Company You've Never Heard Of is Outselling Tesla

For the last five years, China has shown strong demand for small battery-powered vehicles such as electric bicycles. Market research firm Navigant Research recently showed that nine out of every ten e-bikes is sold in China.

But e-bikes are for single riders making short trips, and China has officially been recognized as the largest automobile market in the world since 2013, as cities have grown and commutes lengthen.

It’s the perfect place for electric cars.

Even if electric vehicle penetration is low by market share, China will permanently be in the global top five in EV sales simply because the market is so big.

As you would expect, investors have been bullish on the Chinese electric car industry for a long time because of this.

With recent developments in China, there is even more cause to get excited, and new companies to get excited about.

Subsidy Rules Changing

The Wall Street Journal recently reported that China is changing its rules for green sales subsidies. This year, local regulations will ease up, and it will be easier for companies to sell cars outside their local province.

In the government’s efforts to reduce pollution and stimulate demand for “green” products, it hopes to put five million electric and hybrid cars on the road by 2020. The relaxed guidelines will allow national and provincial subsidies to work together and knock down the consumer cost of electric vehicles by more than 30 percent.

Chinese automobile company BYD told the WSJ that these revised rules will help it increase its electric vehicle sales tenfold.

In May, the founder of China’s leading auto parts company said he was willing to go bankrupt to bring the Fisker luxury electric car brand back from the dead. The considerable reduction in consumer cost will certainly help Fisker along, too.

Surprise Leader

Tesla (NASDAQ: TSLA) is leading the electric vehicle revolution in the United States, but in China, the leader will produce much smaller, much cheaper cars.

At the beginning of 2014, Tesla announced it expected 30-35% of its global sales to come from China this year. However, in May it only imported 532 cars into China.

A company called Kandi Technologies Group (NASDAQ: KNDI), meanwhile, became the number one electric car producer in China, producing nearly three times as many electric cars as Tesla last quarter, according to a recent report.

The Chinese-language report said Kandi’s small electric vehicle production hit 1,565 cars in May, with 4,300 so far this year.

Kandi’s quarterly report claimed it enjoyed a 384.5% increase in electric car sales, and that sales revenue came to a grand total of $8.4 million. It did not specify sales volumes.

The company offers four electric cars, which all fall into the microcar category. The KD-5010 annd KD-5011, for example, feature 42 Volt AC induction motors with a top speed of 44 mph and can carry a driver and one passenger.

Kandi doesn’t just make small cars. It’s actually a pretty small company itself. Its first quarter 2014 report in mid-May showed its revenue was $40.2 million. This was an increase of 174% over the previous year’s $14.7 million. The company finished out the quarter with cash and equivalents worth $20.5 million and a net loss of $14.1 million.

However, it’s part of the NASDAQ Global Select Market composite index, so it has to meet NASDAQ’s standards for earnings, capitalization with cash flow and with revenue, and assets with equity.

“We are very confident that our electric vehicle business will continue its high growth. Through our cooperation with Geely and existing advanced production capacity, we expect that we will soon become China’s leading fully-integrated electric vehicle supplier,” Kandi Technology Group’s Chairman and Chief Executive Officer, Hu Xiaoming said.

The problem could be that the Tesla Model S retails for approximately $121,300 (734,000 RMB) and the Kandi KD-5011 (also known as “Coco”) retailed for just $4.600 (29,000 RMB) after green subsidies. The sticker price of the car is just $14,400 (89,800 RMB). In 2010, the average available income in urban Chinese households was $4,149 dollars.

Certainly, when the Fisker brand attempts to make its comeback in China, even its luxury vehicles are likely to be a fraction of the cost of a Tesla.

Company You’ve Never Heard Of is Outselling Tesla originally appeared in Green Chip Stocks. Green Chip Review is a free 2x-per-week newsletter, is the first advisory to focus exclusively on investments in alternative and renewable energies.