China Automotive Systems Reports Unaudited 2019 Third Quarter Results

WUHAN,China,Nov. 12,2019 --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 30,2019.

Third Quarter 2019 Highlights

Net sales were $100.5 million compared to $112.1 million in the third quarter of 2018;

Gross profit increased to $17.3 million from $15.4 million,and the gross margin rose to 17.2% from 13.7% in the third quarter of 2018;

Income from operations was $4.3 million,with an operating margin of 4.3%,compared with Income from operations of $1.8 million,or a 1.6% operating margin in the same quarter last year;

Net income attributable to parent company's common shareholders was $4.2 million,or diluted earnings per share of $0.13,compared to net income attributable to parent company's common shareholders of $0.4 million,or diluted earnings per share of $0.01 in the third quarter of 2018;

Approximately 96,000 shares of common stock were repurchased.

First Nine Months of 2019 Highlights

Net sales were $315.5 million compared to $371.9 million in the first nine months of 2018;

Gross margin was 14.8% compared with 14.5% in the same period last year;

Income from operations was $8.1 million compared with $7.0 million in the same period last year;

Diluted earnings per share attributable to parent company's common shareholders was $0.26 compared with $0.17 for the first nine months of 2018;

Cash and cash equivalents and pledged cash deposits were $102.3 million as of September 30,2019;

Net cash flow from operating activities was $4.1 million.

Mr.Qizhou Wu,the Chief Executive Officer of CAAS,commented,"Our sales reflected the continuing slow growth in the economy as China's gross domestic product grew by 6.0% in the quarter ended September 30th,the slowest quarterly growth rate since 1992. In the automobile sector,the sales of Chinese-branded cars were down 13.2% year-on-year in the month of September and accounted for 18.5% of the total car sales. This market share represented a decline of 1.2% in market share compared with September 2018. For the first nine months of 2019,total sales of Chinese-branded passenger cars were 18.5% lower than the same period in 2018. The sales of Chinese-branded SUVs declined by 8.0% year-on-year with a decrease of 2.6 percentage points in market share over the previous year. The sales of Chinese brand MPVs were down 10.5% year on year. As a leading supplier of steering products to Chinese-branded vehicles,our sales reflect the current market conditions. However,government stimulus measures including tax cuts and infrastructure investments,have started to improve the economy and if necessary,there may be more infrastructure spending to stabilize economic growth."

"In addition,we are positive about the prospects for our developmental projects. Our electric power steering ("EPS") joint venture with KYB (China) Investment Co.,Ltd. will add more resources to quickly improve our products and market share. Our new electric motor product development for power steering systems with Hyoseong Electric Co. Ltd. and our new recirculating-ball steering system development for a global client's autonomous vehicle development offer new avenues for future growth."

Mr.Jie Li,the Chief Financial Officer of CAAS,"We continue to focus on building our financial strength to offer customers advanced products as well as develop new products to enhance our global presence. During the 3rd quarter,we purchased approximately 96,000 shares of common stock in the open market. We are committed to enhancing long-term shareholder value."

Third Quarter of 2019

In the third quarter of 2019,net sales were $100.5 million compared to $112.1 million in the same quarter of 2018. 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 11.6% to $33.8 million compared to $30.3 million for the same quarter in 2018. The increase in export sales to North America was mainly due to higher sales of the Company's more advanced products. Net product sales for the Company's electric power steering ("EPS") products were $18.5 million,or 18.4% of net sales.

Gross profit was$17.3millionin the third quarter of 2019,compared to$15.4 millionin the third quarter of 2018. Gross margin was 17.2% compared to 13.7% for the same period of 2018,mainly due to changes in the product mix.

Selling expenses were$3.6 millionin the third quarter of 2019,compared to$3.4 millionin the third quarter of 2018. Selling expenses represented 3.6% of net sales in the third quarter of 2019,compared to 3.0% in the third quarter of 2018.

General and administrative expenses ("G&A expenses") were $4.4 millionin the third quarter of 2019,compared to$3.7 millionin the same quarter of 2018. The increase was primarily due to higher professional fees. G&A expenses represented 4.4% of net sales in the third quarter of 2019 compared with 3.3% in the third quarter of 2018.

Research and development expenses ("R&D expenses") were$6.1 millionin the third quarter of 2019,compared to$7.0 millionin the third quarter of 2018. R&D expenses represented 6.1% of net sales in the third quarter of 2019 compared with 6.1% in the third quarter last year. The lower R&D expenses were mainly due to more strict cost controls over R&D expenditures.

Net financial income was$1.6 millionin the third quarter of 2019 compared to net financial income of$0.8 millionin the third quarter of 2018,which was mainly due to the increase in foreign exchange gain as a result of the significant appreciation of USD against RMB.

Income from operations was $4.3millionin the third quarter of 2019,compared to$1.8 millionin the same quarter of 2018. The increase was mainly due to increased gross profit and higher gross margin.

Income before income tax expenses and equity in earnings of affiliated companies was$5.3million in the third quarter of 2019,compared to$1.8 millionin the third quarter of 2018. The increase in income before income tax expenses and equity in earnings of affiliated companies was mainly due to higher operating income in the third quarter of 2019 compared with the third quarter of 2018.

Net income attributable to parent company's common shareholders was$4.2millionin the third quarter of 2019,compared to net income attributable to parent company's common shareholders of$0.4 millionin the third quarter of 2018. Diluted earnings per share were$0.13in the third quarter of 2019,compared to diluted earnings per share of$0.01in the third quarter of 2017.

The weighted average number of diluted common shares outstanding was 31,492,035 in the third quarter of 2019,compared to 31,645,556 in the third quarter of 2018.

First Nine Months of 2019

Net sales for the first nine months of 2019were$315.5 million,compared to$371.9 millionin the first nine months of 2018. Nine-month gross profit was$46.5million,compared to$54.0 millionin the corresponding period last year. Nine-month gross margin was 14.8%,compared to 14.5% for the corresponding period in 2018. For the nine months endedSeptember 30,2019,gain on other sales amounted to$4.9million,compared to$3.0 millionfor the corresponding period in 2018. Income from operations was$8.1millioncompared to$7.0 millionin the first nine months of 2018. Operating margin was 2.6%,compared to 1.9% for the corresponding period of 2018.

Net income attributable to parent company's common shareholders was$8.2millioncompared with$5.5 millionin the corresponding period last year. Diluted earnings per share were$0.26in the first nine months of 2019,compared to diluted earnings per share of$0.17 for the corresponding period in 2018.

As ofSeptember 30,total cash and cash equivalents and pledged cash deposits were$102.3 million. Total accounts receivable including notes receivable were$234.3 million. Accounts payable including notes payable were$176.7 million,and short-term loans were$56.0 million. Total parent company stockholders' equity was$304.9 millionas ofSeptember 30,compared to$304.8 millionas ofDecember 31,2018.

Net cash provided by operating activities was $4.1 million in the first nine months of 2019 compared with net cash provided by operating activities of $9.0 million in the first nine months of 2018. Payments to acquire property,plant and equipment were $23.6 million compared with $24.3 million in the first nine months of 2018. Approximately 96,000 shares of common stock were repurchased during the third quarter of 2019,and the Company expects to repurchase more shares in the future.

Business Outlook

Management has reiterated its revenue guidance for the full year 2019 to $430 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 12,2019 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)

Mainland China Toll Free: +86-400-120-2840

A replay of the call will be available on the Company's website under 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 nine 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.,Ltd.,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 28,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

Investor Relations

+1-212-521-4050

Email: Kevin@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,

2019

2018

Net product sales ($12,277 and $8,207 sold to related parties for the three

months ended September 30,2019 and 2018)

$

100,542

$

112,084

Cost of products sold ($6,474 and $4,659 purchased from related parties for

the three months ended September 30,2019 and 2018)

83,225

96,718

Gross profit

17,317

15,366

Gain on other sales

1,102

482

Less: Operating expenses

Selling expenses

3,563

3,353

General and administrative expenses

4,429

3,708

Research and development expenses

6,112

6,957

Total operating expenses

14,104

14,018

Income from operations

4,315

1,830

Other income/(expense),net

171

(461)

Interest expense

(787)

(431)

Financial income,net

1,552

815

Income before income tax expenses and equity in earnings of affiliated

companies

5,251

1,753

Less: Income taxes

948

326

Equity in loss of affiliated companies

(226)

(1,049)

Net income

4,077

378

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

(172)

1

Net income attributable to parent company's common shareholders

$

4,249

$

377

Comprehensive income:

Net income

$

4,077

$

378

Other comprehensive income:

Foreign currency translation loss,net of tax

(9,703)

(13,012)

Comprehensive loss

(5,626)

(12,634)

Comprehensive loss attributable to non-controlling interests

(892)

(619)

Comprehensive loss attributable to parent company

$

(4,734)

$

(12,015)

Net income attributable to parent company's common shareholders per

share

Basic -

$

0.13

$

0.01

Diluted -

$

0.13

$

0.01

Weighted average number of common shares outstanding

Basic

31,035

31,644,004

Diluted

31,556

China Automotive Systems,except share and per share amounts)

Nine MonthsEndedSeptember 30,

2019

2018

Net product sales ($39,458 and $29,909 sold to related parties for the nine

months ended September 30,2019 and 2018)

$

315,483

$

371,884

Cost of products sold ($18,108 and $20,336 purchased from related parties

for the nine months ended September 30,2019 and 2018)

268,936

317,858

Gross profit

46,547

54,026

Gain on other sales

4,856

2,972

Less: Operating expenses

Selling expenses

10,507

14,067

General and administrative expenses

13,453

12,574

Research and development expenses

19,351

23,349

Total operating expenses

43,311

49,990

Income from operations

8,092

7,008

Other income,131

760

Interest expense

(2,086)

(1,647)

Financial income,net

2,439

947

Income before income tax expenses and equity in earnings of affiliated

companies

9,576

7,068

Less: Income taxes

1,820

1,116

Equity in loss of affiliated companies

(222)

(546)

Net income

7,534

5,406

Net loss attributable to non-controlling interests

(692)

(130)

Net income attributable to parent company's common shareholders

$

8,226

$

5,536

Comprehensive income:

Net income

$

7,534

$

5,406

Other comprehensive income:

Foreign currency translation loss,net of tax

(10,221)

(17,237)

Comprehensive loss

(2,687)

(11,831)

Comprehensive loss attributable to non-controlling interests

(1,454)

(814)

Comprehensive loss attributable to parent company

$

(1,233)

$

(11,017)

Net income attributable to parent company's common shareholders per share

Basic -

$

0.26

$

0.17

Diluted -

$

0.26

$

0.17

Weighted average number of common shares outstanding

Basic

31,498,553

31,501,108

31,622

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(In thousands of USD unless otherwise indicated)

September 30,2019

December31,2018

ASSETS

Current assets:

Cash and cash equivalents

$

83,820

$

86,346

Pledged cash

18,491

29,623

Accounts and notes receivable,net - unrelated parties

212,390

237,519

Accounts and notes receivable - related parties

21,877

18,825

Inventories

87,175

88,021

Other current assets

23,229

35,094

Total current assets

446,982

495,428

Non-current assets:

Property,plant and equipment,net

137,673

129,853

Long-term investments

33,976

32,620

Other non-current assets

31,669

32,598

Total assets

$

650,300

$

690,499

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term loans

$

56,042

$

60,952

Accounts and notes payable - unrelated parties

168,839

205,643

Accounts and notes payable - related parties

7,889

4,477

Accrued expenses and other payables

41,635

47,032

Other current liabilities

23,176

23,196

Total current liabilities

297,581

341,300

Long-term liabilities:

Long-term government loans

7,352

291

Other long-term payable

5,818

8,726

Long-term tax payable

26,693

29,503

Other non-current liabilities

7,950

5,852

Total liabilities

$

345,394

$

385,672

Stockholders' equity:

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

Issued - 32,338,302 and 32,302 shares as of September 30,2019

and December 31,2018,respectively

$

3

$

3

Additional paid-in capital

64,429

64,429

Retained earnings-

Appropriated

11,104

11,104

Unappropriated

219,665

211,439

Accumulated other comprehensive income

(7,604

1,855

Treasury stock - 885,867 and 711,698 shares as of September 30,respectively

(3,396

(2,953

Total parent company stockholders' equity

284,201

285,877

Non-controlling interests

20,705

18,950

Total stockholders' equity

304,906

304,827

Total liabilities and stockholders' equity

$

650,499

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)

Nine MonthsEndedSeptember 30,

2019

2018

Cash flows from operating activities:

Net income

$

7,406

Adjustments to reconcile net income from operations to net

cash provided by operating activities:

Depreciation and amortization

13,050

13,590

(Reversal)/accrual of provision for doubtful accounts

(692)

253

Inventory write downs

3,150

4,971

Deferred income taxes

(601)

(134)

Equity in loss of affiliated companies

222

546

(Gain)/loss on fixed assets disposals

(692)

6

Changes in operating assets and liabilities

(Increase)/decrease in:

Accounts and notes receivable

16,243

29,758

Inventories

(4,765)

(18,220)

Other current assets

4,745

(1,604)

Increase/(decrease) in:

Accounts and notes payable

(28,811)

(28,744)

Accrued expenses and other payables

(4,374)

3,513

Long-term taxes payable

(2,810)

-

Other current liabilities

1,882

(334)

Net cash provided by operating activities

4,081

9,007

Cash flows from investing activities:

Decrease in demand loans and employee housing loans

included in other non-current assets

185

453

Cash received from property,plant and equipment sales

1,164

263

Payments to acquire property,plant and equipment (including

$514 and $6,747 paid to related parties for the nine months

ended September 30,2019 and 2018,respectively)

(23,560)

(24,295)

Payments to acquire intangible assets

(1,435)

-

Investment under equity method

(2,491)

(5,957)

Purchase of short-term investments

(19,647)

(19,974)

Proceeds from maturities of short-term investments

27,040

26,793

Government subsidy received for purchase of property,plant

and equipment

1,898

-

Cash received from long-term investment

579

-

Cash received from repayment of the loan to a related party

-

20,430

Net cash used in investing activities

(16,267)

(2,287)

Cash flows from financing activities:

Proceeds from bank and government loans

54,675

67,938

Repayments of bank and government loans

(52,486)

(69,025)

Proceeds from sale and leaseback transaction

-

11,758

Repayments of the borrowing for sale and leaseback transaction

(3,143)

(2,181)

Dividends paid to non-controlling interest holders of non-

wholly owned subsidiaries

(333)

(524)

Cash received from capital contributions by non-controlling

interest holder

3,542

15,728

Repurchase of common shares

(443)

-

Net cash provided by financing activities

1,812

23,694

Effects of exchange rate on cash,cash equivalents and pledged cash

(3,284)

(4,603)

Net (decrease)/increase in cash,cash equivalents and pledged cash

(13,658)

25,811

Cash,cash equivalents and pledged cash at beginning of the period

115,969

96,093

Cash,cash equivalents and pledged cash at end of the period

$

102,311

$

121,904

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