SEC fines Chinese EV maker $710,000 over misleading statements about US entry
The Dallas Morning News September 26, 2023
(Tribune News Service) — The Securities and Exchange Commission has fined a Chinese company with its U.S. headquarters in Dallas more than $700,000 for a series of what it called misleading statements about a planned launch of passenger electric vehicles.
The settlement order imposing the $710,000 fine said Kandi Technologies Group Inc., which makes go-karts, all-terrain vehicles and electric cars in China, made statements in news releases and regulatory filings that “created the false impression” it had satisfied safety requirements for selling highway-legal EVs in the U.S. and that those sales were imminent.
Treazure Johnson, a lawyer who represented Kandi America in the SEC investigation, said the company cooperated with the regulatory agency. Its settlement was neither an admission to or denial of the SEC findings, she said.
Johnson said the company received U.S. Environmental Protection Agency approval to sell highway EVs but encountered difficulty meeting airbag requirements.
“They’re glad it has been resolved,” she said.
Kandi America arrived in North Texas in 2020, opening its first U.S. sales facility in Garland. The company, known as a battery maker in China before expanding into auto manufacturing, laid the groundwork for its U.S. entry in 2018 when it bought Texas-based ATV distributor SC Autosports.
It said at the time that it bought the company to bring its “pure electric vehicles to the United States.”
In 2021, Kandi America moved from Garland and set up its U.S. headquarters in a former Academy sporting goods store on Forest Lane along U.S. Highway 75.
The SEC’s order described a series of statements by the company about whether its vehicles were approved for U.S. roads. In February 2019, according to the order, the company indicated its vehicles met National Highway Traffic Safety Administration standards. Nine months later, Kandi said in a news release and regulatory filing that it had a contract to supply its U.S. subsidiary with 2,000 EVs at a value of $32 million, with the first 200 delivered by the end of 2019.
No such vehicles were shipped, according to the SEC.
In July 2020, Kandi issued a news release announcing the “formal launch of the most affordable pure electric automobiles in the U.S. market” and stated that its K23 and K27 EV models were highway-legal and available for delivery by the end of that year, the SEC said. No such vehicles were delivered to or sold in the U.S.
“Often, Kandi’s unrealistic timelines were coupled with materially misleading statements about whether its EVs had all necessary regulatory approvals,” the SEC said.
After two years, the company pivoted from trying to sell its EVs in the U.S. as passenger cars and instead marketed them as low-speed neighborhood vehicles, according to the order.
It reported almost $118 million in sales last year, with over half occurring in the U.S. and other countries. Its China sales were just under $52 million.
In the company’s most recent quarterly results, Kandi said sales of off-road vehicles and parts accounted for $31 million of its $36 million in sales for the three months that ended June 30. Lithium ion cells and EV parts were its next biggest revenue producers, both just over $2 million. Electric scooter sales represented $224,212 in revenue.
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