China Automotive Systems Reports 77.0% Net Sales Increase and Return to Profitability in the First Quarter of 2021

WUHAN,China,May 12,2021 -- 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 31,2021.

First Quarter 2021 Highlights

Net sales rose 77.0% to $130.3 million from $73.6 million in the first quarter of 2020

Gross profit increased 75.9% to $19.7 million from $11.2 million in the first quarter of 2020; gross margin was 15.1% compared with 15.2% in the first quarter of 2020

Income from operations increased 320.0% to $4.2 million from $1.0 million in the first quarter of 2020

Net income attributable to parent company's common shareholders was $3.2 million,or diluted income of per share of $0.10,compared to net loss attributable to parent company's common shareholders of $0.03 million,in the first quarter of 2020

Cash and cash equivalents,and pledged cash were $122.0 million as of March 31,2021

Mr. Qizhou Wu,chief executive officer of CAAS,commented,"We are excited to report accelerated top line growth in the first quarter driven by increased demand in each of our key markets - Chinese OEM passenger vehicles,Chinese OEM commercial vehicles and exports to North and South America."

"According to statistics from the China Association of Automobile Manufacturers ("CAAM"),automobile sales in China rose by 75.6% year-over-year in the first quarter of 2021 as passenger vehicle sales grew 75.1% year-over-year and commercial vehicle sales increased by 77.3% year-over-year."

"Each of our operational units achieved sales growth and was profitable in the first quarter of 2021 as all our manufacturing lines were operating at a high utilization rate. Our sales to the Chinese commercial vehicle OEMs rose by approximately 169% year-over-year and sales of our electric power steering products ("EPS") by our Henglong KYB joint venture rose by 200% year-over-year in the first quarter of 2021. North American sales rose by 26.3% year-over-year in the first quarter of 2021,and our Brazil Henglong joint venture has already announced an expected 200% increase in unit sales in South America for the 2021 year."

"We have increased our investment in research and development by 28.6% as automobile technology continues to evolve. Our new EPS system integrates and communicates with the vehicles' main data architecture to provide key Advanced Driver Assistance Systems (ADAS) functions including lane keeping assist (LKA),automatic parking assist (APA),lane centering (LCK) and traffic jam assist (TJA). Other new products are under development as well as ongoing efforts to improve the performance and quality of current steering products. Our new products will continue to provide new growth opportunities and solidify our leadership role in the global steering market."

Mr. Jie Li,chief financial officer of CAAS,"We continued to maintain our financial strength even as we increased investment and expenditures in the first quarter of 2021 to support our growth as we maintained our cash levels,accountsreceivable and payable amounts,and our inventories."

First Quarter of 2021

Net sales increased by 77.0% to $130.3 million in the first quarter of 2021,compared to $73.6 million in the first quarter of 2020. The net sales increase was mainly due to the recovery of the Chinese economy and Chinese automobile demand post-COVID-19. Net sales of traditional steering products and parts increased by 61.2% to $105.6 million for the first quarter of 2021,compared to $65.5 million for the same period in 2020. Net sales of electric power steering ("EPS") products rose 204.9% to $24.7 million from $8.1 million for the same period in 2020. EPS product sales were 19.0% of the total net sales for the first quarterof2021,compared with 11.0% for the same period in 2020. Export net sales rose 30.4% to $40.7 million in the first quarter of 2021 compared with $31.2 million in the first quarter of 2020.Gross profit rose by 75.9% to $19.7 million compared to $11.2 million in the first quarter of 2020. Gross margin in the first quarter of 2021 was 15.1% generally consistent with the 15.2% in the first quarter of 2020.Gain on other sales was $1.3 million,compared to $0.6 million in the first quarter of 2020.Selling expenses were$5.6 million compared to $2.1 million in the first quarter of 2020. This increase in selling expenses was primarily due to higher sales volumes and increased air freight charges. Selling expenses represented 4.3% of net sales in the first quarter of 2021 compared to 2.9% in the first quarter of 2020.General and administrative expenses ("G&A expenses") were $4.6 million compared to$3.4 million in the first quarter of 2020. The increase in G&A expenses was primarily due to higher personnel costs to support the increase in net sales. G&A expenses represented 3.5% of net sales in the first quarter of 2021 compared to 4.6% of net sales in the first quarter of 2020.Research and development expenses ("R&D expenses") were$6.7 million compared to $5.2 million in the first quarter of 2020. R&D expenses represented 5.1% of net sales in the first quarter of 2021compared to 7.1% in the first quarter of 2020.Other income,net was $1.7million for the first quarter of 2021,compared to $0.1 million for the three months ended March 31,2020. The increase of $1.6million was mainly due to government subsidies of $1.4 million received in the first three months of 2021.Income from operations was $4.2million in the first quarter of 2021,compared to $1.0 million in the first quarter of 2020. This growth was primarily due to a higher year-over-year increase in sales and gross profit compared with the increase in operating expenses.Interest expensewas $0.3million in the first quarter of 2021,compared to $0.4million in the first quarter of 2020,primarily due to less loans.Net financial expense was $0.2million in the first quarter of 2021,compared to $0.5 million in the first quarter of 2020. The reduction in net financial expense was primarily due to less foreign exchange losses.Income before income tax expenses and equity in earnings of affiliated companies was $5.3 million in the first quarter of 2021,compared to $0.2 million in the first quarter of 2020. The increase in income before income tax expenses and equity in earnings of affiliated companies in the first quarter of 2021 was mainly due to higher income from operations and higher other income.Net income attributable to parent company's common shareholders was $3.2million in the first quarter of 2021,compared to a net loss attributable to parent company's common shareholders of $0.03 million in the first quarter of 2020. Diluted income per share was $0.10in the first quarter of 2021,compared to nil per share in the first quarter of 2020.The weighted average number of diluted common shares outstanding was 30,857,736 in the first quarter of 2021 compared to 31,174,045 in the first quarter of 2020.Balance SheetAs of March 31,2021,total cash and cash equivalents,and pledged cash were $122.0million,total accounts receivable including notes receivable were $236.6 million,accounts payable including notes payable were $223.9 million and short-term bank and government loans were $46.2 million. Total parent company stockholders' equity was $304.4 million as of March 31,compared to $303.2 million as of December 31,2020.Business OutlookManagement raises revenue guidance for thefull year 2021 to $485 million from $470 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 May 12,2021 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 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 Fiat Chrysler Automobiles (FCA) 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 30,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. 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.

jieli@chl.com.cn

Kevin Theiss

Awaken Advisors

+1-212-521-4050

Kevin@awakenlab.com

- Tables Follow -

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(In thousands of USD unless otherwise indicated)

March 31,2021

December31,2020

ASSETS

Current assets:

Cash and cash equivalents

$

90,374

$

97,248

Pledged cash

31,663

30,813

Accounts and notes receivable,net - unrelated parties

217,372

216,519

Accounts and notes receivable - related parties

19,273

17,621

Inventories

89,638

88,325

Other current assets

30,963

25,132

Total current assets

479,283

475,658

Non-current assets:

Property,plant and equipment,net

138,542

141,004

Land use rights,net

10,626

10,774

Long-term investments

45,518

49,766

Other non-current assets

27,794

30,358

Total assets

$

701,763

$

707,560

LIABILITIES,MEZZANINE EQUITYAND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term loans

$

46,193

$

44,238

Accounts and notes payable - unrelated parties

212,925

212,522

Accounts and notes payable - related parties

10,984

12,730

Accrued expenses and other payables

51,458

55,607

Other current liabilities

27,216

29,387

Total current liabilities

348,776

354,484

Long-term liabilities:

Other long-term payable

35

1,126

Long-term tax payable

23,884

23,884

Other non-current liabilities

8,105

8,151

Total liabilities

$

380,800

$

387,645

Commitments and Contingencies

Mezzanine equity:

Redeemable non-controlling interests

530

523

Stockholders' equity:

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

32,338,302 and 32,302 shares as of March 31,2021 and December 31,2020,

respectively

$

3

$

3

Additional paid-in capital

64,361

64,273

Retained earnings-

Appropriated

11,303

11,303

Unappropriated

218,697

215,491

Accumulated other comprehensive income

15,285

17,413

Treasury stock -1,486,526 and 1,526 shares as of March 31,2021 and

December 31,respectively

(5,261)

(5,261)

Total parent company stockholders' equity

304,388

303,222

Non-controlling interests

16,045

16,170

Total stockholders' equity

320,433

319,392

Total liabilities,mezzanine equity and stockholders' equity

$

701,560

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,

2021

2020

Net product sales ($16,575and $7,494sold to related parties for the three months ended

March 31,2021 and 2020)

$

130,341

$

73,555

Cost of products sold ($8,214and $3,134purchased from related parties for the three

months ended March 31,2021 and 2020)

110,593

62,403

Gross profit

19,748

11,152

Gain on other sales

1,316

600

Less: Operating expenses

Selling expenses

5,609

2,118

General and administrative expenses

4,615

3,429

Research and development expenses

6,680

5,193

Total operating expenses

16,904

10,740

Income from operations

4,160

1,012

Other income,net

1,723

117

Interest expense

(343)

(365)

Financial expense,net

(239)

(531)

Income before income tax expenses and equity in loss of affiliated companies

5,301

233

Less: Income taxesexpense

(641)

(514)

Less: Equity in loss of affiliated companies

(1,429)

(347)

Net income/(loss)

3,231

(628)

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

18

(600)

Accretion to redemption value of redeemable non-controlling interests

(7)

-

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

$

3,206

$

(28)

Comprehensive income:

Net income/(loss)

$

3,231

$

(628)

Other comprehensive income:

Foreign currency translation loss,net of tax

(2,271)

(4,961)

Comprehensive income/(loss)

960

(5,589)

Comprehensive loss attributable to non-controlling interests

(118)

(1,053)

Comprehensive income/(loss) attributable to parent company

$

1,078

$

(4,536)

Net income/(loss) attributable to parent company's common shareholders per share -

Basic

$

0.10

$

-

Diluted

$

0.10

$

-

Weighted average number of common shares outstanding -

Basic

30,851,776

31,045

Diluted

30,736

31,045

Share-based compensation included in operating expense above is as follows:

General and administrative expenses

88

-

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)

Three MonthsEndedMarch 31,

2021

2020

Cash flows from operating activities:

Net income/(loss)

$

3,231

$

(628)

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

(used in)/provided by operating activities:

Share-based compensation

88

-

Depreciation and amortization

6,544

5,101

Reversal of credit losses

(177)

(1)

Deferred income taxes

(254)

(34)

Equity in loss of affiliated companies

1,429

347

Government subsidy reclassified from government loans

-

287

Loss on fixed assets disposals

9

52

(Increase)/decrease in:

Accounts and notes receivable

(3,972)

33,444

Inventories

(1,934)

10,430

Other current assets

(1,371)

(3,455)

Increase/(decrease) in:

Accounts and notes payable

1,595

(18,032)

Accrued expenses and other payables

(4,135)

2,557

Other current liabilities

(1,811)

(824)

Net cash (used in)/provided by operating activities

(758)

29,244

Cash flows from investing activities:

Increase in demand loans and employee housing loans included in other

non-current assets

(33)

(212)

Repayment of loan from a related party

154

-

Cash received from property,plant and equipment sales

51

242

Payments to acquire property,plant and equipment (including $137and

$242paid to related parties for the three months ended March 31,2021

and 2020,respectively)

(3,267)

(1,984)

Payments to acquire intangible assets

(112)

-

Investment under the equity method

-

(2,579)

Purchase of short-term investments

(14,661)

-

Proceeds from maturities of short-term investments

9,873

5,781

Cash received from long-term investment

2,237

448

Net cash (used in)/provided by investing activities

(5,758)

1,696

Cash flows from financing activities:

Proceeds from bank loans

12,569

14,368

Repayments of bank loans

(10,086)

(16,247)

Repayments of the borrowing for sale and leaseback transaction

(1,107)

(1,028)

Net cash provided by/(used in) financing activities

1,376

(2,907)

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

(884)

(1,851)

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

(6,024)

26,182

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

128,061

106,403

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

$

122,037

$

132,585

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