [indiscernible]
Kewa Luo
[Foreign Language]
Xiaoying Zhu
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Xiaoying Zhu
[Foreign Language]
Kewa Luo
[Foreign Language] Okay. So 10-Q is not released yet, but we do have that mentioned in the 10-Q filing. And – but in news, we didn’t mention it because Ms. Zhu is saying that is already released in last week’s press release. And therefore, we did include that just in the recent development in the 10-Q.
Arthur Porcari
One last question, when does he think it will close, officially close?
Kewa Luo
Officially close of the land purchase.
Arthur Porcari
The sale of the JV. Close – we report it as being closed on our book.
Kewa Luo
Wait, Arthur, the question before, did you ask it was the money that received from the Jinhua land, right?
Arthur Porcari
We got the first payment – we got a payment for $34 million, but that wasn’t reported yet.
Kewa Luo
No, no, sorry, sorry.
Arthur Porcari
At some quarter, we are going to report the numbers for our books. When do you expect that to happen?
Kewa Luo
I am sorry, can I clarify? The question you asked before was about the $34 million which we received from Geely, not the Jinhua...
Arthur Porcari
Did I say JV? I’m sorry, I meant the Jinhua.
Kewa Luo
Oh, Jinhua, right, right, right. So right now – but right now, you’re asking about Geely, when this was...
Arthur Porcari
No, no. Right now, I’m asking about Jinhua. When does he expect that to close?
Kewa Luo
The land purchase.
Arthur Porcari
To put it on our books for our earnings numbers.
Kewa Luo
Okay. [Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
Mr. Hu is saying that the first payment will be reflected on this quarter’s – the quarter that we just released. It’s going to be reflected in this book.
Xiaoying Zhu
[Foreign Language]
Kewa Luo
Emily just emphasized that since we received the money in May, so it’s not going to be reflected on the book, but however, we did mention that in the 10-Q.
Arthur Porcari
I realize that’s in the second quarter. Alright, that’s enough. Thank you very much, Mr. Hu. Stay healthy.
Kewa Luo
Thank you.
Arthur Porcari
Thank you. Bye-bye.
Operator
Next question is from the line of Michael Fearnow with Focus Tech. Please proceed with you question.
Michael Fearnow
Yes, thank you. My question relates to a little more detail with your Jinhua Ankao battery – quick battery exchange [indiscernible] will be completed totally in-house with all Kandi parts and technology or will they have to get part from – part of the assembly from outside suppliers?
Kewa Luo
Hello? Can you say one more time? You’re a little bit skipping in the beginning. Hello?
Michael Fearnow
Hello?
Kewa Luo
Yes, I am sorry, can you repeat one more time? You’re a little bit skipping in the beginning.
Michael Fearnow
My question relates around your Jinhua Ankao quick battery exchange technology. Will your battery packs be completed totally by Kandi or its subsidiaries? Or will they need to source from outside suppliers for a portion of the battery packs.
Kewa Luo
Okay. [Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
It is manufactured within our Jinhua facility.
Michael Fearnow
Okay. And it seems like you’re taking advantage of significant business opportunity in these scooters and battery packs. Can Mr. Hu give some more guidance on further consolidations that are talked about in the press release as to when they might actually be completed?
Kewa Luo
I’m sorry, can you repeat one more time?
Michael Fearnow
In today’s press release, we talk about the opportunities for the battery packs and consolidation with the other Kandi subsidiary into a single subsidiary and the further consolidation was announced for supply distribution company. Can Mr. Hu give us some guidance on when these consolidations might be completed?
Kewa Luo
Okay. Okay. [Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
On the reason I like to have these two subsidiaries to merge into one specialized powertrain technology company because one is specializing in the battery pack, the other one is specializing in the powertrain. I think it’s a great combination to put two together. But we already started work this year. However, depending on how this progress, and we still need to evaluate the possibility whether we can raise money in China. So, it’s still very early to estimate when.
Michael Fearnow
Just one final question, in the electric scooters, there’s been some discussion about having Walmart as a sale, distributor in the U.S. Can Mr. Hu give any color or guidance on that opportunity?
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
Well, last year, we signed this contract with DGL to provide the production of the powertrain for the scooters, self-balancing scooters. We see a lot of potential in this market because we utilize the battery for the EV, which has a very high quality. And – but because of the pandemic, this contract has been delayed. If the pandemic is contained, we think the contract will be continue and to complete in this year. And also, I’d like to point it out is that we realize that the hoverboard, which is a balancing scooter, has a lot of potentials. Every year, there are tens million on that in sales, and the number is still growing. And this industry is heavily protected by patent, and that’s how we start to discuss with Hangzhou Chic and we like to utilize our expertise from two subsidiaries, Ankao and Yongkang Scrou to combine their resources and expertise together to become the supplier of – in this industry. And so one thing is the market is very large. Second is the patent. And to emphasize that, Chic – the Hangzhou Chic company that we right now are working on elaboration – collaboration, they have about 598 patents in this sector. So, we think that this market is huge for us to go into.
Michael Fearnow
Thank you.
Kewa Luo
Thank you.
Operator
The next question comes from the line of Mark Miller, a Private Investor. Please proceed with you questions.
Mark Miller
Hi, thanks. I think you covered it. I was going to ask about this – what the previous question was, but did I hear that you said the $77 million contract that was announced last year – or $71 million that is going to be completed in this year?
Kewa Luo
Yes, Mr. Hu saying if – it has been delayed because of the pandemic, but if the pandemic is being contained, we think that this can be completed this year. [Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
Yes, yes, he confirms that if pandemic being controlled, the rest of the contract, $71 million, will be completed, hopefully.
Mark Miller
Okay, good. Just one more here, again, I guess following up. Does Kandi make the motors and the battery packs for these units?
Kewa Luo
For the hoverboard?
Mark Miller
Yes.
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
Yes.
Mark Miller
Are those patented?
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
Mr. Hu is saying that battery is certified but does not have patents. Powertrain systems don’t have – powertrain either. But the hoverboard and the balancing scooter, these products have patents.
Mark Miller
Okay, thanks for taking my questions and stay well, and keep up the good work.
Kewa Luo
Thank you very much.
Operator
The next question is from the line of Michael Pfeffer with Oppenheimer. Please proceed with your questions.
Michael Pfeffer
Hi, thanks for taking my questions. Regarding SC Autosports and EV sales in the U.S., is it safe to assume the 25% tariff is making it very hard to compete with the likes of the new EV Mini, a popular global brand, which has been priced at the same MSRP or $29,500 as the unknown Kandi K23? And if so, what does Kandi have planned to address this?
Kewa Luo
Thank you for your question. [Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
I do think we have a lot of potential advantages because, first of all, we all – our cars are qualified for a full $7,500 federal tax credit, which you can, of course, look up on the website. And second of all, our EV got approved for the importation registration in the USA by NHTSA. And we may think about assembling the EVs in the U.S. to reduce some costs, but we’re still playing with some ideas. We will keep the market informed.
Michael Pfeffer
Just another question or two, how are off-road vehicle sales holding up in the second quarter and what are the expectations?
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
It’s really surprising, but in a very good way that this year, the off-road vehicle sales is extremely good. So, we expect that it’s going to double last year sales.
Michael Pfeffer
Great. And then what type of arrangement do we have with Jinpeng in also selling their K27 or other products in the U.S.? And lastly, any new updates on the Jinpeng relationship, which might include using their massive international dealer network to export Kandi EVs? Thanks.
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
You asked two questions. First, our cooperation with Jinpeng is mainly in two aspects: The first is joining produce model K27, and the second is the cooperation together in domestic ride-sharing market. I do believe that both things are progressing well, even though it is impacted by the pandemic, but I think it’s still on the right track going. And for K27, I estimate probably by the month end – end of this month, if everything goes smoothly, we will start shipping the cars to the U.S.
Michael Pfeffer
Thanks a lot.
Kewa Luo
Thank you.
Operator
Your next question is from the line of Mark Kahnau with Swiss Liquid Future. Please proceed with you question.
Mark Kahnau
Yes, good evening Mr. Hu. Good morning, Kewa. I have a few questions here. Just an intro for these questions, from a recent PR, it appears in the 300,000 government-accredited third and fourth tier city, ride-hailing using Kandi EVs, like the K23 and quick battery exchange, had begun a trial mode before the virus hit late last year in Yongkang. This was a partnership with Jinpeng and Ruibo. In a recent published alphaDIRECT interview, Mr. Hu gave a very clear explanation of the partners’ backgrounds, the partnership in general and its unique business model along with the responsibilities of each partner as well as how each will get paid. For the sake of many shareholders who are on this call or will read the transcript who have not seen that interview, can Mr. Hu share with us what he said on the interview? And when he finished, I have a few more questions.
Kewa Luo
Thanks for the question. [Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
[Foreign Language] Ride-sharing vehicle alliance is actually a tri-party alliance. Ruibo is currently the largest swap battery ride-sharing company in China with state-approved online ride-sharing platform license. Jinpeng has more than 2,000 dealer resources in Tier 3 and Tier 4 cities nationwide. Therefore, Kandi will use its experience and influence in this field to promote the formation of the compliant ride-sharing alliance. Jinhua will utilize its dealer resources to support the growth of the alliance, and Ruibo will be responsible for operations of the ride-sharing project. The compliant ride-sharing alliance is composed of pure electric vehicle manufacturer, ride-sharing operator and operating platform, energy supplier, which is the battery swap and swapping and drivers. The profit certainly come from all parties of the – from this industry trend. This is to say, pure electric vehicle manufacturers generates profits from car sales. Ride-sharing operator and operating platform generate profits from rent and platform usage fees, energy suppliers generate profit from battery swapping and the drivers generate income from their daily operations. That’s pretty much what I said in the interview.
Mark Kahnau
Okay, very good. And now here are a few more questions. How is the Yongkang City trial going on and when does he expect new cities to be added?
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
You actually need a license in order to do the trial operation. And all the licenses that are required for the trial is already approved for Yongkang. So the operators – operations have not truly started again due to the pandemic. There are many dealers in the Tier 3, Tier 4 cities wanted to join the alliance. After Yongkang starts operations and once the pandemic is well controlled, we are going to hold offline meetings with dealers from Tier 3 and Tier 4 cities to sort out the new cities to be added. By then, I will keep everyone informed on how many new cities will be added.
Mark Kahnau
Okay. Very good. In addition to the K23, which was still primarily for ride hailing, does Kandi have a second priority EV expected for release this year? If so, even if nothing specific for now, can you at least give us some idea of the size and the sale price?
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
We are going to upgrade the original K23 model this year, but now there’s no new model to be launched.
Mark Kahnau
Okay. On the last CC, Mr. Hu said that due to COVID-19 virus, the government was temporarily discouraging to release of ride hailing. Assuming this temporary blocks has been lifted, as we already added new cities? And if so, how many of – and when would you expect first sale?
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
Most of these questions I will be answering in the question A, but like I said, actually, right now, the pandemic is still not fully contained. We still need to be – have the temperature check whenever we’re going into public and leaving the public places and we still have to practice social distancing. And the large convention, any group meetings are still not encouraged to be hosted. Therefore, we – what we can do right now is that doing all the preparation work. And hopefully, once the pandemic is fully contained, we are going to move forward quickly. By then, I will certainly report on the progress we have made and including how many cities and the plans we are going to have to move forward.
Mark Kahnau
Okay. And then I have a last question. Well, can we be selling the K23 or other EVs to consumers in China? And if so, what sales network will you be using?
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
The K23 model is going to – only going to be used for the ride-sharing program in China as of now. And this car, at the same time, will also be sold in America. Therefore, we are not using the – any third-party or any sales channel to sell the K23, just our internal sales team. And once this is being deployed, I expect the sales volume for K23 going to be huge. And in America, we will conduct sales through SC dealers sales channel.
Mark Kahnau
Okay very good thank you for taking my questions and look forward for the rest of the year.
Kewa Luo
Thank you very much.
Operator
Thank you. The next question is from the line of Terry McLemore with Scf Securities. Please proceed with your questions
Terry Mclemore
Thank you for taking my call. I have a couple of questions about – continuing on Art’s question about the Jinhua facility. Where are we right now in our current facility? Like how close are we to exiting it and turning it over and being fully paid? And then the second part of that would be, what’s the new facility like? How big will it? How much will it cost? And what will we produce there?
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
So the new land plot right now is being leveled by the government. And we are expecting this to be delivered to us into full construction in July 2020. The new land plot will occupy approximately 100 acres, but the construction area will be equivalent to the old factory, which is about 100,000 square meters, because the old factory buildings were all single-storey buildings, whereas the new factory buildings will be 4-storey buildings. And so the construction period is planned to be about 6 to 8 months. We will move in immediately after factory buildings are fully completed, and we’ll produce – it will produce existing products and probably some intelligent mobility release products as well. And also, I’d like to mention that it’s still going to be our home base headquarters for Kandi.
Terry Mclemore
The new headquarters for Kandi? Okay.
Kewa Luo
Yes, yes. Then.
Terry Mclemore
Okay. One other question, kind of on a different subject regarding Geely and the transfer – equity transfer agreement, where Geely may still owe Kandi some $30 million, the balance has been paid off. How much is outstanding? And when do you expect Kandi to be paid in full? And does Kandi still hold debt to it by the JV or prior EV part sales? And if so, how much of it – when do you expect Kandi to receive it?
Kewa Luo
Thank you. [Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
The equity transfer to Geely should generate RMB516 million. As of right now, we have received RMB330 million, and the remaining balance is RMB186 million. And as of the first quarter this year, the receivables from the joint venture is totaling RMB128 million. And I have to say one more time, because the pandemic, everything has been delayed. And so we – but we have been keeping the discussions with Geely. Hopefully, the remaining balance will be paid. And another thing is that the subsidy, we have heard from some government news that they will start in paying. So once starting paying, I think the account – the receivable will also be paying quickly after that. But if you want to ask exactly time, it’s really hard to predict.
Terry Mclemore
I totally understand. Thank you very much for taking my questions.
Kewa Luo
Thank you.
Operator
The next question is from the line of John Cronin with a Private Investor. Please proceed with your questions.
John Cronin
Yes good morning, Xiaoming. Hope all is well. I have several questions. The first one is, what is a conservative estimate of the number of EV cars that Kandi will actually sell in 2020 in China? And the next question, why is it we seem to be in the correct price segment, and with the impact of COVID and now presumably have access to Geely distribution and marketing, why does Kandi consistently sell less cars than most of the competitors? Is it because of design problems, the margin? What is holding up sales? And can we expect things to change as of May 2020? And will the rest of the year see accelerating sales, such as NIO, Geely, BYD and Tesla?
Kewa Luo
[Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
Yes, the joint venture – we used to have joint venture to sell cars, but I have to say our EVs, compared to most of those EV in the market, is not as competitive as other EV offerings. However, once the joint venture being managed by Geely, they have completely changed their product portfolios. And right now, they have a very high standard, nice design and great performance EVs, and I believe that it’s going to change everything in – the EV sales going to be ramping up going forward.
John Cronin
Okay. Do you have an exact number of the EVs, a conservative guess on how many you’re going to be selling in 2020?
Kewa Luo
Are you asking Fengsheng, our joint – our affiliate company EV sales target this year?
John Cronin
Yes, just Kandi EV sales.
Kewa Luo
Kandi EV. [Foreign Language]
Xiaoming Hu
[Foreign Language]
Kewa Luo
I would estimate Kandi 23 will have about 2,000 EV sales for this year, only K23, this doesn’t include K27.
John Cronin
Okay thank you very much and stay well.
Kewa Luo
Thank you.
Operator
Thank you. At this time, we’ve reached the end of our question-and-answer session. Now I’ll hand the floor back to management for closing remarks.
Xiaoming Hu
[Foreign Language]
Kewa Luo
Thank you, ladies and gentlemen, for attending today’s call. On behalf of the Board of Directors and management team of Kandi Technologies Group, I would like to reaffirm our commitment. We will continue to work diligently to maximize shareholder value by focusing on growing our EV business and delivering strong operational results. Thank you very much for your support. We look forward to talking with you in the next call. If you have any additional questions you haven’t had a chance to ask, please don’t hesitate to contact our Investor Relations department. Thank you. Goodbye.
Operator
This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
- Read more current KNDI analysis and news
- View all earnings call transcripts