Exhibit 99.1 China Automotive Systems Reports Record Annual Revenue, and a 81.2% Increase in Diluted Net Income Per Share to $1.25 in Fiscal Year 2023 - Electric Power Steering ("EPS") Sales Increased by 24.6% in 2023 - WUHAN, China, March 28, 2024 -- China Automotive Systems, Inc. (NASDAQ: CAAS) ("CAAS" or the "Company"), a leading power steering components and systems supplier in China, today announced its unaudited financial results for the fourth quarter and the audited results for the fiscal year ended ...

PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business.) CAAS manufactures and sells power steering systems and related automotive parts through its subsidiaries in China and Brazil, serving over sixty OEMs - CAAS is a Delaware holding company primarily manufacturing power steering systems and related automotive parts in **China and Brazil**[6](index=6&type=chunk)[8](index=8&type=chunk)[24](index=24&type=chunk) - The company serves over **sixty vehicle manufacturers**, including major Chinese and international OEMs[22](index=22&type=chunk) - CAAS's strategic plan emphasizes **market expansion, brand recognition, quality control, cost efficiency, R&D, and strategic acquisitions**[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) Top 5 Customers by Percentage of Total Revenue (2023) | Name of Major Customers | Percentage of Total Revenue in 2023 (%) | | :------------------------------ | :---------------------------------- | | Stellantis N.V. | 17.2 | | BYD Auto Co., Ltd. | 6.4 | | Hubei Hongrun Intelligent System Co., Ltd. | 6.1 | | Mahindra & Mahindra Ltd | 5.5 | | Chery Automobile Co.,Ltd. | 5.2 | - R&D expenditures were **$29.2 million in 2023**, with newly developed products accounting for **33.8% of total sales**[60](index=60&type=chunk) Chinese Automobile Industry Output and Sales Volume Growth (2023 vs. 2022) | Category | Output Growth (YoY, %) | Sales Volume Growth (YoY, %) | | :----------------- | :------------------ | :------------------------ | | Passenger Vehicles | 9.7 | 10.6 | | Commercial Vehicles| 25.0 | 21.2 | Sales and Total Assets by Geographic Region (2023) | Geographic Region | Net Sales (2023, %) | Long-term Assets (2023, %) | | :------------------ | :--------------- | :---------------------- | | China | 65.1 | 98.7 | | United States | 19.3 | 0.5 | | Other Foreign Countries | 15.6 | 0.8 | | Total Consolidated | 100.0 | 100.0 | [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors.) The company faces significant risks from the automotive industry's cyclical nature, rising costs, intense competition, customer dependence, and China's evolving regulatory environment - The automotive industry's **cyclical nature, increasing raw material costs, and intense competition** pose significant business risks[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk)[79](index=79&type=chunk)[81](index=81&type=chunk) - Dependence on **few large customers** (top 5 accounted for **40.4% of 2023 sales**) and **OEM pricing pressure** can materially affect operations[83](index=83&type=chunk)[84](index=84&type=chunk) - Operating in China involves risks from **government intervention, evolving regulatory policies, and legal system uncertainties**[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - The company is exposed to **foreign currency exchange rate fluctuations**, particularly between USD and RMB, impacting operating margins[127](index=127&type=chunk)[128](index=128&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - PCAOB's ability to inspect the company's auditor in China was resolved in December 2022, but future inability could lead to **delisting from Nasdaq**[23](index=23&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) [Item 1B. Unresolved Staff Comments](index=49&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments.) This section confirms the absence of any unresolved staff comments applicable to the company [Item 1C. Cybersecurity](index=49&type=section&id=Item%201C.%20Cybersecurity) The company maintains robust cybersecurity policies, conducts periodic assessments, and reports no material incidents in 2023, with board oversight - The company has established policies and processes for assessing, identifying, and managing material cybersecurity risks, including **periodic assessments and employee training**[194](index=194&type=chunk)[195](index=195&type=chunk) - The **board of directors** oversees strategic cybersecurity risk, with regular briefings from CEO and executive management[197](index=197&type=chunk) - No cybersecurity incidents materially affected the company's business, strategy, operations, or financial condition in **2023**[196](index=196&type=chunk) [Item 2. Properties](index=51&type=section&id=Item%202.%20Properties.) The company's headquarters are in Jingzhou City, PRC, operating numerous manufacturing facilities across China with a total area of 661,526 square meters - The company's headquarters are in **Jingzhou City, Hubei Province, PRC**[198](index=198&type=chunk) Summary of Manufacturing Facilities (as of December 31, 2023) | Name of Entity | Product | Total Area (sq.m.) | Building Area (sq.m.) | Original Cost of Equipment ($ thousands) | | :------------- | :------------------------ | :----------------- | :-------------------- | :----------------------------- | | Henglong | Automotive Parts | 97,818 | 20,226 | 64,293 | | Jiulong | Power Steering Gear | 39,478 | 24,734 | 44,802 | | Shenyang | Automotive Steering Gear | 35,354 | 18,041 | 8,865 | | Chongqing | Power Steering Gear | 57,849 | 22,812 | 3,544 | | Jielong | Electric Power Steering | — | — | 7,449 | | Wuhan Chuguanjie | Electric Power Steering | 53,675 | 44,054 | 5,472 | | Henglong KYB | Automotive Steering Gear | — | — | 16,121 | | Hubei Henglong | Automotive Steering Gear | 280,254 | 78,833 | 92,493 | | Wuhu | Automotive Steering Gear | 83,705 | 27,288 | 7,550 | | Wuhu Hongrun | High Polymer Materials | — | — | 1,158 | | Total | | 661,526 | 249,695 | 251,747 | - **Jielong, Henglong KYB, and Wuhu Hongrun** rent their buildings from other subsidiaries[199](index=199&type=chunk) [Item 3. Legal Proceedings](index=51&type=section&id=Item%203.%20Legal%20Proceedings.) The company is not involved in any pending or threatened legal proceedings, nor are its directors or officers - The company is not a party to any **pending or threatened legal proceedings**[201](index=201&type=chunk) - No director, officer, affiliate, or major security holder is a party adverse to the company in pending litigation[201](index=201&type=chunk) [Item 4. Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to the company's operations PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=52&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities.) The company's common stock trades on Nasdaq under 'CAAS,' with 32.3 million shares outstanding, and does not anticipate paying cash dividends - The company's common stock trades on the **Nasdaq Capital Market** under the symbol **"CAAS"**[203](index=203&type=chunk) - As of December 31, 2023, **32,338,302 common shares** were outstanding with approximately **60 stockholders of record**[206](index=206&type=chunk) Share Repurchase Program Activity | Year Ended December 31 | Shares Repurchased | Cash Consideration ($ thousands) | | :--------------------- | :----------------- | :--------------------- | | 2023 | 0 | 0 | | 2022 | 322,269 | N/A | - The company does not anticipate paying **cash dividends** in the foreseeable future, retaining earnings for operations and expansion[207](index=207&type=chunk) Securities Authorized for Issuance Under Equity Compensation Plans (as of December 31, 2023) | Plan Category | Number of securities to be issued upon exercise of outstanding options (shares) | Weighted average exercise price of outstanding options ($) | Number of securities remaining available for future issuance (shares) | | :------------------------------------------ | :------------------------------------------------------------------- | :--------------------------------------------------------- | :----------------------------------------------------------- | | Equity compensation plans approved by security holders | 2,200,000 | 6.26 | 1,541,150 | [Item 6. [Reserved]](index=52&type=section&id=Item%206.%20%5BReserved%5D.) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=54&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Net income increased by 77.8% to $37.7 million in 2023, driven by 8.8% sales growth and improved gross margin, while operating cash flow decreased Selected Financial Highlights (2023 vs. 2022, in thousands of USD) | Metric | 2023 | 2022 | Change | Change % | | :---------------------------------------------- | :--------- | :--------- | :--------- | :------- | | Net product sales | $576,354 | $529,551 | $46,803 | 8.8 | | Cost of products sold | 472,603 | 446,157 | 26,446 | 5.9 | | Net gain on other sales | 5,788 | 3,696 | 2,092 | 56.6 | | Selling expenses | 15,610 | 16,910 | (1,300) | (7.7) | | General and administrative expenses | 25,503 | 26,120 | (617) | (2.4) | | Research and development expenses | 29,181 | 36,109 | (6,928) | (19.2) | | Other income, net | 5,345 | 5,782 | (437) | (7.6) | | Interest expense | 1,021 | 1,450 | (429) | (29.6) | | Financial income, net | (4,666) | (10,753) | 6,087 | (56.6) | | Income taxes | 5,137 | 3,082 | 2,055 | 66.7 | | Net income | 42,738 | 22,343 | 20,395 | 91.3 | | Net income attributable to non-controlling interest | 5,050 | 1,132 | 3,918 | 346.1 | | Net income attributable to parent company's common shareholders | 37,658 | 21,181 | 16,447 | 77.8 | - Net product sales increased by **8.8% to $576.4 million** in 2023, primarily from a **24.6% increase in Electric Power Steering (EPS) sales**[215](index=215&type=chunk)[216](index=216&type=chunk) - Gross margin improved to **18.0% in 2023** from 15.7% in 2022, driven by a favorable product mix[231](index=231&type=chunk) Cash Flow Summary (2023 vs. 2022, in thousands of USD) | Cash Flow Activity | 2023 | 2022 | Change | | :---------------------- | :--------- | :--------- | :--------- | | Operating Activities | $19,906 | $48,023 | $(28,117) | | Investing Activities | $(28,637) | $(32,740) | $4,103 | | Financing Activities | $6,798 | $(1,583) | $8,381 | - Cash, cash equivalents, and short-term investments totaled **$125.7 million** as of December 31, 2023, a **decrease of $8.4 million**[243](index=243&type=chunk) - Working capital increased by **$23.8 million (15.2%) to $180.3 million** as of December 31, 2023[244](index=244&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=74&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk.) The company faces market risks from foreign currency and interest rate fluctuations, with credit risk concentrated in trade accounts receivable - The company's primary market risks are **foreign currency exchange rate fluctuations** (RMB vs. USD) and **interest rate changes**[284](index=284&type=chunk)[285](index=285&type=chunk) - A price negotiation mechanism with international customers mitigates currency exchange rate risk if fluctuations exceed **8%**[287](index=287&type=chunk) - Credit risk is concentrated in trade accounts receivable, with **Stellantis N.V. accounting for 17.2% of 2023 consolidated revenues**, mitigated by long-term relationships[288](index=288&type=chunk)[435](index=435&type=chunk) - Interest rate risk stems from **credit facility borrowings**, with outstanding indebtedness subject to fluctuations[289](index=289&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=75&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data.) This section references the full consolidated financial statements and supplementary quarterly data, showing fluctuating net sales and income - The financial statements required by this item begin on **page 61** (original document)[290](index=290&type=chunk) Quarterly Results of Operations (2023 vs. 2022, in thousands of USD, except per share amounts) | Metric | 2023 First | 2022 First | 2023 Second | 2022 Second | 2023 Third | 2022 Third | 2023 Fourth | 2022 Fourth | | :------------------------------------------------------------------ | :--------- | :--------- | :---------- | :---------- | :--------- | :--------- | :---------- | :---------- | | Net sales | $142,243 | $136,396 | $137,410 | $127,161 | $137,541 | $137,207 | $159,160 | $128,787 | | Gross profit | 21,618 | 14,734 | 22,718 | 22,711 | 24,757 | 20,918 | 34,658 | 25,031 | | Income/(loss) from operations | 7,744 | (1,538) | 7,789 | 7,200 | 10,153 | 4,887 | 13,559 | (2,598) | | Net income | 7,883 | 149 | 11,468 | 9,935 | 11,244 | 8,007 | 12,143 | 4,252 | | Net income/(loss) attributable to non-controlling interest | 1,055 | 200 | 995 | 500 | 1,749 | 529 | 1,251 | (97) | | Net income/(loss) attributable to parent company's common shareholders | 6,820 | (59) | 10,466 | 9,428 | 9,488 | 7,470 | 10,884 | 4,342 | | Net income/(loss) attributable to parent company's common shareholders per share - Basic | $0.23 | $— | $0.35 | $0.31 | $0.31 | $0.24 | $0.36 | $0.14 | | Diluted | $0.23 | $— | $0.35 | $0.31 | $0.31 | $0.24 | $0.36 | $0.14 | [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=75&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure.) This section confirms no changes in or disagreements with accountants on accounting and financial disclosure [Item 9A. Controls and Procedures](index=76&type=section&id=Item%209A.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - The company's management, including the CEO and CFO, concluded that **disclosure controls and procedures were effective** as of December 31, 2023[292](index=292&type=chunk) - Management assessed and determined that **internal control over financial reporting was effective** as of December 31, 2023[295](index=295&type=chunk) - No **material changes in internal control over financial reporting** occurred during Q4 2023[298](index=298&type=chunk) - The report acknowledges **inherent limitations in control systems**, providing reasonable, not absolute, assurance[297](index=297&type=chunk) [Item 9B. Other Information](index=78&type=section&id=Item%209B.%20Other%20Information.) Wiselink Holding Limited entered a Rule 10b5-1 Trading Plan on June 1, 2023, for the sale of 282,100 shares - **Wiselink Holding Limited** and UBS Financial Services Inc. entered a **Rule 10b5-1 Trading Plan** on June 1, 2023[299](index=299&type=chunk) Rule 10b5-1 Trading Plan Details | Order | Number of shares to be sold (shares) | Type of Limited Order: price(s) | Duration of order | Order cancel Date | | :------ | :-------------------------- | :------------------------------ | :---------------- | :---------------- | | 1 | 282,100 | $5.00 | GTC | August 30, 2024 | [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=78&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections.) The company expects to no longer be a Commission-Identified Issuer after 2023, following PCAOB's access to inspect auditors in China - The company was previously identified as a **Commission-Identified Issuer** under the HFCAA due to PCAOB's inability to inspect its auditor in mainland China[300](index=300&type=chunk) - Following PCAOB's December 2022 announcement of complete access, the company does not expect to be identified as a **Commission-Identified Issuer** after its 2023 annual report[301](index=301&type=chunk) - The company confirms it is **not owned or controlled by any foreign governmental entity**, has no material contracts with such parties, and no foreign government representatives on its board[300](index=300&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=53&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance.) The board includes independent directors on key committees, with family relationships among some executives, and the company maintains a Code of Ethics Directors and Executive Officers (as of December 31, 2023) | Name | Age | Position(s) | | :------------ | :-- | :-------------------------------- | | Hanlin Chen | 66 | Chairman of the Board | | Tong Kooi Teo | 67 | Director | | Guangxun Xu | 73 | Director | | Heng Henry Lu | 58 | Director | | Qizhou Wu | 59 | Chief Executive Officer and Director | | Jie Li | 54 | Chief Financial Officer | | Andy Tse | 53 | Senior Vice President | | Haimian Cai | 60 | Vice President | | Henry Chen | 33 | Vice President | - The **Audit, Compensation, and Nominating Committees** are comprised of independent directors[315](index=315&type=chunk)[316](index=316&type=chunk)[319](index=319&type=chunk) - **Guangxun Xu** chairs the Audit and Nominating Committees, while **Tong Kooi Teo** chairs the Compensation Committee[315](index=315&type=chunk)[316](index=316&type=chunk)[319](index=319&type=chunk) - Family relationships exist between **Hanlin Chen and Andy Tse (brothers-in-law)**, and **Hanlin Chen and Henry Chen (father and son)**[321](index=321&type=chunk) - The company has adopted a **Code of Ethics and Conduct** applicable to all officers, directors, and employees[322](index=322&type=chunk) [Item 11. Executive Compensation](index=56&type=section&id=Item%2011.%20Executive%20Compensation.) The Compensation Committee sets executive compensation, including base salary and performance bonuses, with a new Compensation Recovery Policy adopted in October 2023 - The **Compensation Committee**, comprised of independent directors, sets executive compensation policies and administers benefit plans[324](index=324&type=chunk) - Executive compensation aims to **attract and retain talent** and **align incentives with stockholder value creation**[325](index=325&type=chunk)[326](index=326&type=chunk) - A **Compensation Recovery Policy** was adopted effective October 10, 2023, allowing clawback of incentive compensation based on restated financial results[327](index=327&type=chunk) Executive Officer Compensation (2023 vs. 2022, in thousands of USD) | Name (Position) | Year | Salary ($) | Bonus ($) | Option Awards ($) | Total ($) | | :------------------------- | :--- | :--------- | :-------- | :---------------- | :-------- | | Hanlin Chen (Chairman) | 2023 | 306 | 77 | — | 383 | | | 2022 | 321 | 80 | — | 401 | | Qizhou Wu (CEO) | 2023 | 204 | 51 | — | 255 | | | 2022 | 214 | 53 | — | 267 | | Jie Li (CFO) | 2023 | 122 | 31 | — | 153 | | | 2022 | 128 | 32 | — | 160 | | Haimian Cai (Vice President) | 2023 | 387 | — | — | 387 | | | 2022 | 383 | — | — | 383 | - The company accrued **25% of annual salary as performance bonus** for Named Executive Officers in 2023 due to achieving sales growth[331](index=331&type=chunk)[332](index=332&type=chunk) - No **stock options were granted** to management in 2023 or 2022[334](index=334&type=chunk)[495](index=495&type=chunk) Director Compensation (2023, in thousands of USD) | Name | Fees earned or paid in cash ($) | Option awards ($) | Total ($) | | :------------ | :------------------------------ | :---------------- | :-------- | | Tong Kooi Teo | 32 | — | 32 | | Guangxun Xu | 59 | — | 59 | | Heng Henry Lu | 32 | — | 32 | [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=89&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters.) Management beneficially owned 64.73% of common stock as of December 31, 2023, with Chairman Hanlin Chen controlling 57.39%, giving him significant influence Security Ownership of Certain Beneficial Owners and Management (as of December 31, 2023) | Name/Title | Total Number of Shares | Percentage Ownership (%) | | :--------------------------------------- | :--------------------- | :------------------- | | Hanlin Chen, Chairman | 17,323,670 | 57.39 | | Qizhou Wu, CEO and Director | 1,537,524 | 5.09 | | Guangxun Xu, Director | — | — | | Tong Kooi Teo, Director | — | — | | Heng Henry Lu, Director | — | — | | Haimian Cai, VP | 50,000 | 0.17 | | Jie Li, CFO | 97,031 | 0.32 | | Tse Andy, Sr. VP | 531,682 | 1.76 | | Henry Chen, VP | — | — | | All Directors and Executive Officers (9 persons) | 19,539,907 | 64.73 | - Chairman **Hanlin Chen beneficially owns 57.39% of common stock**, including shares held by his wife and a controlled company, granting him effective control[341](index=341&type=chunk)[532](index=532&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=91&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence.) The company engages in related party transactions at fair market prices, with the Audit Committee reviewing and approving them to ensure arm's-length terms - The company engages in various **related party transactions**, including sales, material purchases, technology services, and short-term loans[455](index=455&type=chunk)[456](index=456&type=chunk)[457](index=457&type=chunk)[458](index=458&type=chunk) - These related party transactions are conducted at **fair market prices** and under terms similar to unaffiliated third parties[455](index=455&type=chunk)[456](index=456&type=chunk)[457](index=457&type=chunk) - The **Audit Committee reviews and approves related party transactions** to ensure arm's-length terms[345](index=345&type=chunk) [Item 14. Principal Accountant Fees and Services](index=91&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services.) PricewaterhouseCoopers Zhong Tian LLP served as principal accountant, with audit fees of $724,000 in 2023, and the Audit Committee pre-approves all services Principal Accountant Fees (in thousands of USD) | Category | Fiscal 2023 | Fiscal 2022 | | :--------- | :---------- | :---------- | | Audit Fees | $724 | $731 | | Other Fees | $44 | $— | | Total Fees | $768 | $731 | - The **Audit Committee has a pre-approval policy** for all audit and non-audit services to maintain auditor independence[347](index=347&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=60&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules.) This section lists the comprehensive financial statements and various exhibits filed as part of the Annual Report on Form 10-K - The report includes the **Independent Auditor's Report, Consolidated Balance Sheets, Income Statements, Comprehensive Income, Equity Changes, Cash Flows, and Notes**[348](index=348&type=chunk) - A list of exhibits, including **corporate governance documents, joint venture agreements, and certifications**, is provided as part of this Form 10-K[351](index=351&type=chunk)[352](index=352&type=chunk)[544](index=544&type=chunk) [Item 16. Form 10-K Summary](index=62&type=section&id=Item%2016.%20Form%2010-K%20Summary.) This item is not applicable to the company's reporting requirements Financial Statements [Report of Independent Registered Public Accounting Firm](index=65&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers Zhong Tian LLP issued an unqualified opinion on the consolidated financial statements, identifying deferred tax asset recoverability as a critical audit matter - **PricewaterhouseCoopers Zhong Tian LLP** issued an **unqualified opinion** on the 2023 and 2022 consolidated financial statements, affirming U.S. GAAP conformity[358](index=358&type=chunk) - A critical audit matter was the assessment of **deferred tax asset recoverability**, involving significant management judgment and estimation uncertainty[362](index=362&type=chunk)[363](index=363&type=chunk)[364](index=364&type=chunk) [Consolidated Balance Sheets](index=67&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $766.4 million in 2023, driven by receivables, while liabilities and equity also grew, reflecting operational changes Consolidated Balance Sheet Highlights (in thousands of USD) | Metric | December 31, 2023 | December 31, 2022 | | :-------------------------- | :---------------- | :---------------- | | Total current assets | $564,075 | $520,718 | | Total non-current assets | $202,365 | $193,634 | | Total assets | $766,440 | $714,352 | | Total current liabilities | $383,739 | $364,195 | | Total long-term liabilities | $14,297 | $28,732 | | Total liabilities | $398,018 | $386,937 | | Total stockholders' equity | $367,809 | $326,833 | - **Cash and cash equivalents decreased to $114.7 million** in 2023 from $121.2 million in 2022[369](index=369&type=chunk) - **Accounts and notes receivable (net) increased to $269.4 million** in 2023 from $224.3 million in 2022[369](index=369&type=chunk)[462](index=462&type=chunk) - **Accounts and notes payable (total) increased to $253.6 million** in 2023 from $235.1 million in 2022[369](index=369&type=chunk)[483](index=483&type=chunk) [Consolidated Statements of Income or Loss](index=68&type=section&id=Consolidated%20Statements%20of%20Income%20or%20Loss) Net product sales increased by 8.8% to $576.4 million, driving a 91.3% rise in net income to $42.7 million and EPS of $1.25 in 2023 Consolidated Statements of Income or Loss Highlights (in thousands of USD, except per share amounts) | Metric | 2023 | 2022 | Change | Change % | | :---------------------------------------------- | :--------- | :--------- | :--------- | :------- | | Net product sales | $576,354 | $529,551 | $46,803 | 8.8 | | Cost of products sold | 472,603 | 446,157 | 26,446 | 5.9 | | Gross profit | 103,751 | 83,394 | 20,357 | 24.4 | | Operating income | 39,245 | 7,951 | 31,294 | 393.6 | | Net income | 42,738 | 22,343 | 20,395 | 91.3 | | Net income attributable to parent company's common shareholders | 37,658 | 21,181 | 16,447 | 77.8 | | Basic EPS | $1.25 | $0.69 | $0.56 | 81.2 | | Diluted EPS | $1.25 | $0.69 | $0.56 | 81.2 | - **Gross margin improved to 18.0%** in 2023 from 15.7% in 2022[231](index=231&type=chunk) - **Research and development expenses decreased by 19.1% to $29.2 million** in 2023[236](index=236&type=chunk) - **Financial income, net, decreased by $6.1 million**, primarily due to lower foreign exchange gains[239](index=239&type=chunk) [Consolidated Statements of Comprehensive Income or Loss](index=69&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20or%20Loss) Comprehensive income reached $37.5 million in 2023, a significant improvement from a $7.6 million loss in 2022, driven by reduced foreign currency translation loss Consolidated Statements of Comprehensive Income or Loss Highlights (in thousands of USD) | Metric | 2023 | 2022 | | :-------------------------------------------------------- | :--------- | :---------- | | Net income | $42,738 | $22,343 | | Foreign currency translation loss | (5,191) | (29,934) | | Comprehensive income/(loss) | 37,547 | (7,591) | | Comprehensive income/(loss) attributable to parent company | $32,813 | $(6,949) | - **Foreign currency translation loss significantly decreased from $29.9 million in 2022 to $5.2 million in 2023**[372](index=372&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=70&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity increased to $367.8 million in 2023, driven by net income and improved accumulated other comprehensive income, with no share repurchases Consolidated Statements of Changes in Stockholders' Equity Highlights (in thousands of USD) | Metric | December 31, 2023 | December 31, 2022 | | :-------------------------------------------------------- | :---------------- | :---------------- | | Common Stock | $3 | $3 | | Additional Paid-in Capital | $63,731 | $63,731 | | Retained Earnings - Appropriated | $11,851 | $11,851 | | Retained Earnings - Unappropriated | $284,832 | $247,174 | | Accumulated Other Comprehensive (Loss)/Income | $(8,258) | $(3,413) | | Treasury Stock | $(7,695) | $(7,695) | | Total parent company stockholders' equity | $344,464 | $311,651 | | Non-controlling Interest | $23,345 | $15,182 | | Total stockholders' equity | $367,809 | $326,833 | - **Net income attributable to parent company increased unappropriated retained earnings by $37.7 million** in 2023[374](index=374&type=chunk) - **Accumulated other comprehensive income improved from $(28.1) million loss in 2022 to $(4.8) million loss in 2023** due to foreign currency translation adjustments[374](index=374&type=chunk) - No **common stock was repurchased in 2023**, maintaining treasury stock at **$7.7 million**[374](index=374&type=chunk)[497](index=497&type=chunk) [Consolidated Statements of Cash Flows](index=71&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow decreased to $19.9 million in 2023, while financing cash flow reversed to a $6.8 million inflow, driven by bank loans Consolidated Statements of Cash Flows Highlights (in thousands of USD) | Cash Flow Activity | 2023 | 2022 | | :------------------------------------------------ | :--------- | :--------- | | Net cash provided by operating activities | $19,906 | $48,023 | | Net cash used in investing activities | $(28,637) | $(32,740) | | Net cash provided by/(used in) financing activities | $6,798 | $(1,583) | | Net decrease in cash and cash equivalents | $(3,757) | $(548) | | Cash, cash equivalents and pledged cash at end of year | $155,194 | $158,951 | - Operating cash flow decreased mainly due to reduced cash inflows from **accounts and notes receivable ($13.8 million)** and **accounts and notes payable ($5.2 million)**[273](index=273&type=chunk) - Cash used in investing activities decreased due to a net effect of **decreased purchase of short-term investments and long-term time deposits ($11.7 million)**[274](index=274&type=chunk) - Financing cash flow increased mainly due to **higher proceeds from bank and government loans ($12.9 million)**[275](index=275&type=chunk) Notes to Consolidated Financial Statements [1. Organization and Business](index=73&type=section&id=1.%20Organization%20and%20Business) CAAS operates through its wholly-owned subsidiaries and 16 indirect subsidiaries/joint ventures in China and Brazil, focusing on automotive systems and components - CAAS is a Delaware corporation operating through its wholly-owned subsidiaries and **16 indirect subsidiaries/joint ventures in China and Brazil**[380](index=380&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk) - Subsidiaries like **Henglong and Jiulong produce power steering gears**, while newer entities like **Henglong KYB and Wuhan Hyoseong focus on electric steering systems**[384](index=384&type=chunk)[386](index=386&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk) - **Zhirong**, established in June 2023, engages in inspection and testing of automotive products[395](index=395&type=chunk) [2. Basis of Presentation and Significant Accounting Policies](index=75&type=section&id=2.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) The financial statements adhere to U.S. GAAP, employing estimates for asset valuation and revenue recognition, with specific policies for credit losses, leases, and foreign currency translation - Consolidated financial statements are prepared in accordance with **U.S. GAAP**, including the company and its subsidiaries, with inter-company balances eliminated[396](index=396&type=chunk) - Significant estimates are made for **long-term asset valuation, receivables, inventories, warranty obligations, and deferred tax asset recoverability**[405](index=405&type=chunk) - Revenue is recognized when **control of products transfers to the customer**, with allowances for estimated price discounts and product warranties[423](index=423&type=chunk)[425](index=425&type=chunk) - The company adopted **ASC Topic 326 for credit losses** and **ASC 842 for leases**[408](index=408&type=chunk)[442](index=442&type=chunk) Warranty Activities (in thousands of USD) | Metric | 2023 | 2022 | | :----------------------------------- | :------ | :------ | | Balance at the beginning of year | $32,435 | $36,572 | | Additions during the year | 11,309 | 10,941 | | Settlement within the year | (12,676)| (11,877)| | Foreign currency translation loss | (628) | (3,201) | | Balance at end of year | $30,440 | $32,435 | - The company's **five largest customers accounted for 40.4% of 2023 consolidated sales**, with Stellantis N.V. alone accounting for **17.2%**[435](index=435&type=chunk) - Functional currencies include **USD, RMB, and BRL**, with foreign currency translation adjustments included in comprehensive income[452](index=452&type=chunk)[453](index=453&type=chunk) [3. Accounts and Notes Receivable](index=84&type=section&id=3.%20Accounts%20and%20Notes%20Receivable) Total accounts and notes receivable, net, increased to $269.4 million in 2023, with the allowance for doubtful accounts rising to $17.0 million Accounts and Notes Receivable (in thousands of USD) | Metric | December 31, 2023 | December 31, 2022 | | :---------------------------------------------- | :---------------- | :---------------- | | Accounts and notes receivable - unrelated parties | $276,836 | $228,667 | | Less: allowance for doubtful accounts - unrelated parties | $(15,599) | $(14,359) | | Accounts and notes receivable, net - unrelated parties | $261,237 | $214,308 | | Accounts and notes receivable - related parties | $9,573 | $11,779 | | Less: allowance for doubtful accounts - related parties | $(1,404) | $(1,763) | | Accounts and notes receivable, net - related parties | $8,169 | $10,016 | | Accounts and notes receivable, net | $269,406 | $224,324 | Allowance for Doubtful Accounts Activity (in thousands of USD) | Metric | 2023 | 2022 | | :--------------------------------------- | :------ | :------ | | Balance at beginning of year | $16,122 | $12,859 | | Amounts provided during the year | 2,002 | 5,371 | | Amounts reversed of collection during the year | (463) | (967) | | Writing off uncollectible account receivables | (410) | — | | Foreign currency translation | (248) | (1,141) | | Balance at end of year | $17,003 | $16,122 | - The company pledged **notes receivable of $11.5 million** in 2023 as collateral for bank notes payable[463](index=463&type=chunk) [4. Advance Payments and Others](index=85&type=section&id=4.%20Advance%20Payments%20and%20Others) Total advance payments and others, net, increased to $16.0 million in 2023, primarily driven by input VAT and prepayments for raw materials Advance Payments and Others (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :-------------------------------------- | :---------------- | :---------------- | | Input VAT | $8,957 | $4,283 | | Prepayments for purchase of raw materials | 3,206 | 3,942 | | Prepayment for R&D service | 1,553 | 748 | | Prepaid income tax | 948 | 1,287 | | Employee advances | 448 | 713 | | Prepayment for share repurchase program | 9 | 754 | | Others | 900 | 734 | | Total advance payments and others | $16,021 | $12,461 | | Less: Allowance for doubtful accounts | (22) | (115) | | Advance payments and others, net | $15,999 | $12,346 | [5. Inventories](index=85&type=section&id=5.%20Inventories) Total inventories remained stable at $112.4 million in 2023, with a shift from finished goods to raw materials and work in process Inventories (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :-------------------- | :---------------- | :---------------- | | Finished goods | $62,760 | $71,371 | | Raw materials | 28,505 | 24,502 | | Work in process | 17,123 | 16,001 | | Cost of R&D service | 4,004 | 362 | | Balance at end of year | $112,392 | $112,236 | - **Inventory write-downs** to cost of product sold were **$4.8 million in 2023** and $4.7 million in 2022[465](index=465&type=chunk) [6. Property, Plant and Equipment](index=85&type=section&id=6.%20Property,%20Plant%20and%20Equipment) Net property, plant and equipment decreased to $101.4 million in 2023 due to depreciation and impairment, despite increased construction in progress Property, Plant and Equipment (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :------------------------- | :---------------- | :---------------- | | Machinery and equipment | $241,761 | $239,385 | | Buildings | 64,390 | 64,928 | | Electronic equipment | 5,804 | 6,242 | | Motor vehicles | 4,587 | 4,308 | | Construction in progress | 11,821 | 8,238 | | Gross Total | $328,363 | $323,101 | | Less: Accumulated depreciation | (226,436) | (216,495) | | Less: Impairment | (568) | — | | Balance at end of year, net | $101,359 | $106,606 | - **Depreciation charges were $17.2 million** in 2023 and $24.2 million in 2022[466](index=466&type=chunk) - The company pledged **$43.3 million in property, plant and equipment and land use rights** as security for credit facilities in 2023[467](index=467&type=chunk) [7. Intangible Assets](index=86&type=section&id=7.%20Intangible%20Assets) Net intangible assets increased to $3.9 million in 2023, primarily due to higher management software licenses, with amortization expenses of $1.0 million Intangible Assets (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :------------------------------ | :---------------- | :---------------- | | Management software license | $7,055 | $3,756 | | Patent technology | 2,340 | 2,266 | | Total intangible assets - at cost | $9,395 | $6,022 | | Less: Accumulated amortization | (5,530) | (4,749) | | Balance at end of year, net | $3,865 | $1,273 | - **Amortization expenses were $1.0 million** in 2023 and $0.6 million in 2022[468](index=468&type=chunk) [8. Long-term Investments](index=86&type=section&id=8.%20Long-term%20Investments) Total long-term investments slightly increased to $60.2 million in 2023, primarily in limited partnerships and corporations accounted for using the equity method Long-term Investments (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :-------------------------------------- | :---------------- | :---------------- | | Limited Partnerships: | | | | Chongqing Venture Fund | $13,158 | $14,435 | | Hubei Venture Fund | 12,217 | 11,738 | | Suzhou Qingshan | 8,409 | 4,179 | | Suzhou Venture Fund | 3,387 | 5,473 | | Suzhou Mingzhi | 1,261 | — | | Subtotal - Investments in limited partnerships | $38,432 | $35,825 | | Corporations: | | | | Sentient AB | $20,417 | $21,831 | | Henglong Tianyu | 793 | 774 | | Chongqing Jinghua | — | 695 | | Jiangsu Intelligent | 531 | 685 | | Subtotal - Investments in corporations | $21,741 | $23,985 | | Total | $60,173 | $59,810 | - Investments in limited partnerships and corporations are accounted for using the **equity method**[469](index=469&type=chunk)[470](index=470&type=chunk)[471](index=471&type=chunk)[472](index=472&type=chunk)[473](index=473&type=chunk) - The company's proportionate share of net loss from equity method investments was **$2.0 million in 2023**[474](index=474&type=chunk) [9. Deferred Income Tax Assets and Liabilities](index=88&type=section&id=9.%20Deferred%20Income%20Tax%20Assets%20and%20Liabilities) Net deferred tax assets increased to $11.2 million in 2023, while deferred tax liabilities decreased, with a reduction in the valuation allowance Deferred Tax Assets and Liabilities (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :------------------------------------------------ | :---------------- | :---------------- | | Total deferred tax assets | $30,229 | $33,635 | | Less: Valuation allowance | (18,981) | (23,270) | | Total deferred tax assets, net of valuation allowance | $11,248 | $10,365 | | Deferred withholding tax for dividend distribution from PRC subsidiaries | $3,943 | $4,010 | | Other taxable temporary differences | 2,349 | 2,713 | | Total deferred tax liabilities | $6,292 | $6,723 | Valuation Allowance for Deferred Tax Assets Activity (in thousands of USD) | Metric | 2023 | 2022 | | :--------------------------------------- | :------ | :------ | | Balance at beginning of year | $23,270 | $22,788 | | Amounts provided for during the year | 589 | 5,058 | | Amounts used during the year | (4,511) | (2,721) | | Foreign currency translation | (367) | (1,855) | | Balance at end of year | $18,981 | $23,270 | - The company has **net operating loss carry-forwards** in Hong Kong (**$1.7 million**) and PRC entities (**$2.4 million and $3.9 million**)[475](index=475&type=chunk) [10. Bank Loans](index=89&type=section&id=10.%20Bank%20Loans) Total bank loans increased to $49.2 million in 2023, with $195.8 million in credit facilities utilized at a 2.6% weighted average interest rate Bank Loans (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :---------------- | :---------------- | :---------------- | | Short-term bank loans | $48,005 | $45,671 | | Long-term loans | 1,221 | 528 | | Total bank loans | $49,226 | $46,199 | - The total credit facility was **$195.8 million in 2023**, with **$49.2 million drawn** at a **2.6% weighted average interest rate**[479](index=479&type=chunk) - Loans are secured by **property, plant and equipment, and land use rights**[479](index=479&type=chunk) - The company complied with all **financial covenants** as of December 31, 2023[481](index=481&type=chunk) [11. Accounts and Notes Payable](index=89&type=section&id=11.%20Accounts%20and%20Notes%20Payable) Total accounts and notes payable increased to $253.6 million in 2023, with notes payable at $93.0 million, secured by pledged cash and notes receivable Accounts and Notes Payable (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :------------------------------------- | :---------------- | :---------------- | | Accounts payable - unrelated parties | $147,712 | $133,882 | | Notes payable - unrelated parties | 93,027 | 84,530 | | Accounts and notes payable - unrelated parties | $240,739 | $218,412 | | Accounts and notes payable - related parties | $12,839 | $16,695 | | Balance at end of year | $253,578 | $235,107 | - The company pledged **cash of $39.3 million** and **notes receivable of $11.5 million** in 2023 as collateral for bank notes payable[482](index=482&type=chunk) [12. Accrued Expenses and Other Payables](index=90&type=section&id=12.%20Accrued%20Expenses%20and%20Other%20Payables) Accrued expenses and other payables decreased to $44.8 million in 2023, with warranty reserves remaining the largest component at $30.4 million Accrued Expenses and Other Payables (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :---------------------------------------- | :---------------- | :---------------- | | Accrued expenses | $10,464 | $9,652 | | Warranty reserves | 30,440 | 32,435 | | Payable for the investment in Sentient AB | — | 2,043 | | Payables for overseas transportation and custom clearance | 400 | 294 | | Dividends payable to holders of non-controlling interests | 424 | 431 | | Accrued interest | — | 465 | | Other payables | 3,043 | 2,991 | | Balance at end of year | $44,771 | $48,311 | [13. Taxes Payable](index=90&type=section&id=13.%20Taxes%20Payable) Short-term taxes payable remained stable at $17.3 million in 2023, while long-term taxes payable decreased to $8.8 million due to payments Taxes Payable (in thousands of USD) | Category | December 31, 2023 | December 31, 2022 | | :---------------------------------------- | :---------------- | :---------------- | | Value-added tax payable | $3,104 | $3,470 | | Tariffs payable | 3,548 | 7,061 | | Long-term taxes payable - current portion | 7,024 | 5,270 | | Income tax payable | 2,293 | 680 | | Other tax payable | 1,298 | 1,117 | | Short-term taxes payable | $17,267 | $17,598 | | Long-term taxes payable | $8,781 | $15,805 | - Long-term taxes payable relate to a **$35.6 million one-time transition tax** from the U.S. Tax Reform, payable over eight years[486](index=486&type=chunk) [14. Redeemable non-controlling interests](index=90&type=section&id=14.%20Redeemable%20non-controlling%20interests) Redeemable non-controlling interests totaled $613,000 in 2023, subject to purchase by the company if a subsidiary fails to complete a qualified IPO - Redeemable non-controlling interests were **$613,000 in 2023** and $582,000 in 2022[369](index=369&type=chunk) - These interests are subject to purchase by the company if the subsidiary fails to complete a qualified IPO, with an **accretion of $30,000** to the redemption value recognized annually[487](index=487&type=chunk)[488](index=488&type=chunk) [15. Stock Options](index=91&type=section&id=15.%20Stock%20Options) The stock option plan allows for 2.2 million common shares, with 22,500 options outstanding and exercisable as of December 31, 2023, and no grants in 2023 or 2022 - The stock option plan, extended to June 27, 2025, allows for issuance of up to **2,200,000 common shares**[489](index=489&type=chunk) Stock Option Activity (Shares) | Metric | 2023 | 2022 | | :-------------------------- | :------ | :------ | | Outstanding - January 1 | 30,000 | 37,500 | | Expired | (7,500) | (7,500) | | Outstanding - December 31 | 22,500 | 30,000 | - As of December 31, 2023, **22,500 stock options were outstanding and exercisable**, with a **weighted-average exercise price of $6.26** and a remaining contractual term of **2.00 years**[493](index=493&type=chunk)[494](index=494&type=chunk) - No **stock options were granted or exercised** during 2023 and 2022[495](index=495&type=chunk) [16. Retained Earnings](index=91&type=section&id=16.%20Retained%20Earnings) PRC subsidiaries must appropriate 10% of after-tax profits to statutory surplus reserves, which are not distributable as cash dividends - **PRC subsidiaries must appropriate 10% of after-tax profits to statutory surplus reserves** annually until 50% of registered capital is reached[496](index=496&type=chunk) - These statutory reserves are **not distributable as cash dividends**[496](index=496&type=chunk) - Statutory reserves appropriated by China subsidiaries were **nil in 2023** and $0.4 million in 2022[496](index=496&type=chunk) [17. Treasury Stock](index=92&type=section&id=17.%20Treasury%20Stock) The company held 2,152,600 shares of treasury stock valued at $7.7 million as of December 31, 2023, with no repurchases in 2023 - **Treasury stock** is accounted for under the cost method and represents repurchased shares no longer outstanding[497](index=497&type=chunk)[498](index=498&type=chunk) - As of December 31, 2023, the company held **2,152,600 shares of treasury stock valued at $7.7 million**[374](index=374&type=chunk) - No **shares were repurchased in 2023**; in 2022, **666,074 shares were repurchased for $2.4 million** under a $5.0 million program[497](index=497&type=chunk) [18. Other Income, Net](index=92&type=section&id=18.%20Other%20Income,%20Net) Other income, net, decreased to $5.3 million in 2023, primarily due to lower government subsidies and the absence of a prior year impairment provision Other Income, Net (in thousands of USD) | Category | 2023 | 2022 | | :------------------------------------------------ | :------ | :------ | | Government subsidy | $3,777 | $6,270 | | Investment income | 1,465 | 1,912 | | Charity donation | 103 | 140 | | Provision for impairment of prepayment for investment in Hefei Senye | — | (2,540) | | Total other income, net | $5,345 | $5,782 | - The decrease in other income, net, was mainly due to **lower government subsidies** and the absence of the Hefei Senye impairment provision in 2023[499](index=499&type=chunk) [19. Financial Income, net](index=92&type=section&id=19.%20Financial%20Income,%20net) Financial income, net, decreased significantly to $4.7 million in 2023, primarily due to lower foreign exchange gains from reduced volatility Financial Income, Net (in thousands of USD) | Category | 2023 | 2022 | | :------------------------- | :----- | :------ | | Foreign exchange income, net | $3,355 | $9,833 | | Interest income | 1,524 | 1,247 | | Bank fees | (213) | (327) | | Total financial income, net | $4,666 | $10,753 | - The decrease in financial income, net, was primarily due to a **decrease in foreign exchange gains** from reduced volatility in 2023[239](index=239&type=chunk)[500](index=500&type=chunk) [20. Income Taxes](index=93&type=section&id=20.%20Income%20Taxes) Income tax expense increased to $5.1 million in 2023 due to higher GILTI taxes, with PRC subsidiaries subject to 25% or preferential 15% rates and withholding taxes on dividends - **Income tax expense increased to $5.1 million** in 2023, mainly due to higher GILTI tax expenses[240](index=240&type=chunk)[514](index=514&type=chunk) - **PRC subsidiaries are subject to a 25% corporate income tax rate**, with a preferential **15% rate for "High & New Technology Enterprises"**[501](index=501&type=chunk)[505](index=505&type=chunk)[506](index=506&type=chunk) - Dividends from PRC subsidiaries to the Hong Kong holding company are subject to a **5% or 10% withholding tax**[503](index=503&type=chunk) - The company recognized **$3.9 million in deferred tax liabilities** for $39.4 million of undistributed profits expected to be distributed from PRC subsidiaries[504](index=504&type=chunk) - **Brazil Henglong is subject to a 24% income tax rate**, plus an additional **10% tax on taxable income over BRL 0.24 million**[507](index=507&type=chunk) - The company is subject to **U.S. corporate income tax at up to 21%** and has a **$35.1 million one-time transition tax liability** from the U.S. Tax Reform[509](index=509&type=chunk)[512](index=512&type=chunk) [21. Income Per Share](index=95&type=section&id=21.%20Income%20Per%20Share) Basic and diluted net income per share increased to $1.25 in 2023, reflecting higher net income attributable to parent company shareholders Income Per Share (in thousands of USD, except per share amounts) | Metric | 2023 | 2022 | | :------------------------------------------------------------------ | :--------- | :--------- | | Net income attributable to parent company's common shareholders | $37,658 | $21,181 | | Weighted average number of common shares outstanding - Basic | 30,185,702 | 30,639,102 | | Weighted average number of common shares outstanding - Diluted | 30,189,421 | 30,641,274 | | Basic income per share attributable to parent company's common shareholders | $1.25 | $0.69 | | Diluted income per share attributable to parent company's common shareholders | $1.25 | $0.69 | - **Basic and diluted EPS increased by $0.56 (81.2%)** in 2023 compared to 2022[520](index=520&type=chunk) - Stock options with exercise prices above market price were excluded from diluted EPS calculations as they were **anti-dilutive**[516](index=516&type=chunk) [22. Significant Concentrations](index=95&type=section&id=22.%20Significant%20Concentrations) The company's business is highly concentrated in China, with RMB currency controls and profit distribution rules posing risks to capital repatriation - A significant portion of the company's business is conducted in **China**, with **RMB as the primary currency**[517](index=517&type=chunk) - **PRC regulations on currency conversion**, especially for "capital account" transactions, require prior SAFE approval, potentially limiting capital repatriation[521](index=521&type=chunk)[522](index=522&type=chunk) - The company relies on **dividend payments from China-based subsidiaries**, subject to PRC profit distribution rules and statutory reserve requirements restricting cash dividends[518](index=518&type=chunk) [23. Related Party Transactions](index=96&type=section&id=23.%20Related%20Party%20Transactions) The company engages in various related party transactions, including sales and purchases, all conducted at fair market prices, with Chairman Hanlin Chen holding significant control Merchandise Sold to Related Parties (in thousands of USD) | Related Party | 2023 | 2022 | | :------------------------ | :------ | :------ | | Hubei Hongrun | $33,829 | $32,489 | | Jingzhou Yude | 11,390 | 8,778 | | Xiamen Automotive Parts | 1,733 | 2,468 | | Other related parties | 562 | 547 | | Total | $47,514 | $44,282 | Materials Purchased from Related Parties (in thousands of USD) | Related Party | 2023 | 2022 | | :--------------------- | :------ | :------ | | Jingzhou Tongying | $12,033 | $12,152 | | Wuhan Tongkai | 8,311 | 9,974 | | Jiangling Tongchuang | 3,390 | 3,238 | | Honghu Changrun | 2,396 | 2,467 | | Henglong Tianyu | 557 | 611 | | Hubei Wiselink | 528 | 310 | | Hubei Yiling | 57 | 30 | | Other related parties | 16 | 28 | | Total | $27,288 | $28,810 | Advance Payments for Property, Plant and Equipment to Related Parties (in thousands of USD) | Related Party | December 31, 2023 | December 31, 2022 | | :--------------------- | :---------------- | :---------------- | | Hubei Wiselink | $3,609 | $1,618 | | Henglong Real Estate | 2,150 | 224 | | Hubei Hongrun | — | 42 | | Total | $5,759 | $1,884 | - **Hanlin Chen**, the chairman, owns **57.39% of the common stock**, granting him effective control over significant matters[532](index=532&type=chunk) [24. Commitments and Contingencies](index=98&type=section&id=24.%20Commitments%20and%20Contingencies) The company has no pending legal proceedings, but has non-cancelable commitments totaling $26.8 million, primarily for purchasing and investment contracts - The company is not a party to any **pending or threatened legal proceedings**[533](index=533&type=chunk) Non-Cancelable Commitments and Contingencies (as of December 31, 2023, in thousands of USD) | Category | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :------------------------------------- | :------- | :--------------- | :-------- | :-------- | :---------------- | | Obligations for investment contracts | $2,965 | $— | $2,965 | $— | $— |

Core Viewpoint - China Automotive Systems, Inc. (CAAS) reported significant growth in net sales and profits for both the fourth quarter and the fiscal year 2023, driven by increased demand for electric power steering (EPS) products and a favorable product mix [1][4]. Fourth Quarter 2023 Highlights - Net sales increased by 23.6% year-over-year to $159.2 million [2][6]. - Gross profit rose by 38.8% to $34.7 million, with gross margin improving to 21.8% from 19.4% [2][6]. - Operating income was $13.6 million, a turnaround from an operating loss of $2.6 million in the same quarter of 2022 [2][8]. - Net income attributable to common shareholders surged by 153.5% to $10.9 million, translating to diluted net income per share of $0.36 [2][9]. Fiscal Year 2023 Highlights - Annual net sales reached a record $576.4 million, an increase of 8.8% compared to $529.6 million in 2022 [3][10]. - Gross profit for the year increased by 24.5% to $103.8 million, with gross margin rising to 18.0% from 15.7% [3][10]. - Operating income skyrocketed by 390.0% to $39.2 million, compared to $8.0 million in 2022 [3][12]. - Diluted net income per share increased by 81.2% to $1.25 [3][14]. Product Performance - EPS sales grew by 24.6% in 2023, accounting for 33.8% of total net sales [4][10]. - Sales in Brazil increased by 22.9%, which helped offset a decline in North American sales [4][10]. Financial Position - Total cash and cash equivalents, pledged cash, and short-term investments were $166.3 million at year-end [5][15]. - The company maintained a strong balance sheet with a current ratio of nearly 1.5 [5][15]. Business Outlook - Management anticipates revenue guidance for fiscal year 2024 to be $605.0 million, reflecting optimism about market conditions and recovery in North America [16].

WUHAN, China, March 15, 2024 /PRNewswire/ -- China Automotive Systems, Inc. (Nasdaq: CAAS) ("CAAS" or the "Company"), a leading power steering components and systems supplier in China, today announced that it will issue unaudited financial results for the fourth quarter ended December 31, 2023, on Thursday, March 28, 2024, before the market opens. Management will conduct a conference call on March 28th at 8:00 A.M. EDT/8:00 P.M. Beijing Time to discuss these results.  A question and answer session will foll ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 Or ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | --- | |-----------------------------------------------------------------------------|------------------|-------|----------------------------------------- ...

China Automotive Systems, Inc. (NASDAQ:CAAS) Q3 2023 Earnings Conference Call November 10, 2023 8:00 AM ET Company Participants Kevin Theiss - IR Jie Li - CFO Conference Call Participants Operator Good morning, everyone, and welcome to the China Automotive Systems' Third Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode and the floor will be open for questions after the presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn ...

Financial Data and Key Metrics Changes - The company's net sales increased by 8.1% year-over-year to $137.4 million in Q2 2023 compared to $127.2 million in Q2 2022 [14] - Net income attributable to parent company's common shareholders rose to $10.5 million in Q2 2023 from $9.4 million in Q2 2022, with diluted earnings per share increasing by 12.9% to $0.35 [18] - For the first six months of 2023, net sales increased by 6.1% year-over-year to $279.7 million, with net income attributable to parent company shareholders reaching $17.3 million compared to $9.4 million in the same period last year [20] Business Line Data and Key Metrics Changes - Net sales of advanced electric power steering (EPS) products rose by 28.4% year-over-year to $41.6 million in Q2 2023 [14] - Sales of traditional steering products increased by 1.1% year-over-year to $95.8 million in Q2 2023 [14] - Sales to the commercial vehicle market increased by 7.2%, while Henglong passenger vehicle sales rose by 27.4% due to higher demand [9] Market Data and Key Metrics Changes - Overall automobile sales in China increased by 17.9% year-over-year in Q2 2023, with passenger vehicle sales rising by 19.3% and commercial vehicle sales up by 10.1% [8] - New energy vehicle sales rose by 44.1% in the first six months of 2023, reflecting a recovery from the previous year's COVID-19 restrictions [9] Company Strategy and Development Direction - The company continues to collaborate with major OEMs like BYD and Stellantis to enhance product offerings and develop new technologies [10] - Focus on developing proprietary EPS products for advanced driver assistance systems (ADAS) and level-4 autonomous driving [11] - Management reiterated a revenue growth target of $560 million for the full year 2023, based on current market conditions [21] Management Comments on Operating Environment and Future Outlook - The Chinese economy showed signs of recovery with a GDP growth rate of 5.5% year-over-year in the first half of 2023, although affected by internal and external factors [6] - Management noted that sales to North America declined by 24.5% due to reduced demand from customers, but market share remained stable [23] - New government incentives are expected to enhance economic growth in targeted markets, including the automobile sector [13] Other Important Information - Total cash, cash equivalents, and pledged cash were $125.5 million as of June 30, 2023 [20] - The company achieved an approximate 11% year-over-year decline in total operating expenses, contributing to an operating profit of $8.2 million in Q2 2023 [12] Q&A Session Summary Question: Could you shed some light on the decline in sales to the US and expectations going forward? - Management confirmed a 24.5% decline in sales to North America, primarily due to a decrease in customer production volumes, but market share remained stable [23] - The company is working on new products and expects to increase shipments as these are rolled out, while also pursuing new clients in North America [24] Question: What percentage of your sales come from North America currently? - Management indicated that approximately 20% of total revenues come from North America [25]

Part I [Unaudited Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Financial%20Statements.) The unaudited financial statements for the period ended June 30, 2023, show a year-over-year increase in net product sales and net income for both the three and six-month periods, with a slight decrease in total assets primarily due to reduced cash and cash equivalents [Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=Condensed%20Unaudited%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For Q2 2023, net product sales increased by 8.1% to $137.4 million, and net income attributable to shareholders rose by 11.0% to $10.5 million, while H1 2023 saw net sales grow by 6.1% to $279.7 million and net income increase by 84.5% to $17.3 million Q2 2023 vs Q2 2022 Performance (Three Months Ended June 30) | Metric | Q2 2023 (in thousands USD) | Q2 2022 (in thousands USD) | Change (%) | | :--- | :--- | :--- | :--- | | Net Product Sales | 137,410 | 127,161 | +8.1% | | Gross Profit | 22,718 | 22,711 | +0.03% | | Income from Operations | 7,789 | 7,200 | +8.2% | | Net Income Attributable to Parent | 10,466 | 9,428 | +11.0% | | Diluted EPS | $0.35 | $0.31 | +12.9% | H1 2023 vs H1 2022 Performance (Six Months Ended June 30) | Metric | H1 2023 (in thousands USD) | H1 2022 (in thousands USD) | Change (%) | | :--- | :--- | :--- | :--- | | Net Product Sales | 279,653 | 263,557 | +6.1% | | Gross Profit | 44,336 | 37,445 | +18.4% | | Income from Operations | 15,533 | 5,662 | +174.3% | | Net Income Attributable to Parent | 17,286 | 9,369 | +84.5% | | Diluted EPS | $0.57 | $0.30 | +90.0% | [Condensed Unaudited Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Unaudited%20Consolidated%20Balance%20Sheets) As of June 30, 2023, total assets decreased to $684.6 million from $714.4 million at year-end 2022, primarily due to reductions in cash and inventories, while total liabilities also decreased to $350.1 million from $386.9 million Consolidated Balance Sheet Highlights (in thousands USD) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | 487,906 | 520,718 | | Cash and cash equivalents | 95,620 | 121,216 | | Total Assets | 684,577 | 714,352 | | **Total Current Liabilities** | 334,600 | 364,195 | | Short-term loans | 38,457 | 45,671 | | Total Liabilities | 350,142 | 386,937 | | **Total Stockholders' Equity** | 333,837 | 326,833 | [Condensed Unaudited Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2023, net cash used in operating activities was $0.05 million, a significant shift from the $14.5 million provided in the prior year, while net cash used in investing activities remained stable and financing activities increased cash usage due to higher loan repayments Cash Flow Summary (Six Months Ended June 30, in thousands USD) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash (used in)/provided by operating activities | (52) | 14,484 | | Net cash used in investing activities | (24,046) | (24,443) | | Net cash (used in)/provided by financing activities | (5,556) | 1,610 | | **Net decrease in cash, cash equivalents and pledged cash** | **(33,410)** | **(15,676)** | [Notes to Condensed Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Unaudited%20Financial%20Statements) The notes detail the company's organizational structure, including a new subsidiary, Hubei Zhirong, established in June 2023, and cover significant accounting policies, customer concentration, segment performance, and related party transactions - In June 2023, the company established a new wholly-owned subsidiary, Hubei Zhirong Automobile Technology Co., Ltd., which engages in the inspection and testing of automotive products[28](index=28&type=chunk)[114](index=114&type=chunk) - For the six months ended June 30, 2023, the company's five largest customers accounted for **41.7%** of consolidated net product sales, with one single customer representing **20.0%** of sales[38](index=38&type=chunk) - The company operates through **16 product sectors**, with six main segments (Henglong, Jiulong, Wuhu, Henglong KYB, Hubei Henglong, and Brazil Henglong) being the principal profit makers[101](index=101&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management attributes the 6.1% year-over-year revenue growth for the first six months of 2023 to a 21.8% increase in electric power steering (EPS) systems sales, which now constitute 32.0% of total net sales, with improved gross margin and reduced operating expenses contributing to higher operating and net income [Results of Operations - Q2 2023 vs Q2 2022](index=34&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20June%2030%2C%202023%20and%202022) In Q2 2023, net product sales increased by 8.1% to $137.4 million, driven by a 28.4% surge in electric power steering (EPS) sales, which now represent 30.3% of total sales, while gross margin slightly decreased to 16.5% and net income attributable to shareholders grew by 11.0% to $10.5 million - Net sales of electric power steering (EPS) systems increased by **28.4%** to **$41.6 million** in Q2 2023, accounting for **30.3%** of total net sales, up from 25.5% in Q2 2022[123](index=123&type=chunk) - Gross margin decreased by **1.4 percentage points** to **16.5%** in Q2 2023, mainly due to a change in product mix[131](index=131&type=chunk) - Operating expenses decreased, with selling expenses down **6.7%**, G&A down **6.9%**, and R&D expenses down **16.2%** year-over-year[132](index=132&type=chunk) [Results of Operations - H1 2023 vs H1 2022](index=39&type=section&id=Results%20of%20Operations%20-%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) For the first half of 2023, net sales grew 6.1% to $279.7 million, propelled by a 21.8% increase in EPS sales, with gross margin improving significantly to 15.9% due to a better product mix, and net income attributable to shareholders rising sharply by 84.5% to $17.3 million - Net sales of EPS systems increased by **21.8%** to **$89.4 million** in H1 2023, making up **32.0%** of total net sales, compared to 27.8% in H1 2022[141](index=141&type=chunk) - Gross margin increased by **1.7 percentage points** to **15.9%** in H1 2023, primarily due to a change in product mix[150](index=150&type=chunk) - R&D expenses decreased by **18.9%** to **$13.0 million**, mainly due to decreased R&D activities for new projects[150](index=150&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2023, the company had working capital of $153.3 million and cash and short-term investments of $111.1 million, with primary capital sources being bank loans and acceptance facilities totaling $140.2 million in available credit, of which $68.3 million was utilized Working Capital and Cash Position (in millions USD) | Metric | June 30, 2023 (in millions USD) | December 31, 2022 (in millions USD) | | :--- | :--- | :--- | | Working Capital | 153.3 | 156.5 | | Cash, Cash Equivalents & Short-term Investments | 111.1 | 134.1 | Credit Facilities as of June 30, 2023 (in thousands USD) | Facility Type | Amount Available | Amount Used | | :--- | :--- | :--- | | Comprehensive credit facilities | 140,193 | 68,291 | - Net cash used in operating activities was **$0.1 million** for H1 2023, compared to net cash provided of **$14.5 million** in H1 2022, a decrease of **$14.6 million** primarily due to unfavorable movements in working capital[171](index=171&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) The company reports that there have been no material changes to its market risk disclosures since its Annual Report on Form 10-K for the year ended December 31, 2022 - There were no material changes to the market risk disclosures from the Company's 2022 Annual Report on Form 10-K[177](index=177&type=chunk) [Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures.) The company's management, including the CEO and CFO, evaluated the disclosure controls and procedures and concluded they were effective as of June 30, 2023, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023[178](index=178&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[179](index=179&type=chunk) Part II — Other Information [Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings.) The company is not a party to any pending or threatened legal proceedings, and no director, officer, affiliate, or major security holder is involved in litigation adverse to the company - The Company is not a party to any pending or threatened legal proceedings[181](index=181&type=chunk) [Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors.) There have been no material changes from the risk factors that were previously disclosed in Item 1A of the company's 2022 Annual Report on Form 10-K - No material changes have occurred regarding the risk factors previously disclosed in the 2022 Annual Report on Form 10-K[182](index=182&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) The company reported no unregistered sales of equity securities or use of proceeds during the period - None[182](index=182&type=chunk) [Defaults Upon Senior Securities](index=54&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) The company reported no defaults upon senior securities - None[183](index=183&type=chunk) [Mine Safety Disclosures](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to the company - Not applicable[183](index=183&type=chunk) [Other Information](index=54&type=section&id=Item%205.%20Other%20Information.) The company reported no other information for this item - None[183](index=183&type=chunk) [Exhibits](index=55&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed with the quarterly report, including CEO and CFO certifications (Rule 13a-14(a) and Section 1350) and XBRL interactive data files - Exhibits filed include Rule 13a-14(a) Certifications, Section 1350 Certifications, and various XBRL documents[185](index=185&type=chunk)

Financial Data and Key Metrics Changes - Net sales increased by 4.3% to $142.2 million in Q1 2023 compared to $136.4 million in Q1 2022, driven by the gradual recovery of the Chinese economy post-COVID-19 [13] - Gross profit climbed by 46.9% to $21.6 million from $14.7 million in Q1 2022, with gross margin improving to 15.2% from 10.8% [14] - Net income attributable to parent company's common shareholders was $6.8 million in Q1 2023, compared to a net loss of $0.1 million in Q1 2022 [18] Business Line Data and Key Metrics Changes - Net sales of traditional steering products were $94.4 million in Q1 2023, consistent with $95.4 million in Q1 2022 [13] - Net sales of electric power steering (EPS) products rose 16.6% to $47.8 million from $41 million in Q1 2022, with EPS product sales representing 33.6% of total net sales [13] - Sales of passenger vehicle EPS products surged by 24.8% year-over-year to $37.2 million [13] Market Data and Key Metrics Changes - Passenger vehicle unit sales in China declined by 7.3% year-over-year, while commercial vehicle unit sales decreased by 2.9% [8] - New energy vehicle unit sales rose by 26.2% year-over-year, with new energy passenger vehicle sales increasing by 25.2% [8] - North American net export sales rose by 5.5% to $34.7 million in Q1 2023 compared to $32.9 million in Q1 2022 [14] Company Strategy and Development Direction - The company is expanding its relationship with BYD, focusing on new EPS steering products for BYD's high-end vehicle models [9] - The introduction of the Alfa Romeo Tonale in the US market is part of the strategy to strengthen international presence [10] - The company is working on developing its own Advanced Driver Assistance Systems (ADAS) using its AP04 platform for Level 4 autonomous driving [10] Management Comments on Operating Environment and Future Outlook - Management anticipates that the Chinese economy will continue to recover from COVID lockdowns, benefiting the automobile industry over the next several quarters [12] - The company maintains its revenue guidance for the full fiscal year 2023 at $560 million, based on current operating and market conditions [18] Other Important Information - Total operating expenses declined by approximately 15.6% year-over-year in Q1 2023, led by a 21.5% reduction in selling and R&D expenses [11] - R&D expenses decreased by 21% to $6.4 million compared to $8.1 million in Q1 2022, representing 4.5% of net sales [15] Q&A Session Summary Question: Revenue increase for Hubei and Henglong - The revenue for Hubei and Henglong increased by over 5%, mainly driven by North America business, not specifically related to Alfa Romeo [21] Question: Future revenue expectations for Hubei and Henglong - Expected revenue for Hubei and Henglong to remain in the range of $30 million to $35 million per quarter for the remainder of the year [23] Question: Gross margin expectations for 2023 - Management expects gross margin for 2023 to be higher than in 2022, with Q1 2023 gross margin at 15.2% [25][26] Question: R&D expenses as a percentage of revenue - R&D expenses are expected to account for 5% to 5.5% of total revenue going forward, lower than the previously mentioned range [28]

Financial Performance - Net product sales for Q1 2023 were $142.243 million, an increase of 4.3% from $136.396 million in Q1 2022[113] - Net income for Q1 2023 surged to $7.883 million, a significant increase of 5,190.6% compared to $149 thousand in Q1 2022[113] - Net income attributable to parent company's common shareholders reached $6.820 million, compared to a loss of $59 thousand in Q1 2022, marking an increase of 11,659.3%[113] - Net product sales for the three months ended March 31, 2023, were $142.2 million, an increase of $5.8 million or 4.3% compared to $136.4 million for the same period in 2022, driven by increased sales of electric power steering (EPS) systems[115] - Net sales of EPS were $47.8 million for the three months ended March 31, 2023, up $6.8 million or 16.6% from $41.0 million in the same period of 2022, representing 33.6% of total net sales[115] - Gross margin improved to 15.2% for the three months ended March 31, 2023, compared to 10.8% for the same period in 2022, reflecting a 4.4% increase due to a favorable product mix and higher average selling prices[125] Expenses - Cost of products sold decreased by 0.9% to $120.625 million in Q1 2023 from $121.662 million in Q1 2022[113] - Research and development expenses decreased by 21.5% to $6.390 million in Q1 2023 from $8.137 million in Q1 2022[113] - Selling expenses were reduced by 21.5% to $3.384 million in Q1 2023 compared to $4.312 million in Q1 2022[113] - Selling expenses decreased by $0.9 million or 21% to $3.4 million for the three months ended March 31, 2023, primarily due to reduced transportation, marketing, and office expenses[125] - Research and development expenses were $6.4 million for the three months ended March 31, 2023, down $1.7 million or 21% from $8.1 million in the same period of 2022, mainly due to lower tooling charges[126] Cash Flow and Working Capital - Cash and cash equivalents and short-term investments decreased to $120.6 million as of March 31, 2023, down $13.5 million or 10.1% from $134.1 million as of December 31, 2022[131] - Working capital increased to $164.3 million as of March 31, 2023, up $7.8 million or 5.0% from $156.5 million as of December 31, 2022[131] - Net cash used in operating activities for Q1 2023 was $1.4 million, a decrease of $2.9 million compared to Q1 2022, primarily due to an increase in net income excluding non-cash items by $4.1 million[148] - Net cash used in investing activities for Q1 2023 was $16.7 million, down $28.9 million from $45.6 million in Q1 2022, mainly due to a decrease in short-term investments purchases by $9.9 million and an increase in proceeds from maturities of short-term investments by $24.7 million[149] - Net cash used in financing activities for Q1 2023 was $0.4 million, a decrease of $0.3 million compared to $0.7 million in Q1 2022, attributed to an increase in bank loan repayments by $4.8 million[150] Debt and Credit Facilities - Total comprehensive credit facilities amount to $146.688 billion, with $73.928 billion used and an assessed mortgage value of $123.681 billion[137] - The company has pledged assets including land use rights and buildings valued at approximately $27.8 million for credit facilities with China CITIC Bank[139] - The company has a working capital loan from Bank of China of $2.91 million at an annual interest rate of 3.00%, due on October 28, 2023[143] - The company has a working capital loan from China CITIC Bank of $1.455 million at an annual interest rate of 3.65%, due on March 1, 2024[143] - The company has a total of $37.3 million in bank loans and $36.6 million in notes payable as of March 31, 2023[138] - The assessed value of pledged assets includes equipment valued at approximately $75.4 million for the revolving credit facility with Hubei Bank[140] - The company has a working capital loan from Hankou Bank of $2.789 million at an annual interest rate of 2.30%, due on December 25, 2023[143] - The company has a working capital loan from China Everbright Bank of $4.366 million, with an assessed value of pledged assets at approximately $9.1 million[142] - The company has a working capital loan from Chongqing Bank of $15,000 at an annual interest rate of 3.80%, due on April 14, 2023[143] - The company has a working capital loan from China CITIC Bank of $6.965 million at an annual interest rate of 2.30%, due on June 15, 2023[143] - Total notes payable as of March 31, 2023 amounted to $105.466 million, with specific due amounts for working capital ranging from $13.283 million to $22.892 million across various months[146] Operational Insights - The company has approximately 3,964 employees dedicated to design, development, manufacture, and sales as of March 31, 2023[103] - The company aims to improve overall margins and long-term operating profitability through operational improvements and business structure adjustments[103] - The company has business relationships with over sixty vehicle manufacturers, including major domestic and foreign brands[102] - The impact of COVID-19 on the company's operations and financial position remains uncertain, with potential ongoing effects[104] Internal Controls and Compliance - The company complied with all financial covenants as of March 31, 2023, ensuring adherence to obligations related to notes payable and working capital loans[145] - The company's disclosure controls and procedures were evaluated as effective as of March 31, 2023, ensuring timely and accurate reporting[153] - There were no material changes in the company's internal control over financial reporting during Q1 2023[154] - The company did not have any significant off-balance sheet arrangements as of March 31, 2023[151]