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Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 71979  
Subject: Chinese Kandi (KNDI) Date: 9/22/2010 1:50 PM
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I have said often that I don't like the idea of investing directly in China. This morning I ran across a series of four write-ups on Kandi Technologies, Corp. (KNDI) that has me reevaluating not only my not-to-invest in China policy but my view of the future of electric vehicles as well. This is really exciting!

Can electric vehicles (EVs) be disruptive technology? Not the way the major auto makers are approaching the market. To be disruptive a technology has to be cheaper and the Volt sure isn't, and it has to serve an under-served market and the Volt sure doesn't. To have a chance of success, EVs need a really new paradigm. It seems that Kandi Technologies has found such a new way.

Kandi was founded in 2002 to manufacture and export "two, three and four wheeled gas powered, mainly off road, recreational vehicles exclusively for the US export market." When that market collapsed in 2008 the company changed gears into EVs with a radically new approach to vehicle ownership.

One eye opening statistic is that in China 50 million people join the ranks of the middle class each year. That's more than the whole population of Venezuela! If just 1% want to own cars, that's 500,000 cars per year! The market is HUGE! But they can't afford Volt's. They need a small affordable vehicle. But "small" or rather light weight, is just what you need to make electric cars functional. Half the cost of the car is in the battery and Kandi is going to sell the cars without a battery! How's that for NPI thinking? They are making their EV with a quick changing battery (it takes about 2 minutes to change it) and the batteries will be owned by a cartel of battery service stations. This solves an innumerable set of problems starting with the capital outlay for the battery, a place to plug it in overnight and the resale value of the vehicle which will no longer be influenced by the state of the battery since it does not come with one. Pretty damn ingenious. And the Chinese government is supplying huge amounts of subsidies. Under these conditions, EVs could well become a disruptive technology, cheaper, less capable and serving a brand new market. It should not come as a surprise that these ideas were not hatched by a major automaker. Majors don't want to cannibalize their own markets, they want to continue serving their very best customers who don't want dinky little toys for cars.

Arthur Porcari has to be congratulated on his great write-up:

Examining Kandi Technologies: A China-Based EV and Quick Change Battery Company (Part I)at Seeking Alpha
http://seekingalpha.com/article/226081-examining-kandi-techn...

Part 2
http://seekingalpha.com/article/226092-examining-kandi-techn...

Part 3
http://seekingalpha.com/article/226223-examining-kandi-techn...

Part 4
http://seekingalpha.com/article/226225-examining-kandi-techn...

Denny Schlesinger
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Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50089 of 71979
Subject: Re: Chinese Kandi (KNDI) Date: 9/22/2010 3:00 PM
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About battery rentals, I was going to mention that before IBM signed a Consent Decree in the late 1950s or early 1960s, they didn't sell their equipment, you could only rent it by the month. IBM, of course, made piles of money. IBM's competitors wanted to force IBM to sell the equipment so they could buy it and lease it back to IBM's customers.

Kandi is providing technology to the battery service consortium and will receive a royalty stream. Kandi does not have to make any capital contribution to the battery side of the business. Kandi makes the razors and the consortium rents out the blades.

Denny Schlesinger

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Author: valhallas One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50093 of 71979
Subject: Re: Chinese Kandi (KNDI) Date: 9/22/2010 4:59 PM
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Denny...hope this works better than chp...thinking about buying them and will keep an eye on thtese guys!

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Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50095 of 71979
Subject: Re: Chinese Kandi (KNDI) Date: 9/22/2010 5:54 PM
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Denny...hope this works better than chp...thinking about buying them and will keep an eye on thtese guys!


CHP is working out OK. A week ago I doubled my investment. I now have four times the shares and my cost basis is $0.325 (after expenses). My loss at this point is just 5.2%, not something to worry about. You might recall my saying that the shares were worth between 25 and 35 cents so buying at 20.5¢ made sense. Today they closed near the high end of the range.

While making or losing money is important individually, what the board cares about is discussing the stories of the stocks that come up. Do you have an opinion one way or another on either CHP or KNDI?

Denny Schlesinger

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Author: dumaflotchie Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50100 of 71979
Subject: Re: Chinese Kandi (KNDI) Date: 9/22/2010 8:14 PM
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Very interesting Denny.....not the least of which was your considering investing in China!

But seriously, I also thought is was pretty novel concept but a few questions of course:

1) What is the market lock against another entrant since they are essentially just selling a chassis?

2) How can the cost of ownership be less if one has to rent batteries every 180 km? Have they provided any cost comparison from an owner's perspective?

3) Is the battery technology quick change simply enough that it could be installed at gas stations such that all that infrastructure wouldn't have to be built?

It does sound intriguing at first glance I must admit.

The issues particular to China that it could address:

1) Pollution reduced
2) Cost of initial ownership reduced
3) Smaller cars for smaller families

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Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 50104 of 71979
Subject: Re: Chinese Kandi (KNDI) Date: 9/22/2010 10:20 PM
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1) What is the market lock against another entrant since they are essentially just selling a chassis?

With 50 million new middle class entrants each year I would think there is market for a dozen car makers. Still, Clayton Christensen asks the very pointed question of why incumbents don't get on the band wagon sooner. Geoffrey Moore gave part of the answer in Living on the Fault Line. It has to do with old timers defending their turf, preferring to sell more expensive products with higher commissions and so on.


2) How can the cost of ownership be less if one has to rent batteries every 180 km? Have they provided any cost comparison from an owner's perspective?

If you rent the battery, the total cost of ownership might be higher in the long run but your cost of entry is about half because the battery is about half the cost on an EV.


3) Is the battery technology quick change simply enough that it could be installed at gas stations such that all that infrastructure wouldn't have to be built?

I don't have any info on the Chinese technology but the article mentioned an Italian outfit that has a robot that exchanges the batteries in just a few minutes. Since the main job of these service stations is to charge batteries, in would think that access to the grid would be an important consideration. In any case, this is dealt with by the battery consortium, not Kandi. Do you also want to invest in the battery side of the business?

Denny Schlesinger

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