Greetings. Welcome to Kandi Technologies Group full-year 2021 financial results call. At this time all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference please press star zero from your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Kewa Luo, Investor Relations Manager. Kewa, you may now begin.
Good day, ladies and gentlemen, thank you for standing by and welcome to Kandi Technologies full year 2021 annual conference call. All participants are in listen-only mode. Later we will conduct a question and answer session, and instructions will follow at that time. As a reminder, we are recording today. If you have objections you may disconnect at this time. Hello everyone, thank you all for joining us today to discuss Kandi's results for the full year of 2021. Earlier today we issued press release covering the results. You can find the press release on the company's website as well as from the newswire services. On the call with me today are Mr. Xiaoming Hu, Chief Executive Officer, and Mr. Alan Lim, Chief Financial Officer. Mr. Hu Xiaoming will deliver prepared remarks in Chinese, which I will then translate.
After that we will have a Q&A session. Before we continue please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the 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 public filings with the SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please note that unless otherwise stated all figures mentioned during the conference call are in U.S. dollars. With that let me now turn the call over to our CEO and Chairman Xiaoming Hu. Go ahead, Mr. Hu.
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Thank you, Kewa . Hello everyone, and welcome to our conference call today. I'm happy to share our business and financial results for the full year 2021. Kandi was able to get back on track with meaningful sales growth in 2021. This turnaround was the result of strategic actions we took to respond to a changing market landscape after the pandemic broke out in 2020. The most important highlight of 2021 was the remarkable growth of revenue in the electric scooter, electric self-balancing scooter and associated parts line of business. The segment accounted for nearly 33% of total annual sales, growing approximately 420% versus last year. Originally, our primary business operations were composed of designing, developing, manufacturing, and commercializing EV products and EV parts.
However, in recent years, as the market got more crowded, some Chinese EV companies decided to chase market share with aggressive pricing, running huge losses. While China's EV market took off early compared to other major economies, we believe that its EV market has not reached a healthy and orderly stage of development. Therefore, considering our financial conditions and the interests of shareholders and other stakeholders, we think it's unwise for us to participate in this loss competition or race to the bottom. Hence, we decided to take the initiative and move up along the supply chain to find more viable business opportunities by leveraging our unique technological and operational strength in specific areas. We firmly believe the battery swap is a prerequisite to universal adoption of EVs.
By leveraging our advanced EV intelligent battery swap equipment manufacturing capacity of EVs with intelligent battery swap mode and dozens of patented technologies in battery swap, we will continue to build our position in the field of online ride-hailing with battery swap modes, and will make full effort when China's EV market enters a more healthy development stage. Looking at the off-road vehicle business, the industry is gradually shifting its focus to electrification. In 2022, we will apply EV technology to off-road vehicle products and launch a variety of pure electric utility terrain vehicles, neighborhood EVs, golf carts, and off-road crossover vehicles. Our plan is to fully utilize our expertise and know-how in making electric vehicles by expanding to off-road vehicles. We will strive to become the market leader in this field in China within three years.
To sum up, we ended 2021 with initial success in our business transformation, with sufficient capital from the government's payment related to our facility relocation and with more business flexibility after exiting the joint venture. Looking forward, we are making full effort to develop products to enter the market for pure electric off-road vehicles, incorporating our EV technology. We expect more opportunities ahead in the EV market in China once it enters a more stable growth mode. We believe there are plenty of opportunities to benefit from the industry's development of EVs and electric off-road vehicles in the future.
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Thank you. Now let's start the Q&A session. Kewa will take any English questions and translate for me. Operator, please go ahead.
Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to move your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. Once again, that is star one to ask a question. Thank you. As a reminder, as we assemble the queue, it is star one to ask a question. Thank you. Our first question is from the line of Frank Blatterman, a Private Investor. Please proceed with your questions.
Well, good morning, Mr. Hu. I have two questions prepared for today's conference call. One involving the status of the Hunan Hengrun battery swap, and the other involving the status of the K23 and K27 in the United States. In light of your statement to today's PR, I am assuming that these are dead in the water at this time. Is that correct?
Hello, hi, Frank.
Yes. Can you hear me?
Yes, I can hear you. Your last part is whether what's getting in the water?
The status of the K23 and K27, also the status of the Hunan Hengrun battery swap.
Okay.
It looks as though we're no longer going to be in that line of business at the present time, and I'm looking for clarification if that is my understanding and it's correct. I have one other short question.
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Hello Frank, good morning. So there are two questions. First, first of all, related to our cooperation with Hunan Hengrun. As you may know, Hunan Hengrun is R&D company with the qualifications and license to manufacture EV in the China market. We are working with them right now, at the moment, at the high end production factory, and we are working with them together to file the production filing. Once the filing is done with the government authority, which we expect around quarter two of this year, we can then pick up the orders and to sell our EV products of K23, which have the battery swap features. As for our K23 and K27, sales channel in the U.S. The problem we encounter is the requirement from the DOT, safety requirement on the airbag.
Originally, we need to have the approval from the EPA in order to sell our EV on for the highway usage in U.S. We noticed that for the safety requirement, it's like a self-filing routine. We noticed that later on, the requirement for the airbag is different between U.S. and China. There's one standard requirement within China and European countries. However, we noticed that it's different in U.S. Primarily is the airbag, it need to fit different size of the driver, which is different requirement from the China standards. That takes up a long time and a lot of investment to refine in order to meet the requirements of the airbag safety per DOT.
We are working on that very hard. However, the time to complete such a refinement in order to meet the requirements in U.S. is uncertain at the moment. We are trying very hard. In order to proceed with our productions, we are doing the parallel pathway approach. First, we are going to refine our airbag requirements in the meantime, and also we are selling the K23 and K27 NEV version in U.S. We have just started in the market, and we have gradually deliver our products to the customers in U.S.
Thank you very much. I have one further question, which you may have already answered. Is the company going to pursue an electric vehicle manufacturing license in China or by affiliation or preferably on its own in the future?
Are you asking whether we're going to apply our own production license or we're going to?
I'm asking if we're going to. Well, the answer I just received apparently gave me the answer to the first part. We're going to operate utilizing the license.
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Of Hunan Hengrun battery.
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Okay. Now, in the future, are we going to pursue a standalone license or is that undecided at this time?
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As for your questions, as you may know, in past few years, a few years ago, the license of manufacturing EV is highly sought and was difficult to apply. When the market started to develop, many smaller companies get phased out in the market. Currently it's easier to acquire those license through the acquisition of the companies. From our approach, we plan to, at the right moment in the future, to acquire those companies with the license alone to consolidate them into our leasing structures instead of applying the license from the local government, because application may be more difficult to go through. Our approach is to look for the suitable targets and complete our acquisitions in the future for those company holding the license of manufacturing EV.
Okay. Thank you very much. Thank you, Kewa.
Thank you.
Thank you. Our next question is coming from the line of Arthur Porcari with Corporate Strategies. Please proceed with your question.
Yes, good morning. By the way, I'm having a hard time. I had a call through to get the operator put me through on the queue for the call. Also Kewa, when you opened up the opening, I couldn't even understand you. Later on it came clearer. Anyway, yes, well, I guess it's been a pretty good year compared to what everybody else seems to be coming up with in the industry over in China. Yes, the stock is just ridiculous. Yesterday the stock closed at $2.52, a market cap of only $194 million. Stunningly, this puts this virtually debt-free company at a significant discount to its reported total cash of around $223 million, or just under $3 a share. Now I'm counting all categories, including restricted cash and CDs.
I don't know why you don't count $59 million in CDs in your number when you reported it, you know, in the press release. At this level it was also trading at almost a 60% discount to book value. Also, its reported total assets at $520 million with only $77 million in liabilities is 7: 1 positive ratio. From a quick value point of view, current assets of $343 million compared to current liabilities of only $64 million gives it a current ratio of 6: 1 and a positive working capital of $274 million, or $3.70 a share. Yeah, trading at $2.50. To top all this off, three months ago, December 6, when the stock closed at $3.86, well over a dollar higher, the company announced a $20 million share buyback.
Yet Friday, actually as of today, the stock is still down over 30% since that announcement. Finally, the insider buy to sell ratio in this company over the last 14 years has been a very bullish 98: 2. Now I've been a market pro for 48 years, since the dollar was trading at $5.86 in 1974. In all those years, until Kandi, I've never seen such a pervasive individual equity market disconnect, particularly on a NASDAQ Global National Market security, in a hot industry, relatively hot anyway, such as EVs. With that said, I have a couple of questions.
Okay. Let me transfer first so far. [Non-English content] Go ahead, Art.
Okay, going back to a couple of conference calls ago, the Q2 2021 conference call, with the stock trading almost double the current price, in response to a similar undervaluation question, the CFO also felt the stock was quite undervalued at that time, and told shareholders he would personally take responsibility to work on improving Kandi's perception in the stock market. Can he give us an update how that's coming along?
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Sure. Yeah, I can answer the question from Art directly. We and our team and also the IR firm has been reaching out to the analysts and the different investors on a routine basis to let them understand the plan and then operation status of the company in order to improve our company's perception in the stock market. We believe that, you know, if they can understand us better, it can help them to understand better, you know, our company and have more confidence in investing in our stocks.
Well, why is it you can't seem to get their attention? I mean, it seems like you got Invesco's attention. I mean, they've been adding more and more recently, and I think number two on their list in their EV or their special fund that they've got over there. We're up to number 2 from number 8 about a month ago in the consumer discretionary area, so at least they like us. It seems like it this is such a no-brainer on this stock. I mean, you're trading at less than half of book value and a huge now at even a discount to net cash in the bank. Anyway, let me go on. Can you tell us how many shares of stock the company's bought back today through the stock purchase program?
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We are sticking with our plan for the shares buyback at the moment. As a matter of fact, the company has bought back the shares back in end of last year and beginning of this year, with over $4 million to acquire and buy back more than 1.1 million shares. We'll stick with the plan and proceed with our share buyback transaction in the future at the right timing.
1.1 million shares. You're trading under. I mean, for the last three months, you've been trading right at basically cash. You know, a couple of years ago, the company bought back probably about that many or just under that many shares, and they paid as high as $5.50 a share. Anyway, why doesn't the company just take 1/3 of the cash, including the CDs? I mean, it's irritating to see $139 million in cash too, as you could tell from my opening there. When realistically, if you count all the real things that are cash equivalents, like $59 million in CDs, you don't even count that. Why don't you take a third of the cash, make a Dutch tender offer, let's say $4 a share. Might could even do it cheaper.
Buy back about 18 million shares, which is about the same amount you sold a 1.5 ago and raised $160 million at $8.80 average price. If you don't do something quick, as one of the soon to be remaining left PCAOB-certified Chinese companies that are safe from delisting, some smart private equity raider might just do it first.
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Thank you for your advice and suggestions, Art. Kandi company and our Board of Directors will stick with our own share buyback plan, and we'll definitely buy additional portion of the shares in the future at the right timing. Right now we are still considering all the conditions, and we will proceed with further buyback in the future.
At the rate you're buying back right now, you've allocated $20 million through the end of this year, to my understanding. At the rates you're buying back, you better accelerate your plan if you plan on getting near $20 million, or else you might have deceived the shareholders. I don't think you wanna do that. It seems to me you got to pick up the pace a bit. Why wouldn't you wanna do it at under cash in the bank? It's just insane to me, you know. Either way, been here 14 years, I guess I'll be here another couple of years. Anyway, you had a great. Don't get me wrong, I think you did a great this past year, considering what everybody else has had to come up against.
You know, even your analysts thought you were gonna lose $0.19 a share for the year, a GAAP loss of $0.19, and then you ended up making $0.30. I guess that's why she's probably not around anymore. Anyway. Goodluck to your company.
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Thanks again for your support and consideration. Of course, we would like to have the better use of our cash on hand. In order to improve our fundamental R&D, expenditure is key to us. I guess at the moment we try to plan ahead and have the better use of these approaches in order to spend on our new products, because we believe that with new products on the market that can improve our financial positions and hence improve our company's stock, you know, value and market. It definitely gets undervalued at the moment, but we believe that the market is somehow irrational at the moment and hopefully it will get back to its normal trend in the future. Thank you.
The irrational market you should be taking advantage of. Thank you. That's it for my questions.
Our next question comes from the line of Walter Hill with Carty & Company. Please proceed with your questions.
Recently, the perennial hot topic concerning U.S. trading China stocks being forced delisted due to refusal by either the company or the China government to allow these companies books open to audits by the PCAOB for certification is back in the news. However, this time it seems for real and that the companies like Didi, NIO, Alibaba, JD, NetEase and several hundred others is mostly ADR specifically under attack and are already arranging for China or Hong Kong listings. This was really highlighted last Friday when the average China stock big or small, saw their share price drop 10%-40% or more and followed through severely yesterday and is even following through again this morning in the pre-market.
On conference calls Kandi shareholders have been told, but not in writing, that Kandi does not have the same risk. Aside from the fact Kandi is a C corp, not an ADR, and it clearly states in Kandi's annual 10-K, audit opinions going back three years to 2019 that Kandi is PCAOB certified, fully compliant with the U.S. SEC and stock exchange audit requirements for continued listing. But that does not seem to stop the stock market from punishing Kandi severely as the rest over this situation yesterday and down at another 11% to the mid-twos.
Can both Mr. Hu and the CFO once and for all clearly explain for the record all the preparations Kandi's management wisely has been going back to 2019 to specifically shield Kandi shareholders from the same fate of forced delisting that some 90% of U.S. trading China stocks of all sizes are now worrying about, and you need to put out some form of a press release stating that Kandi is a C corp, not an ADR, and is fully compliant PCAOB certified, fully compliant with all SEC and stock exchanges. The average investor does not read a 10-Q. The average investor gets their information from looking at press releases. Most people that look at Kandi do not know this. So you guys need to get off your butts and put this out so that the average investor will know this. Let's get this done.
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Thank you for your consideration of this topic and your advice. As you may know, those non-compliant companies from the Chinese-based stocks who get or maybe get delisted from the stock exchange is based on the Holding Foreign Companies Accountable Act, the HFCAA. One of the key point is they hired auditor that cannot be having the work papers inspected by the PCAOB. In order to meet that requirement, our company starting from 2019, has already hired audit firm with headquarters based in U.S. They can be inspected by the PCAOB routine inspection. This can mitigate our risk and we can believe that we are not having the same relevant risk of being delisted.
Of course such disclosure was included in our upcoming 10-K in the risk factor disclosure. Apart from that, we will, you know, assess what's the best way under the compliance or the requirements of the disclosure that we can circulate such news to the investors other than our 10-K. Thank you.
Well, all I can say is that needs to be done, and it needs to be done now. Don't give me all this garbage that we're going to do this or that. You guys do not ever follow through on anything. People are getting sick and tired of having their stock go down. If you don't think now is the time to buy this stock, then you all need to be fired. We need to get rid of y'all and get somebody else in there in your place.
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We understand your concern and frustration, and then we'll definitely work harder to do that.
Thank you.
Thank you. Our next question is from the line of Harold Gaburi, a Private Investor. Please proceed with your questions.
Hello, Mr. Hu. Hello, everyone. My question is this. What is the status of Kandi's special products like manufacturing of third-party parts, such as for the hoverboard or other third-party EV parts and product sales like EV motors batteries? Because it's clear in past filings that Kandi's is making third-party sales of parts and products, but other than the hoverboard motors and batteries, we never hear about the other parts and products. Can Mr. Hu tell us what is going on in this segment, both future and present? Thank you.
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Thank you for your concern. As a matter of fact, we are aware of, you know, the market that as you may know, in the Chinese market, the EV companies, they're trying to chase the market share, the occupancy with very aggressive pricing and even running a huge losses, with their aggressive approach. While in China's EV market took off early compared to other major economies like U.S. and European countries, we believe that the EV market has not reached a very healthy and orderly stage of the development. Therefore, considering our financial conditions and the interest of shareholders, we think that it's unwise for us to participate in this loss competition, at the moment.
We firmly believe that the battery swap is definitely a prerequisite to universal adoption of EVs in the future. By leveraging our advanced EV intelligent battery swap equipment, the technology and then the manufacturing capacities of the EVs that enables the battery swap features as well as our dozens of the patent technologies in such category of the battery swap. We believe that we'll continue to build our positions and enhance our fundamental in the field of the online car-hailing industries in the market with our battery swap mode. We'll definitely make a full effort when the EV market in China enters a more healthy development stage.
Apart from that, we are aware that in the whole, you know, the whole major markets like U.S., European countries, those off-road vehicles, ATVs, UTVs tend to become more electric than the gas running in the past. Our plan is based on our technology. In 2022, we will launch a few more UTVs, off-road vehicles, the golf cart with the pure electric models. With our technology accumulate in the past, we definitely would be. I believe that we can be a leading position in the three years in both China and in the world. That's our plan and our goal. Thank you.
One little question. Hello? Hello?
Yes.
One little question.
Sure.
Are we supplying other companies with EV products or batteries or are we involved with other companies for our sales?
I'm sorry, say it one more time. Are we selling the EV parts for other companies? Is that what you asked?
Yeah. Do we supply products and parts and that to other companies that either in competition or in the same line that we are in? In the EV, for example.
Can you elaborate your question? Are you asking whether there's other competitor also in the same business that offering the EV parts, as a supplier to other companies?
Yeah. I just wanna find out if we're supplying parts and to third party to other people. For example, are we selling batteries to other companies? Are we selling?
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Yes. Addressing your question, we do. With our more advanced technology and experience in manufacturing different parts and battery. We do and have an edge to provide such as the electric vehicle parts and the batteries to other manufacturer, and that's part of our business.
Thank you. Thank you very much for everything.
Thank you.
Our next question is from the line of Paul King with PK Capital Partners. Please proceed with your question.
Hello, good morning. Our research indicates that NIO is leading the way in the battery swap technology stations throughout China, and now they are going global. In the Scandinavian countries, they will be installing their battery swap stations. It seems that their technology is recognized. We have also discovered that NIO is working closely with the Chinese government in Beijing on becoming the sole or would like to be the sole battery swap station in China. What's Kandi's opinion or perspective on that? How does Kandi's swap technology or how do they plan to catch up to NIO? Thank you.
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As for the China EV market, as we mentioned earlier, it's still not in a very healthy and orderly stage development. As for NIO that you mentioned, the battery swap features they offer only works for their own brand. Our goal and our vision is that as soon as all the standard is set, meaning the battery swap will be universally adopted by different brands, that will make the battery swap market and the whole field be more prominent and adopted by the regular users. We don't see that stage has been reached yet. Our own technology, however, enables the adoption and utilization by different other brands with some minor auto and tailor-made features. We are different than NIO because we try to offer our battery swap services to different other brands. We will wait until the time is right, and then we will enhance our market occupancy. Thank you.
Okay. You mentioned earlier that producing EV cars in China is not profitable at the moment. Can you talk about the profitability of producing EVs for the car hailing industry that you mentioned?
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As to your question, that's exactly our thought, because in the current market in China, EV field, is very saturated, however, is not becoming healthy and orderly developed. So it's not very profitable, or even having the huge loss, at the current to enter this market. We try to scale down our EV market share at the moment, and in the meantime, try to enhance our own battery swap equipment and the technology until the moment is right, then we can go in the market. At the moment, we try to focus on the more profitable products, such as the electric off-road vehicles, the UTVs and ATVs, golf cart, those products. That's our focus for this coming year.
No, I'm sorry. My question was regards to car- hailing. If it's not profitable to produce cars for the EV market, how is it profitable to produce EVs for the car hailing business that you're focusing on?
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As to your question, as a matter of fact, it's not profitable either for the car- hailing products because they have similar situations and the conditions as other regular EV markets. That's why we mentioned that we have scaled down our production volume in the car hailing vehicles and focus on the more profitable sector, such as the off-road vehicles and UTVs, etc. However, we try to keep our share in the market and keep our name in it, but we try to not spending too much to have the much larger market share. We just try to have our, you know, our position in the market and let people be aware of our existence, and that's our major goal for now.
Thank you so much. Have a great day.
Thank you.
Thank you.
The next question comes from the line of Mike Pfeffer with Oppenheimer. Please proceed with your questions.
Hi. Thanks for taking my question. I'm gonna make one or two comments and it leads up to my question, so if that's okay. About six months ago, the company announced an acquisition in China's very hot lithium battery manufacturing sector of China-based Jiangxi Huiyi New Energy Co., Ltd., a 7-year-old award-winning lithium battery producer with over 300 employees to include 40+ researchers and holding some 50 related patents, already producing some 90 million batteries per year. This seemed a perfect fit for Kandi's already noteworthy battery division, and that it brings Kandi a coveted full China battery manufacturer's license to allow its passenger EV sales in China. Maybe you can translate that and I'll go to the next part please.
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Okay. One more part. The deal called for Kandi to make an initial cash acquisition, which also called for a three-year share earn out for up to 2.5 million Kandi shares. To earn shares requires Huiyi to have a minimum annual net profit of $2.3 million each year, including this year, or loses a third of the 2.5 million shares each year it misses. Maybe you could translate that, and then I'll get to the question, please. Thank you.
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Okay. On the call right after the purchase, when asked if that $2.3 million profit should be reached this year, Mr. Hu projected yes. Also shareholders were told Huiyi should also begin producing batteries for EVs by the end of 2021. A few questions. Did Huiyi reach its expected $2.3 million profits to earn its first tranche of stock last year?
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As a matter of fact, the three years will evaluate the net income, the margin for each year. The first period under evaluation is from July 1st, 2021- June 30th, 2022. So the first period is not completed yet, so that's why the company has not reached the state whether they can earn the first tranche of the stock or not. We will keep you posted in the upcoming filings.
Just a few more quick questions. In December, Kandi put out a PR about Huiyi's new revolutionary lithium iron phosphate battery IFR 18650-2200mAh. The release called this one of the most advanced on the global market now entering mass production. Is this battery the new battery for EVs?
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Actually it's not solely for the EVs, and yet, however, it's rather more universally adopted like EVs, different other electric like the hoverboard, scooters, they can utilize the same battery as well. It's just the battery with a higher power capacity.
Could Mr. Hu explain why this new battery is so much different or better than its competitors? Is it related to this high capacity you're talking about?
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I guess the crux is the power capacity that we can compete and compare with other competitors. As you may know, energy density is one of the key indicators to measure the performance of the lithium-ion battery product, and its level reflects you know our R&D capacity and our technical level of one entity. Huiyi actually helped lead to launching you know such lithium iron phosphate batteries back in 2019 in our Chinese domestic market. At that time, the product is 11% higher than the average in terms of the capacity. With the continued self-improvement enhancements, Huiyi then developed a new set of batteries in November 2021.
The new product has been successfully mass-produced, and then the new product compared with the product we launched back in 2019, it enhanced a further 10% of the capacity with a higher energy density level. With this new product launched, it makes us having the leading position in the domestic market in China and also one of the most advanced position manufacturers in the world.
Okay. Thank you. The last question is how does this tie into Kandi's existing multi-year operating battery division? Thanks.
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As you may know, you know, we used to purchase the original and then the raw materials of the batteries from other manufacturers in the market. With the acquisitions of Huiyi, we can now consolidate its battery production features and apply that in our different parts, different divisions in our EV manufacturing that we can enhance our whole production chain and make the whole different divisions developed all together. Basically, there's a good synergy between Huiyi and our original EV production line.
Thank you.
Thank you.
Our final question comes from the line of Raymond Palmer with Raging Capital Management. Please go ahead with your questions.
Yes, hello. Having followed the company for a decade or more, it's initially because of your battery exchange program. I'm surprised to hear that you have decided strategically to scale down your EV production. At the same time, you have this partnership announced with Hengrun, which is a company that has a very wide array of vehicles they're producing. Are they producing EVs that for which you supply the battery exchange technology? And furthermore, are you producing battery swap units for other companies at all? Are there any in operation or what is the plan on it? And then I have a second question.
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Hi, are you referring to Hengrun, right?
Well, whatever you pronounce it, the Chinese company that you're partnering with for the battery swap, they seem to have a wide platform of various vehicles they're already selling. If you're not producing EVs yourself, are you producing battery swap exchange units for the use of other companies like Hengrun or whichever way you pronounce it?
Well, both company is in battery. One is Hengrun, which we announced in January, the other one is Huiyi, we announced last year. Which one are you referring to?
Doesn't matter, but I'm interested. Are you selling battery quick exchange units at all? Are there any in operation? What is your plan on it? If you're not p roducing EVs, are you producing the quick battery exchange units for sale for use of other companies, for other makes?
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There are two parts to your questions. First of all, we are working with Hengrun in order to get our filing approved by the local government, which is expected to be sometime in quarter two in this year. After that, we are eligible to manufacture and sell the EVs in the domestic market. However, we will try to limit our production volume to a rather considerably less amount because of the disorderly, you know, stage of the market I just mentioned. Recently, there are a few competitors in the market, the EV manufacturers, they try to in order to enhance their market share, they even selling the product with a negative margin. That's not the plan we try to adopt because we try to, you know, conserve our financial resources. We will.
You'll wait?
We'll wait until the market getting more orderly, more healthy, then we will spend more effort and to manufacture and sell more EVs at that moment. At that point, at this point, we try to limit our productions, and the plan is only to have a considerable image of that, you know, we are a player in this market, we have our existence. However, we try to limit our production, so in order to reserve our financial position for the benefit of shareholders and the company. As for the second question about the-
Yes, you mentioned that already three times, throughout the conference call. My question was, if you're not producing EVs yourself, are you producing your quick battery exchange units for other companies, for other makes of EVs?
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Because the battery swap is not mature at the market. It's not that very prominent. Each brand, each company, they are trying to develop their own standard. And consequently, there's not really a sales of the battery swap equipment to other companies, because we only fit our own use, and other companies, they try to develop their own model as well. No, there's no sales. There's no plan to sell our EV battery swap, you know, our equipment to other companies at the moment.
I see. Since other companies are making headway in installing battery exchange units widely, how do you want to protect your technological advances that you obviously do have in the field?
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At the market right now, there are some major players. They try to spend aggressively even with the huge loss in order to gain the market share. However, as I mentioned, the market is not mature yet even though they build all the battery swap stations, the utilization rate is rather low. It's not prominent to the regular end users at the moment. Of course, we will follow the technology to enhance our own fundamentals, but we try not to enter this aggressive market, because what we have is really just burning money. With our cash on hand, it will not be sufficient for us to enter this market in the long run. We will wait until the market becomes more healthy. It will be more cost efficient. Margin-wise, it is making sense for us to enter in the future, but not at the moment.
Thank you, that's helpful. Can I add another question please?
Sure.
Yes please, thank you. From your explanation it appears you are grounded on reserving cash and you are sitting on a very ample supply of cash that's probably above $3 per share. Since markets are widely manipulated and markets are also dependent on psychological aspects. With a company that is sitting on hundreds of millions of cash and is undervalued with a 50% discount to book value, it does not appear that the owners of the company and the majority owners like Mr. Hu believe there is value in the company to spend for buying back their own shares. That's a large concern for shareholders. Why do you believe it's not valuable to buy your company at a price where actually you're not only having a discount to book value, but to the cash per share? How could you spend your money better if you believe in the company?
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Actually we have already answered such similar question in the past, so we not try to elaborate too much. Long story short, we will stick with our share buyback plan and enter the market in the right moment.
If our employees and C-level Executives then also foregoing getting cash or share compensation as incentives while they're not buying back their own shares and waiting for the markets to change.
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We are actually again stick with our plan and try to, you know, as you may know, we have already bought like $4 million of the shares in the last few months. In the end of last year and another batch in January this year. We will continue to proceed with the shares buybacks with our plan. However, the thing is that we are confident with the shares, but if the company again spend more money to buy the shares, it's not necessarily meaning the shares, you know, our price will increase. Again, we will, you know, considering the whole market conditions and proceed with our shares buyback plan in the future.
You're basically saying you don't think the company is at $2.50 a valuable buy for yourself, but you're preserving the cash you have for compensation for employees and for incentive and bonus shares for the company as a compensation plan. Is that correct?
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So I guess our plan is, again, we will speak of our own buyback plan. And then as for the compensation, we just offer them with standard package. And of course, we are not trying to manipulate the share price ourselves because that's not complying with the SEC rule. So we just try to enhance on the fundamental and hopefully, the share price will be improved.
I wasn't implying that you manipulate the share price. I was saying do you believe the company at $2.50 is valuable enough to use the money that you have in the bank to buy your own shares? Or do you think it's not valued correctly at $2.50 and should be cheaper? If you think it should be valued higher, whether it would be a pertinent investment into the company's benefit and the shareholder benefits.
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Yeah. Thanks again for your consideration. We'll definitely take your advice into consideration and proceed in the future.
Thank you. I appreciate your response.
Thank you. At this time, we've reached the end of our question and answer session. I'll turn the floor back to management for closing remarks.
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Thank you again for attending today's conference call. We look forward to our next call. This concludes our call today. Thank you.
You may disconnect your lines at this time. Thank you for your participation.