Nov. 4, 2014 3:00 PM ET | 9 comments | About: Ka

Nov. 4, 2014 3:00 PM ET | 9 comments | About: Kandi Technologies, Corp (KNDI), Includes: TSLA

http://seekingalpha.com/article/2637745-kandi...car-market

Disclosure: The author is long TSLA, KNDI. (More...)
Summary

The USA, China, Japan, and Norway lead the world in new energy vehicle sales during the first nine months of 2014.
With new energy vehicle sales growth rates projected at 500% and 300% for 2014 and 2015, respectively, China could take the lead as early as 2015.
New energy vehicle worldwide sales grow steadily at a healthy rate, while ICE vehicle sales slow substantially.
Tesla and Kandi, along with Nissan and BMW, are the only PEV companies among top ten in NEV sales this year.
Long or short term, TSLA and KNDI have outperformed top car manufacturers.

"Suppose Elon Musk and team began with a play for the masses - and did so in the world's most populous nation. Kandi Technologies is doing just that. I'm intrigued by this little disruptor" - Rick Munarriz, The Rule Breakers.

Abstract

Electric car technology is one of the most disruptive technologies of our time, if not the most. This green technology is changing the social landscape in many countries. Slowly but surely it is gradually reducing dependency on Middle East oil consumption, while improving air quality in major cities.

China has been pushing the new energy vehicle (NEV), to alleviate pollution in many cities like Shanghai, Beijing and Hangzhou, among others. It is also seizing the opportunity to become the world's leader in NEV production and sales. China uses the term new energy vehicle to denote pure electric vehicle (PEV), plug-in hybrid vehicle (PHEV), or fuel cell vehicle.
The World's Top Ten NEV Markets

Exhibit 1 shows the top ten countries with the highest accumulated NEV sales from 2012 to date. The USA is the undisputed leader with over 238K electric cars sold, though the growth rate has begun to level off a bit. After slow July and August sales that led naysayers to believe that Tesla (NASDAQ:TSLA) domestic sales have peaked, in September Tesla reported record sales of 2,500 Model S, more than twice BMW (OTCPK:BAMXY) i3 sales which carries a lower price of about $50,000. In the first nine months of 2014, Tesla sold approximately 11,000 cars in the U.S.

Norway this year leads Europe in NEV sales with over 15,000 cars sold in the first nine months. Tesla has sold over 3,500 Model S in Norway so far this year, averaging more than 400 cars per month. European EV sales are expected to be up a robust 80% in 2014.

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Exhibit 1 - The world's top ten NEV markets

China's current five-year plan, begun in 2011 and ending in 2015, calls for half a million NEVs on the road by the end of 2015. NEV sales progressed slowly during the first three years (see Exhibit 2) but accelerated this year after the government implemented a number of incentives and restrictions. NEV sales in the first nine months of 2014 are about 40,000 cars with over 50,000 cars produced. The annual output estimate has been raised from 35,000 in April to over 80,000 NEVs in October, a 128% increase.

China is currently overtaking Japan's number two position in NEV sales. With astounding growth rates of 500 percent, and 300 percent projected for 2014 and 2015, respectively, next year China is expected to overtake the number one spot currently held by the USA.

Kandi Technologies (NASDAQ:KNDI) is the undisputed PEV production and sales leader in China. For the first nine months of 2014, through a partnership with Geely (OTCPK:GELYY), Kandi has produced more than half of China's total PEVs, and one-third of China's NEVs. The company is on track to deliver 20,000 or more PEVs this year. Geely, or Zhejiang Geely Holding Group, is the largest auto manufacturer in China, who owns Volvo (OTC:VOLAF) Cars.

Tesla's China imports jumped to 1,147 Model S in September, bringing total Tesla imports in the six month period to 3,431 PEVs. Tesla began importing the Model S to China in late April this year.

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Exhibit 2 - PRC annual NEV production, 2011-2015

NEV vs. ICE Vehicles

China is the world's largest automobile market. Despite a fivefold increase in NEV sales this year, and a threefold increase projected for 2015, NEV sales results are still meager compared to ICE vehicle sales results. According to the Chinese Association of Automobile Manufacturers (CAAM), almost two million cars were sold in China in September alone, a 2.5 percent increase over last year. In the first nine months of 2014, passenger and commercial vehicles sales growth increased 7%, reaching 17 million.

Though ICE vehicles sales numbers may look intimidating, ICE car sales growth have slowed to a crawl, only 7% growth is expected for 2014, or about half of the original forecast. In 2013, China's domestic car sales were twenty two million, an increase of 14% year over year. Whereas, NEV sales are expected to continue to accelerate in 2015. Benefiting from a number of central and local government policies in favor of NEVs, subsidies and other incentives, China's NEV industry is driving into the fast lane. According to China Securities News, auto experts predict that next year China's new energy automobile production and sales are expected to reach 250,000 units.
Kandi Technologies and Tesla - The Ultimate Beneficiaries

As previously explained, the world is decisively moving toward the adoption of electric car technologies. Traditional car companies like Ford Motors (NYSE:F), GM (NYSE:GM), Fiat Chrysler (NYSE:FCAU), Toyota (NYSE:TM) and Honda (NYSE:HMC) are facing a huge dilemma. On one hand they see orders for their PEVs and/or PHEVs have surged hundreds of percent. On the other hand, sales for their core products, the ICE vehicles, are slowing substantially in many markets like China. Because the percentages of NEV sales are still small compared to ICE vehicle sales, many car companies are facing flat or declining revenues.

Tesla and Kandi are two of a few leading car manufacturers which focus solely on PEV products. Therefore they are riding the fastest growing segment of the auto industry. In China, PEVs garner the most incentives and subsidies from Central and local governments. In some cities like Beijing, PHEVs don't even qualify for local subsidies. Tesla's China import does not qualify for either Central or local subsidy in China, however some cities like Shanghai grant Tesla buyers free license plates.

EV Sales ranked the world's top 10 NEV manufacturers in the first nine months of 2014, and Tesla and Kandi are listed as #3 and #6, respectively. Note that out of the ten companies, only four companies produced PEVs: Nissan, Tesla, Kandi and BMW. Investor's Business Daily newspaper and financial web site Investors.com currently ranks Kandi as #2 and Tesla #3 on their list of twelve auto manufacturers, behind Tata Motors (NYSE:TTM). Ranked from fourth place to ninth place respectively are Fiat Chrysler, Toyota, Honda Motors, GM, Ford Motors and Nissan Motors (OTCPK:NSANY).

Exhibit 3 shows the performances of the top auto manufacturers. From the charts, it is obvious that Kandi and Tesla are the best performers for both short and long terms. KNDI returns the highest percentages to investors in the six-month and one-year periods, but trails TSLA for the longer terms.

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Exhibit 3 - Short and long-term performances of major auto makers
Conclusion

From the above analysis, it becomes apparent that the world is embracing electric car technologies. Despite its accelerated growth, compared to ICE vehicles market, NEV market is still in its infancy. Only a handful of emerging car manufacturers like Tesla and Kandi benefit from the early transitional stage, because they can ride the quickly expanded NEV market, without linkages to the slowing ICE vehicle market. Before the end of this decade, when NEV sales reach a million units or more, sole NEV producers will benefit tremendously, despite stiffer competition.

"The traditional auto industry is heading for bankruptcy, no longer has a market," Geely Chairman Li Shufu recently said at the Fifth Global Forum held in Wuhan, China. Mr. Li believes that in the future, every car is put on the market as if a tree is planted on the road. Future cars are safe, green, healthy, intelligent, and no longer pollute the environment.