NEW YORK ( TheStreet) -- A Chinese electric vehicle maker is stealing some of Elon Musk's mojo.
Tesla (TSLA) shares fell nearly 3% in advance of its first quarter earnings report, scheduled for after the market close tomorrow. Meanwhile, China-based electric vehicle manufacturer Kandi Technologies (KNDI) rose as much as 6% higher amidst a spate of bullish articles on the potential of the Chinese electric car market and Kandi specifically.
Recent news from Kandi is fueling bullish sentiment. Last week, Kandi inked a deal with a lithium-ion battery manufacturer for 25,000 battery cases to help bring more electric vehicles to market. Kandi currently rents out its electric cars for short-term durations. But, with the battery deal, investors see a future where Kandi supplies the middle class with electric vehicles for sale.
Tesla CEO Elon Musk, of course, intends to do just that with Tesla's fourth generation mass-market car. However, right now Tesla only has offerings for wealthier consumers. Tesla's upcoming SUV will still be targeted to the upper middle class. Kandi is already focused on the middle class consumer with its smaller, budget friendly cars and all-terrain vehicles.
? Serge Z. (@Kepin_69) May. 6 at 11:53 AM
@Kepin_69 Exactly, KNDI EV's are meant for the 80 plus percent of the population that can't afford a TSLA or any car for that matter.? Dee Ehl (@Deluxeones) May. 6 at 11:56 AM
Moreover, Kandi has access to the Chinese market that Tesla, as an outsider, is unlikely to enjoy. China sales are important. Though most investors on StockTwits.com expect Tesla to beat analyst calls for $0.10 EPS on $699.10 million in revenues tomorrow, what many are really watching to justify a Tesla buy Wednesday is whether the company is successfully tapping the Chinese market.
$TSLA Q1 results not important (5% beat in Revs?).. but the Q2 guidance (china), giga plans, production ramp, GM% increase all important? Honest Jonno (@HonestJonno) May. 6 at 12:05 PM
Moreover, Kandi, as a domestic Chinese player, could enjoy generous subsidies from the Chinese government as well as better access to China's massive consumer base. Some investors now believe Kandi is a more attractive company than Tesla.
China aside, the biggest reason why electric car investors are opting for Kandi instead of Tesla is Kandi is relatively cheap. Kandi has a $518 million market cap and had $94.5 million in sales in 2013. In other words, it trades at 5X trailing-twelve-month sales. Tesla has a near $26 billion market cap and a price to trailing twelve-month sales ratio of roughly 13, according to stats on Yahoo Finance.
Of course, Tesla has some key benefits over Kandi. For one, Kandi isn't even selling cars yet. Tesla sells them like hot cakes. The current problem for Tesla is not convincing people to buy a Model S, but keeping up with demand. There is a three-month wait to get one of Tesla's $70,000 plus cars. Sentiment on Tesla is 80% bullish ahead of earnings, according to StockTwits' analytics.
Still, many investors who feel priced out of Tesla's stock and giving Kandi a whirl. And, today at least, most liked the ride.
At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.