China Automotive Systems Reports 2020 First Quarter Results

WUHAN,China,June 23,2020 -- China Automotive Systems,Inc. (NASDAQ: CAAS)("CAAS" or the "Company"),a leading power steering components and systems supplier in China,today announced its unaudited financial results for the first quarter ended March 31,2020.

First Quarter 2020 Highlights

Net sales decreased 32.6% to $73.6 million from $109.2 million in the first quarter of 2019 primarily due to the impact of the COVID-19 pandemic lockdown in China

Net sales of electric power steering ("EPS") products declined 63.5% to $8.1million from $22.2 million in the first quarter of 2019

Net product sales to Fiat Chrysler and Ford in North America were $28.1 million consistent with the same quarter last year

Gross margin increased to 15.2% compared with 12.9% in the first quarter of 2019

Net income attributable to parent company's common shareholders was $0.05million,compared to $1.5 million in the first quarter of 2019

Total cash and cash equivalents and pledged cash were $132.6million

Mr. Qizhou Wu,chief executive officer of CAAS,commented,"Our extraordinary sales decline reflects the devastating impact of the COVID-19 pandemic on China's economy and especially the domestic Chinese automobile industry. China'sGDP declined by 6.8% year-over-year,and car sales were down 42% in the first quarter of 2020 compared to the first quarter of 2019 according to the China Association of Automobile Manufacturers ("CAAM"). Internationally,our sales to our tier-1 North American customers remained constant. Also,our innovative,new powerpack brushless motors are about to start commercial production to add a new revenue channel."

Mr. Jie Li,chief financial officer of CAAS,"Even during the most difficult quarter in our Company's history,our operations continued to generate positive cash flowand our cash position improved. Our gross margin increased in the first quarter and wehavemaintained net profitability during this crisis. With our strong balance sheet and effective cashflow management,we remain financially sound."

First Quarter of 2020

In the first quarter of 2020,net sales were $73.6 million compared to $109.2 million in the same quarter of 2019,reflecting a 32.6% year-over-year decline. The decrease in net sales was mainly due to lower sales volume for legacy hydraulic products due to coronavirus lockdown and lower average selling prices in the domestic markets during the pandemic crisis.

Gross profit was $11.2million in the first quarter of 2020 compared with $14.0 million in the first quarter of 2019. The gross margin increased to 15.2% in the first quarter of 2020compared to 12.9% in the first quarter of 2019,mainly due to changes in the product mix.

Gain on other sales was $0.6 million in the first quarter of 2020 compared to $1.3 million in the first quarter of 2019,reflecting lower scrap volume.

Selling expenses were $2.1 million in the first quarter of 2020,compared to $3.1 million in the first quarter of 2019. The decrease was primarily due to the lower freight expenses,resulting from the suspension of the Company's operations for most of the quarter due to the outbreak of the COVID-19 pandemic. Selling expenses represented 2.9% of net sales in the first quarter of 2020 compared to 2.8% in the first quarter of 2019.

General and administrative expenses ("G&A expenses") were $3.4million in the first quarter of 2020,compared to $4.6 million in the same quarter of 2019. The decrease was primarilydue to lower office expenses. G&A expenses represented 4.6% of net sales in the first quarter of 2020 compared with 4.2% in the first quarter of 2019.

Research and development expenses ("R&D expenses") were $5.1 million in the first quarter of 2020,compared to $6.6 million in the first quarter of 2019. R&D expenses represented 6.9% of net sales in the first quarter of 2020 compared to 6.0% in the first quarter of 2019. Lower R&D expenses wereprimarily due to increased cost controls.

Other income was $0.1 million for the three months ended March 31,2020 compared to $1.4 million for the three months ended March 31,2019,representing a decrease of $1.3 million,primarily due to lower governmental subsidies anda donation made to combat COVID-19 pandemicin the first quarter of 2020.

Income from operations was $1.2million in the first quarter of 2020,compared to $1.0 million in the same quarter of 2019. The increase was primarily due to higher gross margin and decreased operating expenses offsetting the impact of lower sales volume in the first quarter of 2020.

Interest expense was $0.4 million in the first quarter of 2020 compared to $0.6 million in the same quarter of 2019. The decrease was primarily due todecreased loans.

Net financial expense was $0.5 million in the first quarter of 2020 compared to $0.7 million in the first quarter of 2019. The increase in net financial expense was primarily due to a decrease in foreign exchange loss in the first quarter of 2020.

Incomebefore income tax expenses and equity in earnings of affiliated companies was $0.4million in the first quarter of 2020,compared to $1.2 million in the first quarter of 2019. The decrease inincomebefore income tax expenses and equity in earnings of affiliated companies in the first quarter of 2020 was mainly due to lower income from operations and lower other income.

Net income attributable to parent company's common shareholders was $0.05million in the first quarter of 2020,compared to $1.5 million in the first quarter of 2019. Diluted earnings per share were nilper share in the first quarter of 2020,compared to $0.05 in the first quarter of 2019.

The weighted average number of diluted common shares outstanding was 31,174,119in the first quarter of 2020,compared to 31,513,297in the first quarter of 2019.

Balance Sheet

As of March 31,2020,total cash and cash equivalents and pledged cash were $132.6million,total accounts receivable including notes receivable were $196.5 million,accounts payable were $165.8 million and bank and government loans were $51.1 million. Total parent company stockholders' equity was $283.8million as of March 31,compared to $289.2million as of December 31,2019.

Business Outlook

By mid-March,most of the Company's production operations were up and running after the lockdown restrictions were lifted by the respective local governments as the COVID-19 outbreak subsidedin China. In April,the Company regained its full operating capacity and reopened its Wuhan headquarters after a temporary relocation to Jingzhou City in March.

Mr. Qizhou Wu,further commented,"Industry data show that April and May auto sales in China experienced a strong rebound. We remain cautiously hopeful that the resilience of Chinese economy and large consumer base will propel a reasonable recovery of the auto sector in the remaining part of the year."

Management reiterates itsrevenue guidance for the full year 2020 of $360 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 June 23,2020 at 8:00 A.M. EDT/8:00 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:

US Toll Free:

+1-877-407-8031

International:

+1-201-689-8031

China (toll free):

+ 86 400 120 2840

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

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 ten 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 LLCand Ford Motor Company 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 May 14,2020 and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. If the outbreak of COVID-19 is not effectively and timely controlled,our business operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook for automobile sales,the slowdown in regional and national economic growth,weakened liquidity and financial condition of our customers or other factors that we cannot foresee. Any of these factors and other factors beyond our control,could have an adverse effect on the overall business environment,cause uncertainties in the regions where we conduct business,cause our business to suffer in ways that we cannot predict and materially and adversely impact our business,financial condition and results of operations. A prolonged disruption or any further unforeseen delay in our operations of the manufacturing,delivery and assembly process within any of our production facilities could continue to result in delays in the shipment of products to our customers,increased costs and reduced revenue. 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)

ThreeMonthsEndedMarch 31,

2020

2019

Net product sales ($7,494 and $12,836 sold to related parties for the three

months ended March 31,2020 and 2019)

$

73,555

$

109,193

Cost of products sold ($3,134 and $5,504 purchased from related parties for

the three months ended March 31,2020 and 2019)

62,403

95,148

Gross profit

11,152

14,045

Gain on other sales

600

1,269

Less: Operating expenses

Selling expenses

2,118

3,085

General and administrative expenses

3,429

4,590

Research and development expenses

5,053

6,602

Total operating expenses

10,600

14,277

Income from operations

1,152

1,037

Other income,net

117

1,407

Interest expense

(365)

(568)

Financial expense,net

(531)

(665)

(Loss)/income before income tax expenses and equity in earnings of

affiliated companies

373

1,211

Less: Income taxes

514

198

Equity in (loss)/earnings of affiliated companies

(347)

211

Net (loss)/income

(488)

1,224

Net loss attributable to non-controlling interests

(533)

(243)

Net income attributable to parent company's common shareholders

$

45

$

1,467

Comprehensive income:

Net (loss)/income

$

(488)

$

1,224

Other comprehensive income:

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

(4,961)

6,363

Comprehensive (loss)/income

(5,449)

7,587

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

(897)

214

Comprehensive (loss)/income attributable to parent company

$

(4,552)

$

7,373

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

Basic -

$

-

$

0.05

Diluted -

$

-

$

0.05

Weighted average number of common shares outstanding

Basic

31,045

31,507,487

Diluted

31,119

31,297

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(In thousands of USD unless otherwise indicated)

March 31,2020

December31,2019

ASSETS

Current assets:

Cash and cash equivalents

$

108,171

$

76,708

Pledged cash

24,398

29,688

Accounts and notes receivable,net - unrelated parties

182,873

211,841

Accounts and notes receivable - related parties

13,625

21,164

Inventories

71,158

82,931

Other current assets

16,885

18,833

Total current assets

417,110

441,165

Non-current assets:

Property,plant and equipment,net

134,261

140,437

Land use rights,net

10,121

10,346

Long-term investments

40,790

39,642

Other non-current assets

27,395

28,374

Total assets

$

629,677

$

659,964

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term loans

$

44,057

$

46,636

Accounts and notes payable - unrelated parties

157,376

180,175

Accounts and notes payable - related parties

8,391

6,492

Accrued expenses and other payables

47,547

45,337

Other current liabilities

24,115

25,134

Total current liabilities

281,486

303,774

Long-term liabilities:

Long-term government loans

7,057

7,167

Other long-term payable

3,938

4,948

Long-term tax payable

26,693

26,693

Other non-current liabilities

7,901

8,010

Total liabilities

$

327,075

$

350,592

Stockholders' equity:

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

Issued - 32,338,302 and 32,302 shares as of March 31,2020 and

December 31,respectively

$

3

$

3

Additional paid-in capital

64,400

64,429

Retained earnings-

Appropriated

11,265

11,265

Unappropriated

220,493

221,237

Accumulated other comprehensive income

(8,059)

(3,462)

Treasury stock –1,164,257 and 1,257 shares as of March 31,2020

and December 31,respectively

(4,261)

(4,261)

Total parent company stockholders' equity

283,841

289,211

Non-controlling interests

18,761

20,161

Total stockholders' equity

302,602

309,372

Total liabilities and stockholders' equity

$

629,964

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)

Three MonthsEndedMarch 31,

2020

2019

Cash flows from operating activities:

Net (loss)/income

$

(488)

$

1,224

Adjustments to reconcile net (loss)/income from operations to

net cash provided by/(used in) operating activities:

Depreciation and amortization

5,100

3,987

Reversal of provision for doubtful accounts

(1)

(355)

Deferred income taxes

(34)

(84)

Equity in loss/(earnings) of affiliated companies

347

(211)

Government subsidy reclassified from government loans

287

-

Loss on fixed assets disposals

52

-

(Increase)/decrease in:

Accounts and notes receivable

33,303

(1,977)

Inventories

10,430

(121)

Other current assets

(3,455)

2,387

Increase/(decrease) in:

Accounts and notes payable

(18,047)

(21,299)

Accrued expenses and other payables

2,557

(2,208)

Other current liabilities

(824)

443

Net cash provided by/(used in) operating activities

29,227

(18,214)

Cash flows from investing activities:

Increase in demand loans and employee housing loans

included in other non-current assets

(212)

(249)

Cash received from property,plant and equipment sales

242

834

Payments to acquire property,plant and equipment (including

$242 and $760 paid to related parties for the three months

ended March 31,2020 and 2019,respectively)

(1,976)

(8,777)

Payments to acquire intangible assets

-

(1,194)

Investment under the equity method

(2,579)

-

Purchase of short-term investments

-

(15,563)

Proceeds from maturities of short-term investments

5,781

14,901

Cash received from long-term investment

448

-

Net cash provided by/(used in) investing activities

1,704

(10,048)

Cash flows from financing activities:

Proceeds from bank loans

14,368

15,275

Repayments of bank loans

(16,247)

(11,881)

Repayments of the borrowing for sale and leaseback transaction

(1,028)

(1,063)

Repurchase of common shares

-

(342)

Net cash (used in)/provided by financing activities

(2,907)

1,989

Effects of exchange rate on cash,cash equivalents and pledged

cash

(1,851)

1,980

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

cash

26,173

(24,293)

Cash,cash equivalents and pledged cash at beginning of the

period

106,396

115,969

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

$

132,569

$

91,676

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