China Automotive Systems Reports Unaudited 2021 Third Quarter Results

WUHAN,China,Nov. 12,2021 -- 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 30,2021.

Third Quarter 2021 Highlights

Net sales decreased 5.4% to $108.2 million compared with $114.4 million in the third quarter of 2020;

Electric power steering ("EPS") product sales increased by 76.0% to $29.4 million;

Gross profit increased 23.5% to $16.8 million and gross margin increased to 15.5% from 11.9% in the third quarter of 2020;

Income from operations was $0.6 million compared with income from operations of $0.1 million in the third quarter of 2020;

Net loss attributable to parent company's common shareholders was $0.3 million,or diluted loss per share of $0.01,compared to net income attributable to parent company's common shareholders of $2.4 million,or diluted earnings per share of $0.08,in the third quarter of 2020.

First Nine Months of 2021 Highlights

Net sales rose by 32.4% to $359.2 million compared to $271.2 million in the first nine months of 2020;

Gross profit increased 60.8% to $52.4 million and gross margin increased to 14.6% from 12.0% in the first nine months of 2020;

Income from operations was $4.9 million compared with loss from operations of $4.1 million in the first nine months of 2020;

Net income attributable to parent company's common shareholders was $6.1 million,or diluted income per share of $0.20,compared to net loss attributable to parent company's common shareholders of $1.8 million,or diluted loss per share of $0.06,in the first nine months of 2020;

Cash and cash equivalents and pledged cash were $115.0 million as of September 30,2021.

Mr.Qizhou Wu,the Chief Executive Officer of CAAS,commented,"Passenger car sales declined by 13% in the third quarter of 2021 while commercial vehicles sales declined by 24.0%,according to statistics from the China Association of Automobile Manufacturers. U.S. auto sales were down approximately 13% for the third quarter of 2021 and September monthly sales decreased by 26% as a chip shortage further reduced production."

"Our activity in Europe has accelerated. During the third quarter of 2021,we developed a new steering system for one of Europe's leading auto brands,Alfa Romeo. The 2021 Tonale is Alfa Romeo's first luxury plug-in-hybrid SUV model. Purchase orders for approximately 100,000 annual units are expected for this new CAAS steering system. In July 2021,we received the SGS TÜV ISO26262:2018 ASIL-D certification from SGS TUS,which is headquartered in Germany. The D certification is the highest and most stringent safety standard. And our related party,Swedish Sentient AB's technology is receiving significant interest especially for its autonomous driving capabilities."

"While both the Chinese and North American auto markets are temporarily disrupted due to the shortage of chips,our EPS sales are growing stronger and our South American operations are booming."

Mr.Jie Li,the Chief Financial Officer of CAAS,"We maintained our strong financial position as cash and cash equivalents and pledged cash was $115.0 million and working capital was $145.6 million at September 30,2021. We have sufficient production capacity so our capital spending has been reduced. Our investment in new technologies will lead us to new growth products in the future."

Third Quarter of 2021

In the third quarter of 2021,net sales decreased by 5.4% to $108.2 million compared to $114.4 million in the same quarter of 2020. The decrease in net product sales was mainly due to the decline in market demand as a result of the chips shortage and other overall auto market trends. Sales of the Company's hydraulic products decreased 19.3%. Net product sales for the Company's EPS products increased by 76.0% to $29.4 million,or 27.2% of net sales,compared with $16.7 million,or 14.6% of net sales,in the third quarter of 2020. Net product sales to North America decreased by 16.2% to $31.0 million,due to lower sales volumes,compared with $37.0 million for the same quarter in 2020.

Gross profit was$16.8 millionin the third quarter of 2021,compared to$13.6 millionin the third quarter of 2020. Gross margin was 15.5% compared to 11.9% for the same period of 2020,mainly due to changes in the product mix.

Selling expenses were$4.8 millionin the third quarter of 2021,compared to$3.8 millionin the third quarter of 2020. The higher selling expenses were mainly related to higher personnel and logistics expenses. Selling expenses represented 4.4% of net sales in the third quarter of 2021,compared to 3.3% in the third quarter of 2020.

General and administrative expenses ("G&A expenses") were $6.2 millionin the third quarter of 2021,compared to$5.1 millionin the same quarter of 2020. The increase was primarily due to the increased bad debt provision for accounts receivable. G&A expenses represented 5.7% of net sales in the third quarter of 2021 compared with 4.5% of net sales in the third quarter of 2020.

Research and development expenses ("R&D expenses") were$5.7 millionin the third quarter of 2021,compared to$6.1 millionin the third quarter of 2020. R&D expenses represented 5.3% of net sales in the third quarters each of 2021 and 2020. Lower R&D was mainly due to reduced personnel expenses.

Income from operations was $0.6millionin the third quarter of 2021,compared toincome from operations of $0.1 millionin the same quarter of 2020. The higher income from operations was mainly due to higher gross profit and higher gross margin in the third quarter of 2021.

Other income was $2.4 million in the third quarter of 2021 compared with $0.4 million in the third quarter of 2020 primarily due to higher government subsidies received in the third quarter of 2021.

Financial expense,net was $0.8 million in the third quarter of 2021 compared with $2.3 million in the third quarter of 2020 mainly due to lower foreign exchange losses.

Income before income tax expenses and equity in earnings of affiliated companies was$1.9 million in the third quarter of 2021,compared toloss before income tax expenses and equity in earnings of affiliated companies of $2.3 millionin the third quarter of 2020. The increase of income before income tax expenses and equity in earnings of affiliated companies was mainly due to higher other income and lower financial expense compared with the third quarter of 2020.

Income tax expense was $2.4 million in the third quarter of 2021,compared to an income tax benefit of $0.2 million for the third quarter of 2020,which was mainly due to an increase in the valuation allowance recognized in the third quarter of 2021.

Net loss attributable to parent company's common shareholders was$0.3 millionin the third quarter of 2021,compared to net income attributable to parent company's common shareholders of$2.4 millionin the third quarter of 2020. Diluted lossper share was$0.01in the third quarter of 2021,compared with diluted earnings per share of$0.08in the third quarter of 2020.

The weighted average number of diluted common shares outstanding was 30,851,776 in the third quarter of 2021,compared to 31,113,374 in the third quarter of 2020.

First Nine Months of 2021

Net sales for the first nine months of 2021 increased by 32.4% to $359.2 million,compared to$271.2 millionin the first nine months of 2020. Gross profit for the first nine months of 2021 increased by 60.8% to $52.4 million,compared to$32.6 millionin the corresponding period last year. Gross margin for the first nine months of 2021 was 14.6%,compared to 12.0% for the corresponding period in 2020. For the nine months endedSeptember 30,2021,gain on other sales amounted to$2.5 million,compared to$2.9 millionfor the corresponding period in 2020. Income from operations was$4.9 millioncompared toloss from operations of $4.1 millionin the first nine months of 2020.

Net income attributable to parent company's common shareholders was$6.1 millioncompared withnet loss attributable to parent company's common shareholders of $1.8 millionin the corresponding period last year. Diluted income per share was$0.20in the first nine months of 2021,compared to diluted loss per share of$0.06 for the corresponding period in 2020.

As ofSeptember 30,total cash and cash equivalents and pledged cash deposits were$115.0 million. Total accounts receivable including notes receivable were$227.3 million. Accounts payable including notes payable were$215.1 million,and short-term loans were$42.2 million. Total parent company stockholders' equity was$326.3 millionas ofSeptember 30,compared to$319.4 millionas ofDecember 31,2020.

Net cash used in operating activities was $5.9 million in the first nine months of 2021 compared with net cash provided by operating activities of $52.7 million in the first nine months of 2020. Payments to acquire property,plant and equipment were $5.3 million compared with $8.9 million in the first ninemonths of 2020.

Business Outlook

Management reiterated its revenue guidance of $495 million for the full year 2021. 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 12,2021 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: +1-888-506-0062 (North America)

Phone Number: +1-973-528-0011 (International)

Mainland China Toll Free: +86-400-120-3199

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 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 a deteriorating market outlook for automobile sales,a 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)

ThreeMonthsEnded

September 30,

2021

2020

Net product sales ($14,691 and $16,840 sold to related parties for the three

months ended September 30,2021 and 2020)

$

108,231

$

114,417

Cost of products sold ($6,505 and $7,012 purchased from related parties for the

three months ended September 30,2021 and 2020)

91,439

100,842

Gross profit

16,792

13,575

Gain on other sales

487

1,497

Less: Operating expenses

Selling expenses

4,802

3,800

General and administrative expenses

6,174

5,142

Research and development expenses

5,712

6,072

Total operating expenses

16,688

15,014

Income from operations

591

58

Other income

2,407

350

Interest expense

(255)

(403)

Financial expense,net

(821)

(2,313)

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

companies

1,922

(2,308)

Less: Income taxes expense/(benefit)

2,441

(189)

Add: Equity in earnings of affiliated companies

251

3,632

Net (loss)/income

(268)

1,513

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

42

(848)

Accretion to redemption value of redeemable non-controlling interests

(7)

(3)

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

$

(317)

$

2,358

Comprehensive income:

Net (loss)/income

$

(268)

$

1,513

Other comprehensive income:

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

(1,338)

12,774

Comprehensive (loss)/income

(1,606)

14,287

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

(40)

77

Accretion to redemption value of redeemable non-controlling interests

(7)

(3)

Comprehensive (loss)/income attributable to parent company

$

(1,573)

$

14,207

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

share -

Basic

$

(0.01)

$

0.08

Diluted

$

(0.01)

$

0.08

Weighted average number of common shares outstanding -

Basic

30,776

31,112,076

Diluted

30,374

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)

Nine MonthsEnded

September 30,

2021

2020

Net product sales ($47,016 and $40,439 sold to related parties for the nine months

ended September 30,2021 and 2020)

$

359,176

$

271,156

Cost of products sold ($21,916 and $16,298 purchased from related parties for the nine

months ended September 30,2021 and 2020)

306,807

238,598

Gross profit

52,369

32,558

Gain on other sales

2,528

2,935

Less: Operating expenses

Selling expenses

14,857

8,895

General and administrative expenses

16,852

13,330

Research and development expenses

18,318

17,390

Total operating expenses

50,027

39,615

Income/(loss) from operations

4,870

(4,122)

Other income,net

5,636

1,724

Interest expense

(892)

(1,214)

Financial expense,net

(878)

(2,903)

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

companies

8,736

(6,515)

Less: Income taxes expense

3,280

294

Add: Equity in earnings of affiliated companies

435

3,454

Net income/(loss)

5,891

(3,355)

Less: Net loss attributable to non-controlling interests

(219)

(1,590)

Accretion to redemption value of redeemable non-controlling interests

(21)

(3)

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

$

6,089

$

(1,768)

Comprehensive income:

Net income/(loss)

$

5,891

$

(3,355)

Other comprehensive income:

Foreign currency translation income,net of tax

1,977

8,171

Comprehensive income

7,868

4,816

Comprehensive loss attributable to non-controlling interests

(92)

(1,062)

Accretion to redemption value of redeemable non-controlling interests

(21)

(3)

Comprehensive income attributable to parent company

$

7,939

$

5,875

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

Basic

$

0.20

$

(0.06)

Diluted

$

0.20

$

(0.06)

Weighted average number of common shares outstanding -

Basic

30,153,162

Diluted

30,855,967

31,162

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 Balance Sheets

(In thousands of USD unless otherwise indicated)

September 30,

2021

December 31,

2020

ASSETS

Current assets:

Cash and cash equivalents

$

80,729

$

97,248

Pledged cash

34,272

30,813

Accounts and notes receivable,net - unrelated parties

200,221

216,519

Accounts and notes receivable - related parties

27,055

17,621

Inventories

106,427

88,325

Other current assets

28,762

25,132

Total current assets

477,466

475,658

Non-current assets:

Property,plant and equipment,net

129,249

141,004

Land use rights,net

10,623

10,774

Long-term investments

40,742

49,766

Other non-current assets

28,066

30,358

Total assets

$

686,146

$

707,560

LIABILITIES,MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term loans

$

42,210

$

44,238

Accounts and notes payable - unrelated parties

203,132

212,522

Accounts and notes payable - related parties

11,975

12,730

Accrued expenses and other payables

52,293

55,607

Other current liabilities

22,228

29,387

Total current liabilities

331,838

354,484

Long-term liabilities:

Other long-term payable

-

1,126

Long-term tax payable

21,074

23,884

Other non-current liabilities

6,437

8,151

Total liabilities

$

359,349

$

387,645

Mezzanine equity:

Redeemable non-controlling interests

544

523

Stockholders' equity:

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

32,338,302 and 32,302 shares as of September 30,2021 and December 31,2020,

respectively

$

3

$

3

Additional paid-in capital

63,731

64,273

Retained earnings-

Appropriated

11,303

11,303

Unappropriated

221,580

215,491

Accumulated other comprehensive income

19,263

17,413

Treasury stock –1,486,526 and 1,526 shares as of September 30,2021 and

December 31,respectively

(5,261)

(5,261)

Total parent company stockholders' equity

310,619

303,222

Non-controlling interests

15,634

16,170

Total stockholders' equity

326,253

319,392

Total liabilities,mezzanine equity and stockholders' equity

$

686,560

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)

Nine MonthsEnded

September 30,

2021

2020

Cash flows from operating activities:

Net income/(loss)

$

5,355)

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

by operating activities:

Share-based compensation

88

-

Depreciation and amortization

19,686

15,935

Provision/(reversal) of credit losses

1,644

(360)

Deferred income taxes

2,573

464

Equity in gain of affiliated companies

(435)

(3,454)

Government subsidy reclassified from government loans

-

287

Loss on fixed assets disposals

71

67

(Increase)/decrease in:

Accounts and notes receivable

6,631

29,454

Inventories

(17,500)

2,644

Other current assets

(129)

1,214

Increase/(decrease) in:

Accounts and notes payable

(11,506)

10,493

Accrued expenses and other payables

(2,325)

2,451

Long-term taxes payable

(2,809)

(2,809)

Other current liabilities

(7,462)

(289)

Other non-current liabilities

(285)

-

Net cash used in operating activities

(5,867)

52,742

Cash flows from investing activities:

(Decrease)/increase in demand loans included in other non-current assets

(357)

44

Repayment of loan from a related party

154

-

Cash received from property,plant and equipment sales

252

1,444

Payments to acquire property,plant and equipment (including $929and $1,677paid to

related parties for the nine months ended September 30,2021 and 2020,respectively)

(5,344)

(8,879)

Payments to acquire intangible assets

(505)

(422)

Investment under the equity method

(308)

(5,360)

Purchase of short-term investments and long-term time deposits

(46,212)

(42,716)

Proceeds from maturities of short-term investments

40,016

21,626

Cash received from long-term investment

10,116

448

Net cash used in investing activities

(2,188)

(33,815)

Cash flows from financing activities:

Proceeds from bank loans

42,700

39,586

Repayments of bank loans

(44,854)

(50,550)

Repayments of the borrowing for sale and leaseback transaction

(3,328)

(3,078)

Cash received from capital contributions by non-controlling interest holder

-

722

Deemed distribution to shareholders

-

(88)

Acquisition of non-controlling interest

(538)

(81)

Repurchase of common shares

-

(1,000)

Net cash used in financing activities

(6,020)

(14,489)

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

1,015

2,647

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

(13,060)

7,085

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

$

115,001

$

113,488

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