Dixon Chen - Investor Relations - Grayling Global Hanlin Chen - Chairman Qizhou Wu - Chief Executive Officer Jie Li - Chief Financial Officer Daming Hu - Chief Accounting Officer

Bill Gregozeski - Mont Blanc Capital

Greetings and welcome to the China Automotive Systems Second Quarter 2013 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dixon Chen with Grayling Global. Thank you, Mr. Chen. You may begin.

Thank you. Thank you for joining us today and welcome to China Automotive Systems 2013 second quarter and six months conference call. My name is Dixon Chen; I am with Grayling, China Automotive Systems’ U.S. Investor Relations Advisor. Joining us today are Mr. Hanlin Chen, Chairman; Mr. Qizhou Wu, Chief Executive Officer; and Mr. Jie Li, Chief Financial Officer; and Mr. Daming Hu, Chief Accounting Officer. They will be available to answer questions later in the conference call and we will help with translations. Before we begin, I would like to remind all listeners that throughout this call, we may make statements that may contain forward-looking statements. Forward-looking statements represent our estimate and assumptions only as of the date of this call. As a result, the company’s actual results could differ materially from those contained in this forward-looking statement due to a number of factors including those described under the heading Risk Factors in the company’s Form 10-K Annual Report for the year-end December 31, 2012, and under the heading Risk Factors in the company's Form 10-Q for the three months ended March 31, 2013 and June 30, 2013 filed with the SEC, and the documents subsequently filed with the company from time-to-time with the SEC. The company expressly disclaims any duty to provide updates to any forward-looking statements made on this call whether as a result of new information, future events or otherwise. Now I will provide a brief overview and summary of 2013 second quarter results and then I will turn the call to management and conduct the question-and-answer session. The 2013 second quarter results are unaudited under U.S. GAAP. For our call today, I will review all the financial results in U.S. dollars. Let me walk you some industry information, our sales increased by 21.8% to a second quarter record of $97.9 million compared with a year-over-year growth of 12.3% for the China automotive industry, according to China Association of Automotive Manufacturers. Our record second quarter sales follow our record sales in this first quarter of 2013 for the first quarter in our history. We continue to grow faster than the overall market by capturing market share to increase our leadership position in the Chinese steering market. We increased our sales into the passenger vehicle segment in the second quarter of 2013 as retail sales growth remained strong due to stable inventory levels, enhanced financial liquidity and firmer pricing due to the strong vehicle demand. Frequently retail price discount accelerate towards midyear but in 2013 a lower percentage of vehicle model reported discounting the retail price. June passenger vehicle sales were up 11.3% and have accelerated to 13.5% growth in July of 2013. As a leading supplier of steering product in China, our sales increased as passenger vehicle sales volume rose. Sales to our new foreign joint venture customer SAIC-GM-Wuling continued strong as SUVs demand remain robust in the second quarter of 2013 and sales of the new product increased to North America. We believe the vehicle replacement cycle is approximately every five years in China and we are beginning to enter into the next replacement cycle that could keep the retail sales growing over the next two years. For the Chinese commercial vehicle market our steering product benefited from the Chinese government’s increasing spending on railroad, highways and other infrastructure projects during the second quarter of 2013. A new central government took office in early 2013. And it is refocusing the government’s policies, so internal consumption will replace infrastructure and export as the key driver of the Chinese economy in the near future. Additionally, the second quarter commercial vehicle sales increased as a pre-buy of national four emission standard compliance vehicle result in higher vehicle sales possibly at the expense of future sales of vehicles that could require more expensive national four emission standard. However, diesel fuel quality may have to improve to achieve the national four emission, so local government are allowing for the continuing sales of national three vehicle which could sustain the sales in the near future. The commercial vehicle market, inventory level and the status of its vehicle replacement cycle also allow us to be cautiously optimistic. Our market capturing sales are a direct result of our building a world class R&D program. Our ability to design, manufacture advanced high value steering product to meet the customer’s exact specification led us to become the preferred vendor to manage Chinese OEM including industry leaders such as Chery, Geely, Brilliance, Donfeng, BYD and others. Based on our track record in China of providing high value products based on the performance, quality, price, innovation we have formed joint venture with SAIC-IVECO-Hongyan and Beijing Auto domestically and we also supply foreign joint venture SAIC-GM-Wuling Dongfeng Peugeot Citroen and FAW-Volkswagen where our products are used in the foreign vehicle models produced in China. In addition, we have designed, produced and exported steering products to Chrysler in North America for the Jeep Wrangler and for the heavy duty Dodge van 2500 and 3500 pickup trucks. Our R&D has also designed and we have manufactured the first domestically designed electric power steering system to provide advanced steering that improve fuel efficiency and replace higher priced imports. With over 310 steering product models, we can now meet the needs of a wide range of passenger and commercial vehicle customers plus our R&D can quickly customize models or build entire new model to meet or exceed our customers’ requirement. In the first half of 2013, China Automotive Systems Jingzhou Henglong Automotive Technology Test Center became the only Nationally Accredited Laboratory among the Chinese steering companies. This new laboratory provides the capability to quickly design, build and test a wide variety of new steering products so we can penetrate new domestic markets segment and enter additional global market. In the second quarter of 2013, we increased our investment in R&D by 24.3% for further development of our electric power steering and other new steering systems. Our contributions to Chrysler were acknowledged during the first half of 2013 as we won the 2012 Chrysler China Region Excellent Supplier Award, the second place award for 2012 in the Global Metal Product Supplier category. And finally, Chrysler’s 2013 Supplier of the Year Metallic Award. This is an honor to receive such award from a well-established global OEM and it highlights our ability to become a valued supplier of high-quality, high performance product that meet the most demanding requirement. In August 2012, we announced a $5 million share buyback program to take advantage of the abnormally low share valuation in the market, for the Chinese stock trading in the U.S. market. Approximately, 200,000 common shares have been repurchased in open market transactions since August 2012 at a cost of nearly $1 [billion] [ph]. For the second quarter of 2013, net income attributed to the parent company’s common shareholders was $5 million or diluted earnings per share of $0.18. This should be noted that for the comparison purpose net income in the second quarter of last year benefited by $3.4 million from the gain on the change of fair value of derivatives and by $1.4 million from the gain on redemption of convertible note in addition to $2.6 million from income from discontinued operations net of the income tax. All of these items were not present in the second quarter of 2013. 2012 second quarter net income was $12.2 million and diluted earnings per share was $0.29. At June 30, 2013 our cash and cash equivalent remained at a historical high of $90.6 million. Our cash position demonstrated our ability to continuously invest our positive cash flow to expand our profitable operations and increase research and development to ensure our future growth and leadership. Through our investment in our company, we remain the leader in the Chinese power steering industry as we continue to build our international [strategy] [ph]. Let me now walk you through our second quarter of 2013 financial results. In the second quarter of 2013, net sales increased by 21.8% to a second quarter record of $97.9 million compared to $80.4 million in the same quarter of 2012. The net sales increase was mainly due to significant sales to SAIC GM Wuling automobile, an increase in sales of Brilliance Auto; an increase in passenger vehicle sales in China; and the sales increase to a customer in North America, all of which were partially offset by lower average selling prices of products sold in China. Gross profit increased by 17.9% to $18.4 million in the second quarter of 2013, compared to $15.6 million in the second quarter of 2012. The gross margin was 18.8% in the second quarter of 2013 versus 19.4% in the second quarter of 2012. The increase in gross profit was primarily due to greater sales volume. The reduced gross margin was mainly because more lower gross margin products were sold in the second quarter of 2013. Selling expenses rose by 81.0% to $3.8 million in the second quarter of 2013, compared to $2.1 million in the second quarter of 2012. Selling expenses represented 3.9% of net sales in the second quarter of 2013, compared to 2.6% in the second quarter of 2012. The increase was mainly due to a gain in salaries and wages and expenses on [salesmen] [ph], warehouse rental fee, transportation expenses, and as a result of an increase in sales volume. General and administrative expenses, G&A expenses, increased by 3.2% to $3.2 million in the second quarter of 2013, compared to $3.1 million in the same quarter of 2012. With the progress of purported securities class action more legal defenses were taken in the second quarter of 2013 than the same quarter of 2012 which resulted in an increase of legal expenses. G&A expenses represented 3.3% of net sales in the second quarter of 2013 and 3.9% in the second quarter of 2012. Research and development expenses, R&D increased by 24.3% to $4.6 million in the second quarter of 2013 compared to $3.6 million in the second quarter of 2012. The increase in R&D expenses was mainly due to the development and trial of the company’s electric power steering and other new products as well as higher external support fees and increased wages. R&D expenses represented 4.7% of net sales in the second quarter of 2013, compared with 4.6% in the second quarter of 2012. Income from operations decreased by 9.3% to $7.8 million in the second quarter of 2013, compared to $8.6 million in the same quarter of 2012. As a percentage of net sales, the operating margin was 8.0% in the second quarter of 2013, compared to 10.7% in the second quarter of 2012. The decrease was mainly due to the increase in operating expenses as well as a decrease in selling prices in second quarter of 2013. Net financial expenses decrease by 80.0% to $0.1 million in the second quarter of 2013, compared to $0.5 million in the second quarter of 2012. This reduction was primarily due to a decrease in interest expenses, as there were no financial expenses related to the convertible note in the second quarter of 2013, as a result of the redemption of all remaining convertible notes by the company on May 25, 2012 known as the redemption. There was no gain or loss on the change in the fair value of derivatives in the second quarter of 2013, due to the redemption in the second quarter of 2012 compared to a non-cash gain of $3.4 million in the second quarter of 2012 primarily due to movements in the company’s stock prices during such quarter. There was no gain or loss on the redemption of convertible notes in the second quarter of 2013 due to the redemption in the second quarter of 2012, as compared to a gain of $1.4 million in the second quarter of 2012. Income before income tax expenses and equity in earnings of affiliated companies was $7.7 million in the second quarter of 2013, compared to $12.9 million in the second quarter of 2012. The decrease in income before income tax expenses and equity and earnings of affiliated companies in the second quarter of 2013 was mainly due to the fair values of derivatives of $3.4 million and a gain on redemption of convertible notes of $1.4 million in the second quarter of 2012 compared with no such gains or losses in the second quarter of 2013. Net income attributable to the parent company’s common shareholders was $5.0 million in the second quarter of 2013 compared to net income attributable to parent company’s common shareholders of $12.2 million including income from discontinued operations of $2.6 million; in the corresponding quarter of 2012 diluted earnings per share was $0.18 in the second quarter of 2013 compared to diluted earnings per share of $0.29 including net income per share of discontinued operations of $0.08 in the second quarter of 2012. The weighted average number of diluted common shares outstanding was 28,048,789 in the second quarter of 2013 compared to 30,257,347 in the second quarter of 2012. Six months results. Net sales for the first six months of 2013 increased by 21.0% to $195.1 million compared to $161.3 million in the first six months of last year. Six month gross profit was $37.8 million compared to $31.0 million in the corresponding period last year. Six month gross margin was 19.4% compared to 19.2% for the corresponding period in 2012. Income from operations was $17.2 million compared to $14.9 million in the first six months of 2012. Operating margin was 8.8% compared to 9.2% for the corresponding period of 2012. Income from continuing operations was $13.7 million in the first six months of 2013, compared to $11.9 million in the corresponding period of 2012. Diluted earnings per share were $0.39 in the first six months of 2012 compared to diluted earnings per share of $0.40 including $0.09 of diluted earnings per share from discontinued operations for the corresponding period in 2012. As of June 30, 2013 total cash and cash equivalents and short term investments were $90.6 million compared to $87.6 million as of December 31, 2012. Working capital was $153.2 million as of June 30, 2013 compared to $138.7 million as of December 31, 2012. The business outlook, management increased its revenue guidance to 15% year-over-year growth in the full year 2013. This target is based on the company’s current views on operating and market conditions which are subject to change. With that operator we are ready to begin the Q&A.

Thank you. (Operator Instructions) Our first question today is coming from Bill Gregozeski from Mont Blanc Capital. Please proceed with your question.

Hello, Bill. Bill Gregozeski - Mont Blanc Capital: Can you hear me?

Yes, hello. Bill Gregozeski - Mont Blanc Capital: Okay. On sales to Chery it looked like they were down quite a bit [inaudible] -- where do you guys see sales to Chery going in the foreseeable future?

[Foreign Language] Okay. There’s two reasons - two factors affecting our sales to, decline in our sales to Chery. First is Chery their own business they are experiencing a year-over-year sales decline. And secondly we went through a management change in our Wuhu Henglong facility. We were dissatisfied with their performance and so we decided to change the management team and put in a bit more experienced team to run that division. So we expect the second half of the year should pick up more sales from Chery. Bill Gregozeski - Mont Blanc Capital: Okay, all right. And on the EPS [electronic power steering] business where - what kind of sales did you do for that in the second quarter, and how do you guys see that ramping up?

[Foreign language] Okay, second quarter we sold about 40,000 units of EPS systems and that represented a 100% year-over-year increase for the second quarter. So second quarter 2012 we sold only 20. And we're still on track to achieve our 200,000 units sales for the entire 2013, and that basically tells you our second half of year we should see a noticeable increase in EPS sales. Bill Gregozeski - Mont Blanc Capital: Okay, all right. And for Chrysler, how many production lines you guys have up and running for them now?

[Foreign Language] Okay. We are currently running full capacity for two production lines that’s dedicated to Chrysler products; most lines now we're going to over time stage. So as you see the order books has been quite full. Our third line is coming online some time towards the end of the year. Bill Gregozeski - Mont Blanc Capital: Okay

Third production line. Bill Gregozeski - Mont Blanc Capital: All right. And on the gross margin side, you had cited higher sales as the reason for the higher margin what's the utilization rate now and where do you guys think you can get the margins?

[Foreign Language] The utilization rate for the passenger vehicles steering is right now running at 90%. However, commercial vehicle steering product, our production line, the utilization rate is only 85%. So we believe there are some room for increase, actually for both but more on the commercial vehicle sector. Bill Gregozeski - Mont Blanc Capital: Okay, do you see margins as increasing throughout the year or staying along the current level?

[Foreign Language] So we expect the gross margin will remain this level throughout a year. It's mainly due to towards the middle of the year we usually do a discount for our main customers. So that will offset the utilization rates, the benefit coming from the higher utilization rate. We're doing that price adjustment, mainly focusing on increasing market share. So that’s helping our main target throughout the year now. Bill Gregozeski - Mont Blanc Capital: Okay. On the selling expense and the G&A, can you kind of talk about how much of each of those is fixed and how much is ties to sales?

[Foreign Language] On the - you asked for SG&A, let’s look at selling expenses first, it’s about 70% is variable based on [higher net] [ph] sales and that will change and then about 30% is fixed. Now if you look turn into the G&A expense is about half-and-half, so half of them will be fixed. Bill Gregozeski - Mont Blanc Capital: Okay, all right. And my last question was with more large cities adding the limits on new licenses, how do you guys see that in general in China back in the passenger market?

[Foreign Language] Okay. So actually we have seen the growth driver going forward will be interior China mainly the tier 3 and tier 4 cities in mid and west part of China mainly due to their higher GDP growth and the fast growing disposable income of those residents. So a lot of those purchases for the vehicles actually already coming from those regions. So we remain optimistic these will be our growth driver. Bill Gregozeski - Mont Blanc Capital: Okay, all right. Thank you very much.

(Operator Instructions) There are no questions at this time. I would like to turn the floor back over to management for any further or closing comments.

Thank you for attending China Automotive Systems second quarter 2013 report. We look forward to speaking with you. Thank you.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.