China Automotive Systems Reports Unaudited 2020 Third Quarter Results

WUHAN,China,Nov. 12,2020 -- 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 30,2020.

Third Quarter 2020 Highlights

Net sales increased 13.8% to $114.4 million compared with $100.5 million in the third quarter of 2019;

Gross profit decreased to $13.6 million and gross margin declined to 11.9% from 17.2% in the third quarter of 2019;

Income from operations was $0.1 million compared to income from operations of $4.4 million in the third quarter of 2019;

Net income attributable to parent company's common shareholders was $2.4 million,or diluted earnings per share of $0.08,compared to net income attributable to parent company's common shareholders of $4.3 million,or diluted earnings per share of $0.14,in the third quarter of 2019;

Approximately 322,000 shares of common stock were repurchased.

First Nine Months of 2020 Highlights

Net sales were $271.2 million compared to $315.5 million in the first nine months of 2019;

Gross margin was 12.0% compared with 14.8% in the same period last year;

Diluted loss per share attributable to parent company's common shareholders was $0.06 compared to diluted earnings per share attributable to parent company's common shareholders of $0.26 for the first nine months of 2019;

Net cash flow from operating activities was $52.7 million compared with $4.1 million for the first nine months of 2019;

Cash and cash equivalents and pledged cash deposits were $113.5 million as of September 30,2020.

Mr.Qizhou Wu,the Chief Executive Officer of CAAS,commented,"Our sales regained growth momentum in the third quarter as the Chinese economy has quickly rebounded from the worst effects of the COVID-19 pandemic. According to statistics from the China Association of Automobile Manufacturers ("CAAM"),new passenger car sales rose by 8.5% year-over-year in the month of July,by 6.0% in August and by 8.0% in September. As a leading supplier of steering products forChinese-branded vehicles,I am pleased that our sales growth outpaced the overall market. We still have work to do but we are encouraged by the positive signs on our way to a strong recovery."

"With the worst behind us in China,we believe the government will continue to promote policies to ensure continued economic growth and to introduce incentives for domestic consumption which will benefit the automobile industry," Mr. Wu concluded.

Mr.Jie Li,the Chief Financial Officer of CAAS,"Our operations continued to generate positive operating cash flow and we purchased less capital production equipment in the third quarter of 2020 as our capacity remains sufficient. Maintaining our financial strength has been one of our highest priorities as we continue to strengthen our balance sheet by reducing bank borrowing and controlling inventory. During the 3rd quarter,we also purchased approximately 322,000 shares of common stock in the open market that demonstrates our commitment to enhancing long-term shareholder value."

Third Quarter of 2020

In the third quarter of 2020,net sales rose 13.8% to $114.4 million compared to $100.5 million in the same quarter of 2019. The increase in net product sales was mainly due to a change in the product mix and higher domestic sales volume of the Company's hydraulic products combined with increased sales to North American customers. Net product sales to North America grew by 9.8% to $37.0 million compared to $33.8 million for the same quarter in 2019. Net product sales for the Company's electric power steering ("EPS") products were $16.7million,or 14.6% of net sales.

Gross profit was$13.6 millionin the third quarter of 2020,compared to$17.3 millionin the third quarter of 2019. Gross margin was 11.9% compared to 17.2% for the same period of 2019,mainly due to higher unit costs for EPS and export products compared to the third quarter last year.

Selling expenses were$3.8 millionin the third quarter of 2020,compared to$3.6 millionin the third quarter of 2019. Selling expenses represented 3.3% of net sales in the third quarter of 2020,compared to 3.6% in the third quarter of 2019.

General and administrative expenses ("G&A expenses") were $5.1 millionin the third quarter of 2020,compared to$4.4 millionin the same quarter of 2019. The increase was primarily due to higher office expenses. G&A expenses represented 4.5% of net sales in both the third quarter of 2020 and the third quarter of 2019.

Research and development expenses ("R&D expenses") were$6.1 millionin the third quarter of 2020,compared to$6.0 millionin the third quarter of 2019. R&D expenses represented 5.3% of net sales in the third quarter of 2020 compared with 6.0% in the third quarter last year. The lower R&D percentage was mainly due to more strict cost controls over R&D expenditures.

Net financial expense was$2.3 millionin the third quarter of 2020 compared to net financial income of$1.6 millionin the third quarter of 2019,which was mainly due to foreign exchange losses compared with foreign exchange gains in last year's third quarter.

Income from operations was $0.1millionin the third quarter of 2020,compared toincome from operations of $4.4 millionin the same quarter of 2019. The lower income from operations was mainly due to reduced gross profit and lower gross margin in the third quarter of 2020.

Loss before income tax expenses and equity in earnings of affiliated companies was$2.3 million in the third quarter of 2020,compared toincome before income tax expenses and equity in earnings of affiliated companies of $5.3 millionin the third quarter of 2019. The loss before income tax expenses and equity in earnings of affiliated companies was mainly due to lower gross profit and the lower income from operations in the third quarter of 2020 compared with the third quarter of 2019.

Net income attributable to parent company's common shareholders was$2.4 millionin the third quarter of 2020,compared to net income attributable to parent company's common shareholders of$4.3 millionin the third quarter of 2019. Diluted earnings per share were$0.08in the third quarter of 2020,compared to diluted earnings per share of$0.14in the third quarter of 2019.

The weighted average number of diluted common shares outstanding was 31,113,374 in the third quarter of 2020,compared to 31,492,035 in the third quarter of 2019.

First Nine Months of 2020

Net sales for the first nine months of 2019were$271.2 million,compared to$315.5 millionin the first nine months of 2019,reflecting the impact of the COVID-19 pandemic on the automobile industry in China and globally. Nine-month gross profit was$32.6 million,compared to$46.6 millionin the corresponding period last year. Nine-month gross margin was 12.0%,compared to 14.8% for the corresponding period in 2019. For the nine months endedSeptember 30,2020,gain on other sales amounted to$2.9 million,compared to$4.9 millionfor the corresponding period in 2019. Loss from operations was$4.1 millioncompared toincome from operations of $8.1 millionin the first nine months of 2019.

Net loss attributable to parent company's common shareholders was$1.8 millioncompared withnet income attributable to parent company's common shareholders of $8.2 millionin the corresponding period last year. Diluted loss per share was$0.06in the first nine months of 2020,compared to diluted earnings per share of$0.26 for the corresponding period in 2019.

As ofSeptember 30,total cash and cash equivalents and pledged cash deposits were$113.5 million. Total accounts receivable including notes receivable were$209.0million. Accounts payable including notes payable were$201.4 million,and short-term loans were$44.6 million. Total parent company stockholders' equity was$293.2 millionas ofSeptember 30,compared to$289.3 millionas ofDecember 31,2019.

Net cash provided by operating activities was $52.7 million in the first nine months of 2020 compared with net cash provided by operating activities of $4.1 million in the first nine months of 2019. Payments to acquire property,plant and equipment were $8.9 million compared with $23.6 million in the first ninemonths of 2019. Approximately 322,000 shares of common stock were repurchased during the third quarter of 2020,and the Company expects to repurchase more shares in the future,reflecting market conditions.

Business Outlook

Management has increased its revenue guidance from $360 million to $390 million for the full year 2020. 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 12,2020 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 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 LLC and 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 March 28,2019,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)

ThreeMonthsEndedSeptember 30,

2020

2019

Net product sales ($16,840and $12,277sold to related parties for the three

months ended September 30,2020 and 2019)

$

114,417

$

100,542

Cost of products sold ($7,012and $6,474purchased from related parties for

the three months ended September 30,2020 and 2019)

100,842

83,225

Gross profit

13,575

17,317

Gain on other sales

1,497

1,102

Less: Operating expenses

Selling expenses

3,800

3,563

General and administrative expenses

5,142

4,429

Research and development expenses

6,072

5,988

Total operating expenses

15,014

13,980

Income from operations

58

4,439

Other income

350

171

Interest expense

(403)

(787)

Financial (expense)/income,net

(2,313)

1,552

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

affiliated companies

(2,308)

5,375

Less: Income tax (benefit)/expense

(189)

948

Equity in earnings/(loss) of affiliated companies

3,632

(226)

Net income

1,513

4,201

Net loss attributable to non-controlling interests

(848)

(113)

Accretion to redemption value of redeemable non-controlling interests

(3)

-

Net income attributable to parent company's common shareholders

$

2,358

$

4,314

Comprehensive income:

Net income

$

1,513

$

4,201

Other comprehensive income:

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

12,774

(9,703)

Comprehensive income/(loss)

14,287

(5,502)

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

80

(837)

Comprehensive income/(loss) attributable to parent company

$

14,207

$

(4,665)

Net income attributable to parent company's common shareholders per

share -

Basic

$

0.08

$

0.14

Diluted

$

0.08

$

0.14

Weighted average number of common shares outstanding -

Basic

31,112,076

31,035

Diluted

31,374

31,035

China Automotive Systems,except share and per share amounts)

Nine MonthsEndedSeptember 30,

2020

2019

Net product sales ($40,439and $39,458sold to related parties

for the nine months ended September 30,2020 and 2019)

$

271,156

$

315,483

Cost of products sold ($16,298and $18,108purchased from

related parties for the nine months ended September 30,2020

and 2019)

238,598

268,936

Gross profit

32,558

46,547

Gain on other sales

2,935

4,856

Less: Operating expenses

Selling expenses

8,895

10,507

General and administrative expenses

13,330

13,453

Research and development expenses

17,390

19,343

Total operating expenses

39,615

43,303

(Loss)/income from operations

(4,122)

8,100

Other income,net

1,724

1,131

Interest expense

(1,214)

(2,086)

Financial (expense)/income,903)

2,439

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

earnings/(loss) of affiliated companies

(6,515)

9,584

Less: Income taxes

294

1,820

Equity in earnings/(loss) of affiliated companies

3,454

(222)

Net (loss)/income

(3,355)

7,542

Net loss attributable to non-controlling interests

(1,590)

(688)

Accretion to redemption value of redeemable non-controlling

interests

(3)

-

Net (loss)/income attributable to parent company's common

shareholders

$

(1,768)

$

8,230

Comprehensive income:

Net (loss)/income

$

(3,355)

$

7,542

Other comprehensive income:

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

8,171

(10,221)

Comprehensive income/(loss)

4,816

(2,679)

Comprehensive loss attributable to non-controlling interests

(1,059)

(1,454)

Comprehensive income/(loss) attributable to parent company

$

5,875

$

(1,225)

Net (loss)/income attributable to parent company's common

shareholders per share -

Basic

$

(0.06)

$

0.26

Diluted

$

(0.06)

$

0.26

Weighted average number of common shares outstanding -

Basic

31,153,162

31,498,553

Diluted

31,619

31,501,108

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(In thousands of USD unless otherwise indicated)

September 30,2020

December31,2019

ASSETS

Current assets:

Cash and cash equivalents

$

81,767

$

76,715

Pledged cash

31,721

29,688

Accounts and notes receivable,net - unrelated parties

189,144

211,841

Accounts and notes receivable - related parties

19,881

21,164

Inventories

82,011

82,931

Other current assets

35,834

18,974

Total current assets

440,358

441,313

Non-current assets:

Property,plant and equipment,net

136,058

140,481

Land use rights,net

10,392

10,346

Long-term investments

49,754

39,642

Other non-current assets

30,859

28,374

Total assets

$

667,421

$

660,156

LIABILITIES,MEZZANINE EQUITY AND STOCKHOLDERS'

EQUITY

Current liabilities:

Short-term loans

$

44,588

$

46,636

Accounts and notes payable - unrelated parties

189,915

180,175

Accounts and notes payable - related parties

11,518

6,492

Accrued expenses and other payables

48,866

45,341

Other current liabilities

25,918

25,135

Total current liabilities

320,805

303,779

Long-term liabilities:

Long-term government loans

-

7,167

Other long-term payable

2,103

4,948

Long-term tax payable

23,884

26,693

Other non-current liabilities

8,013

8,010

Total liabilities

$

354,805

$

350,597

Mezzanine equity:

Redeemable non-controlling interests

517

-

Stockholders' equity:

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

Issued - 32,338,302 and 32,302 shares as of September 30,2020

and December 31,respectively

$

3

$

3

Additional paid-in capital

64,273

64,466

Retained earnings-

Appropriated

11,265

11,265

Unappropriated

218,741

221,298

Accumulated other comprehensive income

4,181

(3,462)

Treasury stock - 1,486,526and 1,164,257 shares as of September 30,

2020 and December 31,respectively

(5,261)

(4,261)

Total parent company stockholders' equity

293,202

289,309

Non-controlling interests

18,897

20,250

Total stockholders' equity

312,099

309,559

Total liabilities,mezzanine equity and shareholders' equity

$

667,156

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)

Nine MonthsEndedSeptember 30,

2020

2019

Cash flows from operating activities:

Net (loss)/income

$

(3,356)

$

7,542

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

net cash provided by operating activities:

Depreciation and amortization

15,935

13,052

Reversal of provision for doubtful accounts

(360)

(692)

Deferred income taxes

464

(601)

Equity in (earnings)/loss of affiliated companies

(3,454)

222

Loss/(gain) on fixed assets disposals

67

(692)

Government subsidy reclassified from government loans

287

-

(Increase)/decrease in:

Accounts and notes receivable

29,454

16,243

Inventories

2,644

(1,615)

Other current assets

1,214

4,725

Increase/(decrease) in:

Accounts and notes payable

10,493

(28,793)

Accrued expenses and other payables

2,451

(4,374)

Long-term taxes payable

(2,809)

(2,810)

Other current liabilities

(1,330)

1,882

Net cash provided by operating activities

52,741

4,089

Cash flows from investing activities:

Decrease in demand loans and employee housing loans

included in other non-current assets

44

185

Cash received from property,plant and equipment sales

1,444

1,164

Payments to acquire property,plant and equipment (including

$1,577and $514paid to related parties for the nine months

ended September 30,2020 and 2019,respectively)

(8,879)

(23,571)

Payments to acquire intangible assets

(422)

(1,435)

Investment under the equity method

(5,360)

(2,491)

Purchase of short-term investments and long-term time

deposits

(42,716)

(19,647)

Government subsidy received for purchase of property,plant

and equipment

-

1,898

Proceeds from maturities of short-term investments

21,626

27,040

Cash received from long-term investment

448

579

Net cash used in investing activities

(33,815)

(16,278)

Cash flows from financing activities:

Proceeds from bank loans

39,586

54,675

Repayments of bank loans

(50,550)

(52,486)

Repayments of the borrowing for sale and leaseback transaction

(3,078)

(3,143)

Dividends paid to non-controlling interest holders of non-

wholly owned subsidiaries

-

(333)

Cash received from capital contributions by non-controlling

interest holder

722

3,542

Deemed distribution to shareholders

(88)

-

Acquisition of non-controlling interest

(81)

-

Repurchase of common shares

(1,000)

(443)

Net cash (used in)/provided by financing activities

(14,489)

1,812

Effects of exchange rate on cash,cash equivalents and pledged

cash

2,648

(3,284)

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

cash

7,085

(13,661)

Cash,cash equivalents and pledged cash at beginning of the

period

106,403

115,977

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

$

113,488

$

102,316

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