China Automotive Systems Reports Fourth Quarter and Fiscal Year 2008 Financial Results

WUHAN, Hubei, China, March 26, 2009: China Automotive Systems, Inc., the "Company", , a leading power steering components and systems supplier in China, today announced its 2008 fourth quarter and financial results for the year ended December 31, 2008.

  -- Net Sales for 2008 Fourth Quarter were $38.3 million
  -- Net Sales for the 2008 Year were $163.2 Million
  -- Diluted EPS for 2008 Year at $0.46
  -- Sales Growth of 10%-15% Expected in 2009

Mr. Qizhou Wu, Chief Executive Officer of the Company, commented, "The Chinese economy grew approximately 9.0% in 2008, which represents the slowest growth in the last few years as the global economic and financial crisis is also affecting China. The slowing domestic economy reduced the production and sales of automotive vehicles in the latter part of the year, but we still grew faster than the industry in general during 2008."

"As a result of the slowdown, the Chinese Government launched a number of stimulus measures to enhance the economy, including the automotive and agricultural industries. Beginning in late January 2009, vehicle sales began to respond to these incentives. A number of our major customers are positioned to benefit from these measures and we also expect to grow during the rest of 2009."

"Fourth quarter income was temporarily affected by the global economic and financial crisis. However, we maintained a high level of operations to meet customers' orders while we also added production capacity and inventories to accommodate future growth. Going forward, our unit cost and gross margin should benefit from our investment in advanced production equipment and lower material inventory expenses," Mr. Wu concluded.

Fourth Quarter 2008:

Total net sales for the fourth quarter of 2008 were $38.3 million compared with $37.7 million in the same period for 2007, and compared with $36.9 million for the third quarter of 2008.

Gross profit for the fourth quarter of 2008 was $10.7 million compared with $12.7 million in the fourth quarter of 2007, and compared with $9.9 million in the third quarter of 2008. The gross margin in the 2008 fourth quarter was 28%, up from 27% in the third quarter of 2008. The increase of gross margin was mainly due to the decline of raw material costs.

Operating income for the fourth quarter of 2008 was $964,000 compared with $3.5 million in the same quarter in 2007. Higher fourth quarter operating expenses included higher operating expenses compared with the previous year's fourth quarter mainly due to, 1) non-cash amortization related to convertible note discount, 2) stock based compensation, 3) higher bad debt provision, and 4) non-cash loss on change in fair value of derivative related to convertible notes.

Pro forma net income was $2.8 million compared with $1.8 million in the fourth quarter of 2007. Pro forma diluted EPS was $0.09, compared with $0.07 in the fourth quarter of 2007, based on a greater number of diluted shares outstanding.

GAAP net income for the fourth quarter of 2008 was $502,000, or $0.02 versus $2.2 million, or $ 0.09 per diluted share in the previous year's fourth quarter, and compared with $ 2.8 million, or $ 0.09 per diluted share for the third quarter of 2008, based on a greater number of diluted shares outstanding.