Under the shadow of the 'dual anti-dumping' investigation, Taotao Vehicle has been having a tough time recently.

On June 24, Taotao Vehicle hit a "20CM" limit down during trading. As of the closing bell, the price was quoted at 57.93 yuan per share, with a decline of 17.50%, and a trading volume of 4.4995 million shares.

After the trading session on June 24, Taotao Vehicle replied on an interactive platform that the products involved in this 'dual anti-dumping' investigation application are expected to only involve the company's electric golf cart products, and the investigation is still in the preliminary stage of damage determination by the US International Trade Commission, which has not had an impact on the company's production and operations.

On the same day, Taotao Vehicle released a performance forecast, expecting net profit attributable to shareholders for the first half of 2024 to be between 165 million yuan and 185 million yuan, representing a year-on-year increase of 22.72% to 37.59%; non-GAAP net profit is expected to be between 162 million yuan and 181 million yuan, representing a year-on-year increase of 25.68% to 40.48%.

On June 25, Taotao Vehicle's decline narrowed somewhat, with the latest price around 57 yuan per share.

Pioneer in Overseas Expansion

Public information shows that Cao Matao, the founder of Taotao Vehicle, is a "second-generation factory owner" whose parents operated a factory producing furnaces, costumes, and other products. In 2015, he established Taotao Vehicle on his own and continued to focus on the field of smart electric low-speed vehicles and special vehicles, pioneering a unique overseas expansion model.

Since entering the North American market, the company has always regarded building its own brand and building independent channels as strategic priorities. At the same time, it actively explores new sales models, breaks through the traditional export agent model, establishes overseas subsidiaries for "warehouse-type" sales, and adopts a combination of "offline and online" to vigorously expand sales channels.

After years of development, Taotao Vehicle's product line has covered new energy products such as electric scooters, electric bicycles, and electric golf carts. Special vehicles include all-terrain vehicles and off-road vehicles. The channel system is becoming increasingly perfect, and the upstream and downstream advantages are further highlighted.

In the upstream manufacturing segment, Taotao Vehicle is located in the Yongwujin hardware industrial cluster area, able to procure raw materials nearby; moreover, the company has a high self-production rate of core components and possesses independent research and development and production capabilities for core components, which can fully compress upstream manufacturing costs and provide a guarantee for the company's profitability.

In terms of downstream channels, Taotao Vehicle's high-end brand DENAGO focuses mainly on online independent stations and offline high-end distributor channels, currently having 120 distributors in the North American market; the GOTRAX brand cooperates with Amazon, with multiple electric products ranking among the top, while also having independent station platforms and offline cooperation with Amazon, Best Buy, Target, and other supermarkets.

In 2023, the company achieved revenue of 2.14 billion yuan, representing a year-on-year increase of 21.4%. From the perspective of categories, electric scooters achieved sales revenue of 718.0915 million yuan, representing a year-on-year increase of 4.52%; electric bicycles achieved sales revenue of 164.8334 million yuan, representing a year-on-year increase of 111.11%; all-terrain vehicles achieved sales revenue of 620.4275 million yuan, representing a year-on-year increase of 21.21%.

It is worth noting that in 2023, the OEM and independent brand products of electric golf carts began to enter the market, achieving sales revenue of 78.5 million yuan, accounting for 3.66% of operating income.

Since 2024, Taotao Auto's electric golf carts have been selling smoothly in the United States. In the first quarter, the growth rate of this business reached as high as 967%, contributing to the main revenue increment.

It is reported that golf carts in the North American market can be certified and put on the road. As low-speed commuting vehicles, they can partially replace the demand for cars and meet the basic needs of consumers for short distance commuting and outdoor travel. They are currently the main competitive area for domestic manufacturers. The company's lithium-ion electric scooters priced at $7999 and $9999 have a significant cost performance advantage compared to second-hand scooters priced at $20000 from local brands, driving the rapid growth of the company's new business.

As of now, Taotao Automobile Industry has expanded to more than 120 high-end distributors of electric golf carts, and its products have settled in more than 800 professional TSC stores. Compared to the beginning of the year, the company has seen a good growth in the number of sales channels for electric golf carts.

According to data from Tonghuashun, as of June 25th, a total of 8 institutions have made predictions for the 2024 performance of Taotao Auto Industry, with an average predicted net profit of 374.89 million yuan and an average predicted earnings per share of 3.4300 yuan (the highest is 3.6900 yuan, the lowest is 3.2000 yuan). According to this forecast, the net profit for 2024 will increase by 33.66% compared to the previous year.

The coexistence of challenges and opportunities in the "dual anti" campaign

On June 20, 2024, the American Personal Transportation Manufacturers Alliance, consisting of American companies Club Car and Textron Specialized Vehicles, Inc., filed an application to the US Department of Commerce and the US International Trade Commission in the United States time to initiate anti-dumping and countervailing investigations ("anti-dumping" investigations) against imports of specific low-speed passenger vehicles ("CLSPTVs") from China.

The CLSPTV involved in this "double anti" investigation application is expected to include electric vehicle products from Xiamen Dale, Green Pass Technology, and Taotao Auto Industry. According to the application, the anti-dumping investigation period is expected to be from October 1, 2023 to March 31, 2024, and the anti-dumping investigation period is expected to be for the entire year of 2023.

Affected by this news, the stock price of Taotao Automobile Industry has plummeted for consecutive days.

Taotao Automobile Industry stated that the company will actively initiate the "double anti" investigation and response work, establish a "double anti" investigation working group, and fully respond to the "double anti" investigation. At the same time, based on the existing overseas production layout, the company will further plan and accelerate the construction speed of the Vietnam factory and the US electric golf cart manufacturing base, as well as actively expand other markets, to digest or reduce the adverse effects of international trade friction, and help further strengthen the product competitiveness of the company's electric golf cart.

"When the industry is going smoothly, it may not be clear what problems the company has. However, once the industry encounters a headwind, the company's problems become apparent."

Some opinions question that Taotao Automobile Industry has seized the dividends of rapid industry development and achieved rapid performance growth, but the hidden danger is that it relies too much on cost advantages. This path dependence may lead companies to be more inclined towards OEM production, ultimately trapping them in the low-end market for a long time. In addition to limited development space, in the context of the China US trade friction, contract manufacturing enterprises that rely on cost advantages are too easy to be manipulated.

Compared to other listed companies in the same industry, Taotao Automobile Industry is in a disadvantaged position in terms of research and development investment and technological innovation capabilities. The 2023 annual report shows that the vast majority of the company's students are vocational students, and the R&D expense rate is relatively low.

There are also views that Taotao Automobile Industry has a relatively low shipment volume during the "double anti" review stage, so the mandatory traceability risk for past shipped products is relatively low, and there is no need to worry excessively. In the future, the company is expected to achieve localized manufacturing in the United States, and a series of issues such as tariffs and shipping costs will be avoided. It may also truly enter the core ball cart market, which is a significant development opportunity for the company.