China Automotive Systems Reports a 26.8% Net Sales Increase in 2022 Third Quarter and 175% Diluted EPS Growth in First Nine Months

Q3 Revenues in Brazil Grew by 51.9% year-over-year Amid Currency Headwinds

WUHAN,China,Nov. 14,2022 -- 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 30,2022.

Third Quarter 2022 Highlights

Net sales increased by 26.8% to $137.2 million compared with $108.2 million in the third quarter of 2021;

Electric power steering ("EPS") product sales increased by 52.4% to $44.8 million;

Gross profit increased 24.4% to $20.9 million and gross margin was 15.2% compared with 15.5% in the third quarter of 2021;

Income from operations was $4.9 million compared with income from operations of $0.6 million in the third quarter of 2021;

Net income attributable to parent company's common shareholders was $7.5 million,or diluted income per share of $0.24,compared to a net loss attributable to parent company's common shareholders of $0.3 million,or diluted loss per share of $0.01,in the third quarter of 2021.

First Nine Months of 2022 Highlights

Net sales rose by 11.6% to $400.8 million compared to $359.2 million in the first nine months of 2021;

Gross profit increased 11.4% to $58.4 million and gross margin was 14.6% compared with 14.6% in the first nine months of 2021;

Income from operations was $10.6 million compared with income from operations of $4.9 million in the first nine months of 2021;

Net income attributable to parent company's common shareholders was $16.8 million,or diluted income per share of $0.55,compared to net income attributable to parent company's common shareholders of $6.1 million,or diluted income per share of $0.20 in the first nine months of 2021;

Free cash flow increased to $19.8 million compared with negative $11.7 million in the first nine months of 2021;

Cash and cash equivalents and pledged cash were $131.7 million as of September 30,2022.

Mr.Qizhou Wu,the Chief Executive Officer of CAAS,commented,"Overall vehicle sales in China rose by 29.4% in the third quarter of 2022 with passenger car sales up by 36.6% while commercial vehicles sales declined by 10.6%,according to data from the China Association of Automobile Manufacturers. U.S. auto sales declined slightly by 0.9% in the third quarter of 2022. Sales of both our traditional hydraulic and our EPS steering products grew during the third quarter of 2022. Overall,our sales in China remained strong as many of our customers experienced solid growth creating higher demand for our products."

"We look forward to the remainder of 2022 as we believe the auto industry will continue to be buoyant as Chinese GDP grew at 3.9% in the third quarter of 2022 according to the Chinese National Bureau of Statistics,exceeding a consensus estimate of 3.4%. The auto industry growth in China is still being hampered by lockdowns,COVID restrictions and supply chain issues. However,we believe these issues will be resolved over time and the government has been implementing favorable policies to further revitalize the economy. We are maintaining our market positions for when the auto markets more fully recover."

Mr.Jie Li,the Chief Financial Officer of CAAS,"Our financial position remains robust as we have generated positive cash flow from operations and have cash and cash equivalents and pledged cash of $131.7 million at September 30,2022. We are increasing our spending on new research and development projects and new machinery to add innovative products for future growth. We purchased 382,418 common shares in accordance with our share repurchase program in the third quarter of 2022."

Third Quarter of 2022

In the third quarter of 2022,net sales increased by 26.8% to $137.2 million compared to $108.2 million in the same quarter of 2021. The increase in net product sales was due to a 17.3% gain in the Company's sales of hydraulic products,and an increase of 52.4% in EPS net product sales. EPS net sales were $44.8 million,or 32.7% of net sales,compared with $29.4 million,or 27.2% of net sales,in the third quarter of 2021. Net product sales to North America decreased by 4.8% to $29.5 million,due primarily to changes in the product mix,compared with $31.0 million for the same quarter in 2021. Net product sales in Brazil rose by 51.9% to $11.5 million due to higher demand.

Gross profit was$20.9 millionin the third quarter of 2022,compared to$16.8 millionin the third quarter of 2021. Gross margin was 15.2% compared to 15.5% for the same period of 2021,mainly due to the change in product mix.

Selling expenses were$4.0 millionin the third quarter of 2022,compared to$4.8 millionin the third quarter of 2021. The lower selling expenses were mainly due to a decrease in transportation expenses. Selling expenses represented 2.9% of net sales in the third quarter of 2022,compared to 4.4% in the third quarter of 2021.

General and administrative expenses ("G&A expenses") were $4.9 millionin the third quarter of 2022,compared to$6.2 millionin the same quarter of 2021. The decrease was primarily due to a decline in the provision for credit losses provided for accounts receivable. G&A expenses represented 3.6% of net sales in the third quarter of 2022 compared with 5.7% of net sales in the third quarter of 2021.

Research and development expenses ("R&D expenses") increased by 66.7% to $9.5 million in the third quarter of 2022,compared to$5.7 millionin the third quarter of 2021. R&D expenses represented 6.9% of net sales in the third quarter of 2022 compared with 5.3% of net sales in the third quarter of 2021. Higher R&D expenditures were primarily due to increased investment for new projects.

Income from operations was $4.9 millionin the third quarter of 2022,compared toincome from operations of $0.6 millionin the same quarter of 2021. Higher income from operations was mainly due to increased gross profit,a higher gain on other sales and greater cost controls in the third quarter of 2022.

Other income was $0.7 million in the third quarter of 2022 compared with $2.4 million in the third quarter of 2021 primarily due to lower government subsidies received in the third quarter of 2022.

Net financial income was $4.8 million compared with net financial expense of $0.8 million in the third quarter of 2021 mainly due to the foreign exchange volatility of the US dollar against the RMB and the Brazilian Real.

Income before income tax expenses and equity in earnings of affiliated companies was$10.0 million in the third quarter of 2022,compared toincome before income tax expenses and equity in earnings of affiliated companies of $1.9 millionin the third quarter of 2021. The higher income before income tax expenses and equity in earnings of affiliated companies was mainly due to increased income from operations compared with the third quarter of 2021.

Income tax expense was $0.9 million in the third quarter of 2022,compared to an income tax expense of $2.4 million for the third quarter of 2021,which was mainly due to the valuation allowance recognized in the third quarter of 2021.

Net income attributable to parent company's common shareholders was$7.5 millionin the third quarter of 2022,compared to net loss attributable to parent company's common shareholders of$0.3 millionin the third quarter of 2021. Diluted income per share was$0.24in the third quarter of 2022,compared with diluted loss per share of$0.01in the third quarter of 2021.

The weighted average number of diluted common shares outstanding was 30,640,260 in the third quarter of 2022,compared to 30,851,776 in the third quarter of 2021.

First Nine Months of 2022

Net sales for the first nine months of 2022 increased by 11.6% to $400.8 compared with $359.2 million in the first nine months of 2021. Gross profit for the first nine months of 2022 increased by 11.4% to $58.4 million,compared to$52.4 millionin the corresponding period last year. Gross margin for the first nine months of 2022 was 14.6%,compared to 14.6% for the corresponding period in 2021. For the nine months endedSeptember 30,2022,gain on other sales amounted to$5.3 million,compared to$2.5 millionfor the corresponding period in 2021. Income from operations was$10.5 millioncompared toincome from operations of $4.9 millionin the first nine months of 2021.

Net income attributable to parent company's common shareholders was$16.8 millioncompared withnet income attributable to parent company's common shareholders of $6.1 millionin the corresponding period last year. Diluted income per share was$0.55in the first nine months of 2022,compared to diluted income per share of$0.20 for the corresponding period in 2021.

As ofSeptember 30,total cash and cash equivalents and pledged cash deposits were$131.7 million. Total accounts receivable including notes receivable were$208.6 million. Accounts payable including notes payable were$210.2 million. Total parent company stockholders' equity was$302.2 millionas ofSeptember 30,compared to$321.0 millionas ofDecember 31,2021.

Net cash provided by operating activities was $31.7 million in the first nine months of 2022 compared with net cash used in operating activities of $5.9 million in the first nine months of 2021. Payments to acquire property,plant and equipment were $11.8 million compared with $5.3 million in the first nine months of 2021.

Business Outlook

Management increases its revenue guidance to $540 million for the full year 2022. 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 14,2022 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 see the dial-in information below,enter the call 10 minutes before the call start time and ask to be connected to the "China Automotive Systems" conference with pin 258800.

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 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 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 Annual Report on Form 10-K 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. 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,

2022

2021

Net product sales ($11,181 and $14,691 sold to related parties for the

three months ended September 30,2022 and 2021)

$

137,207

$

108,231

Cost of products sold ($7,689 and $6,505 purchased from related parties

for the three months ended September 30,2022 and 2021)

116,289

91,439

Gross profit

20,918

16,792

Gain on other sales

2,290

487

Less: Operating expenses

Selling expenses

3,978

4,802

General and administrative expenses

4,893

6,174

Research and development expenses

9,450

5,712

Total operating expenses

18,321

16,688

Income from operations

4,887

591

Other income,net

744

2,407

Interest expense

(384)

(255)

Financial income/(expense),net

4,760

(821)

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

10,007

1,922

Less: Income taxes

899

2,441

Add: Equity in (loss)/earnings of affiliated companies

(1,101)

251

Net income/(loss)

8,007

(268)

Less: Net income attributable to non-controlling interests

529

42

Accretion to redemption value of redeemable non-controlling interests

(8)

(7)

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

$

7,470

$

(317)

Comprehensive income:

Net income/(loss)

$

8,007

$

(268)

Other comprehensive income:

Foreign currency translation loss,net of tax

(18,705)

(1,338)

Comprehensive loss

(10,698)

(1,606)

Less: Comprehensive loss attributable to non-controlling interests

(604)

(40)

Accretion to redemption value of redeemable non-controlling interests

(8)

(7)

Comprehensive loss attributable to parent company

$

(10,102)

$

(1,573)

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

Basic

$

0.24

$

(0.01)

Diluted

$

0.24

$

(0.01)

Weighted average number of common shares outstanding -

Basic

30,637,876

30,776

Diluted

30,260

30,776

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,

2022

2021

Net product sales ($31,343 and $47,016 sold to related parties for the nine months ended

September 30,2022 and 2021)

$

400,764

$

359,176

Cost of products sold ($21,725 and $21,916 purchased from related parties for the nine

months ended September 30,2022 and 2021)

342,401

306,807

Gross profit

58,363

52,369

Gain on other sales

5,326

2,528

Less: Operating expenses

Selling expenses

12,358

14,857

General and administrative expenses

15,309

16,852

Research and development expenses

25,473

18,318

Total operating expenses

53,140

50,027

Income from operations

10,549

4,870

Other income,net

7,067

5,636

Interest expense

(1,156)

(892)

Financial income/(expense),net

9,318

(878)

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

25,778

8,736

Less: Income taxes expense

5,013

3,280

Add: Equity in (loss)/earnings of affiliated companies

(2,674)

435

Net income

18,091

5,891

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

1,229

(219)

Accretion to redemption value of redeemable non-controlling interests

(23)

(21)

Net income attributable to parent company's common shareholders

$

16,839

$

6,089

Comprehensive income:

Net income

$

18,091

$

5,891

Other comprehensive income:

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

(36,323)

1,977

Comprehensive (loss)/income

(18,232)

7,868

Less: Comprehensive loss attributable to non-controlling interests

(957)

(92)

Accretion to redemption value of redeemable non-controlling interests

(23)

(21)

Comprehensive (loss)/income attributable to parent company

$

(17,298)

$

7,939

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

Basic

$

0.55

$

0.20

Diluted

$

0.55

$

0.20

Weighted average number of common shares outstanding -

Basic

30,778,336

30,779,883

30,855,967

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,

2022

December 31,

2021

ASSETS

Current assets:

Cash and cash equivalents

$

100,712

$

131,695

Pledged cash

31,033

27,804

Accounts and notes receivable,net - unrelated parties

199,636

195,729

Accounts and notes receivable,net - related parties

8,919

14,607

Inventories

104,629

116,493

Other current assets

43,251

15,052

Total current assets

488,180

501,380

Non-current assets:

Property,plant and equipment,net

104,877

127,721

Land use rights,439

10,732

Long-term investments

52,755

36,966

Other non-current assets

19,642

39,963

Total assets

$

674,893

$

716,762

LIABILITIES,MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term loans

$

44,208

$

47,592

Accounts and notes payable - unrelated parties

197,610

214,590

Accounts and notes payable - related parties

12,578

13,464

Accrued expenses and other payables

48,321

50,332

Other current liabilities

32,058

25,838

Total current liabilities

334,775

351,816

Long-term liabilities:

Long-term tax payable

15,805

21,075

Long term loans

532

-

Other non-current liabilities

6,140

6,430

Total liabilities

$

357,252

$

379,321

Commitments and Contingencies

Mezzanine equity:

Redeemable non-controlling interests

575

553

Stockholders' equity:

Common stock,$0.0001 par value - Authorized - 80,000,000 shares; Issued –32,338,302

and 32,302 shares as of September 30,2022 and December 31,2021,respectively

$

3

$

3

Additional paid-in capital

63,731

63,731

Retained earnings-

Appropriated

11,481

11,481

Unappropriated

243,202

226,363

Accumulated other comprehensive income

(9,420)

24,717

Treasury stock –1,938,129 and 1,486,526 shares as of September 30,2022 and December

31,respectively

(6,828)

(5,261)

Total parent company stockholders' equity

302,169

321,034

Non-controlling interests

14,897

15,854

Total stockholders' equity

317,066

336,888

Total liabilities,mezzanine equity and stockholders' equity

$

674,762

China Automotive Systems,Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)

Nine MonthsEnded

September 30,

2022

2021

Cash flows from operating activities:

Net income

$

18,891

Adjustments to reconcile net income from operations to net cash provided by

operating activities:

Share-based compensation

-

88

Depreciation and amortization

17,402

19,686

Provision of credit losses

602

1,644

Deferred income taxes

2,880

2,573

Equity in loss/(earnings) of affiliated companies

2,674

(435)

Loss on fixed assets disposals

35

71

(Increase)/decrease in:

Accounts and notes receivable

(21,616)

6,631

Inventories

115

(17,500)

Other current assets

(3,748)

(129)

Increase/(decrease) in:

Accounts and notes payable

5,795

(11,506)

Accrued expenses and other payables

3,004

(2,325)

Long-term taxes payable

(2,809)

(2,809)

Other current liabilities

9,252

(7,462)

Other non-current liabilities

-

(285)

Net cash provided by/(used in) operating activities

31,677

(5,867)

Cash flows from investing activities:

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

288

(357)

Repayment of loan from a related party

-

154

Cash received from property,plant and equipment sales

1,143

252

Payments to acquire property,plant and equipment (including $2,632 and

$929 paid to related parties for the nine months ended September 30,2022

and 2021,respectively)

(11,842)

(5,344)

Payments to acquire intangible assets

(68)

(505)

Investment under the equity method

(12,802)

(308)

Purchase of short-term investments

(79,311)

(46,212)

Proceeds from maturities of short-term investments

55,944

40,016

Cash received from long-term investment

3,986

10,116

Net cash used in investing activities

(42,662)

(2,188)

Cash flows from financing activities:

Proceeds from bank loans

43,616

42,700

Repayments of bank loans

(41,465)

(44,854)

Repayments of the borrowing for sale and leaseback transaction

(1,130)

(3,328)

Repurchase of common shares

(1,567)

-

Acquisition of non-controlling interest

-

(538)

Net cash used in financing activities

(546)

(6,020)

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

(16,223)

1,015

Net decrease in cash,cash equivalents and pledged cash

(27,754)

(13,060)

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

159,499

128,061

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

$

131,745

$

115,001

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