1. automotive and vehicles

The Power to Steer Chinese Auto Industry
INVESTOR PRESENTATION
October 2013
Safe Harbor Statement
This presentation 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 and financial performance and condition. 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 consumer
preferences and tastes; and effectiveness of marketing; changes in
laws and regulations; fluctuations in costs of production, and other
factors as those discussed in the Company's reports filed with the
Securities and Exchange Commission from time to time.
2
Introduction to CAAS
Who We Are
China Automotive Systems is the
largest supplier of power steering
components and systems in China. Its
subsidiary groups offer a full range of
auto parts incorporated into steering
systems for both passenger
automobiles and commercial vehicles.
Investment Highlights
Key Milestones
1993
– Established Jiulong to produce Integral Power
Steering Gear in Heavy-duty vehicles
1997
– Established Henglong to produce Rack and Pinion
Steering Gear in passenger vehicles
2001 – Signed licensing agreement with Bishop Steering
for power steering valve technology
2002 – Established JV with Brilliance Auto
2004 – Listed on NASDAQ Small Cap
– Selected as Exclusive Supplier for Steering Pumps
for GM Wuling in China
2006 – Formed JV with Chery Auto

#1 market share in China

Key supplier to many top 10 auto makers

Increasing number of supplier contracts
with Sino-foreign JVs

Strong R&D, high quality and low cost

Majority sales to China domestic market
Growing exports
Ranked 23rd in FORTUNE'S "100
Fastest-Growing Companies“ in 2010


– Established JV to produce Electric Power Steering
(EPS)
2007 – Launched Detroit office to develop NA business
– Won supplier contract from FAW-Volkswagen
2008 – Won contracts with ChangAn Auto and Dongfeng
Peugeot Citroen
2009 – Began shipments to Chrysler in N. America
2010 – Formed JV with Beijing Auto and designed new
capacity of 500,000 units
2012 – Formed JV with SAIC-Iveco Hongyan and designed
capacity of 200,000 units for CV
– Established a Sino-foreign JV with two Brazilians
3
Organizational Chart
CHINA AUTOMOTIVE SYSTEMS, INC. [NASDAQ:CAAS]
100%
100%
HENGLONG USA CO.
GREAT GENESIS HOLDINGS LIMITED
70%
100%
Shenyang Jinbei Henglong Automotive Steering System Co., Ltd. (SHENYANG)
Hubei Henglong Automotive System Group Co., Ltd. (Hubei Henglong)
80
%
81
%
Jingzhou
Henglong
Automotive
Parts
Co., Ltd.
Shashi
Jiulong
Power
Steering
Gears
Co., Ltd.
(HENGLONG)
(JIULONG)
83.34
%
85
%
77.33
%
70
%
50
%
Universal
Sensor
Application,
Inc.
Wuhan
Jielong
Electric
Power
Steering
Co., Ltd.
Wuhu
Henglong
Automotive
Steering
System Co.,
Ltd.
Chongqing
Henglong
Hongyan
Power
Steering
System Co.
Beijing
Hailong
Automotive
System
Co., Ltd.
(USAI)
(JIELONG)
(WUHU)
(CHONGQING)
(HAILONG)
80
%
CAAS Brazil’s
Imports And
Trade In
Automotive
Parts Ltd.
(Brazil )
80
%
Jingzhou Henglong
Automotive Technology
(Testing) Center
(TESTING)
4
Our Products

The company’s product offering encompasses a full range of auto parts which
are incorporated into steering systems for both passenger automobiles and
commercial vehicles.
Steering Column
Steering Pumps
Steering Hoses

Rack & Pinion Power
Steering Gears
The company currently offers four separate series of power steering sets and
over 300 models of power steering and manual steering sets, steering
columns, steering oil pumps, and steering hoses.
5
Fast Growing Chinese Auto Market
China Domestic Auto Market (million units)
 Beginning in 2009, China becomes the
world’s largest auto nation
 Auto penetration in China is currently at
5% compared with the 60% penetration in
US, Europe, and Japan
 Rising demand from low-to-mid income
families whose purchasing power has
increased with falling car prices
 85 million vehicles on the road, 144 million
driver licenses with 22 million new
issuance every year
•
Source: CAAM
 China auto parts sales is expected to
reach US$350 billion by 2015.
 All vehicle export reached 0.8 million units
on 49% yoy increase.
•
(1)Source: China, Ministry of Public Security. (2) Investment Report of China Auto & Auto Parts Industry, 2000-2008
•
(3) China auto Parts Industry Report 2007-2008, (4) AlixPartners Study Feb ’08; Analysis of China Auto Parts Market 2008-2009 (5) Sinomind, Roland Berger Analysis
6
Leading Competitive Position
 CAAS is China’s largest
supplier of power steering
components and systems
 China has 100 auto OEMs.
Only 30 power steering
system suppliers
 Safety related components =
High barrier of entry
OTHERS
16%
CAAS
16%
ZHEJIANG
SHIBAO 4%
SHANGHAI
ZF, 11%
ZHAOHE 4%
Market Share of
Steering Gear for
Year 2012
HUBEI
TRIRING
4%
IMPORT
5%
 Major competitors, Shanghai
ZF and FKS, are captive
suppliers to specific JV
automakers: Volkswagen,
GM, Toyota, Honda etc.
YUBEI
(KOYO
INCLUDED)
10%
CHONGQING
CHANGRON
G, 7%
ZHEJIANG
WANDA, 7%
FAW
KOYO 8%
MANDO 8%
Source: Company estimates
CAAS is able to innovate and introduce new products and manage costs
much more nimbly than its state-owned or foreign JV competitors.
7
Competitive Strength
CAAS is well positioned to take advantage of the fast
growing Chinese auto market opportunity
Strong Technology
R&D Capabilities




Rapid Product
Introduction
Top-Notch
Management
225+ engineers; 3 technology and R&D centers
85+ Chinese patents; 4 trademarks
Partner with Bishop Steering Technology, Namyang, Korea Delphi
Automotive Systems and Tsinghua University
Ongoing recruits from best auto engineering schools in China


Independent supplier;
Quick turnaround on new platform development
CAAS 3 months vs Competitors 3-6 months
 Approximately 30 sedan makers in China have produced nearly 70
sedan models; Chinese OEMs are demanding fast product cycles

Most senior management have been with CAAS for over 15years
CEO 19 yrs, CFO 15yrs, CAO 16 yrs, VP Sales 19 yrs, VP R&D 19 yrs
 Strong auto background and proven track records with OEMs in China
 With 60% ownership in CAAS, Chairman is committed to create longterm shareholders’ value
8
Strong Cost Management
Cost pressures will continue
as the ASPs of autos decline in
China
Only suppliers with effective
cost control measures can
continue to maintain margins
CAAS’ Cost Management Measurement
• Continued technological innovations
– Reduce overall manufacturing and processing cost developed through in-house R&D advancements
– Retool and customize some of the production equipment
• Reduce the cost of raw materials
– Volume purchase of major raw materials through a bidding process
– Optimize product design to reduce the raw material wastage in the process of production
• Reduce manufacturing expenses
– Improve productivity of current labor hours through more efficient use of the new equipment
(Over USD 40M spent on high grade equipment in the past 4 years)
– Set “targets” to control manufacturing overhead
9
Main Customers

More than 60 OEM customers

Revenue contribution from passenger vehicle was 85.2% in 2012

No customer accounts for more than 15% of total revenue

Signature western brands: Chrysler, FAW-Volkswagen, Dongfeng Peugeot, GM
Driving Force: passenger vehicle products
Major Customers in 2012
Chrysler
3.7%
11.7%
5.7%
6.2%
9.4%
6.2%
6.9%
9.0%
7.1% 7.9%
Geely
Chery
Dongfeng
Great Wall
Brilliance
FAW
BYD
Foton
SAIC GM
10
Road to Detroit
First entry to US aftermarket with
steering system for Volvo S40
First meeting with Chrysler
Won Chrysler´s Excellent
Supplier Award
First meeting with
Visteon
Won multi-year contract
from Chrysler Ram
Won multi-year contract from Chrysler Wrangler
Passed vehicle dynamic evaluation and received
trial order from Chrysler
Opened office in Troy, Michigan
11
Growing R & D Capability

With state-of-art power steering gear inspection & test equipment, calibration
room, physical & chemical inspection lab and vehicle test track, CAAS is
building up a leading power steering inspection and test center.
12
2012 Highlights
PV sales 15.5 mil. and +7.1% YoY
CV sales 3.8 mil. and -5.49% YoY
2012 – the year OEMs overpromised and under-achieved
“Favorable Environment”
Recovery of the overall economy of China;
Continued increase in the income of China’s urban
and rural residents; Continuing development of
the highway system will positively impact on the
sale of automobiles in China.
“Size Matters More”
Small car (≤ 1.6 liter): sales grew 6.5% to 7.6m units
and accounted for 71% total PV sales;
Leading PV OEM Sales
• Shanghai GM
“National Brand”
National PV brands sold 6.49 m units, up 6.1% YoY, • GM Wuling
its market share down from 42.23% to 41.85%
• Shanghai Volkswagen
• FAW Volkswagen
* Source: CAAM
13
Growth Strategy
International Market





Accelerate international expansion
through direct sales and partnerships
Continue to develop relationships with
top tier international automotive OEMs
Form joint venture in other emerging
markets – JV in Brazil
Build channel relationships to capture
aftermarket opportunity
Establish international office to pursue
business development and R&D
MAIN GOAL: DEVELOPING
RELATIONSHIPS AND WINNING
CONTRACTS IN US AND EUROPE
Domestic Market





Grow market share in China by
partnering with fast growing OEMs –
JV with OEMs
Penetrate existing clients’ different lines
of products
Approach low-margin foreign brands
who import parts
Focus on continuous improvement in
production efficiency and quality
Introduce new products through R&D
BENEFITS OF EPS: FUEL EFFICIENCY,
ENVIRONMENTAL FRIENDLY AND
HIGHER MARGIN
14
Robust Organic Revenue Growth


Top line grew 889% over the last 8 years – all organic growth
Despite the economic downturn, the revenue of the company remains flat
USD millions
USD millions
101
99
76
75
99
Q4
84
38
38
31
36
28
2007
37
73
Q3
Q2
65
85
82
80
47
63
41
45
84
91
84
2008
2009
2010
2011
2012
Q1
15
Positive Free Cash Flow
Free Cash-Flow
OP Cash Flow
$ millions
$millions
40
20
35
18
38.6
30
16
34.1
14
35
25
14.5
17.5
12
20
15
19.2
10
16.2
16.4
8
10.6
6
10
4
5
4.2
2
0
0
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
FCF= Op Cash Flow minus CapEx
16
2013 Q2 Summary
Month Ended June 30
($’000)
2013
2012
Net sales
$97,889
$80,379
Gross profit
$18,389
$15,632
Selling expenses
$ 3,800
$ 2,088
G&A
$3,217
$3,130
Income from operations
$7,814
$8,574
(Loss) gain on change in fair value of derivative
-
Net income (loss) attrib to common shareholders
$4,981
Diluted EPS
$0.21
$3,411
$12,163
$0.03
17
Balance Sheet
($’000)
6/30/2013
6/30/2012
Cash and cash equivalents
$75,270
$77,692
Accounts and Notes Receivable
$25,941
$20,047
Inventories
$48,251
$46,889
Property and Equipment, Net
$83,361
$77,330
$526,234
$457,721
Accounts and Notes Payable
$183,707
$157,617
Bank and Government Loans
$47,175
$41,655
--
$691
$41,939
$35,984
Total Liabilities
$276,459
$236,915
Total Shareholders Equity
$249,775
$220,806
Total Assets
Convertible Note
Non-controlling interests
18
Investment Highlights

China is the world’s largest automotive market

Growing China auto parts industry

High barrier of entry for safety-related components

Leading market share

Diversified customer base

Key supplier to Chinese home-grown auto makers

High-quality products, strong R&D and competitive pricing

Well positioned for further potential export opportunities
19
The Power to Steer Chinese Auto Industry
THANK YOU!
www.caasauto.com