China Automotive Systems Reports 90.0% Increase in Net Income Per Share to $0.57 in the First Six Months of 2023

WUHAN,China,Aug. 11,2023 --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 second quarter and six months ended June 30,2023.

Second Quarter 2023 Highlights

Net sales rose 8.1% year-over-year to $137.4 million from $127.2 million in the second quarter of 2022.

Gross profit was $22.7 million,which is consistent with the $22.7 million in the second quarter of 2022.

Income from operations was $7.8 million,compared to income from operations of $7.2 million in the second quarter of 2022.

Net income attributable to parent company's common shareholders was $10.5 million,or diluted earnings per share of $0.35,compared to net income attributable to parent company's common shareholders of $9.4 million,or diluted earnings per share of $0.31 in the second quarter of 2022

First Six Months of 2023 Highlights

Net sales grew by 6.1% year-over-year to $279.7 million,compared to $263.6 million in the first six months of 2022.

Gross profit increased by 18.4%year-over-year to $44.3 million,compared to $37.4 million in the first six months of 2022.

Income from operations rose by 171.9% year-over-year to $15.5 million compared to income from operations of $5.7 million in the first six months of 2022.

Net income attributable to parent company's common shareholders was $17.3 million,compared to net income attributable to parent company's common shareholders of $9.4 million in the first six months of 2022;

Diluted earnings per share attributable to parent company's common shareholders increased by 90.0% year-over-year to $0.57,compared todiluted earnings per share attributable to parent company's common shareholders of $0.30 in the first six months of 2022.

Cash and cash equivalents,and pledged cash were $125.5 million,or approximately $4.16 per share,as of June 30,2023.

Mr.Qizhou Wu,Chief Executive Officer of CAAS,commented,"Our revenue growth accelerated in the second quarter. Most of our divisions reported higher sales and most encouragingly,net sales of our advanced electric power steering ("EPS") grew by 28.4% year-over-year."

"According to statistics from the China Association of Automobile Manufacturers,overall automobile sales in China increased by 17.9% year-over-year in the second quarter of 2023 with passenger vehicles sales rising by 19.3% year-over-year and commercial vehicle sales up 10.1% year-over-year. For the six months ended June 30,2023,overall car sales increased by 9.8% year-over-year as passenger vehicle sales grew 8.8% year-over-year and commercial vehicle sales grew by 15.8% year-over-year."

"Chinese GDP growth rate for the first half of 2023 was 5.5% year-over-year. The Chinese government recently announced a plan to increase economic growth through policy changes and incentives. The automobile,housing and real estate,tourism and other services sectors were highlighted as key parts of this plan. We are hopeful that new changes and forthcoming policies can help boost consumer confidence and further improve the automotive market," Mr. Wu concluded.

Mr. Jie Li,Chief Financial Officer of CAAS,"We maintained a strong balance sheet with cash and cash equivalents plus pledged cash of $125.5 million,with working capital of $153.3 million at June 30,2023. In the first six months of 2023,we used approximately $5.4 million to acquire property,plant and equipment. During the second quarter,we also managed cost reductions by reducing spending in selling,and general and administrative,and research and development expenses."

Second Quarter of 2023

Net sales increased by 8.1% year-over-year to $137.4 million in the second quarter of 2023,compared to $127.2 million in the second quarter of 2022. Net sales of traditional steering products and parts increased by 1.1% year-over-year to $95.8 million for the second quarter of 2023,compared to $94.8 million for the same quarter in 2022. Net sales of EPS products rose 28.4% year-over-year to $41.6 million from $32.4 million for the same period in 2022. EPS product sales were 30.3% of the total net sales for the second quarter of2023,compared to 25.5% for the same period in 2022. Export net sales to North American customers decreased by 24.5% year-over-year to $28.9 million in the second quarter of 2023,compared to $38.3 million in the second quarter of 2022. North American sales declined due to less demand and the effects of foreign exchange fluctuations. Sales in Brazil rose 43.5% year-over-year to $12.2 million in the second quarter of 2023 from $8.5 million in the second quarter of 2022.Gross profit was $22.7 million,which is stable to $22.7 million in the second quarter of 2022. Gross margin in the second quarter of2023was 16.5%,compared to 17.9% in the second quarter of 2022. The decrease in gross margin was mainly due to the changes in the product mix.Gain on other sales was $0.7 million,compared to $2.1 million in the second quarter of 2022.Selling expenses decreased by 6.7% year-over-year to $3.8 million compared to $4.1 million in the second quarter of 2022,primarily due to lower marketing and office expenses. The appreciation of the USD against RMB also affected expense levels. Selling expenses represented 2.8% of net sales in the second quarter of 2023,compared to 3.2% in the second quarter of 2022.General and administrative expenses ("G&A expenses") decreased by 6.9% year-over-year to $5.3 million compared to$5.7 million in the second quarter of 2022,primarily due to reversal of credit losses and the impact of appreciation of the USD against the RMB. G&A expenses represented 3.9% of net sales in the second quarter of 2023,compared to 4.5% of net sales in the second quarter of 2022.Research and development expenses ("R&D expenses") decreased by 16.2% year-over-year to $6.6 million compared to $7.9 million in the second quarter of 2022. R&D expenses represented 4.8% of net sales in the second quarter of 2023compared to 6.2% in the second quarter of 2022.Other income,net was $2.0 million for the second quarter of 2023,compared to $2.8 million for the three months ended June 30,2022.Incomefrom operations was $7.8 million in the second quarter of 2023,compared to income from operations of $7.2 million in the second quarter of 2022. The increase was primarily due to lower operating costs.Interest expensewas $0.3 million in the second quarter of 2023,compared to $0.4million in the second quarter of 2022.Net financial incomewas $4.0 million in the second quarter of 2023,compared to net financial incomeof $2.5 million in the second quarter of 2022. The change in net financial incomewas primarily due to the appreciation of the USD against RMB.Incomebefore income tax expenses and equity in earnings of affiliated companies was $13.4 million in the second quarter of 2023,compared to income before income tax expenses and equity in earnings of affiliated companies of $12.2 million in the second quarter of 2022.Net income attributable to parent company's common shareholders was $10.5 million in the second quarter of 2023,compared to net income attributable to parent company's common shareholders of $9.4 million in the second quarter of 2022. Diluted earnings per share was $0.35 in the second quarter of 2023,compared to $0.31 per share in the second quarter of 2022.The weighted average number of diluted common shares outstanding was 30,189,537 in the second quarter of 2023,compared to 30,849,009 in the second quarter of 2022.First Six Months of 2023 Net sales increased by 6.1% year-over-year to $279.7 million in the first six months of 2023,compared to $263.6 million in the first six months of 2022. Six-month gross profit was $44.3 million,compared to $37.4 million in the corresponding period last year. Six-month gross margin was 15.9%,compared with 14.2% in the first six months of 2022. Gain on other sales was $1.4 million in the first six months of 2023,compared to $3.0 million in the corresponding period last year. Income from operations was $15.5 million in the first six months of 2023,compared with income from operations of $5.7 million in the first six months of 2022.Net income attributable to parent company's common shareholders was $17.3 million in the first six months of 2023,compared to net income attributable to parent company's common shareholders of $9.4 million in the corresponding period in 2022. Diluted earnings per share increased by 90.0% year-over-year to $0.57 in the first six months of 2023,compared to diluted earnings per share of $0.30 in the first six months of 2022.Balance SheetAs of June 30,total cash and cash equivalents,total accounts receivable including notes receivable,were $234.0 million,accounts payable including notes payable,were $216.7 million and short-term loans were $38.5 million. Total parent company stockholders' equity was $317.8 million as of June 30,compared to $311.7 million as of December 31,2022.Business OutlookManagement has reiterated its revenue guidance for the full year 2023 of $560.0 million. This target is based on the Company's current views on operating and market conditions,which are subject to change.Conference CallManagement will conduct a conference call on August 11,2023 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 seethe dial-in information below,enter the call10 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: +86-400-120-3199Code: 235847A replay of the call will be available on the Company's website under the investor relations section.About China Automotive Systems,Inc. Based inHubei 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 eight 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 StatementsThis 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. 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 as 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. 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.

jieli@chl.com.cnKevin Theiss

Awaken Advisors

+1-212-521-4050

Kevin@awakenlab.com-Tables Follow –China Automotive Systems,Inc. and SubsidiariesCondensed Unaudited Consolidated Statements of Operations and Comprehensive Income(In thousands of USD,except share and per share amounts)

Three Months Ended June30,

2023

2022Net product sales ($13,194 and $9,158 sold to related parties for the three

months ended June 30,2023 and 2022)

$137,410

$127,161Cost of products sold ($7,311 and $6,496 purchased from related parties for the

three months ended June 30,2023 and 2022)

114,692

104,450Gross profit

22,718

22,711Gain on other sales

742

2,105Less: Operating expenses

Selling expenses

3,794

4,068General and administrative expenses

5,271

5,662Research and development expenses

6,606

7,886Total operating expenses

15,671

17,616Income from operations

7,789

7,200Other income,net

1,963

2,804Interest expense

(276)

(370)Financial income,net

3,543Income before income tax expenses and equity in earnings of affiliated

companies

13,439

12,177Less: Income taxes expense

1,487

3,156Add: Equity in (loss)/earnings of affiliated companies

(484)

914Net income

11,468

9,935Less: Net income attributable to non-controlling interests

995

500Accretion to redemption value of redeemable non-controlling interests

(7)

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

$10,466

$9,428Comprehensive income:

Net income

$11,468

$9,935Other comprehensive income:

Foreign currency translation loss,net of tax

(16,886)

(19,055)Comprehensive loss

(5,418)

(9,120)Comprehensive loss attributable to non-controlling interests

(80)

(642)Accretion to redemption value of redeemable non-controlling interests

(7)

(7)Comprehensive loss attributable to parent company

$(5,345)

$(8,485)

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

Basic

$0.35

$0.31Diluted

$0.35

$0.31

Weighted average number of common shares outstanding -

Basic

30,185,702

30,847,706Diluted

30,537

30,009China Automotive Systems,except share and per share amounts)

Six Months Ended June30,

2023

2022Net product sales ($26,770 and $20,162 sold to related parties for the six

months ended June 30,2023 and 2022)

$279,653

$263,557Cost of products sold ($14,326 and $14,036 purchased from related parties

for the six months ended June 30,2023 and 2022)

235,317

226,112Gross profit

44,336

37,445Gain on other sales

1,395

3,036Less: Operating expenses

Selling expenses

7,178

8,380General and administrative expenses

10,024

10,416Research and development expenses

12,996

16,023Total operating expenses

30,198

34,819Income from operations

15,533

5,662Other income,465

6,323Interest expense

(525)

(772)Financial income,541

4,558Income before income tax expenses and equity in earnings of affiliated

companies

22,014

15,771Less: Income taxes expense

2,316

4,114Add: Equity in loss of affiliated companies

(347)

(1,573)Net income

19,351

10,084Less: Net income attributable to non-controlling interests

2,050

700Accretion to redemption value of redeemable non-controlling interests

(15)

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

$17,286

$9,369Comprehensive income:

Net income

$19,351

$10,084Other comprehensive income:

Foreign currency translation loss,net of tax

(12,332)

(17,618)Comprehensive income/(loss)

7,019

(7,534)Comprehensive income/(loss) attributable to non-controlling interests

1,241

(353)Accretion to redemption value of redeemable non-controlling interests

(15)

(15)Comprehensive income/(loss) attributable to parent company

$5,763

$(7,196)

Net income attributable to parent company's common shareholders per

share -

Basic

$0.57

$0.30Diluted

$0.57

$0.30Weighted average number of common shares outstanding -

Basic

30,730Diluted

30,191,309

30,850,859China Automotive Systems,Inc. and SubsidiariesCondensed Unaudited Consolidated Balance Sheets(In thousands of USD unless otherwise indicated)

June30,2023

December31,2022ASSETS

Current assets:

Cash and cash equivalents

$95,620

$121,216Pledged cash

29,921

37,735Accounts and notes receivable,net- unrelated parties

217,493

214,308Accounts and notes receivable,net- related parties

16,547

10,016Inventories

100,262

112,236Other current assets

28,063

25,207Total current assets

487,906

520,718Non-current assets:

Property,plant and equipment,net

99,347

106,606Land use rights,net

9,080

9,555Long-term investments

62,179

59,810Other non-current assets

26,065

17,663Total assets

$684,577

$714,352

LIABILITIES,MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term loans

$38,457

$45,671Accounts and notes payable-unrelated parties

205,951

218,412Accounts and notes payable-related parties

10,762

16,695Accrued expenses and other payables

45,972

48,311Other current liabilities

33,458

35,106Total current liabilities

334,600

364,195Long-term liabilities:

Long-term tax payable

8,781

15,805Other non-current liabilities

6,761

6,937Total liabilities

$350,142

$386,937

Commitments and Contingencies

Mezzanine equity:

Redeemable non-controlling interests

598

582

Stockholders' equity:

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

shares as of June 30,2023 and December 31,2022,respectively

$3

$3Additional paid-in capital

63,731

63,731Retained earnings-

Appropriated

11,851

11,851Unappropriated

264,460

247,174Accumulated other comprehensive income

(14,936)

(3,413)Treasury stock – 2,152,600 and 2,600 shares as of June30,2023 and December31,

respectively

(7,695)

(7,695)Total parent company stockholders' equity

317,414

311,651Non-controlling interests

16,423

15,182Total stockholders' equity

333,837

326,833Total liabilities,mezzanine equity and stockholders' equity

$684,352China Automotive Systems,Inc. and SubsidiariesCondensed Unaudited Consolidated Statements of Cash Flows(In thousands of USD unless otherwise indicated)

Six Months Ended June30,

2023

2022Cash flows from operating activities:

Net income

$19,084Adjustments to reconcile net income from operations to net cash provided by operating activities:

Depreciation and amortization

9,528

12,012(Reversal)/provision of credit losses

(459)

527Deferred income taxes

237

2,945Equity in loss of affiliated companies

347

1,573Loss on fixed assets disposals

15

46(Increase)/decrease in:

Accounts and notes receivable

(18,323)

(4,333)Inventories

8,355

896Other current assets

(904)

(1,218)Increase/(decrease) in:

Accounts and notes payable

(10,323)

(6,156)Accrued expenses and other payables

(604)

(2,643)Long-term taxes payable

(5,268)

(2,809)Other current liabilities

(2,004)

3,560Net cash (used in)/provided by operating activities

(52)

14,484Cash flows from investing activities:

(Increase)/decrease in demand loans included in other non-current assets

(14)

291Cash received from property,plant and equipment sales

582

572Payments to acquire property,plant and equipment (including $2,022 and $2,143 paid to related parties for the

six months ended June30,2023 and 2022,respectively)

(5,438)

(7,881)Payments to acquire intangible assets

(2,361)

(41)Investment under the equity method

(7,729)

(5,480)Purchase of short-term investments

(40,491)

(59,758)Proceeds from maturities of short-term investments

30,822

45,150Cash received from long-term investment

583

2,704Net cash used in investing activities

(24,046)

(24,443)Cash flows from financing activities:

Proceeds from bank loans

34,280

35,852Repayments of bank loans

(39,836)

(32,916)Repayments of the borrowing for sale and leaseback transaction

—

(1,130)Repurchase of common shares

—

(196)Net cash (used in)/ provided by financing activities

(5,556)

1,610Effects of exchange rate on cash,cash equivalents and pledged cash

(3,756)

(7,327)Net decrease in cash,cash equivalents and pledged cash

(33,410)

(15,676)Cash,cash equivalents and pledged cash at beginning of the period

158,951

159,498Cash,cash equivalents and pledged cash at end of the period

$125,541

$143,822