China Automotive Systems Reports Third Quarter 2007 Results

Net Sales up 39% YoY, Operating income grew 95% YoY, Net income increased 68% YoY

WUHAN, Hubei, China, Nov. 9 /Xinhua- PRNewswire- FirstCall/ -- China Automotive Systems, Inc. (NASDAQ:CAAS) , a leading power steering components and systems supplier in China, today announced 2007 third quarter financial results.

Third Quarter 2007 Highlights:

-- Total net sales for the period increased to US$31.2 million, reflecting 39% year-over-year growth;
-- Net sales from steering components for passenger vehicles increased to US$20.2 million, reflecting 49% year-over-year growth;
-- Net sales from steering components for commercial vehicles increased to US$8.11 million, reflecting a 26% increase year-over-year;
-- Operating income increased to US$6.6 million, reflecting 95% year-over-year growth;
-- Net income rose to US$2.6 million, reflecting 68% year-over-year growth; and
-- Diluted earnings per share were US$0.11, an increase of 57% year-over- year

Total net sales for the third quarter of 2007 were US$31.2 million compared with US$22.4 million reported in the same period of 2006, and US$36.3 million for the second quarter of 2007, reflecting a 39% year-over-year growth and a 14% quarter-over-quarter decline, respectively. Net income for the third quarter of 2007 was US$2.6 million, compared with US$1.5 million for the same period last year, and US$2.5 million for the second quarter of 2007, reflecting 68% year-over-year growth and a 5% quarter-over- quarter increase, respectively. Fully diluted earning per share were US$0.11 for the third quarter of 2007, compared with US$0.07 the same period last year and US$0.10 per diluted share for the second quarter of 2007.

Net sales of steering products for passenger and light-duty vehicles for the third quarter of 2007 increased to US$20.2 million compared with US$13.6 million reported in the same period of 2006 and $ 22.8 million for the second quarter of 2007, reflecting 49% year-over-year growth and a 11% quarter-over- quarter decline respectively. Net sales from steering products for commercial vehicles for the third quarter of 2007 increased to US$8.1 million as compared with US$6.4 million reported in the same period of 2006 and US$ 9.9 million for the second quarter of 2007, reflecting a 26% increase year-over-year and a 18% quarter-over-quarter decline, respectively.

"Despite the seasonality of the Chinese passenger vehicle market, we are pleased to report that our revenue increased by 39% year-over-year during this quarter. While the Chinese domestic auto industry grew by 27% in the first 9 months of 2007, China Automotive Systems achieved a robust 40% year-over-year growth. Our sales and marketing efforts continue to position the Company to capture additional market share, specifically for more OEM penetration. We continue to invest in R&D to provide advanced product offerings and improve product quality. Our recently added capacity in the Wuhu facility (the joint venture with Chery Auto) and the forthcoming Hengsheng facility, will significantly expand our production capacity to fuel our penetration into domestic, high-end, Sino-foreign joint venture OEMs and prepare the Company to compete in the global marketplace. Our goal is to build a Chinese power steering powerhouse and attract more customers with our strong engineering ability, broad high-quality product offerings, and growing production capacity'' said Mr. Qizhou Wu, Chief Executive Officer of China Automotive Systems.

Gross profit for the third quarter of 2007 increased to US$11.4 million compared with US$8.2 million reported in the same period for 2006 and US$12.1 million for the second quarter of 2007, reflecting a 39% increase year-over- year and a 6% quarter-over-quarter decline, respectively. Operating income for the third quarter of 2007 was US$6.6 million compared with US$3.4 million reported in the same period of 2006 and US$6.3 million for the second quarter of 2007, reflecting a 95% year-over-year growth and an 5% quarter-over-quarter growth respectively.

Total cash and cash equivalents as of September 30, 2007 were US$21.8 million as compared with US$27.4 million as of December 31, 2006. Stockholder's equity increased to US$62.7 million as of September 30, 2007 from US$53.4 million as of December 31, 2006.

Mr. Jie Li, Chief Financial Officer, stated, ''With the combination of our increased capacity and our sales growth, China Automotive Systems started to generate economies-of-scale as we experienced a stable gross profit margin and a rising operating margin during this quarter and in first 9 months of 2007. We carefully planned our overall expansion with tight cost control and continued to generate positive cash-flow from operations to help fund our capital expenditures to increase capacity and our working capital needs. We continue to focus on improving our market position, profitability and building shareholder value.''

Recent Development

On September 25, 2007. China Automotive Systems announced the promotion of Mr. Qizhou Wu to Chief Executive Officer and Mr. Jie Li to Chief Financial Officer. Former CEO, Hanlin Chen continues to serve as the Chairman of the Board with a focus on developing the Company's vision and strategic plan for future growth including mergers and acquisitions and other strategic expansion. Mr. Qizhou Wu was a co-founder of China Automotive Systems and he has over 20- years experience in the automotive industry, in particular in the original equipment manufacturing (OEM) sector. Mr. Wu was the Company's Chief Operating Officer since March 2003 overseeing the growth and expansion of operations. Mr. Jie Li has served as the Corporate Secretary of the Company since December 2004. Mr. Li brings extensive experience in management and corporate planning including mergers and acquisition. Prior to joining the Company in September 2003, Mr. Li had management responsibilities as he was Assistant President of Jingzhou Jiulong Industrial Inc. and the general manger of Jingzhou Tianxin Investment Management Co. Ltd.

On October 29, 2007, China Automotive Systems announced it has formed a new wholly owned subsidiary, Jingzhou Hengsheng Automotive Systems Co. Ltd. ("Hengsheng"), to focus on opportunities with Sino-foreign joint venture OEMs in China and OEMs in international markets. The first phase of the new facilities, with a capacity of 700,000 power steering units, is expected to be fully constructed by the end of 2008. Hengsheng will gradually install new equipment, complete testing and ramp up production capacity in the next 3 years to reach a designed capacity of 1.3 million units by 2010. This expansion will more than double China Automotive Systems' current capacity of approximately 1.1 million units. Hengsheng will focus its quality assurance on meeting the stringent standards required by many global OEMs. As a wholly owned foreign enterprise, Hengsheng will benefit from an income tax exemption through 2010 followed by preferential tax treatment (at a 15% rate) for the following 3 years thereafter.

About CAAS

Based in Hubei Province, People's Republic of China, China Automotive Systems, Inc. is a leading supplier of power steering components and systems to the Chinese automotive industry, operating through seven Sino-foreign joint ventures. The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles. The Company currently offers 4 separate series of power steering and 307 models of power steering with an annual production capacity of 1,100,000 sets, steering columns, steering oil pumps and steering hoses. Its customer base is comprised of leading Chinese auto manufacturers such as China FAW Group, Corp., Donfeng Auto Group Co., Ltd., Brilliance China Automotive Holdings Ltd., Beiqi Foton Motor Co., Ltd. and Chery Automobile Co., Ltd. etc. For more information, please visit: http://www.caasauto.com/ .

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the Company's operations, financial performance and, condition. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, the impact of competitive products, pricing and new technology; changes in consumer preferences and tastes; and effectiveness of marketing; changes in laws and regulations; fluctuations in costs of production, and other factors as those discussed in the Company's reports filed with the Securities and Exchange Commission from time to time.

Source: China Automotive Systems, Inc.

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