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Tesla Motors is struggling in China, but that doesn't mean that homegrown players in the world's most populous nation are having the same problems. In fact, what's bad for Tesla may ultimately be good for Kandi Technologies Group .
Tesla stunned investors at the Automotive News World Congress on Tuesday night, warning that sales in China had fallen sharply sequentially. Wasn't China supposed to be Tesla's promising catalyst for accelerating growth? Making matters worse for Tesla, the maker of high-end all-electric sedans isn't looking to turn a profit until at least 2020.
Why are sales tanking in China? CEO Elon Musk blames the shortfall on what he sees as misperceptions when it comes to charging requirements for electric vehicles. That may be true, but that's a weak scapegoat. If the public sees it that way, the misperception is the new perception. A common misperception can explain why sales for a particular product never took off, but it doesn't justify a sudden and sharp decrease in Chinese demand for Tesla's expensive sedans.
Kandi crush saga
It's against this backdrop that shares of Kandi followed Tesla lower at the open on Wednesday, but naturally not to the same extent. There are, however, many differences between Tesla and Kandi. Tesla makes pricey cars; Kandi toils away on the cheap end. Tesla's putting profitability on the back burner for the next few years, while Kandi's consistently profitable with its much smaller enterprise now. Kandi is also a Chinese company, and that's important -- the government recently expanded subsidies available to buyers of clean-energy cars made by Chinese businesses.
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Both companies are growing fast. Revenue at Tesla and Kandi soared 60% and 167%, respectively, through the first nine months of last year.
However, perhaps the biggest difference between Tesla and Kandi is that the models couldn't be more different. Tesla's focusing on traditional car sales. Kandi's vehicles can be purchased directly, but for now the real driver here is a fast-growing car-sharing program that it runs across a couple of different cities in partnership with Geely Automotive.
Folks paying a little more than $3 an hour to rent small electric vehicles that are dispensed out of multilevel garages may not seem like a scintillating model, but it makes sense in China, where actual auto ownership levels are low. Kandi's program offers bicyclists and mass-transit users a way to shop for groceries or go out on a date without the limitations of the other means of transportation. Kandi's garages do the charging, so the misperceptions that Tesla is alluding to -- or perhaps the larger fears of ponying up a lot of money to buy an electric car in the first place without easy access to a charging station -- don't really apply here.
It's also no longer just about hourly rentals for Kandi. It introduced a "Mini Police Car" program on Wednesday. The initial project in that niche involves delivering 60 vehicles to the Hangzhou Uptown Public Security Bureau. The fleet will be used to assist in safety patrols, fire safety inspections, and other policing matters.
Don't let Tesla's grim view of China in the near term lead you to write off the country's hunger for electric cars. There are different models trying to give it a go, and they aren't all struggling.
The article Kandi Can Kick Tesla's Chinese Curse originally appeared on Fool.com.
Rick Munarriz owns shares of Kandi Technologies. The Motley Fool recommends Kandi Technologies and Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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