China Automotive Systems Signed Supply Agreement with Volkswagen Joint Venture in China

WUHAN, Hubei, China, May 17, 2007 /Xinhua-PRNewswire/ -- China Automotive Systems, Inc. , a leading power steering components and systems supplier in China, today announced its subsidiary, Jingzhou Henglong Automotive Parts Co., has entered into an agreement with FAW Volkswagen to supply its high quality power steering systems.

The agreement will commence immediately, with a term of one year and an option to extend for a further two years. The power steering systems will be installed in Volkswagen's Jetta and Audi vehicles in China. The first commercial shipment will be delivered by China Automotive Systems on May 21st 2007. Other terms of the contract were not disclosed.

With this supply agreement, China Automotive Systems has entered into Volkswagen's global sourcing system. According to the China Association of Automobile Manufacturers, two key Volkswagen joint ventures in China, FAW Volkswagen and Shanghai Volkswagen, collectively produced and sold more than 680,000 passenger cars in China in 2006. FAW Volkswagen, the number one passenger car producer in China, experienced a robust 40% year over year unit sales growth in 2006. In the first quarter of 2007, FAW Volkswagen's production and sales unit growth accelerated to 55% up from same period in 2006.

"This agreement represents a major step towards our goal of becoming the number one producer in the power steering market in China. After a decade long effort of improving our product R&D, quality control, production scale and after-sale customer services, we have finally become a tier one supplier to one of the largest global automakers. We are very excited about this opportunity to provide reliable and dependable support to Volkswagen's rapid growth in China. As China's passenger vehicle OEM market continues to grow, we remain focused on expanding our market share and strengthening our relationships with major OEMs, like Volkswagen, by providing high quality and competitively priced products. In addition, we continue to improve product quality and ramp up production capacity to prepare for potential opportunities outside of China," said Mr. Hanlin Chen, Chairman and Chief Executive Officer of China Automotive Systems.