KNDI 康迪车业

Operator

Good day and welcome to the Kandi Technologies’ Second Quarter 2018 Financial Results Call. Today’s conference is being recorded. And at this time, I would like to turn the conference over to Kewa Luo, IR Manager. Please go ahead.

Kewa Luo

Thank you, operator. Hello, everyone, and welcome to Kandi Technologies Group Inc’s second quarter 2018 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 the CEO, Mr. Hu Xiaoming; and Chief Financial Officer, Mr. Bing Mei, both 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 Security 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, 2017 any 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 CEO, Mr. Hu Xiaoming.

Hu Xiaoming

[Foreign Language] Hello, everyone. Thank you for joining our second quarter 2018 earnings conference call. Due to the 2018 government subsidy policy adjustments in product structure requirements, the JV Company discontinued the manufacturing and selling of its EV products with a driving range of less than 200 kilometers and shifted its focus to the development of new EV models with a driving range exceeding 300 kilometers. This has accepted our revenue in second quarter. Currently, our new 300 kilometer EV models including K23, K27, and K28 or EX3 received the approval from the Ministry of Industry and Information Technology of the People’s Republic of China, MIIT. The JV Company has resumed its normal production and sales. With restored production and a recovery of sales, we believe that Kandi’s growth will return to the right track. Despite recent weak stock performance, the management team is dedicated to improving Kandi’s market competitiveness and regaining our leading position in the EV industry. Now, I would like to turn the call to our Chief Financial Officer, Mr. Mei Bing to give you more details on our financial highlights. Afterwards, I will answer you the question in the Q&A session. Thank you.

Bing Mei

Thank you, Mr. Hu, and hello to everyone on the call. Now, I would like to provide a brief overview of our financial results for the second quarter of 2018. Please note that all numbers I will discuss today are in the U.S. dollars unless otherwise noted. First let me walk you through the second quarter financial results. Total net revenue for the second quarter was $16.4 million, a decrease of 40.1% from $27.3 million for the same quarter of 2017. The decrease in revenue was largely due to the decrease in EV part sales during the quarter. EV part sales were $15.5 million for the second quarter of 2018, or 94.8% of our total net revenue, a decrease of $10.7 million or 40.8% as compared with $26.2 million for the same quarter of 2017. The decrease was largely due to the reason that Mr. Hu stated in his remarks. Our cost of goods sold was $14.3 million during the second quarter, a decrease of 39.3% from $23.6 million in the same quarter of 2017. The decrease was primarily due to the corresponding decrease in sales. Gross profit for the second quarter was $2.1 million, a decrease of 45.3% from $3.8 million for the same quarter of 2017. Gross margin decreased to 12.6% in the second quarter from 13.7% in the same quarter of 2017. Margin decrease was mainly due to the vast majority of our gross profits, came from less profitable EV parts business in the second quarter. Total operating expenses in the second quarter were $4.7 million, compared with $7.1 million in the same quarter of 2017. The decrease in total operating expense was mainly due to the decreasing R&D expenses in this quarter. Net income was $1.4 million in the second quarter, an increase of $12.9 million as compared to a net loss of $11.6 million in the same quarter of 2017. The increase was mainly due to the profits from the JV companies and decreased R&D expenses in this period as compared to the same period of last year. Non-GAAP net income in the second quarter was $2.5 million, an increase of $12.1 million from $9.5 million of non-GAAP net loss in the same quarter of 2017. The change from loss to profit was mainly due to profits from the JV companies and the decrease of R&D expenses in this period as compared to the same period of last year. Let me touch on the JV companies’ financials now. For the second quarter of 2018, the JV companies net sales were $19.6 million, compared to $18.7 million in the same quarter of 2017, an increase of 5.3%. There were 1,802 EV products sold in the quarter. Net income was $4.8 million, compared to net loss of $14.6 million in the same quarter of 2017. We are accountable of our investments in the JV Company under the equity method of accounting as we have 50% ownership interest in the JV Company. As a result, we recorded 50% of the JV Company’s income was $2.4 million for the second quarter of 2018. After eliminating intra-entity profits and losses, or share of the after-tax profit of the JV Company was $2.4 million for this quarter. Next, I will review the Company’s cash flow. Our operating cash inflow includes cash received primary from sales of our EV parts and off-road vehicles. This cash inflows were offset largely by cash paid primary to our suppliers, operational expense, employee compensation, and the interest expense on our financings. For the first half of 2018, cash used in operating activities was $0.2 million as compared to $1.7 million in the same period of 2017. Our investing cash off roads, include the cash paid primarily for business acquisitions and the purchase of six assets, intangible assets and the construction improvement. This cash off-roads were offset largely by cash received primary for disposition of our investments. For the fist half of 2018 cash used in investing activities was $0.6 million, as compared to cash provided by investing activity of $3.4 million for the same period of last year. Our financing cash improved – cash received primary from proceeds from bank loan and the note payables. This cash improvement was offset largely by cash paid primary for repayments of bank loans and the notes payable. For the first half of 2018, cash used in the financing activities were $5.8 million as compared to cash provided by financing activities of $2.7 million for the same period of last year. We had a working capital deficit, of $8.6 million as of June 30, 2018. As Kandi vehicle increased the capital contribution to the JV company by converting it’s loan to the JV company’s registered capital, which reflects a decrease of $63.3 million from a working capital suppress of $53.7 million, as of December 31, 2017. As of June 30, 2018, we have a total cash and restricted cash of $9.5 million compared to $16.1 million as of December 31, 2017. That is it from me. Thank you. Q&A

Kewa Luo

Operator, we can now take some questions.

Operator

[Operator Instructions] We will take our first question from Michael Fairnow from Focus Tech Investments. Please go ahead.

Michael Fairnow

Yes, good morning, Michael Fairnow. I am addressing the recent announcement that you are going to be distributing some in the U.S. I am surprised when they made the original announcement. If the stock did not act positively and therefore I would like to get a further detail on what the forward-looking expectations are. I am going to break my question down into three parts, so we can get a more cohesive response. Initially, can you update us on the status of the delivery of the prototypes, to the U.S. and when you actually expect them to be approved for sales and distributions in the U.S. [Foreign Language]

Hu Xiaoming

[Foreign Language] And based on our evaluation we believed that as you will be very welcome in the U.S. And these three EV prototypes right now have already arrived in the U.S. Our subsidiaries, Sportsman Country is working on getting the vehicles certified by the relevant department in the U.S. government, and I think it goes into the approved very soon. Once they have all these qualifications to sell the EV thing in the U.S. we will have Sportsman start the marketing effort first for the EVs in America.

Michael Fairnow

Follow-up, as far as the sales in distribution channels without, sold it to Sportsman or did you expect to be also through normal, distribution sales of other, of automobile distribution sales or independent and when sales actually start do you expect to get the full $7,500 Federal U.S. Tax credit per vehicle and based on that can you give us indication of what the expected retail price will be for the EX3 and EX22. And then when we are talking about pricing can you also give us some update on how you expect to deal with any U.S. tariffs on Chinese cars. [Foreign Language]

Kewa Luo

Okay. Mr. Hu answered your question one by one. I will go through them. The first one is that as for now we are going to have the Sportsman Country as the representative, distribution representative to sell our EVs in the U.S. And on 21 Sportsman Country is going to host an unveiling event in Dallas. But then they are going to invite hundreds of distributors into the event. So can you talk about the car. And we’re thinking probably there’ll be around 50 distributors will have interest in signing the contract want you to sale the car. So we will find out more information once the happens. And the second question is form – as far as I understand, our few models. EV models, we’ll be eligible to receive $7,500 tax credit. And I heard in some states such as Dallas buyers probably will also be eligible to receive another $2,500 tax credit. So all together it’s $10,000. But again this is our first time applying this. And we don’t know how this is exactly going to work, but we’re hoping to be awfully legible for this tax credit. And the third question, right now we’re in the process of applying DOT. So from what I heard from the sportsman team is that DOT is the most important thing that we have to receive. So once that’s being certified then we should will be more clear on the plan going forward. And in terms of the price, right now we are not decided yet but we’re probably going to price the smaller cars K22 less than US$20,000. So if the consumer is going to get US$10,000 as the tax credit this is going to cost less than US$10,000. So for the other cars basically we are going price around US$20,000, actually below US$20,000. So again if consumers are able to get a US$10,000 tax credit, their car actually is going to cost less than US$10,000. And the last question regarding to the tariff I believe that this trade war will have certain impact on the car. But the price that we are putting into consideration already reflects a possible 25% tax. So that’s basically what the outplaying is now. I hope I answered all your questions.

Unidentified Company Representative

[Foreign Language] For the smaller cars if the consumer gets the US$10,000 credit, the price will be less than US$10,000. And the UX2A with the tax credits will be less than 20,000. So just want to confirm that and clarify.

Michael Fairnow

To make sure I’m understanding it, the smaller car with all the credits would be 10,000 or less?

Kewa Luo

Yes.

Michael Fairnow

Larger car with tax credit would be in the $20,000 range, is that correct?

Kewa Luo

Yes, correct.

Michael Fairnow

Okay. And just a clarification on distribution channels beyond Sportsman Country, understand hosting of – hosting an event, they expect to have other independent auto dealers at that event for potential distribution channels, is that correct? [Foreign Language]

Hu Xiaoming

[Foreign Language] Yes.

Michael Fairnow

That is correct?

Hu Xiaoming

Yes, that’s correct. That we are going to invite the independent car dealers and car distributors, a variety of car dealers and distributors to coming to the event.

Michael Fairnow

And just kind of a follow-up comment and question, as you know, it’s been quite some time just Mr. Hu has been to the U.S. and had a chance to meet with a number of his U.S. shareholders. When the distribution sale was ultimately kicks off in the U.S., he was saying that it would be an excellent time for Mr. Hu to travel to the U.S. and have an event which shareholders could attend as well as potential distributors and dealers. Could we pass and to look forward just such an event? [Foreign Language]

Hu Xiaoming

[Foreign Language] At this time, I don’t have plans to come here. I have my working schedule conflicts. But in the future when the car starts selling, I will make time to come to the U.S. to meet with our shareholders. But I believe that Sportsman’s team will be very capable to host our successful event.

Michael Fairnow

If Mr. Hu may come – when they ultimately are realizing sales and distribution, would that be as an example for the six months? [Foreign Language]

Hu Xiaoming

[Foreign Language] Well, I’m hoping that it’s going to be sooner than six month and once that our car starts selling. I’d love to come to U.S. to meet with our shareholders.

Michael Fairnow

And I’m sure that all the shareholders are looking forward to that. Thank you for your questions.

Hu Xiaoming

Thank you. [Foreign Language] Next question, please?

Operator

And our next question comes from Robert Limpert, a Private Investor. Please go ahead.

Robert Limpert

Hi, good morning. I think all Kandi investors are excited about Kandi cars coming to the United States. But my question has to do with Kandi electronic vehicle parts, electric vehicle parts business. So last year, we spent $7 million in the acquisition of Jinhua An Kao Power. And can you tell us specifically what parts that they sold and were they only exclusively for Kandi EVs? And then I have a second question. [Foreign Language]

Hu Xiaoming

[Foreign Language] Our Jinhua An Kao primary products are batteries like battery pack technology. And actually we are – they have been selling to the third-parties and so far haven’t been selling any to Kandi, as well as the second quarter but in the future. We can potentially supply to the JV company as well?

Robert Limpert

And my second question is there, Mr. Hu give us an update regarding Kandi getting its own license? [Foreign Language]

Hu Xiaoming

[Foreign Language] This thing has been already very difficult. Here is a detailed update. On April 8, 2018 the official of Department of Industry of the National Development and Reform Commission together was relevant personnel and has performed a research group and made a special trip to the JV company in Rugao to conduct an inspection on the qualifications of Kandi Jiangsu for awarding this product license. The group fully affirmed our highly place to the management and products of our facility also made a request for items need to be improved. For these items National Development and Reform Commission, NDRC issued a notification of the NDRC General Office notice of rectification about problems relating to Jiangsu Guoxin and Kandi Jiangsu – Jiangsu Guoxin is the other company who is also applying for the license. So relating to these companies – these two companies newly built pure electric passenger vehicle project on May 12. And so on May 12 this notice was given to us. In accordance with the request of the notice, Kandi Jiangsu made a serious rectification and submitted the rectification report to the Provincial and Municipal Development and Reform Commission on May 23 after the rectification is completed. Hence five days later on May 28, the Provincial Development and Reform Commission organized a relevant department and experts to Kandi Jiangsu again for checking. On June 22, the Jiangsu Provincial Development and Reform Commission reported to the National Development and Reform Commission about items that need to be adjusted. So these passed the rectification checking and the request approval or also authorization from the Jiangsu Development and Reform Commission according to Rule Number 27 as soon as possible. Currently, the company is waiting for the final approval from the NDRC. And this has been very long process, we understand, and we also being very patiently waiting. But we heard that there will be new policy about the license will come out. However, the government promised us that our license will be approved prior to the new policy. And we heard that the new policy will be even more complicated more – even more difficult to get. But hopefully our license is going to be received very soon. And I just want you to know that we are also being very frustrated still and we are hoping to get it and we will let the market know as soon as we get the approval letter.

Robert Limpert

Well, that sounds like very good news and we’re all looking forward to that. So thanks for answering my question.

Kewa Luo

Thank you. [Foreign Language] Next question, please.

Operator

And our next question comes from Ted Schwartz of TAS Associates. Please go ahead.

Ted Schwartz

All right. I got a couple real quick ones. Regarding the K23 earlier this year in the March 15 conference call and an answer to a question as to who’s started that the K23 we go into production on March 28 and the $14 million payment would be due one week after went into production. Also ownership would change around that same time. That was said 3.5 months ago and we’ve heard nothing on any of the subjects. In fact, we’ve heard nothing on the K23 other than it did finally get approved by the government. What is the status of the K23 on these particular subjects?

Kewa Luo

[Foreign Language]

Hu Xiaoming

[Foreign Language] The first passive model K23 prototype has been in production on March 28. It has passed the inspections of mandatory projects and product function conducted by the National Vehicle Product Inspection Authorities. Additionally, the EV product with 200 kilometer driving range and 300 kilometer driving range both have been included in the announcement. So next it is expected to be included in the sales tax exemption and the directory. So we are thinking that that’s going to be approved verso until, so after that approved it will be start, it will be launching the market of start selling. Originally I thought once the K23 starting the production, $14 million government grant and/or US$14 million government grant will be given. But however, the newest update is that they won’t be given to us still this card start being selling. So they now there’s already in the process. And I think we’re going to be resuming soon. I know it has been dragging for a while. But we’re dealing with the government. We have – you are called by their rules.

Ted Schwartz

All right, thank you. One other, what is Mr. Hu paying of the carbon credit program that articles in China have indicated, which got taken effects in 2019. Does he think this will be more favorable the Kandi than the subsidy program, we generally seeing to be delayed? [Foreign Language]

Hu Xiaoming

[Foreign Language] In my opinion carbon credit will be very helpful and receivable to Kandi and other manufactures. And this has been going on for failures. As this can be finalized by the government next year, it will help the industry to be regulated. And as of now, as you can see the subsidy policy has been repeatedly changing and that has insert other companies like in order to adjust their changes our first half year in 2018 has been affected in sales. So I do believe that if the regulation, the policies once are finalized is going to be well receivable to the company and to the market.

Ted Schwartz

All right. Thank you very much. I appreciate the responses.

Kewa Luo

Thank you. Next question please.

Operator

And our next question comes from [indiscernible] Please go ahead.

Unidentified Analyst

Hi, thank you. Shareholders have an heard much from the company about car share in the past year, even though in the last conference call discussion over the new EV seem to be concentrated more on consumer sales and rare hailing. The last official city count reported more than two years ago there were 16 cities and around 30,000 EV. However, several channel media articles speak as ZZY now in as many as 25 cities. Last year, it reported that the subsidy rose for leasing and rental was changed to no subsidy would be paid until the EV reaches 30,000 kilometers. I have two groups of questions. The first is ZZY still the only car share company Kandi provides EV far and is so which Kandi EVs now be used. What is the number of cities and EVs and if the 13,000 kilometer requirement is two for subsidies how is that affecting Kandi’s future outlook for the care share. Is this still expected to be a major growth area for Kandi? What’s the average life of our EVs in the care share before being replaced? Now stopping here to for an answer for those and then I have one more question. Thank you, thank you. [Foreign Language]

Hu Xiaoming

[Foreign Language] This is not two question. These sounds like there’s five, six questions altogether. But we’re – I’m going to answer you one by one. First, I give you why was the only car share company, can you provide EV. In the future, we will like to cooperate with other car share service companies as well. Second, all Kandi EVs can be used for car share program. So it’s really based on what type of models and the car share – the actual car share program need than we will provide accordingly. The third question is the, subsidy policy change, you would definitely has create some impact in receiving the subsidies in the timely manner and right now – in the past, the service company will get subsidy right away, but right now, they have to – they want get a tier rate as was not 30,000 now 20,000 kilometers. So this new standards have create some delays, the manufactures and the service company have – are working on this. So they basically, one gated tail the cars which the required mileage. And the fourth question, I do believe that our EVs of our popular among consumers giving affordability and improved driver range and right now all our cars can run over 300 kilometers. So our best strategy now were target primary in consumer base market and the car share will be secondary market out we’re focusing on. And in the second half of 2018, our business will be more involved away, you selling the consumer market. And the fifth question is that, DCY is operating about 40,000 EVs in approximately 20 cities. Before the number was around 30 cities, but the some cities has been consolidated. So right now is about 20 cities. And the next question, as periodically electric vehicle has the average life of eight years or 150,000 kilometer, but since right now we haven’t had the vehicle for that long or the vehicle hasn’t been given for 150,000 kilometers. So the actual time is yet to be determine based on the fact. And so the – so my answer basically, I don’t think it’s the accurate right now, since we haven’t really experience.

Unidentified Analyst

All right. I have a follow-up. A couple of years ago, Kandi announced two long-term car share framework agreements with car dealer paying down for 60,000 units over six years and government control slight down to enterprise in [indiscernible] 50,000 units over five year. Last earnings conference call is something important strategic agreements have been put on hold to changing subsidy policies, but likely subject to renegotiation once the policy is clear. And any updates on these agreements. [Foreign Language]

Hu Xiaoming

[Foreign Language] Just like you said, the policy has been repeatedly changing and also the market condition has changing the way of. Also we haven’t had much in EV share in the first half of this year so these two framework agreement are still pending than not yet the actual sales contract.

Unidentified Analyst

Thank you. That’s all in my questions.

Kewa Luo

Thank you. Next question please.

Operator

And our next question comes from Mark Miller, Private Investor. Please go ahead.

Mark Miller

Good evening folks. I just have one question here. On the last conference call, Mr. Hu said on not yet production, the EX3 has overwhelming cash deposits. You mentioned that dealers want to sell a various model. Hope Mr. Hu said, so this car will be sold in a variety of dealerships not only in Geely report a stores, dealer reports that has some 904 shops in China and 250 international dealerships, and is there any in the U.S. Two multi-parts questions here for you guys. How many dealers outside of the Geely stores have now signed up with deposits, how much of the deposit that they have to put down? Do you guys have sufficient powers to sell already or are they taking deposits orders. Are the same dealers also selling the rest of the Kandi EV fleet? [Foreign Language]

Hu Xiaoming

[Foreign Language] First of all, I want to clarify that even though Geely has about 904 stores, but it doesn’t mean that each four stores will sale all kinds of models that Geely has. So for example Geely’s Hainan only sale in 24 stores, yes, I want to clarify that. Then to answer your question Global HawkEX3, is definitely meeting the current market searching demand for SUV while expanding Kandi’s product portfolio ever since the launch of the model X3 there have been a lot of dealers have expressed their insist and made deposits. So far we have about 131 dealers signed and made the deposit. Each deposit is RMB1 million. However 300 kilometer driving rent to the SUV just received approval from MIC and still awaiting tax exemption notice which is expected by the end of August or the beginning of September. In anticipation of tax exemption notice we are hoping sales will begin in early September, we believe the launch of this EX3 model will propel the JV company to a new level by improving the market potential and profitability.

Mark Miller

I got a follow-up here to it, short one. What percent of Geely stores, I think you answered it, sort 131 dealers, okay. What if any restrictions are in place… [Foreign Language]

Hu Xiaoming

[Foreign Language] Go ahead, finish your question.

Kewa Luo

Can you just finish your question or that’s all?

Mark Miller

Let’s follow up with this short one here. Any restrictions, restricting sales in the balance of the stores and here’s where I’m going to, China Media reports that the EX3 is the electric version of the top selling gas power, Geely Auto X3 Vision which is already sold over 100 this year. If this is true, why would Geely Auto with no financial interest in the Kandi JV, allow Kandi JV to share the sub brand, then Geely has no direct financial interest in the EX3. What compensation in 10 of the four shops received? And then lastly, what if any other Kandi Global Hawk has been sold in the Geely for shops? That’s all I got.

Kewa Luo

Okay. Before I translate the question, I want to you to clarify your last question that to Hu you were asking? What percentage of Geely for our stores like only handling EX3 and you thought that will instill 131 but Mr. Hu just clarified though 131 is not part of the current for our stores that owned by Geely, like he explained for our store they have – each store has only felt certain models. So these are 131 the stores are – our stores that are interesting selling the EX3. So just want to clarify that?

Mark Miller

But they are not affiliated with Geely. [Foreign Language]

Hu Xiaoming

[Foreign Language] JV is owned Geely and Kandi. So if it JV sales store cautiously related to Geely. [Foreign Language] And the plan that the distributor selling is Geely Global Hawk.

Mark Miller

Okay.

Kewa Luo

Okay. Let me translate the question you just asked. [Foreign Language]

Hu Xiaoming

[Foreign Language]

Kewa Luo

Mr. Hu what you’re saying is not correct [indiscernible] that a little bit off, because Geely is 50% equity holder in a JV company. So naturally, it has the financial interest in a JV company. Model EX3 is developed together by Geely and the JV Company. So I don’t understand, why you’re saying that. Geely has no interest, financial intervene in Kandi JV allowing Kandi JV to share the sub brand. So EX3 is the brand that developed, it branded by Geely and has developed by both Kandi JV and the Kandi Company and the JV Geely. So I just want to clarify that.

Mark Miller

So how much compensation would Geely receive then on the sales approximately? [Foreign Language]

Hu Xiaoming

[Foreign Language] So the company Geely has the 50% equity holder, equity interest in JV. So it’s not Geely going to take part of money for each sales, after the auditing the Geely will getting half of what – we acquired half of the financial results from JVs sales.

Mark Miller

Okay. I get it. Thanks. Keep up the good work. Thank you.

Kewa Luo

Thank you. Next question, please?

Operator

And our next question comes from Mark Kahnau from Swiss Liquid Future. Please go ahead.

Mark Kahnau

Yes, good evening or good morning, everybody. I have in fact four questions. Now on the first question is – reasonable you were yield K28 model. Is that new top model of EX3? What is the difference between the new [indiscernible] and the other two? Kewa actually maybe we go each question by each question, if you? [Foreign Language]

Hu Xiaoming

[Foreign Language] The name K8. First of all, model K28 is EX3, they are the same thing. But K20A is the manufacturers internal number and the EX3 is the model brand name for marketing.

Mark Kahnau

Okay. I get it. And the second question. Other than in the increased range what is the different the UK17 K12 from K27 and K22? [Foreign Language]

Hu Xiaoming

[Foreign Language]

Kewa Luo

And K27 and K22 both are upgraded version of K17 and K12. Now only the driving range is increased. In short in I cannot explain all the details that have been upgraded, but overall the overall technology driving performance are upgraded as well.

Mark Kahnau

Okay, got it. And maybe last two questions together. Business aware of any other EV maker that has five new release for China. And lastly, the China media keeps speaking up for Beijing new energy EV also called always possible to have two EVs at the different companies with the same modeling? [Foreign Language]

Kewa Luo

The Electric vehicle industry in China is going rapidly. So I think each manufacture is coming up with a variety of models and certainly have more than five models. And candy thing one of the pioneer in the EV sector has been following trends closely as well as enhancing our own brand, identity introducing more exciting even EV products to me to market them. I think its very interesting that the new energy has the EV called EX3, I believe its their concept counterpart of our EX3 called Geely Global HawkEX3. I guess the model numbers are same by the brain is different. They are different cars, I’m sure the consumers will see the difference.

Mark Kahnau

Okay. Thank you for taking my question.

Kewa Luo

Thank you. Next question, please.

Operator

And our next question comes from [indiscernible]

Unidentified Analyst

Thank you, Mr. Hu. Just wanted to say it was very nice quarter, particularly consider in your liquidity in the old models, even more impressive that all new models were approved so quickly. With that I have questions. That have to do with the comments in the China media by two Kandi Executives and one by Mr. Hu. So let me get into that right now. On June 6, in a China Media article, the company reported at the second session of the government bank Enterprise Financial Cooperation Conference. That Lee Hu – I’m sorry for pronouncing, Chief Financial Officer Kandi Electric Vehicles, Zen Zu said and I quote, the company is a 50% joint venture between the Nasdaq listed Kandi technology group and Gailey holding group, it’s specialized in production of pure electric passenger vehicle cars and is expected to be taxable this year will reach RMB 2.5 billion. Now that’s about 300 and that’s an end quote. That’s about $370 million the $370 million in revenues would appear to be about right for 20 EVs which is also the guidance number stated in March of the year end conference call by Mr. Hu for this year, which also curiously ties in with this statement recently made by [indiscernible] CEO, Kandi Electric Vehicle Group at the 2018 Group Quality Improvement Conference hosted by Mr. Hu on July 18. At this conference Mr.[indiscernible] list the requirements for 2018 to include and I quote in the face of the new goal of production and sales of 20,000 vehicles trading losses into profits quality is the promise of production. Hope you want to pay us on to him first and then I go into the questions. [Foreign Language]

Unidentified Analyst

Since each of these 20,000 EV sales comments were made at mid-year and so few EV’s were sold and have one reach this goal, we would have to have a pretty phenomenal second half both on its own business for selling parts along with almost $400 million worth of cars by the JV. There’s Mr. Hu still see this is a target for the end of the year. [Foreign Language]

Hu Xiaoming

[Foreign Language] The company has made some adjustment to the product structure to meet 2018 government subsidy policy, so we started manufacturing and the selling of EV product with less than 200 kilometer driving range, and consequently the first half of 2018 given much in EV sales, over the JV company has developed a new EV models with that driving range exceeding 300 kilometers, currently our new 300 kilometer EV models including a K23, K27 and K28 or EX3 all we think the approval from the MIT. In August the JV Company has resumed its normal production and sales I believe that the sale will have a boost – we have boost us in the second half. I have to stay we are very excited and will look forward to 4Q result.

Unidentified Analyst

Again turning down to the 20,000 that all three of the machine, but again that’s a target in the goal, and they certainly have a capacity to do it if in fact the orders are there. One last quick question with a totally new fleet of EV’s this Mr. Hu still have is target for 2020 back on track for maybe 200,000 units, as he said in the March conference call was past year as a target. [Foreign Language]

Hu Xiaoming

[Foreign Language] Achieving 200,000 EVs in sales is our goal. We will work towards that goal. Meanwhile, we’re also adjust ourselves – plan according to the market condition each year, we will try our best to regain candy’s leading position in the EV industry in China. This determination and our goal are aren’t change.

Unidentified Analyst

Thank you, very good.

Kewa Luo

Thank you. Next question please.

Operator

And our next question from [indiscernible] a private investor. Please go ahead.

Unidentified Analyst

Good morning to all and good evening also. I have two questions about the national subsidy. On the last conference call when I asked this question Mr. Hu quote that on the subsidy payment for 2015 and 2016, that is also already in the process of clearing and settling. So, we are still expecting to finalizing and receiving the subsidy in June or July? And Mr. Hu added a quote as for now that is the RMB1.3 billion approximately $200 million owned from government to JV. And just a little bit short on $100 million owned from JV to Kandi. My first question, regarding the first part, Mr. Hu seemed to have giving the impression that he was personally aware that researches are already in the process of clearing and settling, which would seem to be the last step before payment, which having which was expected to happen in June or July, yet here we are in August and still no payment could Mr. Hu give some color as why the subsidy payment has been delayed so long and especially from some Chinese media, many companies received in 2016 and 2017 subsidy in the past few months. [Foreign Language]

Hu Xiaoming

[Foreign Language] The government only has done a product 2016 subsidy clearance and the settling working is doing. The subsidy approval documents have been allocated to each local government financial department. It’s now in the process of transferring to each company, really while we see total RMB298.8 million, so how much of each amount will be attributed to JV Company, is still yet to be determined. The subsidy from 2013 and the remaining of 2016 are expected to start clearance and the settling in October. At the very first day for receiving the payment, it will be provided only by the government. The reason that there has been delay is that in 2013, the subsidy has been clearing and settling by the Ministry of DynaScan Technology, but right now, it’s taking and handing – has been handling by Ministry of Industry and Information Technology. So, there have been some changes in government internal handling process. But what I just said basically is the most update we have got from the government.

Unidentified Analyst

I have a second question is the short one. So how much does it JV owned and Gilly holding or if the Kandi carrying the most of the JV that alone. [Foreign Language]

Hu Xiaoming

[Foreign Language] Okay. The loans to JV are equal. So, Gilly and Kandi will each pay a 50% of the loan. But however for the trade receivables that now, we are depending on the actual sales. An we can take the next question.

Operator

And our final question will come from Mike Pfeffer from Oppenheimer. Please go ahead.

Mike Pfeffer

Hi. I have one follow-up question. On the last conference call, it was discussed that the Genoa government approached Kandi about acquiring Kandi’s wholly-owned Genoa legacy RV facility for some 160 million. Mr. Hu’s response, what he felt it was a real perspective that and promising, but up to the local government has to win. And more than three quarters, the total market cap of Kandi, this excess asset would be huge to its share value. Has there been any government follow-up towards the sale? [Foreign Language]

Xiaoming Hu

[Foreign Language] Regarding the asset transition we are still in a discussion with them. This is a government contract, so you will be guided through the municipal government plan on the cities reform and development. The amount $160 million is our valuation, so the actual amount is still into determinant, it may be more or it may be less. But I do believe that this is never promising we would just have to wait for the update, but we will try to opt-in maximum interest for the entity.

Mike Pfeffer

Okay thank you. One follow up question just, and this is the follow-up question from the same conference call. Last year the company reported overall net asset valuation on Kandi exceeding $600 million. Mr. Hu stated that $600 million valuation did not reflect most of the $160 million, Geneva perspective sale. So the overall value of the Kandi should have gone up considerably with this perspective bid, would Mr Hu share us thoughts on what the new higher value might be, and can he give us his opinion why Kandi with a new fleet of EVs and a bright business outlook would be trading at a 70% discount to liquidation value and not be attracting either more current in scarifying or buying friends and contacts of Mr Hu or Mr. Bing, thank you. [Foreign Language]

Hu Xiaoming

[Foreign Language] We all know the stock price is extremely undervalued, I cannot speak on behalf of others, I cannot make others feel or make others go by our shares, but I am very confident myself and the plan buying back $3 million to $5 million worth of Kandi stock within the next six months based on certain criteria.

Mike Pfeffer

Thank you.

Hu Xiaoming

Thank you. Operator?

Operator

And there are no further questions at this time. I would like to turn the conference back over to speakers for additional or closing remarks.

Hu Xiaoming

[Foreign Language] Thank you, ladies and gentlemen for attending Kandi’s 2018 second quarter earnings call. In closing, allow me to represent the board of directors and the management team at Kandi Technologies Group to reaffirm all our commitments. We will continue to work diligently to maximize shareholder value by focusing and growing our EV business strategically while delivering strong operational results. I believe that we will be soon back to the leading position in the EV industry. Thank you very much for your support and we hope to continue with your support. We look forward to talking with you the next quarter if you have any additional questions, please don’t hesitate to contact our Investor Relations department. Good bye.