Arcimoto (FUV) and Kandi Technologies (KNDI) are focused on the low-end EV segment. While Arcimoto sells two-seater three-wheeled EV’s which are suited to urban motoring, Kandi is focused on low-end electric hatchbacks and small sedans. Kandi also a car-sharing vertical.
But which stock, FUV or KNDI, is a better buy for 2021?
Arcimoto was founded by CEO Mark Frohnmayer in 2007 with the vision of disrupting urban-mobility. The Oregon based company builds two-seater three-wheeled vehicles that it believes is the future of the millennial auto market. The company went public in September 2017 via an IPO that raised $19 million. This year’s pandemic forced the company to raise an additional $16.5 million from institutional investors. As of this quarter, the company has a backlog of over 4000 pre-orders. Arcimoto has a market cap of $196 million.
Kandi was founded back in 2013 in China with the aim of being one of the largest EV players in the country. The company was formed as a joint venture between Kandi and the Geely Group, which is one of China’s biggest automotive companies. Under the partnership, Geely is responsible for the design and engineering of the vehicles while Kandi takes care of the manufacturing and deliveries.
Arcimoto’s flagship vehicle is the FUV, which a two-seater three-wheeled vehicle. The company believes that the future of urban mobility is in cheap, individual-use, convenient vehicles and have designed their product around that belief. Arcimoto is now focused on scaling production to 50000 vehicles per year by the end of 2022. Their FUV has a top speed of 75mph and a range of 102 miles, which covers daily mileage for most urban motorists.
Over the past few quarters, the company was focused on perfecting their product and making it mass-production ready. The company has been producing only 2 models a day until recently and has delivered about 200 FUV’s so far. The FUV starts at about $18000. The company also sees a huge market for commercial three-wheeled vehicles, as they are more economically productive than two-wheelers due to more storage capacity and power, whilst being cheaper than cars. They have developed two commercial vehicles, the Rapid Responder for police and healthcare uses, and the Deliverator, for last-mile delivery.
Their production costs for commercial vehicles are lower than consumer ones due to more basic features and their product-fit is better in the commercial market as their product is more economical than conventional alternatives. The company aims to put the commercial versions in production by the end of 2020. The company has partnered with DHL for directly shipping the vehicle to customers across the US. This will help the company save on sales and retail network and use resources to scale production.
Kandi is a unique proposition among the new crop of Chinese EV manufacturers. Unlike NIO and Xpeng that are in the luxury and comfort segments, Kandi has directly entered into the lower spectrum of the sector. Their cars are by far cheaper than the likes of NIO, Xpeng, and Tesla. Under its partnership with Geely, the company is completely vertically integrated.
The company recently launched its K27 compact hatch, which it claims will cost just $10000 in the US after tax-credits. The company markets itself as the most affordable EV manufacturer in the world. The company also operates the largest car-share program in the world with rates of under $5 dollars an hour. The company recently received US EPA approval for its K27 and K23 models. The company is also finalizing its deal with the Chinese government pure-EV rideshare program that will comprise 300000 vehicles. Kandi has begun its trial and will gradually deliver 1000 EV’s to the city of Haikou and 2500 EV’s to the city Shaoxing.
Arcimoto currently has a $75 million pre-order backlog. Arcimoto expects sales to pick up as the work-from-home trend subsides, as their product is cheap and ultra-convenient and people would generally be averse to public transport. The company expects to breakeven after hitting production levels of between 3000 and 5000 units. The company believes that commercial-use vehicles are crucial to hitting these production levels as they are cheaper to make, have a higher profit margin, and are high-volume products.
Kandi reported revenues of $18.7 million in Q3 and a net loss of $1.5 million. Gross-margins for Q3 were 20.9%. As of last week, Kandi has working capital of $79 million and cash reserves of $24 million. Kandi has a market cap of $496 million. The company has just started posting profit when the pandemic struck. The company has a P/E of 59, which is a bargain compared to the EV average.
While both Arcimoto and Kandi have garnered significant consumer interest, Kandi is definitely the one with higher upside because their products have far more mass-appeal and also being domiciled in China, KNDI has access to the biggest EV market in the world which is expected to hit 3 million new EVs a year by 2025. Also, being the largest developing economy in the world, China will have a huge demand for low-end EVs.