WUHAN, Hubei, China, Oct. 29 /Xinhua-PRNewswire/ -- China Automotive Systems, Inc. (Nasdaq: CAAS), a leading power steering components and systems supplier in China, today announced it has formed a new wholly owned subsidiary, Jingzhou Hengsheng Automotive Systems Co. Ltd. ("Hengsheng"), to focus on opportunities with Sino-foreign joint venture OEMs in China and OEMs in international markets.
Hengsheng is based in Jingzhou City, Hubei Province, where the main business of China Automotive Systems is also located. The Company expects to invest approximately US $30 million in Hengsheng over the next 3 years. The working capital for Hengsheng will be funded by short-term bank loans and the cash flow generated from its operations. As a wholly owned foreign enterprise, Hengsheng will benefit from an income tax exemption through 2010 followed by preferential tax treatment (at a 15% rate) for the following 3 years thereafter.
The first phase of the new facilities, with a capacity of 700,000 power steering units, is expected to be fully constructed by the end of 2008. Hengsheng will gradually install new equipment, complete testing and ramp up production capacity in the next 3 years to reach a designed capacity of 1.3 million units by 2010. This expansion will more than double China Automotive Systems' current capacity of approximately 1.1 million units. Hengsheng will focus its quality assurance to meet the stringent standards required by many global OEMs.
"After a thorough feasibility study and financial analysis, the board decided to launch this new subsidiary to extend our leadership in China and prepare to penetrate the global markets. As China Automotive Systems continues its rapid sales growth and geographic expansion, it is essential to further expand our production capacity to meet the demands of the domestic high-end market and overseas customers. In order to fully leverage the economies-of-scale and to satisfy these high-profile customers' critical requirements, it is in our best interest to set up a new subsidiary to focus on those market opportunities," said Mr. Qizhou Wu, Chief Executive Officer of China Automotive Systems.
About CAAS
Based in Hubei Province, People's Republic of China, China Automotive Systems, Inc. is a leading supplier of power steering components and systems to the Chinese automotive industry, operating through seven Sino-foreign joint ventures. The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles. The Company currently offers 4 separate series of power steering and 307 models of power steering with an annual production capacity of 1.1 million sets, steering columns, steering oil pumps and steering hoses. Its customer base is comprised of leading Chinese auto manufacturers such as China FAW Group, Corp., Donfeng Auto Group Co., Ltd., Brilliance China Automotive Holdings Ltd., Beiqi Foton Motor Co., Ltd. and Chery Automobile Co., Ltd. etc. For more information, please visit http://www.caasauto.com .
Safe Harbor Statement
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the Company's operations, financial performance and, condition. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, the impact of competitive products, pricing and new technology; changes in demand for the Company's products; changes in consumer preferences and tastes; and effectiveness of marketing; changes in laws and regulations; fluctuations in costs of production, delays and cost overruns related to developing and opening new production facilities; and other factors as those discussed in the Company's reports filed with the Securities and Exchange Commission from time to time.
For further information, please contact:
Jie Li
Chief Financial Officer
China Automotive Systems
Email: jieli@chl.com.cn
Kevin Theiss
Investor Relations
The Global Consulting Group
Tel: +1-646-284-9409
Email: ktheiss@hfgcg.com
Stacey Dimakakos
Financial Media Relations
The Global Consulting Group
Tel: +1-646-284-9417
Email: sdimakakos@hfgcg.com
