Shares of Kandi Technologies Plunge 14% on China Woes

By Daniel

What: Kandi Technologies Group researches, develops, and manufactures electric-vehicle products and parts in China and has established itself as one of its leading manufacturers of pure electric-vehicle products. On Thursday afternoon, however, its shares are down more than 14%.

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So what: There is no direct news pressuring shares of Kandi today. Rather, the company is feeling the pressure as a Chinese electric-vehicle auto parts producer at a time when the globe is growing increasingly concerned about China's economy. This has created a vicious cycle for Kandi, among many other stocks, as oil prices continue to plunge, makinge near-term outlook for electric-vehicle demand that much more murky.

Even beyond China's overall economic worries, the country's automotive industry had drastically slowed throughout 2015 until the government stepped in and cut the purchase tax on vehicles with a 1.6-liter engine or less from 10% down to 5%. That incentive will last through 2016 and likely boost vehicle sales temporarily, but the near-term concerns for the Chinese automotive market remains -- and shares of Kandi will continue to feel pressure in the near term.

Now what: For investors this promises to be a very volatile stock, especially as China's economic woes continue and oil prices remain low. However, if investors can avoid watching Kandi's drastic share price fluctuations, the long-term outlook is very bright. China's pollution problems are here to stay, and that means there will still be plenty of demand for electric vehicles, products, and parts. Kandi is well positioned for that future, even if the near-term cloudiness continues to block that view.

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Daniel Miller has no position in any stocks mentioned. The Motley Fool recommends Kandi Technologies. 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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