China Automotive Systems Reports Third Quarter Results

SHANGHAI, China, Nov. 17, 2003 -- China Automotive Systems, Inc. (BULLETIN BOARD: CAAS) , today announced financial results for the third quarter ended September 30, 2003.

"We are on target with our financial goals for the year," said Hanlin Chen, chief executive officer of China Automotive Systems. "As the number two leader in the power steering market in China, we will continue to pursue aggressive strategies on a technological level to increase our competitive edge further. The opportunities for continued strong growth in the automotive sector in China for the near-term are very good. Longer term, prospects are even better as the Chinese middle class move toward first-time auto owner status. China Automotive Systems expects to benefit from this explosive growth."

The Company's sino-foreign joint ventures are presented on a consolidated basis for the three months and nine months ended September 30, 2003, as compared to the equity method of accounting for the comparable periods ended September 30, 2002. Accordingly, the results of operations for the three months and nine months ended September 30, 2003 are not comparable to the periods ended September 30, 2002.

Net sales for the three months and nine months ended September 30, 2003 were $13,287,000 and $36,776,000 respectively.

Gross profit for the three months and nine months ended September 30, 2003 was $5,824,000 or 43.8% of net sales and $16,479,000 or 44.8% of net sales respectively.

Administrative, selling and general expenses for the three months and nine months ended September 30, 2003 were $1,101,000 and $5,037,000 respectively.

Stock Compensation. During March 2003, in connection with the reverse acquisition completed in March, 2003, the Company issued common stock purchase warrants to three consultants to acquire an aggregate of 550,375 shares of common stock, exercisable for a period of one year at $1.20 per share. The aggregate fair value of these warrants, calculated pursuant to the Black- Scholes option pricing model, was $1,300,000, which was charged to operations for the three months ended March 31, 2003.

Profit from operations for the three and nine-month periods ended September 30, 2003 was $4,095,000 and $8,505,000 respectively. Excluding the non-cash charge of $1,300,000 related to the issuance of warrants in March 2003, profit from operations would have been $9,805,000 for the nine months ended September 30, 2003.

Profit Before Minority Interest. Profit before minority interest was $4,186,000 for the three months ended September 30, 2003 and $7,741,000 for the nine months ended September 30, 2003. Excluding the non-cash charge of $1,300,000 relating to the issuance of warrants in March 2003, profit before minority interest would have been $9,041,000 for the nine months ended September 30, 2003.

Minority Interest. The Company recorded the minority interests' share in each sino-foreign joint venture's earnings aggregating $1,769,000 for the three months ended September 30, 2003 and $4,506,000 for the nine months ended September 30, 2003.

Net profit was $2,417,000 for the three months ended September 30, 2003 and $3,235,000 for the nine months ended September 30, 2003.

Liquidity and Capital Resources:

At September 30, 2003, cash and cash equivalents were $5,736,000 and working capital was $17,568,000 reflecting a current ratio of 1.46:1.

At September 30, 2003, the Company's total assets were $74,747,000 and its shareholders' equity was $19,905,000.

Based in Shanghai, China, China Automotive Systems, Inc., registered as a Delaware corporation, through its wholly owned subsidiary, owns joint venture interests in five entities in China that manufacture power steering systems and other products for different segments of the automobile industry in China.