Geely Ties Up with Kandi to Produce Low-Speed EVs
It seems Chinese companies are making some smart moves where electric vehicles are concerned. Shanghai Maple Guorun, a passenger car subsidiary of Geely Group, announced yesterday that it would form a 50/50 joint venture with Kandi Technologies Inc., a producer of low-speed electric vehicles based in the east China province of Zhejiang.
When I initially read the news, I thought, “Great, Geely’s cheap cars combine with Kandi’s cheap and who knows how good EV technology. Not a winner.” Then I read some of the stories in the Chinese press about the JV and I started changing my mind. It might make sense for both companies, though I wouldn’t personally want to drive around in the tiny cheap low-speed EVs the JV will turn out.
On Kandi’s part, the NASDAQ-listed company seems a bit shaky, regardless of its many big announcements regarding government contracts for small, low-speed BEVs. According to website Seeking Alpha, which was a relentless promoter of Kandi’s stock until it wasn’t, Kandi did not deliver thousands of electric vehicles to the city of Hangzhou that Kandi had said it would. Seeking Alpha also said Kandi misrepresented a letter of intent for another business deal as an actual contract.
This latest announcement of the venture with the Geely subsidiary is real—since Geely says the same thing. But we should take a wait-and-see approach to see how well Kandi’s technology holds up when it actually has to produce vehicles in decent quantities. Indeed, I’m not sure what technology Kandi actually brings to the deal as Geely already has EV technology. I suppose Kandi’s low-speed EV technology is much less sophisticated (see: cheaper) than Geely’s.
Geely, for its part, made a statement admitting that the consumer market in China for electric passenger vehicles has not materialized, and was not likely to be viable for a long time. Geely launched both a plug-in hybrid and a battery electric passenger car, but sales have been between negligible and non-existent. However, said a Geely spokesperson, the company stated that it “took a fancy to Kandi’s smaller-sized low-cost and low-speed electric vehicles.” Geely believes electric vehicles will be a “major solution” for current energy and traffic congestion problems.
Geely was once known for producing cheap and cheerful ICE cars. Its chairman, Li Shufu, bragged about his vehicle’s low-cost and didn’t seem to worry much about quality. But Li is no dummy, and his company is now able to turn out decent-quality cars.
Nonetheless, I'm not yet fully convinced about Geely’s investment in Kandi. China has dozens of low-speed electric vehicle producers, of which about 90 percent are based in the north China province of Shandong. Okay, maybe 90 percent is a high number, but Shandong is LSEV central. And Kandi’s EV technology has never been tested for mass production. But, Geely’s investment is only about $80 million. I guess Li Shufu figures that the Kandi is a low-stakes wager—so he’s taking a chance.
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