Did you get that from boygofast?
I just bought a kit on ebay from boygofast that looks just like yours and am having similar problems.
One major problem is the sprockets bind on the chain. It has nothing to do with the chain being loose. The sprockets are poorly made and are not designed for this application. I fixed this by grinding down the teeth, I found that trick on a website.
The other problem is the auto clutch is nearly useless. Mine didn't work at all at first, but then it started clutching a little after riding it a while. It's on or off though. It engages fully when you give it gas and does not disengage at all until you come to a stop. It's almost like riding without a clutch at all.
Since the clutch does not provide any slip, I am not able to ride up a hill unless I already am up to speed. I am also not able to coast because it doesn't disengage till you stop.
I also am very disappointed with this kit. It was cheap, but it is so cheaply made that it is not worth having. I am looking into getting a different gearbox to solve my clutch problems.
Also the kit came with cotter cranks! Who the heck has a bike with cotter cranks?! I haven't seen one in 20 years. Also the bolts were so cheap I had to supply my own to properly mount the plate.
I paid $220 plus $65 shipping which sounds like a great deal for a 4 cylinder kit, but it isn't. I would way rather spend a few hundred more bucks and get a quality kit that actually works.