Greetings. Welcome to the Kandi Technologies Second Quarter 2020 Financial Results Call. At this time, all participant lines will be in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note that this conference is being recorded. At this time, I will turn the conference over to Kewa Luo with Investor Relations. Please go ahead.

Thank you, operator. Hello, everyone. Welcome to Kandi Technologies Group, Inc. second quarter of 2020 earnings conference call. The company released the results earlier today and the press release is available on Kandi's website at www.kandivehicle.com. With us today are Mr. Hu Xiaoming, Kandi's Founder, Chairman and Chief Executive Officer, and Mr. Jehn Lim, Chief Financial Officer. Mr. Hu will deliver prepared remarks, followed by a question-and-answer session. Before we get started, please note that today's discussion will often contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. As a reminder, this conference call is being recorded. In addition, an audio webcasting of this conference will be available on Kandi's Investor Relations website. I will now turn the call over to Kandi's Founder, Chairman and CEO, Mr. Hu Xiaoming.

[Foreign Language] Thank you, Kewa. And hello, everyone. Welcome. Thank you for joining us on the call today. Despite the COVID-19 headwinds and a decreased customer demand, our second quarter business results were factory. We achieved $4.1 million in profit. And gross margins improved slightly to 18.2% versus 17.4% in the same period of 2019. Kandi is making progress and we're positioned to bounce back due to our focused and aggressive effort. In second quarter, our effort was on preparation for the online car hailing business and EV sales in the US made a meaningful progress in these areas. First, our fully automatic intelligent batteries change system was delivered to the rideshare operator in Haikou City on August 2, 2020. Installation has been completed and will be put into trial operation shortly. With strong support from the government, battery swap stations are classified as infrastructure construction in China for the first time. We think that our fully automated smart replacement will be viewed favorably by the market and drive the sales of our electric vehicles. Second, our American wholly-owned subsidiary, SC Autosports, made significant progress on preparing to launch EV sales in United States, while maintaining growth of offroad vehicles. We were excited to announce that our virtual launch will take place on August 18 to kick off presale, which will be a key milestone in the company's history. As a technology innovator, Kandi is committed to provide high-quality products with great performance and affordable price. [Foreign Language] Let's now turn to the questions. In the interest of time, our CFO, Mr. Jehn Lim, will answer your question directly in English. And since Jehn has joined for a very short time, if there was any questions he's not able to answer you, Kewa will translate and I will give you answer. Operator, please proceed.

[Operator Instructions]. Our first question comes from the line of Walter Hill with Carty & Co.

Last quarters conference call and, Mr. Hu said, "as this business is developing quickly, we will consider merging Yongkang Scrou and Jinhua An Kao into a single specialized power train technology company and evaluate the possibility of raising capital in China's capital market to fund growth. The raising capital in China's capital market to fund growth was eye catching. My questions: Since the company borrows money all the time, for Mr. Hu to specifically bring up capital markets to future growth, it would seem he is talking about raising equity for the joint subsidiaries with either a private equity round or IPO for the combined subsidies or both. If so, it would seem a perfect way to unlock hidden value, in that such a combination of two subs could in his hot market be valued up to $1 billion in a first round private equity financing if, in fact, 300,000 Kandi EV program with An Kao's QBX is underway and the Hangzhou Chic hoverboard program is underway with Yongkang Scrou. This new combined high tech company would look like a natural listing on the new Shanghai technology STAR stock exchange, where by the way Li Shufu is in the process of co-listing Geely.

Hi, everyone. First of all, it's my pleasure to meet everyone on the call today. As for the questions, first of all, we have we named the Jinhua An Kao to Zhejiang Kandi Smart Battery Swap Technology Company, Ltd. in the second quarter. Of course, we will continue the Yongkang Scrou under its name. As for the questions, we are actually evaluating the possibility and the option of the abovementioned companies, whether they are listed on the Science and Technology Innovation Board or we'll explore the possibility of any other private equity investments. So, at the moment, we're exploring the options and the possibilities. When there's any plans further, we'll probably announce to everyone.

The next question is from the line of Fred Rasher with Cleantech [ph].

We have had a lot of information out on Kandi America with the upcoming US virtual release of the K23 and K27. While it is clear that Kandi has a 100% interest in the K23 sales, the K27 seems to be very similar to an EV that is made by Kandi partner in the 300,000 EV government accredited ride hailing company, Jinpeng. If this is the same EV or it has been modified by Kandi from the original Jinpeng model, if so, will Kandi be working with Jinpeng on other models? Also, just what is it that Jinpeng is responsible for in the 300,000 EV program? Thank you.

So, as questions – first of all, K23 has a US version and a domestic car hailing version in China. As for the second question, does Jinpeng work in any other models? It is actually. The K27 US versions is a model that is developed by us in the cooperation with Jinpeng. And we believe as the corporations proceed further, there's a possibility of cooperating with Jinpeng to develop other models. This option is not ruled out. And therefore, the second question about the role of Jinpeng, first of all, Jinpeng has more than 2,000 dealers in third and fourth tier China cities across the country in China. So, in our 300,000 electric vehicle plan, Jinpeng will mainly use dealer resources to jointly promote the project. So, basically, we are utilizing the network and resources of Jinpeng.

The next question is from the line of Michael Pfeffer with Oppenheimer.

Regarding financials. From the filings, it appears that Kandi did collect some $32 million as the first payment in Q2 from the Jinhua government for the sale of Kandi's 18 years held Jinhua legacy facility, leaving some $42 million still owed to Kandi from Jinhua. Also, it appears Geely still owes Kandi some $26 million from Kandi's JV equity sale. Do you expect to receive the balance owed from each by year-end?

Actually, there's good progress of the two payments you mentioned. First of all, on July 9, 2020, Kandi received a second payment. It was approximately $70 million from the government under the repurchase agreement as for the relocation of our Jinhua facilities. In addition, as for the payment from Geely, on July 27 this year, we have received all of the remaining equity transfer payment from Geely, which is roughly $26 million. And so far, all of the equity transfer funds has been received from Geely. So, it's all been settled.

Does Fengsheng still owe Kandi for parts provided during the JV? And if so, how much?

It does. The company Kandi continues to provide the parts and components to Fengsheng. We still have the daily operations. As of June 30, 2020, the receivable from Fengsheng related to the supply is about $20 million.

And then, my last question. Thank you for your time. Also, if my math is correct, it appears that the Jinhua facility being sold to the government is carried on Kandi's books at a depreciated price of less than $7 million. So, if correct, when closed, based on a much appreciated $76 million sale price, Kandi would book a huge pretax GAAP profit of over $1 share on this transaction alone. Can you address my guesstimate on this? And also, which quarter do you anticipate this will officially close and be booked?

Your calculation is basically correct. We actually recognize the amount in accordance with the US GAAP. It's mainly based on the degree of the completion of how we execute the contract. Actually, as of June 30, the second quarter of this year, we have recognized $13.9 million in the gain from the disposal of such assets. It's based on the return to the government. It's about 73,000 square meters of the brownfield land. And it's approximately 21% of the land use rights we returned from quota plant. The remaining portion of the gain is expected to be recognized in the first quarter of 2021. That's the time when we expect to complete the whole agreement and the relocation process.

Our next question is from the line of Mark Kahnau with Swiss Liquid Future.

My question has to do with Kandi solely owned sub – An Kao's subsidiary [indiscernible]. I was happy to see in the recent PR of what appears to be the first sale of Kandi's patented proprietary 90-second battery swap system which is unique, in that it can also allow a roadside emergency, in situ mobile swap in five minutes due to the battery location cleared off the weeds. Longtime followers of Kandi, this announcement seemed to trigger to a series of potential huge events kicking off previously announced first four government-accredited Kandi-initiated ride hailing five-year 6 billion plus program for third and fourth tier cities in China. Early this year, Kandi had announced two different billion dollar patents in this program. Xiaoming, Jehn Ming, my multi-part question is, one, since cars must be included in the deal, but not announced, can you tell us how many K23s are involved in this single transaction and approximately K23 sales price? And is this the launch of the five year, 6 billion plus 300,000 EV program or a side deal?

So, it is. Yes. Is it a launch of our five year, 300,000 electrical vehicle plan? So, Kandi will cooperate with Zhejiang Global and Jinpeng to build an online car hailing platform. We strive to invest 300,000 electric vehicles in the next five years. The platform will actually purchase no less than 56,000 K23 electric vehicles from Kandi in the next five years. The price is approximately RMB 90,000 per vehicle excluding subsidies from the government.

And my second question is then, it is understood that Kandi's pretended 90 second QBX unit are modular and therefore somewhat portable. How long does it take to set up and/or move such a unit?

So, our smart battery exchange system achieved one click exchange in 90 seconds. Each system occupies an area about 50 square meters. And you can meet the exchange service of over 280 electric vehicles every day.

And my third question would then be, how many additional cars and stations can we expect this year? And what are the revenues per QBX unit for Kandi?

Since the project started in the second half of the year, the numbers of the cars and the stations will not be significant. It's definitely the direction of our future development to promote. As for the revenue from the QBX unit, please take a long look at upcoming financial reports with the figures we've incurred.

And can An Kao custom design and sell QBX stations for other manufacturers and battery setups?

Yeah. Our smart battery swap system has registered more than 20 patents and a number of copyrights. But then our positions mainly provide such system to the power swap companies instead.

My last question would be, other than selling the EVs and QBX stations, can Kandi participate in any other revenue source of the affiliated with you and Jinpeng?

Yes. Apart from the streams you mentioned, Kandi will own a small share in the company, which operates the car hailing platform. So, then we will have a small share of revenue from that operation as well.

[Operator Instructions]. The next question is from the line of Mark Miller.

From the last conference call, Mr. Hu stated, recently, we have been in discussions with Mr. Ying Jiawei, if I'm pronouncing his name, CEO of Hangzhou Chic Intelligent Technology, a high tech company that is well recognized as a major exporter in intelligence balanced scooter sector. We have agreed to have Kandi to start using its power train system to produce balanced scooters for this company. Hangzhou has accumulated more than 500 technical patents in the balanced scooter sector and is originator of the balanced scooter products. Last year, Kandi announced that one of its subsidiaries, the Yongkang Scrou, if I'm pronouncing that correctly, initiated a relationship with DGL, Walmart's largest high tech China buyer, to provide up to 71 million in hoverboards for their premium Hover-1 brand, which Consumer reports call the second most demanded Christmas gift last year. Some small portion of that deal was booked by Kandi in quarter four, but as addressed on the last conference call, due to the COVID-19, the business was curtailed. However, at that time, Mr. Hu felt that this was still a viable order for later this year as the virus abates. Can we get some update on this DGL deal? And can Mr. Hu also give us a better feel for the Hangzhou Chic deal and what it could mean for Kandi? And then, one more specifically, just what is Kandi providing for Hangzhou Chic? Are they making the whole hoverboards or just the motors and how big can this deal become? Thank you.

As for the agreement with DGL, the order of DGL has resumed production in July. And we expect that the deal can be complete by the end of this year, with about 300,000 units to be complete by the end of the year. For the second question, Hangzhou Chic has begun to use the motors produced by Scrou and the battery packs produced by the Smart Battery Exchange, which is formerly called Jinhua & Co. After the project is sorted out, the end result is expected to exceed over RMB 500 million.

What was booked in quarter four? What number do we have there? Of the 71 million.

Well, I guess, we will – currently, we're working on the plan and I guess the quarter four data will be released during our year-end financials for 2020.

Okay. But I'm assuming – when he says small portion of the deal was booked by Kandi in quarter four, do we have a number here that was actually – that we booked in sales from last year?

A small portion of the sales was booked, but I think we can refer to the financials of last year for better details.

Our next question is from the line of Arthur Porcari with Corporate Strategies.

Sounds like we have our new chief financial officer on board. Welcome aboard. Some of us think you took a long time to have someone that could interact on these conference calls the way you are. Mine's going to be a little bit long now. I'm going to preface by question by saying, I'm a long retired brokerage firm founder and Kandi investor. I've never seen received any compensation whatsoever from Kandi or Geely or other management. I get accused for it all the time on the chat board. So, I want to put this on the record in front of the company. In the last decade, I've visited Kandi in China twice along with publishing over 50 articles on the company. Based on the massive new interest in Kandi, I want to preference my question today with background on an area outside of the US EV sales that alone should justify a much higher price today than it could soon be monetized. To move on here, Kandi has been a partner with Geely Holdings, wholly owned by Li Shufu, a top five wealthiest in China since 2013. Due to his controlling ownership in Geely Auto, Volvo, Proton, Lotus and a half dozen other auto companies. Geely is considered the largest privately owned auto conglomerate in the world. Additionally, it owns 75 plus percent of CAOCAO, a top China ride hailing company, which just surpassed 2 million trips per day. A year ago, Geely Holdings felt it was time for the JV. Then called Kandi Electric Vehicles Group, which had sold some 60,000 EVs since exception to either go big or go home kind of a quote and offered Kandi a sweet deal by buying the 22% interest of its 44% JV share for a 40% premium to book value. This at a time when most Chinese EV companies were going out of business. In fact, that was back at the time when actually NIO went below $2 a share, when Li Shufu bought Kandi's piece out at a 40% premium. Earlier this year, Geely changed the company's name to Fengsheng. It's currently building two EVs under the Maple badge. Now, for clear control, Mr. Li also committed to provide whatever debt capital necessary to Fengsheng to grow. After this transaction, Fengsheng, which is now jointly owned 78% by Geely Holdings, 22% Kandi, saw the JV dissolved and replaced by a corporate structure converting Kandi's 22% JV interest into equity shares. Much in the same way that Kandi ended up owning the Alibaba stock, we won't be booking any of these revenues for the company. I'm going to stop right there if we need to. Does this need to be retranslated for Mr. Hu? Or can we just move on?

Yeah, thanks. Move on. At the time of the transaction closed last year, Geely Holdings total cash cost basis to acquire at 78% equity was up around $330 million, which happened to be more than Li Shufu paid to acquire his initial controlling equity interest in Geely Auto, London Black Cab Company, Proton and Lotus all combined. Again, I'm just trying to show how important Geely thinks this relationship with Kandi is. By dissolving the JV, Geely Holdings then became exclusively responsible for some 400 million in Fengsheng's payable as of the last report we had late last year. Since that time, using Geely Holdings' credit, restructuring Fengsheng, designed and built two EVs for sale with subsidy and sales tax exemption. All under this new Maple badge. On July 11, the smaller, heavily equipped Maple 30X went on sale in China with five different reasonably priced versions due to China's subsidies, which have now been extended to at least 2022, the consumer costs could now run for only $9000 to $11,000. The second – I'm going to have my questions here in a moment. The second EV, a midsized Maple 60V crossover SUV is specifically built for ride hailing. As announced, Li Shufu has just received government approval and has not yet been priced. It's expected to go on sale later in Q3. All told, I believe there's somewhere around 15 cars that Geely has announced in the China media that they plan to have made and sold no later than the year 2024 in Fengsheng. And by the way, I think that also includes a sports car and a pickup truck, what's said in the interview. Okay, now for some questions. Is Geely keeping Kandi updated on Fengsheng's sales? If so, do we know how many EVs were sold in July? If that can't be disclosed right now, does Mr. Hu feel Fengsheng sales will be announced monthly, like most other Chinese EV companies, on the MIIT government website. That's one of the few questions.

First of all, I would like to thank you for your follow in the past years and your long-term support means a lot to us. It's valuable. And apparently, you brought up a lot of informations. What I would like to first say that is, since the beginning of 2019, Geely positioned our joint venture, which is now called Fengsheng, as an enterprise to compete with the new forces and the powers in the manufacturing of the auto industry. Although all the shares has been transferred to Geely, it's actually the Geely Technology Group Co Ltd. instead of the Geely Holdings. We believe that after the equity restructuring of the joint venture company, even though as we built the shareholding percentage owned by us, Kandi, with Geely's ability to operate and the resources in the automotive sector as a controlling shareholder, we believe that we will now be rewarded with even more benefits and income from Fengsheng, the joint venture, than what the 50% of equity from the original joint venture can offer. So, this can ultimately maximize the interest of us as a shareholder. And now, we as a non-controlling shareholder, we try not to be involved too much in the management of the Fengsheng in order to let Geely do what they do best. And regarding your question about the sales, I think that Fengsheng sales should be at similar level as the figures announced by majority of other Chinese EV companies on their website.

Do you expect them to actually be reported though? So, you're saying yes, you do expect that to be shown up there even if Geely does not individually – since they're private, they don't have to announce Geely Holdings is private. They don't have to announce it, but it would probably show up there. And that's what we're going to have to rely on that?

We believe that the service will be somewhat similar as other China EV companies on the MIIT website.

Do we expect the Kandi as its only -- really only other partner here will be also reporting those numbers so far? You have been pretty good about putting out things that are happening at Fengsheng. Would those numbers also be put out once they come to a significant level?

Yes. We actually as a partner of the company will be informed and join the meeting regularly from time to time. So, when there are new updates or any significant data pops up, they will report to us as well.

I know that Mr. Hu's on the board of directors of Fengsheng as well, so I'm sure he is being kept updated. A few more quick questions. Before the COVID virus, Geely was targeting sales of 30,000 Fengsheng units this year. Is this still a Geely target or goal? And is Geely sharing any of the current sales estimate so far they may have for the balance of the year? And if so, maybe what about next year?

Th permit, it is impacted actually by the pandemic. I think the sales target for 2020 will be adjusted for sure. Currently, there's no definitely a sales plan confirmed yet by the company.

Okay. When should we expect the 60V sales to begin? New car.

So, the 60V has been approved by the government and it is expected to be launched in the market by the end of this year or early next year.

Okay. Geely reported a few months ago that Fengsheng will be developing and selling 14 different models to include the pickup and sports car by 2024, with a total of – three cars total this year. Is that still their game plan as well as we know it?

Well, this plan was announced a few months ago during the Maple brand launch content and the presale launch event of that 30X, the first piece out. And what you mentioned should be consistent with Fengsheng's plan, although there should be two models for this year instead of three.

I just saw an article that came out in China a few weeks ago that said there'd be three. But two for this year. Okay, last question. Now, with two new EVs for sale and the third expected – well, expected in Q4 which I – I guess we don't expect anymore, which is currently listed on the Hong Kong Stock Exchange, just announced it's doing an IPO for co-listing on the new Shanghai STAR technology exchange. This is a new exchange, allowing for the first time tech companies that have no earnings to actually list. With that said, is there any likelihood that a private equity financing and/or IPO be undertaken by Geely for Fengsheng in the next 12 months?

At the moment, we have no comment on whether Fengsheng will conduct a private placement or IPO on some other market. And if there's such an event in the future, we'll definitely announce that to everyone promptly.

Okay. Well, thank you very much. Very helpful here. And Mr. Hu and you all keep up the good work. And it's been a heck of a year. We did 60 million in the fourth quarter last year. After doing 6 billion in the first quarter and only 23 million in the second, maybe this year we'd do as good. Okay, thank you very much. Goodbye.

The next question is from the line of Jay Levine, a private investor.

Yes. Hello. And thank you for taking my questions. Can you disclose roughly how much revenue Kandi would be receiving from the sale and installation of one single QBX station? And that would be just the station itself with the automation robotics, without the batteries, if we could keep that aside. And second part, how many batteries do you think would be needed for a QBX station running at full capacity? Or rather, how many batteries can a single station accommodate?

As for this question, I'm not entirely sure. So, maybe we can delegate this question to Mr. Hu. So, Kewa, will you please translate the question for Mr. Hu, so he can reply to the gentleman.

[Foreign Language]

[Foreign Language] We're planning to have one QBX station to serve 280 vehicles per day and there will be 47 batteries will be working on one station to serve 280 vehicles if running full capacity. And because our battery swap stations is most advanced, we believe that it's going to have a very good sale price of around RMB 100 million. However, in terms of how much revenue we're going to receive from that, it's not time to disclose yet. But once we start the selling, we will disclose that price in our filings.

So, you're saying RMB 100 million per station installation? And is that with or without the batteries? Is that just the station or…?

[Foreign Language]

[Foreign Language] I think I mistake – it was RMB 1 million, not RMB 100 million. Sorry, RMB 1 million without batteries, including the installation.

Because I'm not sure I heard you right, the station will serve 180 vehicles or 280 vehicles?

280.

The next question is regarding the Kandi, Jinpeng, Ruibo vehicle operation alliance. Is Kandi still in partnership with DiDi for rideshare leasing platforms or is the alliance now in effect a competitor to DiDi in the rideshare industry? And then, I had a little second part to that. Can you reveal – or do you want to just handle that first?

Okay. Let's handle this first. [Foreign Language]

[Foreign Language] [Foreign Language] DiDi Fengsheng are targeting the first and second tier cities. And what we do together with Jinpeng and Ruibo are targeting third and fourth tier cities. So, if one day DiDi going to targeting the third and fourth tier cities, then I believe we're going to in competition.

So, you're saying DiDi is targeting a different market, but if they were to target the same market as Kandi, Jinpeng, Ruibo, then there would be some competition?

Yes.

But you're still working with DiDi in its other area? Or you're not?

[Foreign Language]

[Foreign Language] We did – have signed a contract with DiDi in the past. However, since now we're targeting the third and fourth tier cities, so we're now working together Ruibo and Jinpeng. In the future, we're going to also tapping into the market where DiDi is, we're most likely to partner with them.

Yes. So, the Kandi, Jinpeng, Ruibo operation will be producing cars into the 300,000 car program?

[Foreign Language].

[Foreign Language] Jinpeng, Ruibo, they're operators. So, they're not going to manufacture EVs for the program. But going forward, depending on how our collaboration goes, we may work together with Jinpeng to produce cars.

Right. But you're using the Vehicle Operating Alliance as the – obviously, not the manufacturer, but the operator for the 300K program?

[Foreign Language]

[Foreign Language] The main operator is Ruibo and Kandi is playing a role providing the QBX an K23 models in this program. And Jinpeng, we're utilizing their distribution network to help promoting this program.

Understood. Can you reveal yet the percentage equity stake for Jinpeng in the Alliance and is Ruibo also receiving a stake? And is Kandi receiving any cash for providing the stake?

[Foreign Language]

[Foreign Language] So, the equity for Jinpeng in the whole program is 10%. And Kandi also has 10%. And the rest will be owned by Ruibo, which is 80%.

Ruibo has 80%? Okay. Now, the QBX station that was just installed in Haikou City, that is for the operations of the alliance and how many K23s do you think would be used in the Hainan trial and how many QBX stations will be required maybe to cover Hainan Island?

[Foreign Language]

[Foreign Language] Hainan is the first city we are starting to operating the 300,000 program – [indiscernible] program and we're thinking to first deliver 100 K23 models for the trial operation. But within two years, we're estimated to deliver 12,000 EVs. And based on each QBX station, we'll serve 280 vehicles. You can do the math, eventually how many stations are needed to run the program in Haikou.

The 12,000 vehicles in two years and then you can divide how many QBX stations would be needed for that many vehicles. Right?

Right. Right. And this is going to be a gradual process.

Of course. Regarding the K27, you're producing a new US version now. But previously you had a K27 specifically for the Chinese markets, the consumer market. Are you still selling that K27 to the consumer market in China? And are there any sales figures on that? And can you confirm – I thought you heard – someone asked about the Maple 30X. Are you not able to reveal sales yet for the Maple 30X? And I'll just finish. Is there any plan to modify the Chinese version of the K27 with swappable batteries, so it can also be used in rideshare? So, I'll let you handle those questions.

[Foreign Language]

We only have to do K27s for American market. And so, we are not going to modify K27 for the Chinese consumers. And also, because K27 is a very small size compact car. So, it's not going to be used for the – not suitable for the ridesharing market. Regarding to the Maple 30X, I think we have very limited involvement with Fengsheng. Please just follow the public figures for the sales numbers. We don't have access to that and we're not going to report on behalf of Fengsheng regarding their sales numbers.

But as far as the subsidies, the government seems to keep diminishing the subsidies. And correct me if I'm wrong, I believe you still get the 10% tax waiver for new energy vehicles, but the new range is RMB 16,200 to RMB 22,500 for the subsidy range, and that's for a minimum of 300,000 kilometers. And since we do 300,000 kilometer cars, I assume we're getting the lower end of that range, which is the RMB 16,200 subsidy or $2,300. So, you can maybe come – does that sound right? You want to confirm that?

Either you can go either RMB or US dollars. Don't switch back and forth. So, I don't get confused.

I'm sorry. I just read recently, the current ranges, you get a 10% sales tax waived. And the range of the new subsidy is RMB 16,200 to RMB 22,500. That's the range. And since it's a range and the minimum that you must pay for a vehicle range is 300 kilometers. I assume we're getting the low end of the subsidy range, which would be the RMB 16,200. Does that sound right?

So, you're confirming whether that's right, right? Correct?

Correct.

Let me ask Mr. Hu. [Foreign Language]

[Foreign Language] Mr. Hu confirmed its' correct. And 10% is the sales tax waived and we can approximately receive RMB 18,000 subsidies per car.

Since the range, the minimum range, vehicle range for receiving the subsidy is 300 kilometers and all the cars seem to be just a hair above 300 kilometers. My concern is, do you foresee or do you know from your contacts with the government if they plan on increasing the range of the minimum? Because they went from 250 to 300. If they go to 350, then the cars are not going to be qualified for the subsidy. So, do you think the 300 kilometers will hold for the next three, five years? Or do you foresee range increases that would mean a reworking of the car's battery enhancement or some other method or redesign to improve the range? So, there's 300,000…

[Foreign Language]

[Foreign Language] He's saying that this is a very good question. Since right now the battery swapping has been very favored by the government and also the market, therefore, there won't be concerns over the drive range. Because in the future, if you can just exchange your battery everywhere, then you don't have to really worry about whether the car can last you either 300 kilometers or more. And Mr. Hu believes that, in the future, battery swapping will be the future of the EV industry.

Yes. But that's good for the driver. I'm just wondering about the subsidy, the subsidy minimum range. So, you're saying, if it's a battery swap vehicle, if it falls beyond an increase in the range, it will still get a subsidy because it's swappable. There'll be a different standard for a swappable car.

Okay, okay. I got it. [Foreign Language]

[Foreign Language] Mr. Hu is saying that this year we're going to continue with the same policy. However, next year, how policy is going to be modified? We're not sure. We'll see. But this year, due to the COVID, we're going to just stick with what we have.

Thank you. At this time, we've reached the end of our question-and-answer session and I'll hand the floor back to management for their closing remarks.

[Foreign Language] Ladies and Gentlemen, thank you for attending today's call. On behalf of the Board of Directors and the management team at Kandi Technologies Group, I would like to reaffirm our commitment that we'll continue to work diligently to maximize shareholder value by focusing on growing our EV business and delivering strong operational results. Thank you very much for your support. We look forward to talking with you in the next call. If you have any additional questions, please do not hesitate to contact our Investor Relations department. Thank you. Goodbye.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.