Hello, and welcome to Kandi Technologies Full Year 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Kewa Luo. Please go ahead.

Thank you, operator. Hello, everyone. Thank you for joining us on today's conference call to discuss Kandi’s results for the full year 2020. We issued our press release today covering the results. That press release is available on the company's website at www.kandivehicle.com, as well as from Newswire services. On the call with me today are Mr. Xiaoming Hu, our Founder, Chairman and Chief Executive Officer; and Mr. Alan Lim, our Chief Financial Officer. Mr. Hu will deliver prepared remarks in Chinese, which I will then translate. After that, we will have a question-and-answer session. Before we continue, please note that today's discussions will 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 actual 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 annual report on Form 10-K for the fiscal year ended December 31, 2020, and in other public filings with the SEC. We do 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. Please note that unless otherwise stated all figures mentioned today during the conference call are in U.S. dollars. With that, let me now turn the call over to our CEO, Xiaoming Hu. Go ahead, Mr. Hu.

[Foreign Language] Hello, welcome everyone. And thank you for joining us on the call today. 2020 was the year full of challenges. COVID-19 unexpectedly impacted every corner of the global economy. Most countries found fought the virus including implementation of quarantine enforcement of curfew. Unfortunately, this caused many companies still haven’t been operating in normal hours and bankrupted many small businesses. Kandi quickly responded to the crisis by temporarily closing our facilities, working remotely and carefully cleaning every day. Although our operations in China restarted by the end of March, many revenue streams were still adversely affected. There were several production interruptions caused by the many waves of the pandemic. [Foreign Language] However, even in the face of such a difficult business environment, we achieved solid sales growth in our off-road vehicles, electric scooters, electric self-balancing scooters and related parts. You can see more details in our 10-K. [Foreign Language] In 2020, we actively started new market opportunities that could leverage our competitive strengths. We decided to pursue product innovation in electric scooters and in electric self-balancing scooters, which have a potential global market of tens of millions of units sold each year. We pursued revenue in these opportunities by spending production of intelligent transportation products that exploit our advantages in electric motors and battery packs. [Foreign Language] Looking back on this challenging year, we still achieved multiple milestone, and the progress in our strategic projects. First, we smoothly executed the real estate repurchase agreement with Jinhua Economic and Technological Development Zone, a key element of our Jinhua facility relocation. The development zone agreed to pay us approximately RMB 525 million or US$80 million in three installments. We have received the first two installments, totaling RMB 363 million, or US$55 million. The remaining payment is expected to be received in the second quarter of this year. [Foreign Language] Our second milestone was the successful trial of our so called 300,000 government-accredited pure EV within five years rideshare program. The JV platform operator, Zhejiang Ruiheng Technology Company, plans to take delivery of over 3,000 government compliant EVs in 2021. Gradual delivery is underway. All those EVs feature our battery swapping technology. The Chinese government has implemented several policies that favor the manufacturing of EVs with battery swap enabled such as, the new subsidy policy. The battery swapping stations were included for the first time in infrastructure construction in the government work report. [Foreign Language] We moved forward in many ways in 2020. For example, we signed an agreement with the Zhejiang State Grid Electric Vehicle Service Company in October 2020 to strategically in corporate battery exchange into Pure EVs. We believe the tailwinds of Chinese government policies can help the production and sales of our EV parts and battery swap equipment. [Foreign Language] The third achievement was in the U.S. market. We successfully held a virtual launch event to introduce our K23 and K27 EV models into the U.S. in August 2020. We have obtained clearance from the United States Environmental Protection Agency, EPA, for both models. So our focus now is working on some modification to meet DOT's requirements, as well as Federal Motor Vehicle Safety Standards requirements. We are also working on future improvements catering to the U.S. consumers. [Foreign Language] In addition to the three milestones, by year-end, we signed a Strategic Cooperation Agreement with the Hangzhou Branch of the Agricultural Bank of China. They will provide a line of credit to support our ride-sharing market expansion. With capital from the real estate repurchase agreement and the $160 million from the direct placement in November 2020, we are confident that we can fund the R&D necessary to develop new EV models, battery swapping technology, and the ride-sharing program. [Foreign Language] Before we move on to Q&A session, I want to highlight that we recently exited from the Fengsheng affiliation, previously called JV Company by transferring all remaining equity interest. This is important because we will no longer be restricted by the associated non-compete clauses. This means we can pursue the EV market in China more aggressively. [Foreign Language] We can now take some questions.

Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Shawn Severson from Water Tower Research. Your line is now live.

Hello, everyone. My first question is about the battery exchange and rideshare initiative. I'm trying to understand exactly how many machines have been sent to the first site? And then a follow-up to that, I guess the second part of that is; what do you plan for selling cars in 2021? And when you look at the rollout of this broader across the Chinese market; is this something that's going to be coming in big chunks, or is this going to be more of an even flow of a rollout? Or will you have kind of large lumpy sales, I guess, is what I’m trying to understand. Will it be something that kind of flows out fairly evenly over the next couple of years?

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

Hi, everyone, this is Alan. And I'm answering on behalf of the translation from Mr. Hu. As for the question about those smart battery devices. So far, there are three devices have released to the market, one being sent to the Haikou City, and other two has been sent to Kaohsiung. As for the – our plan for this current 2021, there will be 50 devices expected to be distributed during the year. As for our EVs in China, so far we have or at least have the orders of 3,000 EVs that featuring the smart battery swap. It will be released to the market gradually during the year 2021. And as for our trend, we are following the plans on our customers that have the so-called 300,000 EV cars in five years program. And of course, we will follow the suite flow and we will adjust it as necessary, and so far, that's the plan from our side.

Great. Thank you for that. Just a follow-up question, and regarding the entry into the U.S. market, seems to be a little bit of a delay there, but if I understood you correctly, you said there were some improvements being made for the U.S. market or for U.S. consumers. Could you be a little more specific on what that means? And then also details when the Dallas HQ will be ready?

[Foreign Language]

[Foreign Language]

So as for our update in the U.S. market, after our launch event in August last year, we have been applying all the paperwork and all the work steps to be fully eligible to sell EVs in the U.S. market. So far, we obtained the approval and certification from the EPA. And as for the DOT, there are still some safety requirements that we are trying to meet and satisfy. And mostly, about that crash pad because there will be requirement for multiple of the crash pad, especially for the safety air bags. The standards for the air bags is different from the U.S. and European market and in the PLC market. And that's why so far what we are doing in the major requirement is to be hard to refine our standard for the air bag in order to meet the standards from the DOT. As a matter of fact, there are two pathways that we are working on right now. One is, of course, we are trying to working really hard to meet the safety standards from the DOT asap. Meanwhile, we have released the EV – the so-called NEV version with the limit – with the speed limit. Of course, there'll be less requirements for the safety like an air bag that has been fulfilled in terms of the requirements, and we've already sold those NEV in the U.S. market.

Great. Thank you. I'll step back in the queue.

Thank you. Our next question today is coming from M Marin from Zacks. Your line is now live.

Thank you. So can you please provide some additional color on the relationship with the Agricultural Bank? Whether you intend to use that as sort of the model and replicate other relationships to drive growth? And if so, could you give us some sense of timing, how long it took to negotiate that kind of relationship, and in terms of how we should think about that going forward? Thank you.

[Foreign Language]

[Foreign Language]

So basically, our strategic cooperation with the Agricultural Bank of China, the so-called ABC, is really from the line of credit. That speculated the whole ride-sharing program, especially for our, the so-called 300,000 EVs in five years program. So when you looked at – once we released our EVs to our customer, the riding platform label, the bank will release the credit to label in order to fund the purchase of our EVs. The first line of credit, the offer is RMB 500 million, which is roughly around US$76 million. With the current production rate and with the all the 3,000 EVs during 2021, this line of credit will be sufficient to meet our need. And of course, if they are – the production will be expanding ongoing; ABC is more than happy to hire the line of credit to us, because actually this program is designed for facilitating the whole ridesharing program. So basically, we are needing more resources that ABC will be offering high line of credit depends on the production progress. Meanwhile, we are trying to exploring different options from other financial institutions. But I guess right now, the offer from the ABC is more than enough for us for the moment

Okay, thank you.

Thank you. [Operator Instructions] Our next question today is coming from Michael Fearnow from Focus Tech Investments. Your line is now live.

Yes, good morning. I'd like a little clarification on the – in EV cars. U.S. The neighborhood cars and the current inventory, is it expected to the be showed as neighborhood cars? And if so were there be any significant price reduction? And then – and so answer that question initially?

Hello, can you say one more time. Your audio was skipping in the beginning.

So, say again, Kewa.

Hi, can you just repeat one more time? You were little skipping from the beginning.

On the inventory that was delivered into the U.S. starting last year, can you give me a sense of how much – how many cars had been delivered? And if those cars will be sold as a neighborhood limited range vehicles? And if so, will there be any significant price reduction?

[Foreign Language]

[Foreign Language]

Okay. So as for the NEVs, we have started – basically started to sell to NEVs towards the end of last year. So right now, the amount is not significant. But we have gradually circulate those NEVs to the distributors of our network. So because of the –he length of the speed and the range, there is some price drop compared to our regular EV version. For the price difference, you can refer to our Kandi American website for more details, and you can – so basically get the details of our NEV.

As a follow-up, I would like to get a little more information on your quick battery exchange. Do you – has your technology had lend itself to individual car ownership? Or is it directly on the fleet market? And if it is for individual ownership, can you discuss your ability to compete with manufacturers such as, Geely and Li Motors? And finally, do you expect to ever have quick battery exchange for the U.S. market?

Are you asking that our EV whether is going to sell to individual or only fleet market, right?

That is the first part of the question, correct. And if it’s for individuals, how do you expect to compete with other technologies such as, Geely or the Li Motors?

Okay.

And then the product market, when do you expect to go under the U.S. at some time?

Ones that has the battery swapping features, right?

Correct. Does that expected to ever enter the U.S. market?

Okay. [Foreign Language]

[Foreign Language]

Okay. So far our models of K23 featuring the smart battery swaps features has been available from August, as the PLC ride-sharing program at the moment. And of course, the Company disclaims to develop other new models that can cater the needs of different motor markets. As for the U.S., since the volume of our EVs is not significant and because of the density, is basically that geographic region in the U.S. is pretty getting along. For us, once EV smart battery device can serve up to 200 EVs per day. However, if the EVs around found to be efficient ours to circulate such feature in the U.S. it is quite beneficial from the economic standpoint. And because also the battery exchange conditions and network is pretty sufficient in U.S., so, so far we don’t have plan to enter this market with smart battery swap system.

Thank you. And Kewa, one last point. The last year, there was announcement that they had signed an underwriting agreement with the quick battery exchange division. Can they give us any update on that agreement?

[Foreign Language] I'm sorry, can you say one more time?

Okay. Last year, there was a public announcement where there was some underwriting agreement to go public on this parts change for the quick battery exchange division. Can the company give us any further update on that agreement?

[Foreign Language]

[Foreign Language]

Okay. So as for our IPO for our subsidiary of smart battery swap entity, it's been progressing pretty well. We have commissioned three professional firms to evaluate the IPO here, namely the security in is Zhejiang Certified Public Accountants and Grandall Law Firm. These are the highly ranked firms in China. So, so far being – the work's being done. But as for the general time line, in PLC to get listed, we estimate it will roughly take two years to three years to complete the whole listing.

Thank you.

Thank you. Our next question today is coming from Mike Pfeffer from Oppenheimer. Your line is now live.

Hi, thanks for taking the call. Just following up on that last question about the IPO with the backlog in China for the new STAR exchange, it seems to be taking on a much longer time for companies to list in China. You were just saying two years to three years. And since Kandi is, by definition, a U.S. domicile and list of EV company trade in the U.S., and China EV companies trading in the U.S. have much higher valuations than similar China-listed EV companies. If it’s not too late to change, would management maybe consider or reconsider spinning off a small portion of the subsidiary by way of a tradable stock rights offering to existing Kandi shareholders with the stock purchase rights offering? And maybe a warrant attached additionally, the cost to do this in the U.S. would be negligible, not much more than SEC registration cost and NASDAQ filing fees, you can even bring in the U.S.-based investment banker with the retail clients to standby, underwrite the deal for a small additional cost, which would also give Kandi research analyst. So – and I would think this type of deal could be very positive. It could be similar to a SPAC, much less dilution and much more investor loyalty, but even better, because in the structure shareholders will not only have anti-dilution protection under their ability to do the exercise, or sell the rights in the open market, but also have priority to buy shares at the IPO price, and even get a warm bonus. My question basically is would Mr. Hu consider doing this in the U.S.?

[Foreign Language]

[Foreign Language]

First of all, thank you for your great suggestions. So basically, right now, after the variation from our professional firms engaged in PRC after the evaluation, they believe that the chance to get listed of our – the smart battery swap unit is very likely in PRC within two to three years. So basically, we also consider that the P/E ratio is just higher for our industry in China compared to U.S. That being said, we also engaged some other professional firms in U.S. to evaluate the – another outcomes, what we can do or could explore in the capital market in U.S. So definitely, we are being considering about that pathway as well. At the moment, we may do that, and we'll see.

Thanks.

Thank you. Our next question today is coming from Mark Kahnau from Swiss Liquid Future. Your line is now live.

Yes. Hello, everybody. My question would concern the balance produced scooters so. And last year's update to shareholders, Mr. Hu said, in terms of the produced balancing scooters should exceed 500,000 in 2020. And we expect sales to exceed 3 million units in 2021, But you gave no value of either of these surprising new orders. However, in September 2019, before the virus shutdown, Kandi made a similar announcement for a new product lines, which read Kandi’s wholly owned subsidiary, Zhejiang Kandi Vehicles Co., Ltd. Kandi Vehicles and DGL Group regarding an initial batch of order of 300,000 electric scooters and 500,000 self-electric balancing scooters. Total value of the agreement is expected to be about RMB 500 million, approximately U.S. $70.5 million. This later order would calculate at the around $88 per unit. Since the company did not put any value up to the late 2020 orders as it did in the earlier order, an investor might be left to assume the values of were similar to 500,000 units to – for 2020 could be as much as 44 million. Based on Kandi’s total quarter four sales, 33 million. That assumption would be quite wrong. A few questions to follow-up. Did Kandi reach its 500,000 estimates for 2020? And if so, what was the difference between the 2019 units at 88 each and what was sold in 2020? And the second question is the 3 million in 2021 expectations, still viable. And if so, is it still at 3 million units? And if so, what is the value of this order? And can you tell us who the major buyer or buyers is in this location?

Thank you for your question. [Foreign Language]

[Foreign Language]

So basically, first of all, there may be some misunderstanding here because Scrou manufacturers the motors for the scooters, and balancing scooters, but not really the whole scooters per se. During 2020, our Scrou manufacturer have sold around 150,000 [ph] pieces of motors with a unit price of around RMB 50 to RMB 60 per each motor. And during 2021, of course Scrou plans to produce themselves more than 300 – 3 million orders for the balancing vehicles and scooter. And due to the raw material inflation, we intend to raise our unit price by around 50%, up to RMB 60 to RMB 70 per each motor. Currently, we are working with orders – customers that modify that they are primarily from the region of Zhejiang. All those they get authorized by the Hangzhou Chic Co, which more than 500 patents in terms of the scooters and balancing scooters design and development. Currently, we're working with four to five major manufacturers having set patent authorizations to work on the scooters manufacturing.

[Foreign Language]

So as for the transaction from DGL, we – in doing larger, we noticed that DGL actually does not get authorized the patent of Hangzhou Chic Co. That is why during 2020 the only manufacturer around motors for over 100,000-ish of pieces with those all products. And in this year, we are working closely with Hangzhou Chic Co to get all our products authorized under the patent of Hangzhou Chic Co, and we expect there will be a more volume in production compared to last year.

Okay. Thank you. That’s very helpful. Thanks a lot for the answer.

Thank you.

Our next question today is coming from [indiscernible]. Your line is now live.

Yes, good morning or good evening. And thank you for taking my question. Maybe it's just my line, but due to the heavy electronic interference of on the voice of the CFO, I didn't really catch what he was saying about deployment of the battery – quick battery exchange in China, which is why I would like to reiterate the question and ask how many units are actually deployed and functioning? How many numbers of EVs are being serviced by that? And what do you expect to have a sales for this year? If you could give some color on that?

Sure. [Foreign Language]

[Foreign Language]

So during 2021, we expect to release around 50 pieces of the smart battery swap devices in the China market. Meanwhile, we expect to release around 3,000 units of our EV featuring the smart battery swap features in China market as well.

Yes. And how many of those did you deploy so far?

[Foreign Language] Are you asking cars or QBX…

Both. Apparently, the EVs are being sold for service companies that use the quick battery exchange, isn't it?

[Foreign Language]

[Foreign Language]

So far there are three pieces of the smart battery swap device already circulated to our customers. As for the EVs, there are more than 90 pieces of that K23 featuring the smart battery swap features already deployed to our customers, the quality level.

That's very helpful. Thank you. Since you had additional income earlier this year from the disposal of your share in Fengshen back to Geely, are you having a significant cash surplus? Are you going to put that to use to start your own EV fleets or quick battery exchange-based customer services?

[Foreign Language]

[Foreign Language]

So at the moment, we don't plan to engage in this field of services at our own. But we, of course, will be involved as part of the service provider of the car riding platform.

Thank you. And since you once had a partnership with China State in one of the largest companies on Earth, which was terminated due to political pressures because the QBX was not opportune at the time. Do you hope to revive this relationship with State Grid any time and have them deploy your quick battery exchange stations?

[Foreign Language]

[Foreign Language]

So actually, we have started our cooperation with the State Grid as early as 2010. But however, due to some policy – not so supporting policy and atmosphere during that time, operation has not been resumed later on. In October 2022, [ph] our company has entered into a strategic agreement with the Zhejiang State Grid Electric Vehicle Service company, which is a subsidiary of the State Grid in the area of the battery exchange for pure electric vehicles. Now we are in line with the policy from the government. For example, for the work plan from the government during 2020, the battery swap is part of the area they would like to focus and develop. So we are now in the good timing. Our plan is we'll set up the model in order to have the State Grid to develop further. So that's the plan. I mean, our role is being like a pioneer to develop the model, set the design and it's up to State Grid to develop further and circle it in the whole China.

Thank you. Thank you for adding that color. It’s very interesting and good luck for your IPO in Shanghai or maybe as the SPAC in New York. Thank you. I'll go back to the queue.

Thank you. [Foreign Language]

Thank you. Our final – our last question today is coming from Jim Parker, a private investor. Your line is now live.

Thank you. Good evening. In your announcement today, you had that R&D funds could be used for development sports car. Could you elaborate on what you mean by sports car? And is that for the Chinese consumer or the U.S. consumer? Is the K22 an example of sports car or do you have something else in mind? Thank you.

[Foreign Language]

[Foreign Language]

Okay. So I mean sports car our best edition that entered like a dynamic performances such as [indiscernible] top speed and what are we doing now is try to develop the sports car with the standards of the granular markets, including the U.S. market and European market. And our target is to, at the end, with our sports car models in all markets including the China market, the U.S. market and even the European market is our plan.

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

[Foreign Language]

Thank you again for attending today's call. Eliminating the non-compete restriction from the Fengsheng affiliation enable us to pursue the EV market more aggressively in China, as well as expanding applications of our expertise in battery swap systems to maximize shareholders' value. With supportive policies from the government and sufficient cash and working capital, we believe the years ahead hold a multitude of opportunities that can deliver strong operating and financial results in the coming quarters. This concludes our call today. Thanks again. You may now disconnect.

Thank you. That does conclude today's teleconference. You may now disconnect your line, and have a wonderful day. We thank you for your participation today.