China Automotive Systems Reports 2007 First Quarter Results

China Automotive Systems Reports 2007 First Quarter Results

May 15, 2007

CAAS achieves record Net Sales of US$28.4 million; Gross
Margin returns to 32%


    WUHAN, Hubei, China, May 15
/Xinhua-PRNewswire-FirstCall/ -- China 
AutomotiveSystems, Inc. (Nasdaq: CAAS), a leading power
steering components 
and systems supplier in China, today announced financial
results for the 
first quarter, ended March 31, 2007.

    2007 First Quarter Highlights:
    -- Net sales increased to US$28.4 million, reflecting
35% year-over-year
       growth;
    -- Net sales from steering components for passenger and
light-duty
       vehicles increased to US$21.0 million, reflecting a
35% year-over-year
       growth;
    -- Net sales from steering components for commercial
vehicles increased to
       US$ 7.4 million, reflecting a 38% increase
year-over-year;
    -- Operating income for the first quarter of 2007
increased to $5.2
       million, reflecting a 98% year-over-year growth;
    -- Net income was US$1.6 million, reflecting 50%
year-over-year growth;
       and
    -- Diluted earnings per share was US$0.07, reflecting
40% year-over-year
       growth

    CAAS reported net sales of $28.4 million for the first
quarter ended March
31, compared with $21.0 million in the same period in 2006
and $27.7 million
for the fourth quarter of 2006, reflecting a 35%
year-over-year growth and a
3% quarter-over-quarter growth respectively. Net income for
the first quarter
of 2007 was $1.6 million, or $0.07 per diluted share, as
compared with $1.1
million, or $0.05 per diluted share, in the same period a
year ago and $1.4
million, or $0.06 per diluted share, for the fourth quarter
of 2006,
reflecting a 50% year-over-year and 15%
quarter-over-quarter growth
respectively.

    Net sales from steering products for passenger and
light-duty vehicles for
the first quarter of 2007 increased to $21.0 million as
compared with $15.5
million reported in the same period for 2006, reflecting a
35% year-over-year
growth. Net sales from steering products for commercial
vehicles for the first
quarter of 2007 increased to $7.4 million as compared with
$5.4 million
reported in the same period for 2006, reflecting a 38%
year-over-year growth.

    "After reporting strong sales growth in 2006, we
are extremely pleased
that we have commenced 2007 with another record high in
quarterly sales. As a
result of quality improvements and technological advances,
Chinese home grown
auto makers posted strong performances in the passenger
vehicle market. In
addition, two of our key customers, Chery and Geely Auto,
moved into the top 5
auto sellers by China Association of Auto Manufacturers
during the first
quarter. Chery's recent agreement with Chrysler to
distribute Chery's economy
car in North America and Europe clearly represents a
substantial opportunity
for fuel efficient and environmental friendly Chinese cars
in the global
marketplace. Our joint venture with Chery Auto and new
facility is expected to
come on line early in the 3rd quarter. We believe that we
are well positioned
to capture these new global opportunities with our key
customers. On the
commercial vehicle side, heavy duty truck makers became the
biggest winners as
both production and sales growth exceeded 60% as compared
to first quarter
2006. Our customers, FAW, Sinotruk and Dongfeng motors
continue to dominate
the Chinese domestic truck market.'' said Mr. Hanlin Chen,
Chairman and Chief
Executive Officer of China Automotive Systems.

    Gross profit for the first quarter of 2007 increased to
$9.2 million as
compared with $6.9 million reported in the same period for
2006 and $8.4
million for the fourth quarter of 2006, reflecting a 32%
year-over-year
increase and a 10% quarter-over-quarter increase
respectively. Operating
income for the first quarter of 2007 increased to $5.2
million as compared
with $2.6 million reported in the same period for 2006 and
$3.6 million for
the fourth quarter of 2006, reflecting a 98% year-over-year
growth and a 44%
quarter-over-quarter growth respectively.

    Total cash and cash equivalents as of March 31, 2007
totaled $17.4 million
as compared to $27.4 million as of December 31, 2006.
Stockholder's equity
increased to $56.4 million as of March 31, 2006 from $53.4
million as of
December 31, 2006.

    Mr. Daming Hu, chief financial officer stated, "We
are pleased to see that
our cost control program has started to produce positive
results, especially
given the recent pricing pressure within the auto-parts
industry. Gross
margins were 32.4% for the three months ended March 31,
2007, having recovered
significantly from 30.3% in the fourth quarter of 2006 and
only slightly down
from 33.1% for the same period of 2006. Average selling
price pressure from
our OEM customers was partially offset by our effective
cost reduction
program. In the beginning of 2007, we expected that the
sales price of
automotive parts would reduce by approximately 5%-7% during
2007 as compared
to 2006. To counter such pricing pressure, we continue to
streamline our
production management and raw material purchasing to reduce
costs. During the
first quarter, we successfully controlled our selling
expenses and general
administrative expenses. As we stabilized our sales team to
focus on
relationships with large OEM customers, we see our selling
expenses only
increase by 6.8%. We have further tightened our credit
control on new accounts
and strengthened accounts receivable collections. As a
result, we recovered
part of the provision for doubtful accounts recorded in
prior years; lowered
credit grants to existing and new customers and decreased
our general and
administrative expenses by nearly 26% as compared to the
same period in 2006.
We strive to continue to implement our cost control program
and improve the
bottom line in the coming quarters."

    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 800,000 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.



                        China Automotive Systems, Inc.
         Condensed Consolidated Statements of Operations
(Unaudited)


                                               Three Months
Ended March 31
                                                  2007     
        2006

    Net product sales, including $902,584
     and $583,539 to related parties at
     March 31, 2007 and 2006                   $28,383,392 
     $20,964,452
    Cost of product sold, including
     $1,051,480 and $655,995 purchased
     from related parties at March 31,2007
     and 2006                                   19,191,486 
      14,019,255

    Gross profit                                 9,191,906 
       6,945,197

    Add: Gain on other sales                       112,094 
          82,715
    Less: Operating expenses-
    Selling expenses                             1,593,646 
       1,492,488
    General and administrative expenses          1,509,027 
       2,037,537
    R&D expenses                                  
119,465           189,747
    Depreciation and amortization                  893,251 
         688,490

    Total Operating expenses                     4,115,389 
       4,408,262

    Income from operations                       5,188,611 
       2,619,650

    Add: Other income, net                          38,462 
             624
    Financial (expenses)                          (394,997)
        (334,386)

    Income before income taxes                   4,832,076 
       2,285,888
    Less: Income taxes                           1,294,080 
         200,711

    Income before minority interests             3,537,996 
       2,085,177
    Less: Minority interests                     1,894,895 
         990,779

    Net income                                  $1,643,101 
      $1,094,398

    Net income per common share
    Basic and diluted                                $0.07 
           $0.05

    Weighted average number of common
     shares outstanding
    Basic                                       23,938,078 
      22,680,813
    Diluted                                     23,949,809 
      22,704,753



                        China Automotive Systems, Inc.
                    Condensed Consolidated Balance Sheets


                                                    March
31,    December 31,
                                                       2007
         2006
                                                  
(Unaudited)

    ASSETS
    Current assets:
    Cash and cash equivalents                     
$17,356,752   $27,418,500
    Pledged cash deposits                           
2,989,674     3,484,335

    Accounts and notes receivable, net, including
     $2,090,888 and $1,770,933 from related parties
     at March 31, 2007 and December 31, 2006, net of
     an allowance for doubtful accounts of
     $4,208,453 and $4,086,218 at March 31, 2007 and
     December 31, 2006.                            
60,477,292    57,234,383

    Advance payments and other, including $181,590
     and $487,333 to related parties at March 31,
     2007 and December 31, 2006.                      
920,857       837,014
    Inventories                                    
20,351,984    15,464,571

    Total current assets                         
$102,096,559  $104,438,803

    Long-term Assets:
    Property, plant and equipment, net            
$40,535,608   $40,848,046
    Intangible assets, net                            
433,388     3,140,548

    Other receivables, net, including $840,220 and
     $738,510 from related parties at March 31, 2007
     and December 31, 2006, net of an allowance for
     doubtful accounts of $697,472 and $898,203 at
     March 31, 2007 and December 31, 2006.          
1,432,340       966,715

    Advance payment for property, plant and
     equipment, including $1,159,667 and $488,873 to
     related parties at March 31, 2007 and December
     31, 2006.                                      
3,705,310     2,640,708

    Long-term investments                              
70,513        73,718

    Total assets                                 
$148,273,718  $152,108,538

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
    Bank loans                                     
$8,333,333   $15,384,615

    Accounts and notes payable, including $893,901
     and $640,405 to related parties at March 31,
     2007 and December 31, 2006.                   
40,842,532    37,647,913
    Customer deposits                                 
134,917       146,171
    Accrued payroll and related costs               
1,610,700     1,506,251

    Accrued expenses and other payables             
8,298,907    11,078,186
    Accrued pension costs                           
3,276,133     3,266,867
    Taxes payable                                   
7,114,338     5,914,362
    Amounts due to shareholders/directors             
318,065       358,065

    Total current liabilities                     
$69,928,925   $75,302,430

    Long-term liabilities:
    Advances payable                                  
313,151       313,151

    Total liabilities                             
$70,242,076   $75,615,581

    Minority interests                            
$21,665,326   $23,112,667

    Stockholders' equity:
    Preferred stock, $0.0001 par value - Authorized
     - 20,000,000 shares Issued and outstanding - None    
$--           $--
    Common stock, $0.0001 par value - Authorized -
     80,000,000 shares Issued and Outstanding -
     23,959,702 shares and 23,851,581 shares at March
     31, 2007 and December 31, 2006, respectively       
2,396         2,385
    Additional paid-in capital                     
29,994,873    28,651,959
    Retained earnings-Appropriated                  
6,209,909     6,209,909
    Unappropriated                                 
17,690,338    16,047,237
    Accumulated other comprehensive income          
2,468,800     2,468,800

    Total stockholders' equity                    
$56,366,316   $53,380,290

    Total liabilities and stockholders' equity   
$148,273,718  $152,108,538


    For further information, please contact:

     Christopher Chu
     The Global Consulting Group
     Tel:   [phone]
     Email: [e-mail]