National Press Release

WUHAN, Hubei, China, March 26 /PRNewswire-Asia/ -- China Automotive Systems, Inc., the "Company", (Nasdaq: CAAS), 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.

    Summary of Financial Results
    (US dollars except shares outstanding)         For the Three Months
                                                    Ended December 31,
                                                   2008             2007

    Total net sales                         $    38,267,148  $    37,698,542

    GAAP Net Income                                 501,933        2,187,233
    Amortization related to convertible
     note discount and Interest expenses
     of convertible note                            384,394               --

    Stock-based compensation                        250,026          153,675
    Allowance for doubtful accounts
     (Recovered)                                    960,435         (563,002)

    Loss on change in fair value of
     derivative                                     674,556               --

    Adjustments to the Net Income                 2,269,411         (409,327)
    Pro forma Net Income                          2,771,344        1,777,906


    GAAP Earnings per share                            0.02             0.09

       Adjustment to diluted EPS                       0.07            (0.02)

    Pro forma diluted EPS                              0.09             0.07

    Diluted avg. number of common shares         31,925,211       23,968,841



    Fiscal Year 2008:
    (in millions except per share
    and percentage, audited)
                                             2008        2007   Growth Rate

    Steering gear for commercial
     vehicles                               $40.5       $35.8      13.1%
    Steering gear for passenger
     vehicles                               107.2        83.9      27.8%
    Other                                    15.5        13.9      10.2%
    Total Net Sales                         163.2       133.6      22.1%
    Net Income                               12.4         8.9      40.4%
    Diluted earnings per share              $0.46       $0.37      19.6%

Total net sales for the year 2008 increased to $163.2 million from $133.6 million in the 2007 year, reflecting a 22.1% year-over-year growth. The Company's sales growth was generated by China's rising economy especially in the first half of 2008, higher income levels leading to higher vehicle sales, and investment in the national economy generating a greater number of commercial vehicle sales in China during 2008.

Gross profit for the year 2008 increased to $47.3 million compared with $45.3 million, in 2007 reflecting a 4.3% increase year-over-year. The gross margin in 2008 was 29% compared with 34% in 2007 primarily due to higher raw material prices. The Company is re-designing products and production techniques to enhance the gross margin as well as increasing prices on some commercial vehicle products.

Operating income for the year 2008 was $16.9 million versus $21.3 million in 2007. Higher operating expenses in 2008 included higher selling, and general and administrative expenses compared with the previous year 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 gain on change in fair value of derivative related to convertible notes.

Pro forma net income was $14.2 million compared with $8.1 million in fiscal year 2007. Pro forma diluted EPS was $0.48, compared with $0.34 in fiscal year 2007, reflecting 41.2% year-over-year growth. For 2008, the total number of diluted shares outstanding was 29,668,726 as compared with 23,958,705 in 2007.

GAAP net income for the 2008 year was $12.4 million compared with $8.9 million in 2007, reflecting a 40.4% year-over-year growth. Diluted earnings per share for year 2008 were $0.46 versus $0.37 last year, reflecting 24.3% year-over-year growth, on a greater number of diluted shares outstanding.

    Summary of Financial Results
    (US dollars except shares outstanding,
     GAAP numbers audited)
                                              Fiscal Year Ended December 31,
                                                   2008             2007
    Total net sales                        $    163,179,286 $    133,597,003

    GAAP Net Income                              12,435,241        8,859,906
    Interest expenses of convertible notes
     payable
                                                    918,750
    Amortization related to convertible
     note discount                                  424,665               --

    Stock-based compensation                        345,426          153,675

    Allowance for doubtful accounts
     (Recovered)                                  1,030,738         (881,423)

    (Gain) Loss on change in fair value of
     derivative                                    (998,014)              --

    Adjustments to the Net Income                 1,721,565         (727,748)
    Pro forma Net Income                         14,156,806        8,132,158


    GAAP diluted earnings per share                    0.46             0.37

       Adjustment to diluted EPS                       0.02            (0.03)

    Pro forma diluted EPS                              0.48             0.34

    Diluted avg. number of common shares         29,668,726       23,958,705

Total cash and cash equivalents as of December 31, 2008 were $37.1 million compared with $19.5 million at December 31, 2007. Net cash flow from operations during the 2008 year was $16.4 million compared with $11.3 million for the 2007 period. During 2008, the Company invested $10 million to complete the acquisition of Jingzhou Henglong Automotive Parts Co., Ltd., "Henglong", and another $12.2 million in property, plant and equipment to expand and modernize production capacity. Stockholder's equity increased to $81.3 million from $67.2 million as of December 31, 2007.

Key Accomplishments in 2008:

In February 2008, the Company completed a $35 million private placement of senior convertible notes with warrants with two accredited institutional investors.

In April 2008, the Company acquired another 35.5% of Henglong, so its total ownership reached 80%. This new 35.5% ownership of Henglong was immediately accretive to net earnings in 2008. Among Henglong's main customers are some of China's leading automobile manufacturers, such as Chery Auto, Brilliance Auto, BYD Auto, Geely Auto and FAW Volkswagen. The purchase price was approximately $32.1 million.

In July 2008, the Company announced that Dongfeng Peugeot Citroen Automobile Co. Ltd., "DPCA", ordered 3,000 power steering gears per month for the Dongfeng Peugeot 206 automotive model.

In September 2008, the Company announced that Henglong signed an agreement to supply power steering units to ChangAn Auto Co. Ltd., "ChangAn Auto", one of the largest Chinese auto manufacturing groups, for the model CV6.

In October 2008, the Company received orders from DPCA for power steering gears for another model, the Dongfeng Elysee. For the 206 and Elysee models, DPCA switched to only using power steering gears from the Company, replacing imported gears.

In November 2008, the Company announced its first supply contract for power steering gears with a major vehicle manufacturer headquartered in North America. This agreement acknowledges that the Company has met the stringent high-quality requirements of the global markets.

Mr. Hanlin Chen, Chairman of the Company said, "2008 was an eventful year as we consolidated our profit center, acquired a number of new domestic customers, entered into North America's OEM market, and proved we can make products that meet global quality standards. We have more export orders today than at any time in our history and we look forward to receiving additional orders from customers overseas. We also continued to invest in our production capability to become more efficient and meet the growing demand for our products."

Other Event

In October 2008, the Company announced that the Chairman, Mr. Hanlin Chen, the Chief Executive Officer, Mr. Qizhou Wu, Chief Financial Officer, Mr. Jie Li and other officers intended to purchase the Company's stock in the open market. The table below summarizes management's purchases to date.

    Total number of shares      Total amount        Price range
    151,600                     $426,897            $2.07-US$3.57

Recent Developments

In February 2009, the Company announced that it sold approximately 1.3 million systems and components in 2008 compared with 1.1 million in 2007. This increase reflects continued orders from the Company's major historical customers and new customers acquired in 2008.

In March 2009, the Company announced that Henglong planned to set a record monthly production of 85,000 power steering units for passenger vehicles in March 2009, and another subsidiary, Zhejiang Henglong & Vie Pump-Manufacturing Co. Limited, "WanAn", had matched its record daily production rate of 1,600 units following the Chinese New Year due to a large number of new orders.

Also in March, the Company's subsidiary, Jingzhou Hengsheng Automotive System Co., Ltd., welcomed officials of the Hubei Provincial Government to visit its facilities. Hubei is very important to auto manufacturing in China as it is the headquarters of the second largest Chinese automotive OEM, Dongfeng Motors, and the second largest steel maker, Wisco.

2009 Outlook

Management expects revenue growth to be between 10-15%. These targets are based on the Company's current views on operating and market conditions, which are subject to change.

Mr. Qizhou Wu, the Company's Chief Executive Officer, commented, "We believe the worst of the economic crisis in China is now behind us. In January 2009, China overtook the United States to become the world's largest automotive market. We anticipate that the stimulus packages in China will continue to generate greater economic activity, resulting in further growth in the domestic automotive market of 2009."

About China Automotive Systems, Inc.

Based in Hubei Province, 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 seven Sino-foreign joint ventures. The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles. The Company currently offers 4 separate series of power steering and 307 models of power steering with an annual production capacity of 1.3 million sets, steering columns, steering oil pumps and steering hoses. Its customer base is comprised of leading Chinese auto manufacturers such as China FAW Group, Corp., Dongfeng Auto Group Co., Ltd., Brilliance China Automotive Holdings Ltd., Beiqi Foton Motor Co., Ltd. and Chery Automobile Co., Ltd., etc. For more information, please visit: http://www.caasauto.com .

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the Company's operations, financial performance and condition, and the impact of acquisitions on its financial performance. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, the impact of competitive products, pricing and new technology; changes in demand for the Company's products; changes in consumer preferences and tastes; and effectiveness of marketing; changes in laws and regulations; fluctuations in costs of production, delays and cost overruns related to developing and opening new production facilities; and other factors as those discussed in the Company's reports filed with the Securities and Exchange Commission from time to time.

    For further information, please contact:

     Jie Li
     Chief Financial Officer
     China Automotive Systems
     Email: jieli@chl.com.cn

     Kevin Theiss
     Investor Relations
     Grayling
     Tel:   +1-646-284-9409
     Email: ktheiss@hfgcg.com



                                  Tables Follow -
-




               China Automotive Systems, Inc. and Subsidiaries
                         Consolidated Balance Sheets
                          December 31, 2008 and 2007
                           (audited, U.S. dollars)


                                                       December 31,
                                                 2008               2007
    ASSETS
    Current assets:
    Cash and cash equivalents                 $37,113,375        $19,487,159
    Pledged cash deposits                       6,739,980          4,645,644
    Accounts and notes receivable,
     net, including $1,285,110 and
     $1,869,480 from related parties
     at December 31, 2008 and 2007, net
     of an allowance for doubtful
     accounts of $4,910,478 and
     $3,827,838 at December 31, 2008
     and 2007                                  96,424,856         82,022,643
    Advance payments and others,
     including $9,374 and $55,323
     to related parties at December
     31, 2008 and 2007                          1,442,614            922,578
    Inventories                                26,571,755         20,193,286

    Total current assets                     $168,292,580       $127,271,310

    Long-term Assets:
    Property, plant and equipment,
     net                                      $51,978,905        $46,585,041
    Intangible assets, net                        504,339            589,713

    Other receivables, net, including
     $903,674 and $638,826 from
     related parties at December 31,
     2008 and 2007, net of an allowance
     for doubtful accounts of $659,837
     and $652,484 at December 31, 2008
     and 2007                                   1,349,527            888,697
    Advance payment for property,
     plant and equipment, including
     $2,473,320 and $1,560,378 to
     related parties at December 31,
     2008 and 2007                              6,459,510          6,260,443
    Long-term investments                          79,010             73,973
    Deferred income tax assets                  2,383,065          1,315,510

    Total assets                             $231,046,936       $182,984,687

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Bank loans                                 $7,315,717        $13,972,603
    Accounts and notes payable,
     including $1,097,641 and
     $1,134,817 to related parties
     at December 31, 2008 and 2007             59,246,043         47,530,383
    Convertible notes payable, net,
     including $2,077,923 for discount
     of convertible note payable at
     December 31, 2008                         32,922,077                 --
    Derivative liabilities                      1,502,597                 --
    Customer deposits                             236,018            135,627
    Accrued payroll and related costs           2,715,116          2,664,464
    Accrued expenses and other
     payables                                  12,460,784         14,938,055
    Accrued pension costs                       3,806,519          3,622,729
    Taxes payable                               5,717,438          9,080,493
    Amounts due to
     shareholders/directors                       337,370            304,601

    Total current liabilities                $126,259,679        $92,248,955

    Long-term liabilities:
    Advances payable                              234,041            334,600

    Total liabilities                        $126,493,720        $92,583,555

    Minority interests                        $23,222,566        $23,166,270

    Related Party Transactions
    Commitments and contingencies
    Stockholders' equity:
    Preferred stock, $0.0001 par
     value - Authorized - 20,000,000
     shares Issued and Outstanding -
     None                                             $--                $--
    Common stock, $0.0001 par value -
     Authorized - 80,000,000 shares
     Issued and Outstanding -
     26,983,244 shares and 23,959,702
     shares at December 31, 2008 and
     2007, respectively                             2,698              2,396
    Additional paid-in capital                 27,148,206         30,125,951
    Retained earnings - Appropriated            7,525,777          7,525,777
    Unappropriated                             36,026,516         23,591,275
    Deferred stock compensation                  (500,052)
    Accumulated other comprehensive
     income                                    11,127,505          5,989,463

    Total stockholders' equity                $81,330,650        $67,234,862

    Total liabilities and
     stockholders' equity                    $231,046,936       $182,984,687





               China Automotive Systems, Inc. and Subsidiaries
                     Consolidated Statements of Earnings
                    Years Ended December 31, 2008 and 2007
                           (audited, U.S. dollars)


                                                 Years Ended December 31
                                                  2008              2007
    Net product sales, including
     $4,675,410 and $5,472,509 to
     related parties for Years Ended
     December 31, 2008 and 2007               $163,179,286      $133,597,003
    Cost of product sold, including
     $7,901,944 and $5,472,595 purchased
     from related parties at Years Ended
     December 31, 2008 and 2007                115,920,585        88,273,955

    Gross profit                               $47,258,701       $45,323,048

    Add: Gain on other sales                       734,063           554,150

    Less: Operating expenses
    Selling expenses                            10,869,661         9,674,476
    General and administrative expenses         12,097,500         9,026,717
    R&D expenses                                 2,255,892         1,666,274
    Depreciation and amortization                5,846,290         4,243,930

    Total Operating expenses                    31,069,343        24,611,397

    Income from operations                     $16,923,421       $21,265,801

    Add: Other income, net                       1,067,309            38,462
    Financial income (expenses)                 (1,296,218)         (566,986)
    Gain (loss) on change in fair value
     of derivative                                 998,014                --

    Income before income taxes                  17,692,526        20,737,277
    Less: Income taxes                             185,877         2,231,032

    Income before minority interests            17,506,649        18,506,245
    Less: Minority interests                     5,071,408         9,646,339

    Net income                                 $12,435,241        $8,859,906

    Net income per common share -
    Basic                                            $0.48             $0.37
    Diluted                                          $0.46             $0.37

    Weighted average number of common
     shares outstanding -
    Basic                                       25,706,364        23,954,370
    Diluted                                     29,668,726        23,958,705

SOURCE China Automotive Systems, Inc.