Kandi Technologies Group (NASDAQ:KNDI) Q2 2020 Earnings Call

0:00 Thank you, Operator.

0:30 Hello, everyone. Welcome to Candy Technologies Group, Inc.'s second quarter of 2020 earnings conference call. The company released the results earlier today, and the press release is available on Candy's website at www.candyvehicle.com. With us today are Mr. Hu Xiaoming, Candy's founder, chairman, and chief executive officer, and Ms. Alan Lin, chief financial officer. who will deliver prepared remarks followed by a question and answer session. Before we get started, please note that today's discussions will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Mitigation Reform Act of 1995.

1:18 Forward-looking statements involve inherent risks and uncertainties. As such, the company's 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 findings with the SEC. The company does not assume any obligation to update any forward-looking statement except as required on the applicable law. As a reminder, this conference call is being recorded. An audio webcasting of this conference will be available on Candidate's Investor Relations website. I will now turn the call over to Candidate's founder, chairman, and CEO, Mr. Hu Xiaoming.

2:09 Thank you, Kewa. Hello, everyone. Welcome to our phone call. The pandemic has caused a decline in demand. Our performance in the second quarter is still pleasing. We achieved a profit of $4.1 million. The net profit increased from 17.4% in the same period in 2019 to 18.2% in June. Due to the company's hard work, Conti is making progress and gradually gaining a strong position. In the second quarter, we made a lot of efforts to prepare for the sales of networked vehicles and American electric vehicles. Now we have seen some major progress in the field. Our all-autonomous automatic transmission system was delivered to the Haikou networked vehicle operator on February 2. The installation is now complete and will soon be put into operation. In the government's strong support for the mode of transmission, will be the first company to establish an electric charging station. Under the favorable conditions, we believe that the electric charging station will be affected by the market and will drive the sales of our electric vehicles. Second, we will maintain a separate company in the United States

3:46 Thank you very much. Thank you, Kewa.

4:26 And hello, everyone. Welcome. Thank you for joining us on the call today. Despite the COVID-19 headwinds and a decreased consumer demand, our second quarter business results were satisfactory. We achieved $4.1 million in profits. and Kewa Luo. In the second quarter, our effort was on preparation for the online car handling business, and AU South in the U.S. made meaningful progress in these areas. First, Our fully automatic intelligence battery exchange system was delivered to the right-shear operator in Haikou City on August 7, 2020.

5:25 Installation has been completed and will be put into trial operation shortly. With strong support from the government, battery swap stations are classified as infrastructure construction in China for the first time. We think that our fully automated smart will be viewed favorably by the market and drive the sales of our electric vehicles. Second, our American-only owned subsidiary, SC Auto Sports, made significant progress on preparing to launch EV sales in the United States while maintaining growth of off-road vehicles. We were excited to announce that our virtual launch will take place on August 18 to kick off pre-sales will be a key milestone in the company's history.

6:15 As a technology innovator, Kent is committed to provide high-quality products with great performance and affordable price.

6:24 现在让我们转到这个问题提问时间。 这次会议为了解约时间, 我们将由我们的CFO, Let's now turn to the questions. In the interest of time,

7:07 Our CFO, Mr. Alan Lang, will answer your question directly in English. And since Alan has joined us for a very short time, if there is any questions he is not able to answer you, Kewa will translate and I will give you an answer. Operator, please proceed. Thank you. To ask a question today, you may press star 1 from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would 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 poll for questions.

7:57 Thank you. Our first question comes from the line of Walter Hill with Guardian Company. Please proceed with your question.

8:05 Last quarter's conference call and PR, Mr. Hu said, quote, as this business is developing quickly, we will consider merging Yankeng Scrow and Genwa & Co. into a single specialized powertrain technology company and evaluate the possibility of raising capital in China's capital market to fund growth. The raising capital in China's capital market to fund growth was eye-catching. My questions. Since the company borrows money all the time from Mr. Hu to specifically bring up capital markets to future growth, it would seem he is talking of raising equity for the joint subsidiaries with either a private equity round or IPO for the combined subsidies or both. If so, It would seem a perfect way to unlock hidden value in that such a combination of the two subs could, in his hot market, be valued up to a billion dollars in a first-round private equity financing if, in fact, the $300,000 Candy EV program with Amco's QBX is underway and the Hangout Check Hoverboard program is underway with Yong Kang's Scrowl.

9:26 This new combined high-tech company would look like a natural listing on the new Shanghai Technology Star Stock Exchange, where, by the way, Li Shifu is in the process of co-listing Geely.

9:42 Hi, everyone. First of all, it's my pleasure to meet everyone on the call today. As for the questions, first of all, we have renamed the Jinhua M-Cal to Zhejiang County's Smart Battery Swap Technology Company Limited in the second quarter. And, of course, we will continue to include the Yong Kang Scroll under its name. As for the questions, we are actually evaluating the possibility and the options of the above-mentioned companies, whether listed on the Science and Technology Innovation Board or will explore the possibility of any other private equity investments. So at the moment, we are still exploring the options and the possibilities.

10:27 When there's any planned further, we will promptly announce to everyone. Thank you.

10:37 Welcome. Thank you. The next question is from the line of Fred Brasher with Cleantech. Please receive your question.

10:48 Thank you. We have had a lot of information out on Candy America with the upcoming U.S. virtual release of the K23 and K27. While it is clear that Candy has a 100% interest in the K23 sales, the K27 seems to be very similar to an EV that is made by Candy Partner in the $300,000 EV Government Accredited Ride Hailing Company, Jehn Ping. If this is the same EV or it has been modified by Candy from the original Jehn Ping model, if so, will Candy be working with Jehn Ping on other models?

11:34 Also, just what is it that Jehn Ping is responsible for in the 300,000 EV program? Thank you.

12:07 Hello.

12:10 Hello. I'm sorry. So thank you for the questions. So as for the questions, first of all, K23 has the U.S. versions and the domestic car handling version in China. And as for the second question, what does, you know, Jin Peng involve in any other models? It is actually that the K27 U.S. versions is a model that is developed by us in the cooperation with Jin Peng. and we believe as the cooperation proceeds further, there's a possibility of cooperating with Jehn Peng to develop other models. This option is not ruled out. And then for the second question about the role of Jehn Peng.

12:55 First of all, Jehn Peng has more than 2,000 dealers in third and fourth tier China cities across the country in China. So in our 300,000 electric vehicle plant, will mainly use the resources to jointly promote the project. So basically, we are utilizing the network and resources of Jehn Ping.

13:19 Thank you.

13:20 You're welcome. Our next question is from the line of Mike Pfeiffer with Oppenheimer. Please proceed with your question.

13:31 Good morning. Thanks for the question. Regarding financials, from the filings, It appears that Candy did collect some $32 million as the first payment in Q2 from the Jinhua government for the sale of Candy's 18 years held Jinhua legacy facility, leaving some $42 million still owed Candy from Jinhua. Also, it appears Geely still owes Candy some $26 million from Candy's JV equity sale. Do you expect to receive the balance owed from each by year end?

14:16 Thank you for your question. Actually, that's a good progress of the two payments you mentioned. First of all, on July 9, 2020, Candy received a second payment. It was approximately $70 million U.S. dollars. from the government under the repurchase agreement as for the relocation of our Jinha facilities. In addition, as for the payment from GLE, on July 27th this year, we have received all of the remaining equity transfer payment from GLE, which is roughly 26 million U.S. dollars. And so far, all of the equity transfer funds have been received from GLE. So it's all been settled.

14:59 Okay, thanks. Does Fengsheng still owe candy for parts provided during the GV, and if so, how much?

15:08 It does, because our company, Candy, continues to provide the parts and components to Fengsheng. We still have the daily operations. As of June 30, 2020, the receivable from Fengsheng related to the supply is about $20 million U.S. dollars.

15:26 Okay, and then my last question. Thank you for your time. Also, if my math is correct, it appears that the Jinhua facility being sold to the government is carried on Candy's books at a depreciated price of less than $7 million. So if correct, when closed, based on a much appreciated $76 million sale price, Candy would book a huge pre-tax gap profit of over a dollar share on this transaction alone. Can you address my guesstimate on this, and also which quarter do you anticipate this will officially close and be booked?

16:07 Your calculation is basically correct. We actually recognize the amount in accordance with the US GAAP, mainly based on the degree of the completion of how we execute the contract. Actually, as of June 30th, the second quarter of this year, we have recognized $13.9 million in the gain from the disposal of such assets. It's based on the land we returned to the government. It's about 73,000 square meters of the brownfield land, and it's approximately 21% of the land is returned from the total plant. The remaining portion of the gain is expected to be recognized in the first quarter of 2021. That's the time when we expect to complete the whole agreement and the relocation process.

16:58 Thank you very much. Thank you. Our next question is from the line of Mark Cano with Swiss Liquid Future. Please receive your question.

17:10 Yes, hello. Thank you for taking my call. My question has to do with Candy's wholly-owned sub-UNCAL's quick battery exchange system. I was happy to see it in the recent PR of what appears to be the first sale of Candy's patented priority 90-second battery swap system, which is unique in that it can also allow a roadside emergency in-situ mobile swap in five minutes due to the battery location cleared of the wheels. To long-time followers of CANDY, this announcement seemed triggered to a series of potentially huge events kicking off the previously announced first full government accredited CANDY-initiated ride-hailing five-year, $6 billion-plus program for third and fourth tier cities in China.

18:03 Earlier this year, CANDY had announced two different billion-dollar patent apartments in this program, Shenyang Rubio, and Jipeng Mi. My multi-part question is, one, since cars must be included in the deal, but non-announced, can you tell us how many K23s are involved in this single transaction, and the proper, approximative K23 sales price, and is this the launch of the five-year, six billion plus 300,000 EV program? or Sai Ping.

18:43 So it is, yes, it is the launch of our five-year 300,000 electric vehicle plan. So CanBe will cooperate with Zhizhang, Weibo and JinPeng to build an online car handling platform. And we strive to invest 300,000 shared electric vehicles in the next five years. The platform will actually purchase no less than 56,000 K23 electric vehicles from Candy in the next five years. The price is approximately RMB 90,000 per vehicle, excluding subsidies from the government.

19:23 Okay, yeah, thank you. And my second question is then, it is understood that Candy's patented 90-second Cubex unit are modular and therefore somewhat portable. How long does it take to set up and or move such a unit?

19:41 So our smart battery exchange system achieves one click battery exchange in 90 seconds. Each system occupies an area of about 50 square meters, and it can meet the exchange service of over 280 electric vehicles every day.

20:00 Okay, very good. Thank you. My third question would then be, how many additional cars and stations can we expect this year, and what are the revenues per QBEX unit for candy?

20:14 Since the project has just started in the second half of the year, the numbers of the cars and the stations will not be significant. That is definitely the direction of official development to promote. As for the revenue from the QPEX unit, please stick around with our upcoming financial reports with the figures we will encourage.

20:38 Okay, thank you. And can Ankao custom design and sell cubic stations for other manufacturers and battery setups?

20:48 Yeah, our smart battery swap system has registered more than 20 patents and a number of copyrights, but then our positions mainly provide such systems to the power swap companies instead.

21:02 Very good. And then my last question would be, other than selling the EVs and cubic stations, can we participate in any other revenue source of the affiliate with Rubio and Jinping?

21:15 Yes. Apart from the streams you mentioned, Candy will own a small share in the company which operates the car-hailing platform. So then we will have a small share of the revenue from that operation as well.

21:32 Well, that sounds all very promising and big numbers for the future. Thank you for taking my questions, and I look forward to see the next quarters coming through and be fruitful. Thank you. Thank you. Thank you. As a reminder, you may press star 1 to ask a question. The next question is from the line of Mark Miller. Please proceed with your question.

21:57 Hi, thanks for taking my call. From the last conference call, Mr. Hu stated, recently we have been in discussions with Mr. Ying Shih-wei, if I'm pronouncing his name, CEO of Hangzhou Shi Intelligent Technology, a leading high-tech company that is well-recognized as a major exporter in the intelligence-balanced scooter sector. We have agreed to have Candy to start using its powertrain system to produce balanced scooters for this company. Heng Shih has accumulated more than 500 technical patents in the balanced scooter sector and is the originator of the balanced scooter products.

22:43 Last year, Candy announced that one of its subsidiaries, Yangke Scroll, if I'm pronouncing that correctly, initiated a relationship with DGL Walmart's largest high-tech China buyer to provide up to $71 million in hoverboards for their premium HoverOne brand, which Consumer Reports called the second most demanded Christmas gift last year. Some small portion of that deal was booked by Candy in Q4, but as addressed on the last conference call, due to the and Kewa Luo. Thank you for your questions. As for the agreement of DGL, the order of DGL has resumed production in July.

24:15 and we expect that the deal can be complete by the end of this year with about 300,000 units to be complete by the end of the year. For the second question, Hangzhou Chick has begun to use the motors produced by Scroll and the battery packs produced by the smart battery exchange, which is formerly called Jinhua and Kao. After the project is sorted out, The annual sales is expected to exceed over 500 million RMB.

24:48 What was booked in quarter four? What number do we have there? About the 71 million.

24:58 Well, I guess we're currently working on the plan, and I guess the quarter four data will be released during our year-end financials for 2021.

25:09 Okay, but I would say when you said a small portion of the deal was booked by Candy in quarter four, do we have a number here that was actually that we booked in sales from last year?

25:22 Yeah, a small portion of the sales were booked, but I think we can refer to the financials of last year for better details.

25:30 Okay. All right, thanks.

25:32 Thank you, sir.

25:33 Thanks for your help. Thank you, sir. Thank you. Our next question is from the line of Arthur Porcari with Corporate Strategies.

25:44 Good morning, Mr. Hu. It sounds like we have our new chief financial officer on board. Welcome aboard. Some of us have had a long time to have someone that could interact on these conference calls the way you are. Mine's going to be a little bit long now because I'm going to preference my question by saying I am a long retired brokerage firm founder and candy investor. I've never received any compensation whatsoever from Candy or Geely or other management. I get accused for it all the time on the chat boards. So I want to put this on the record in front of the company. In the last decade, I've visited Candy in China twice, along with publishing over 50 articles on the company. Based on the massive new interest in Candy, I want to preference my question today with background on an area outside the U.S.

26:30 EV sales that alone should justify a much higher price today than what could soon be monetized. To move on here, Candy has been a partner with Geely Holdings, wholly owned by Li Shifu, a top five wealthiest in China, all since 2013. Due to his controlling ownership in Geely Auto, Volvo, Proton, Lotus, and a half dozen other auto companies, Geely is considered the largest privately owned auto conglomerate in the world. Additionally, it owns 75 plus percent of Cao Cao, a top light club China ride hailing company, which just surpassed 2 million trips per day. A year ago, Gilley Holdings felt it was time for the JV, then called Candy Electric Vehicles Group, which had sold some 60,000 EVs since exception to either go big or go home, and offered Candy a sweet deal by buying the 22% interest of its 44% JV share for a 40% premium to book value. This at a time when most Chinese EV companies were going out of business. In fact, that was back at the time when actually NIO went below $2 a share. when Li Shifu bought Candy's Peace out at a 40% pre-yield.

27:41 Earlier this year, Geely changed the company's name to Fen Xing and is currently building two EVs under the Maple badge. Now, for clear control, Mr. Li also committed to provide whatever debt capital necessary to Fen Xing to grow. After this transaction, Fen Xing, which is now jointly owned 78% by Geely Holdings, 22% Candy, saw the JVD Dissolved and replaced by a corporate structure converting Candy's 22% JV interest into equity shares. Much in the same way that Candy ended up owning the Alabama stock, we won't be booking any of these revenues for the company. I'm going to stop right there if we need to. Does this need to be retranslated back from Mr. Hu or can we just move on?

28:24 Yeah, please move on. Thank you.

28:27 Okay, good. Great. At the time of the transaction closed last year, Gilly Holdings' total cash cost basis to acquire its 78% equity was up around $330 million, which happened to be more than Alicia Fu paid to acquire his initial controlling equity interest in Gilly Auto, London Black Cab Company, Proton, and Lotus all combined. Again, I'm just trying to show how important Gilly thinks this relationship with Candy is. by dissolving the JV, Geely Holdings then became exclusively responsible for some $400 million in feng shings payable as of the last report we had late last year. Since that time, using Geely Holdings credit, restructuring feng shing, designed and built two EVs for sale with subsidy and sales tax exemption, all under this new maple badge. On July 11th, the smaller, heavily equipped Maple 30X went on sale in China with five different reasonably priced versions, Due to China's subsidies, which have now been extended to at least 2022, the consumer costs could now run for only $9,000 to $11,000 U.S. I'm going to have my questions here in a moment. The second EV, the midsize Maple 60EV crossover SUV, is specifically built for ride hailing.

29:43 As announced, the lease has just received its government approval and has not yet been priced. It's expected to go on sale later in Q3. All total, I believe there's somewhere around 15 cars that Geely has announced in the China media that they plan to have made and sold no later than the year 2024 in Fengqing. And by the way, I think that also includes a sports car and a pickup truck, is what's said in the interview. Okay, now for some questions. Is Geely Keeping Candy updated on Fengqing sales? If so, do we know how many EDs were sold in July? Okay. and more. If that can't be disclosed right now, does Mr. Hu feel fencing sales will be announced monthly, like most other China EV companies, on the MIIT government website? That's one of our few questions.

30:33 So, first of all, I would like to thank you for your follow-up in the past years, and your long-term support means a lot to us. It's valuable. And apparently, you brought a lot of information What I would like to first say that is since the beginning of 2019, Geely positioned our joint venture, which is now called Feng Chen, as an enterprise to compete with the new forces and powers in the manufacturing of the auto industry. And although the shares have been transferred to Geely, it's actually the Geely Technologies Group Company Limited instead of the Geely Holdings. We believe that after the equity restructuring of the joint venture company, even though it has reduced the shareholding percentage owned by us, Candy, with Geely's ability to operate and the resources in the automotive sector as a controlling shareholder, we believe that we will now be rewarded with even more benefit and income from Feng Chen, the joint venture, than what the 50% of equity from the original joint venture can offer. So this can ultimately maximize the interests of us as shareholders.

31:43 And now we are the non-controlling shareholder. We try not to be involved too much in the management of Feng Chen in order to let Geely do what they do best. And regarding your question about the sales, I think that Feng Chen's sales should be at a similar level as the figures announced by the majority of other Chinese EV companies on the website.

32:10 Thank you for your question. We expect, though, that Candy, as its only partner here, will be also reporting those numbers. So far, you have been pretty good about putting out things that are happening at Feng Xing. Would those numbers also be put out once they come to a significant level?

32:53 Yes, you know, we're actually, as a partner of the company, we'll be informed and join the meeting regularly from time to time. So when there are new updates or any significant data pops up, you know, they will report to us as well.

33:09 I'm sorry. Right. Go ahead. I noticed Mr. Hu is on the board of directors of Feng Cheng as well, so I'm sure he is being kept updated. A few more quick questions. before the COVID virus, Geely was targeting sales of 30,000 feng shing units this year. Is this still a Geely target or goal? And is Geely sharing any of the current sales estimates so far they may have for the balance of the year? And if so, maybe what about next year?

33:38 It is impacted hugely by the pandemic. I think the sales target for 2020 will be adjusted for sure. But Currently, there's no definite sales plan confirmed yet by the company.

33:52 Okay. When should we expect the 6DV sales to begin?

33:56 New car. So the 6DV has been approved by the government, and it is expected to be launched in the market by the end of this year or early next year. Okay.

34:09 Geely reported a few months ago that Feng Xing would be developing and selling 14 different models to include the pickup and sports car by 2024 with a total of... and three of cars total this year. Is that still their game plan as well as we know it?

34:24 Well, the plan was announced a few months ago doing the Maple brand launch content and the pre-sale launch event of the 38th, the first pre-sale. And what you mentioned should be consistent with Feng Chen's plan, although there should be two models for this year instead of three.

34:44 Okay. I just saw an article that came out in China. A few weeks ago, they said there'd be three, but two for this year. Okay, last question. Now, with two new EVs for sale and a third expected, well, I say expected in Q to 4, which I, two for this year. Okay, last question. Now, with two new EVs for sale and a third expected, well, I say expected in Q to 4, which I, no, I guess we don't expect anymore, which is currently listed on the Hong Kong Stock Exchange, just announced it's doing an IPO for co-listing on the new Shanghai Star Technology Exchange. This is a new exchange allowing for the first-time tech companies that have no earnings to actually list. With that said, is there any likelihood that a private equity financing and or IPO be undertaken by Yili for Feng Xing in the next 12 months?

35:33 At the moment, we have no comment on whether Feng Xing will conduct a private placement or IPO on some other market. and if there's such event in the future, we'll definitely announce that to everyone promptly.

35:47 Okay, well, thank you very much. It's been very helpful here and Mr. Hu and y'all keep up the good work and it's been a heck of a year and, you know, I mean, we did $60 million in the fourth quarter last year. After doing $6 billion in the first quarter and only $23 million in the second, maybe this year would do us good. Okay, thank you very much and goodbye.

36:08 Thank you. Thank you. The next question is from the line of Jay Levine with Private Investor.

36:19 Yes, hello, and thank you for taking my questions. Can you disclose roughly how much revenue Candy would be receiving from the sale and installation of one single QBX station? And that would be just the station itself with the automation robotics without the batteries, if we could keep that aside. and second part, how many batteries do you think would be needed for a QBX station running at full capacity? Or rather, how many batteries can a single station accommodate?

37:01 As for this question, I'm not entirely sure. So maybe we can delegate this question to Mr. Hu. So Kewa, will you please kindly translate the question for Mr. Hu so he can reply to the gentleman?

37:16 Sure. Thank you for your question. The power station can change 280 cars every day. There are 40 batteries in it, and 20 batteries can be used.

38:10 In terms of sales and revenue, we are now doing a full automatic inspection, which should be the most advanced in the world. But our price, because we have been through more than 20 years of accumulation, so the price is definitely more reasonable. The sales price is about 1 million yuan, but the profit is also very good. But now it's not convenient to say, but you can see it in the annual report.

38:38 Hi, we are planning to have a 1QBEX station to serve 280 vehicles per day. And there will be 40 set of batteries will be working daily. at one station to serve 280 vehicles if running full capacity. And because our battery swap station is most advanced, we believe that it's going to have a very good sale price, around 100 million RMB.

39:29 But however, in terms of how much revenue we're going to receive from that, it's It's not time to disclose yet, but once we saw the selling, we will disclose that price in our filing.

39:45 So you're saying 100 million RMB per station installation, and is that with or without the batteries? Is that just the station, or...?

40:05 The sales price of RMB 1 million includes the installation and installation fee, right? Yes, the installation fee is included in RMB 1 million, but it does not include the installation fee. Hi, I think I missed it. It was 1 million RMD, not 100 million, sorry, 1 million RMD without batteries, including the installation.

40:47 Okay, great. And just to, because I'm not sure I heard you right, the station will serve 180 vehicles or 280 vehicles? 280,280. 280, okay, fine.

40:55 The next question is,

41:03 regarding the Candy Jinping Ryubo Vehicle Operation Alliance. Is Candy still in partnership with Didi for rideshare leasing platforms, or is the alliance now in effect a competitor to Didi in the rideshare industry? And then I had a little second part to that. Can you reveal the – or do you want to just handle that first?

41:34 Okay, let's handle this first. Okay, let's handle this first.

42:01 Of course, if they do it in the 30 counties, they are also competitors. But our advantage is that in the 30 counties, we will have a lot of advantages.

42:13 Didi, Didi, Chuxing, they are targeting the first and second tier cities. And what we do together with BIMCO and Aribor are targeting third and fourth tier cities. So if one day Didi go into targeting the third and fourth tier cities, I believe we're going to be in competition.

42:37 So you're saying Didi is targeting a different market, but if they were to target the same market as Candy, Jin Peng, Ryubo, then there would be some competition. But you're still working with Didi in its other area?

42:55 He said that we're now working with Didi Do you still cooperate with them in other areas?

43:04 In other areas, we signed a contract with them at that time, but if we want to do it in big cities, we still need to cooperate with them. But now if we want to do it in major cities, it may be more beneficial for us if it is in three or four cities. If it is in three or four cities, we will cooperate with Jinpeng and Rui Bo. If it is in big cities, we will cooperate with Dili. But now we are talking about major cities. and Zixia

43:32 Chen. We did have a contract with Didi in the past, but however, since we're targeting the third and fourth tier cities, so we are now working together with Ribor and Jintao. If in the future we're going to also tap into the market where Didi is, we will most likely to partner with them.

43:56 Yes, so the Kandy, Jehn Ming, Ryugo operation will be producing cars into the 300,000 car program?

44:27 So they are not going to manufacture EVs for the program. But going forward, depending on

44:55 How our collaboration goes, we may work together with Jingpeng to produce cars.

45:05 Right, but you're using the Vehicle Operating Alliance as the, obviously not the manufacturer, but the operator for the 300K program.

45:20 So we are now using these two companies, Jingpeng and Rui Bo, as operators to run our 300,000 car project, right? Yes, the operation is mainly based on Rui

45:30 Bo. We provide him with the electronic equipment and the K2, which is now a K2-3 car. Jingpeng mainly uses his 2,000 or more K2-3, K2, K2, K2, K2, K2, K2, K2, K2, K2, K2, K2, K2, K2, K2, K2, K2, The main operator is Rui Bo, and Candy is playing a role providing the QBEX and K23 models in this program.

45:56 And Jingpeng is utilizing their distribution network and to help promoting this program.

46:23 Understood. Can you reveal yet the percentage equity stake for Jinping in the alliance, and is Ryubo also receiving a stake, and is Candy receiving any cash for providing the stake?

46:38 He wants to ask, in this project, how many shares does Jinping and Weibo have, and will Candy's participation also get So the equity for Jing Hong in the whole program is 10%. And Candy also has 10%.

47:25 And the rest will be owned by Weibo, which is 80%.

47:29 Weibo has 80%.

47:32 Okay. Now, the QPX station that was just installed in Haiku City, that is for the operations of the Alliance. and how many K23s do you think would be used in the Hainan trial and how many QBX stations would be required maybe to cover Hainan Island?

47:59 他想问就是我们812号刚刚运往海口的这个换电设备是否就是来服务于我们30万辆车的项目的 再有就是在海口的这个项目里面 will launch a number of K23 vehicles. And in order for the entire network vehicle project in Haikou to be able to run normally, you estimate that it will require a number of electronic devices. That's it. We...

48:38 The project started in Hainan. The first time we invested was 100 taels. Gradually, the whole of Hainan will have 10,000 to 12,000 units in two years. That is to say, you can calculate the exchange rate that needs to be invested, that is, one station can exchange 280 cars. We will spread it to the left according to this situation, and push it to the left.

49:17 Then you almost have four stations,

49:23 right? 280 stations. Four stations, 200, according to this calculation, I don't have a very good calculation. This is that you can exchange 280 cars every day. Hainan is the first city we are starting to operating the

50:03 and the 300,000 right here in the program. And we are thinking to first deliver 100 K23 models for the trial operation. But within two years, we're estimated to deliver 12,000 EVs. And based on each QBX station, we'll serve 280 vehicles. You can do the math eventually how many stations are needed. to run the program in Haikou.

50:34 So 12,000 vehicles in two years, and then you can divide how many QBX stations would be needed for that many vehicles, right?

50:43 Right, right. And it's going to be a gradual process. Of course.

50:51 Regarding the K27, you're producing a new U.S. version now, but previously you had a K27 that specifically for the Chinese market, the consumer market. And are you still selling that K27 to the consumer market in China? And are there any sales figures on that? And can you confirm, I thought you heard that someone asked about the Maple 30X. Are you not able to reveal sales yet for the Maple 30X? and I'll just finish with, is there any plan to modify the Chinese version of the K27 with swappable batteries so it could also be used in rideshare?

51:40 So I'll let you handle those questions.

51:44 He wants to know if our K27 is going to be sold to the Chinese consumer market. And then, will we change this K27 to be able to use QVEX to quickly change power? And then, in the end, it can also be used in the online car market. In addition, he also heard that someone asked about the Feng Ye 30. The information of this car, he said, you can't, is it still not allowed to disclose the sales data of this car?

52:18 That K27, we cooperated with Kinpeng, we only made the American version, not the Chinese version. The Chinese version, Kinpeng made it himself. This is a problem. Then this car is a, because... We only introduced K27 for American markets. And so...

53:05 and others, we are not going to modify K27 for the Chinese consumers. And also because K27 is a very small-sized compact car, so it's not going to be used for the, not suitable for the right-hand market. Regarding to the Maple 30X, since we have very limited involvement with Feng Chen, please just follow and the public figures for their sales numbers. We don't have access to that and we're not going to report on behalf of Feng Chen regarding their sales numbers.

53:49 Okay, thanks. And one last little section.

53:51 I'm sorry I don't monopolize the call.

53:54 But as far as the subsidies, the government seems to keep diminishing the subsidies. And correct me if I'm wrong, I believe you still get the 10% tax waiver for new energy vehicles, but the new range is 16,200 to 22,500 yuan for the subsidy range, and that's for a minimum of 300,000 kilometers. And since we do 300,000-kilometer cars... I assume we're getting the lower end of that range, which is the $16,200 subsidy or $2,300 in U.S. So you can maybe, does that sound right? Do you want to confirm that? Can you say it one more time?

54:47 You can go either arms or U.S. dollars. Don't switch back and forth so I don't get confused.

55:28 for a vehicle range is 300 kilometers. I assume we're getting the low end of the subsidy range, which would be the $16,200 on cars. Does that sound right?

55:41 So you're confirming what that's right, right?

55:44 Correct? Is that your question? That sounds correct.

55:49 Let me ask Mr. Hu. We can get at least $16,000 in subsidies. He said this number is correct. We can get about $18,000 in RMB. But the tax is still free. This is correct.

56:27 The initial confirm is correct. 10% self-tax is waived. And we can approximately receive 18,000 RMB.

56:47 Thank you for your question.

57:18 Thank you for your question. were redesigned to improve the range. So there's 300,000 that hold for a while.

57:51 他想问就是之前对车的要求就能够拿到补贴的话以前是250公里就行然后被提升到300公里他说你就是从你自己的意见或者说你和政府之间的交流你意想这个300公里 will this demand continue for three to five years? Or do you estimate that it will increase to 350 kilometers? Then the manufacturers will think of other ways to strengthen the range of this car. What do you think? This question is better asked.

58:28 I think electric vehicles used to be a state-related department, but it still does not support the replacement of electric vehicles. In April, the Ministry of State has issued a letter of encouragement and support for the separation of cars, which is to change the power. If we change the power, there will be no such high demand for the Xu Shi journey. If we can change the power everywhere, then the Xu Shi journey will not be possible to do it at night. So in the future, those who make cars will not be in charge of the battery. It will be done by Jiemeng's changing power company.

59:13 He's saying that this is a very, very good question. Since right now the battery swapping has been very favored by the government and also markets,

59:40 and many more. Therefore, there won't be concerns over the drive range because in the future, if you can just exchange your battery everywhere, then you don't have to really worry about whether the car can last you either 300 kilometers or more. And let's believe that in the future, battery swapping will be the future of the EV industry.

1:00:08 Yes, but that's good for the driver. I'm just wondering about the subsidy, the subsidy minimum range. So you're saying if it's a battery swap vehicle, if it falls beyond an increase in the range, it will still get a subsidy because it's swappable? It will be a different standard?

1:00:28 Okay, okay, I got it. He wants to know if this will affect the purchase of subsidies. If this car can be replaced in the future, as long as it is more than 300 kilometers, it can be qualified to get subsidies. This year is definitely like this, no problem. I don't know how to adjust the policy next year.

1:00:58 Okay, Ms. Hu is saying that this year we're going to continue with the same policy

1:01:29 However, next year, how policy is going to be modified, we're not sure. We will see. But this year, due to the COVID, we're going to just stick with what we have.

1:01:44 Okay, very good. I know there's a lot of questions, but a lot of very good answers. So I appreciate it. Thank you.

1:01:51 Thank you very much. Thank you. At this time, we've reached the end of our question and answer session, and I'll hand the floor back to management for their closing remarks.

1:02:05 Thank you. Ladies and gentlemen, thank you for attending today's call. On behalf of the board of directors and the management team at Candy Technologies Group,

1:02:53 I would like to reaffirm our commitment. We will continue to work diligently to maximize shareholder value by focusing on growing our EV business and delivering strong operational results. Thank you very much for your support. We look forward to talking with you in the next call. If you have any additional questions, please do not hesitate to contact our Investor Relations Department. Thank you. Goodbye. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.