China Automotive Systems Reports Unaudited 2018 Third Quarter Results

WUHAN,China,Nov.9,2018 -- China Automotive Systems,Inc. (Nasdaq: CAAS) ("CAAS" or the "Company"),a leading power steering components and systems supplier inChina,today announced its unaudited financial results for the third quarter and nine months endedSeptember 30,2018.

Third Quarter 2018 Highlights

Net sales were $112.1 million compared to$118.4 million in the third quarter of 2017;

Gross margin decreased to $15.4 million from $22.5 million,and the gross margin declined to 13.7% from 19.0% in the third quarter of 2017;

Income from operations was $1.8 million,with an operating margin of 1.6% compared with 4.2% in the same quarter last year;

Net income attributable to parent company's common shareholders was$0.4 million,or diluted earnings per share of$0.01,compared to net income attributable to parent company's common shareholders of$5.1 million,or diluted earnings per share of$0.16,in the third quarter of 2017.

First Nine Months of 2018 Highlights

Net sales increased 4.7% to $371.9 million,compared to$355.3 millionin the first nine months of 2017;

Gross margin was 14.5% compared with 19.2% in the same period last year;

Diluted earnings per share attributable to parent company's common shareholders was$0.17 compared with $0.62 for the first nine months of 2017;

Cash and cash equivalents,pledged cash deposits and short-term investments were$144.1 millionas ofSeptember 30,2018;

Net cash flow from operating activities was$9.0 million.

Mr.Qizhou Wu,the Chief Executive Officer of CAAS,commented,"Sales of our traditional hydraulic products continued to anchor our sales in the Chinese automotive market in the third quarter of 2018. Our advanced hydraulic steering products remain the primary sales driver to Chrysler and Ford for use in the North American markets with sales rising by 22.2% in the third quarter of 2018 compared to the same quarter last year. Sales of our steering columns also grew to help offset softness in the Chinese passenger vehicle and heavy-duty truck markets."

"We continue to be optimistic about our electric power steering ("EPS") business as our new joint venture,Hubei Henglong KYB Automobile Electric Steering System Co.,Ltd.,with KYB (China) Investment Co.,will receive all the EPS business in China from both joint venture partners. Our new joint venture will enhance EPS research and development and production capabilities at CAAS's compound in Jingzhou City."

Mr.Jie Li,the Chief Financial Officer of CAAS,"We continue to focus on our financial strength and cash flow from operations to invest in new products and increase our market penetration."

Third Quarter of 2018

In the third quarter of 2018,net sales were $112.1 million compared to $118.4 million in the same quarter of 2017. The decrease in net product sales was mainly due to a change in the product mix and lower domestic sales volume due to softer demand in the Chinese domestic brand automobile market. Net product sales to North America grew 22.2% to $30.3 million compared to $24.8 million for the same quarter in 2017. The increase in export sales to North America was mainly due to higher sales of the Company's more advanced products.

Gross profit was$15.4 millionin the third quarter of 2018,compared to$22.5 millionin the third quarter of 2017. Gross margin was 13.7% compared to 19.0% for the same period of 2017,mainly due to an increase in the cost of raw materials and the changes in the product mix.

Selling expenses were$3.4 millionin the third quarter of 2018,compared to$4.5 millionin the third quarter of 2017. Lower selling expenses were mainly due to lower unit sales as well as utilizing lower cost shippers. Selling expenses represented 3.0% of net sales in the third quarter of 2018,compared to 3.8% in the third quarter of 2017.

General and administrative expenses ("G&A expenses") were $3.7 millionin the third quarter of 2018,compared to$4.4 millionin the same quarter of 2017. The decline was primarily due to lower personnel expenses. G&A expenses represented 3.3% of net sales in the third quarter of 2018 compared with 3.7% in the third quarter of 2017.

Research and development expenses ("R&D expenses") were$7.0 millionin the third quarter of 2018,compared to$9.2 millionin the third quarter of 2017. R&D expenses represented 6.2% of net sales in the third quarter of 2018 compared with 7.8% in the third quarter last year. The lower R&D expenses were mainly due to greater cost controls over R&D expenditures and the transfer of some research projects to our new joint venture,for electric power steering.

Net financial income was$0.8 millionin the third quarter of 2018 compared to net financial income of$1.0 millionin the third quarter of 2017.

Income from operations was $1.8 millionin the third quarter of 2018,compared to$4.9 millionin the same quarter of 2017. The decrease was mainly due to lower gross profit and lower gross margin.

Income before income tax expenses and equity in earnings of affiliated companies was$1.8 million in the third quarter of 2018,compared to$5.7 millionin the third quarter of 2017. The decrease in income before income tax expenses and equity in earnings of affiliated companies was mainly due to lower operating income in the third quarter of 2018 compared with the third quarter of 2017.

Net income attributable to parent company's common shareholders was$0.4 millionin the third quarter of 2018,compared to net income attributable to parent company's common shareholders of$5.1 millionin the third quarter of 2017. Diluted earnings per share were$0.01in the third quarter of 2018,compared to diluted earnings per share of$0.16in the third quarter of 2017.

The weighted average number of diluted common shares outstanding was 31,645,556 in the third quarter of 2018,compared to 31,644,271 in the third quarter of 2017.

First Nine Months of 2018

Net sales for the first nine months of 2018 were$371.9 million,compared to$355.3 millionin the first nine months of 2017. Nine-month gross profit was$54.0 million,compared to$68.2 millionin the corresponding period last year. Nine-month gross margin was 14.5%,compared to 19.2% for the corresponding period in 2017. For the nine months endedSeptember 30,2018,gain on other sales amounted to$3.0 million,compared to$5.9 millionfor the corresponding period in 2017. Income from operations was$7.0 millioncompared to$23.2 millionin the first nine months of 2017. Operating margin was 1.9%,compared to 6.5% for the corresponding period of 2017.

Net income attributable to parent company's common shareholders was$5.5 millioncompared with$19.7 millionin the corresponding period last year. Diluted earnings per share were$0.17in the first nine months of 2018,compared to diluted earnings per share of$0.62 for the corresponding period in 2017.

Balance Sheet

As ofSeptember 30,total cash and cash equivalents,pledged cash deposits and short-term investments were$144.1 million,total accounts receivable including notes receivable were$249.6 million,accounts payable including notes payable were$196.6 million,and short-term loans were$70.9 million. Total parent company stockholders' equity was$309.5 millionas ofSeptember 30,compared to$306.1 millionas ofDecember 31,2017.

Business Outlook

Management has reduced its revenue guidance for the full year 2018 to US$510 million from US$520.0 million. This target is based on the Company's current views on operating and market conditions,which are subject to change.

Conference Call

Management will conduct a conference call on November 9,2018 at 8:00 A.M. EST/9:00 P.M. Beijing Time to discuss these results. A question and answer session will follow management's presentation. To participate,please call the following numbers 10 minutes before the call start time and ask to be connected to the "China Automotive Systems" conference call:

Phone Number:

+1-877-407-8031 (North America)

Phone Number:

+1-201-689-8031 (International)

A replay of the call will be available on the Company's website under the investor relations section.

About China Automotive Systems,Inc.

Based in Hubei Province,the 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 eight Sino-foreign joint ventures. The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles. The Company currently offers four separate series of power steering with an annual production capacity of over 6 million sets of steering gears,columns and steering hoses. Its customer base is comprised of leading auto manufacturers,such as China FAW Group,Corp.,Dongfeng Auto Group Co.,BYD Auto Company Limited,Beiqi Foton Motor Co.,Ltd. and Chery Automobile Co.,Ltd. in China,and Chrysler Group LLC in North America. For more information,please visit: http://www.caasauto.com.

Forward-Looking Statements

This press release contains statements that are "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent our estimates and assumptions only as of the date of this press release. These forward-looking statements include statements regarding the qualitative and quantitative effects of the accounting errors,the periods involved,the nature of the Company's review and any anticipated conclusions of the Company or its management and other statements that are not historical facts. Our actual results may differ materially from the results described in or anticipated by our forward-looking statements due to certain risks and uncertainties. As a result,the Company's actual results could differ materially from those contained in these forward-looking statements due to a number of factors,including those described under the heading "Risk Factors" in the Company's Form 10-K annual report filed with the Securities and Exchange Commission on March 29,and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. We expressly disclaim any duty to provide updates to any forward-looking statements made in this press release,whether as a result of new information,future events or otherwise.

For further information,please contact:

Jie Li

Chief Financial Officer

China Automotive Systems,Inc.

Email: jieli@chl.com.cn

Kevin Theiss

+1-212-521-4050

Email: kevin.theiss@awakenlab.com

-Tables Follow -

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income

(In thousands of USD,except share and per share amounts)

ThreeMonthsEndedSeptember 30,

2018

2017

Net product sales ($8,207 and $7,563 sold to related parties for the

three months ended September 30,2018 and 2017)

$

112,084

$

118,365

Cost of products sold ($4,659 and $6,549 purchased from related

parties for the three months ended September 30,

2018 and 2017)

96,718

95,878

Gross profit

15,366

22,487

Gain on other sales

482

553

Less: Operating expenses

Selling expenses

3,353

4,537

General and administrative expenses

3,708

4,390

Research and development expenses

6,957

9,194

Total operating expenses

14,018

18,121

Income from operations

1,830

4,919

Other (expense)/income,net

(461)

100

Interest expense

(431)

(318)

Financial income,net

815

1,027

Income before income tax expenses and equity in earnings of

affiliated companies

1,753

5,728

Less: Income taxes

326

991

Equity in losses of affiliated companies

(1,049)

491

Net income

378

5,228

Net (loss)/income attributable to non-controlling interests

1

169

Net income attributable to parent company's common

shareholders

$

377

$

5,059

Comprehensive income:

Net income

$

378

$

5,228

Other comprehensive income:

Foreign currency translation (loss)/gain,net of tax

(13,012)

6,705

Comprehensive (loss)/income

(12,634)

11,933

Comprehensive (loss)/income attributable to non-controlling

interests

(619)

386

Comprehensive (loss)/income attributable to parent company

$

(12,015)

$

11,547

Net income attributable to parent company's common shareholders

per share

Basic -

$

0.01

$

0.16

Diluted -

$

0.01

$

0.16

Weighted average number of common shares outstanding

Basic

31,004

31,004

Diluted

31,556

31,271

China Automotive Systems,except share and per share amounts)

Nine MonthsEndedSeptember 30,

2018

2017

Net product sales ($29,909 and $25,684 sold to related

parties for the nine months ended September 30,2018and

2017)

$

371,884

$

355,333

Cost of products sold ($20,336 and $20,195 purchased from

related parties for the nine months ended September 30,2018

and 2017)

317,858

287,156

Gross profit

54,026

68,177

Gain on other sales

2,972

5,896

Less: Operating expenses

Selling expenses

14,067

13,160

General and administrative expenses

12,574

14,027

Research and development expenses

23,349

23,666

Total operating expenses

49,990

50,853

Income from operations

7,008

23,220

Other income/(expense),net

760

(2)

Interest expense

(1,647)

(1,193)

Financial income,net

947

1,909

Income before income tax expenses and equity in earnings of

affiliated companies

7,068

23,934

Less: Income taxes

1,116

4,367

Equity in (losses)/earnings of affiliated companies

(546)

480

Net income

5,406

20,047

Net (loss)/income attributable to non-controlling interests

(130)

353

Net income attributable to parent company's common

shareholders

$

5,536

$

19,694

Comprehensive income:

Net income

$

5,406

$

20,047

Other comprehensive income:

Foreign currency translation (loss)/gain,net of tax

(17,237)

14,148

Comprehensive (loss)/income

(11,831)

34,195

Comprehensive (loss)/income attributable to non-controlling

interests

(814)

819

Comprehensive (loss)/income attributable to parent

company

$

(11,017)

$

33,376

Net income attributable to parent company's common

shareholders per share

Basic -

$

0.17

$

0.62

Diluted -

$

0.17

$

0.62

Weighted average number of common shares outstanding

Basic

31,622

31,647,833

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(In thousands of USD unless otherwise indicated)

September 30,2018

December31,2017

ASSETS

Current assets:

Cash and cash equivalents

$

95,788

$

64,558

Pledged Cash

26,115

31,535

Short-term investments

22,241

29,587

Accounts and notes receivable,net - unrelated parties

232,114

274,989

Accounts and notes receivable,net - related parties

17,522

19,086

Advance payments and others - unrelated parties

14,160

12,790

Advance payments and others - related parties

413

20,841

Inventories

87,769

79,217

Total current assets

496,122

532,603

Non-current assets:

Property,plant and equipment,net

124,823

126,033

Intangible assets,net

605

661

Other receivables,net - unrelated parties

1,609

2,188

Advance payment for property,plant and equipment - unrelated

parties

8,657

9,657

Advance payment for property,plant and equipment - related

parties

6,566

5,264

Long-term investments

30,874

27,596

Deferred tax assets

12,680

13,367

Total assets

$

681,936

$

717,369

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Short term loans

$

70,900

$

72,711

Accounts and notes payable - unrelated parties

192,146

233,048

Accounts and notes payable - related parties

4,468

7,168

Customer deposits

950

1,128

Accrued payroll and related costs

7,488

8,577

Accrued expenses and other payables

39,251

40,127

Accrued pension costs

3,587

4,051

Taxes payable

8,855

5,927

Amounts due to shareholders/directors

316

343

Advances payable (current portion)

363

383

Total current liabilities

328,324

373,463

Long-term liabilities:

Long-term loans

291

306

Advances payable

342

359

Other long-term payable

9,568

-

Long-term tax payable

29,874

32,719

Deferred tax liabilities

4,029

4,393

Total liabilities

$

372,428

$

411,240

Commitments and Contingencies

Stockholders' equity:

Common stock,$0.0001 par value - Authorized - 80,000,000

shares; Issued- 32,338,302 and 32,302 shares as of

September 30,2018 and December 31,2017,respectively

$

3

$

3

Additional paid-in capital

64,406

64,406

Retained earnings-

Appropriated

10,830

10,707

Unappropriated

214,872

209,459

Accumulated other comprehensive income

1,227

17,780

Treasury stock – 694,298 and 694,298 shares as of September 30,

2018 and December 31,respectively

(2,907)

(2,907)

Total parent company stockholders' equity

288,431

299,448

Non-controlling interests

21,077

6,681

Total stockholders' equity

309,508

306,129

Total liabilities and stockholders' equity

$

681,369

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)

Nine MonthsEndedSeptember 30,

2018

2017

Cash flows from operating activities:

Netincome

$

5,047

Adjustments to reconcile net income from operations to

net cash provided by operating activities:

Depreciation and amortization

13,590

10,933

Share-based compensation

-

100

Increase in provision for doubtful accounts

253

1,034

Inventory write downs

4,971

4,436

Deferred income taxes

(134)

1,354

Equity in earnings/(losses) of affiliated companies

546

(480)

(Loss)/gain on fixed assets disposals

6

(2,204)

Changes in operating assets and liabilities

(Increase) decrease in:

Accounts and notes receivable

29,758

32,807

Advance payments and others

(1,604)

(1,527)

Inventories

(18,220)

(6,441)

Increase (decrease) in:

Accounts and notes payable

(28,744)

(3,023)

Customer deposits

(148)

158

Accrued payroll and related costs

(756)

182

Accrued expenses and other payables

3,513

(6,216)

Accrued pension costs

(237)

443

Taxes payable

807

(9,806)

Net cash provided by operating activities

9,007

41,797

Cash flows from investing activities:

Increase in other receivables

453

159

Cash received from property,plant and equipment sales

263

2,351

Payments to acquire property,plant and equipment

(including $6,747 and $7,656 paid to related parties for

the nine months ended September 30,2018 and 2017,

respectively)

(24,295)

(19,187)

Purchase of short-term investments

(19,974)

(25,017)

Purchase of long-term time deposit

-

(5,836)

Proceeds from maturities of short-term investments

26,793

33,749

Investment under equity method

(5,957)

(7,629)

Cash received for related party loan repayment

20,430

-

Loan to a related party

-

(29,044)

Net cash used in investing activities

(2,287)

(50,454)

Cash flows from financing activities:

Proceeds from bank loans

67,938

69,635

Repayments of bank loans

(69,025)

(39,271)

Proceeds from sale and leaseback transaction

11,758

-

Repayments of the borrowing for sale and leaseback

transaction

(2,181)

-

Dividends paid to non-controlling shareholder

(524)

-

Cash received from capital contributions by non-

controlling shareholder

15,728

-

Net cash provided by financing activities

23,694

30,364

Effects of exchange rate on cash,cash equivalents and

pledged cash

(4,603)

2,859

Net increase in cash,cash equivalents and pledged cash

25,811

24,566

Cash,cash equivalents and pledged cash at beginning of

period

96,093

61,891

Cash,cash equivalents and pledged cash at end of period

$

121,904

$

86,457

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Nine MonthsEndedSeptember 30,

2018

2017

Cashpaidforinterest

$

706

$

573

Cash paid for income taxes

731

4,343

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Nine MonthsEndedSeptember 30,

2018

2017

Property,plant and equipment recorded during the period which

previously were advance payments

$

11,666

$

12,331

Accounts payable for acquiring property,plant and equipment

614

890

Dividendspayabletonon-controllinginterests

-

621

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