Why Kandi Technologies Group Fell 22.4% in March

What happened

Shares of Kandi Technologies Group (NASDAQ: KNDI) sank 22.4% in March, according to data from S&P Global Market Intelligence. The electric vehicle (EV) manufacturer's stock sold off following official news that China would be reducing its subsidies for EVs.

China was already expected to announce the subsidy reduction, but the move arrived with the prospect of additional cuts, and Kandi Technologies saw steep sell-offs in the month as investors weighed the possibility that the country's government will take a less-helpful, more hands-off approach to the EV market.

So what

Kandi reported full-year earnings results on March 15, but it's not clear that the release had a big impact on stock performance. Revenue for the year climbed 9.4% to reach $112.4 million, and the company's net loss narrowed to $8.8 million -- improving from the $23.2 million adjusted loss it posted in 2017.

While the subsidy cut specter had a significant impact, Kandi Technologies stock may have also been due for a bit of a correction. The company's shares gained roughly 30% in February after the National Highway Traffic Safety Administration (NHTSA) gave the all clear for two of the company's vehicles to be imported for use in the U.S. market.

Now what

In addition to news of the subsidy cuts, weak auto sales in China may also have factored into Kandi's sell-offs last month. February's auto sales tracking arrived in March, bearing news that unit sales had fallen 14% year over year. The negative sales trends continued in March, with unit sales falling roughly 12% from the month's sales in 2018.

Chinese auto sales have now fallen for 10 months straight, and some forecasts expect that weakness will continue through 2019. However, other forecasts suggest that the long-term outlook for the electric vehicle market in the country continues to be promising. That doesn't mean that Kandi Technologies will necessarily maintain a lasting position in the space, as the roughly $400 million market-cap company has plenty of larger, more resource-rich competition. The company is valued at roughly 2.6 times trailing sales.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.