[10-Q] China Automotive Systems, Inc. Quarterly Earnings Report
China Automotive Systems, Inc. reported consolidated net product sales of $176,245 thousand for the three months ended June 30, 2025 and $343,339 thousand for the six months ended June 30, 2025. Gross profit was $30,547 thousand for the quarter and $59,132 thousand for the six months. Consolidated net income was $10,372 thousand for the quarter and $18,827 thousand for the six months, with net income attributable to the parent of $7,625 thousand (basic and diluted EPS $0.25) for the quarter and $14,747 thousand (EPS $0.49) for the six months.
The balance sheet shows cash and cash equivalents of $102,194 thousand and total assets of $843,716 thousand as of June 30, 2025. Total liabilities were $432,838 thousand and total equity was $410,878 thousand. Material items disclosed include customer concentration (the five largest customers accounted for 57.1% of sales in the quarter), warranty reserves of $39,676 thousand, inventory write-downs recognized in the periods, related-party transactions, and a definitive Merger Agreement dated June 26, 2025 to effect a redomicile merger into CAAS Cayman, subject to shareholder approval.
China Automotive Systems, Inc. ha registrato vendite nette consolidate di prodotti pari a $176,245 migliaia per i tre mesi chiusi al 30 giugno 2025 e $343,339 migliaia per i sei mesi chiusi al 30 giugno 2025. Il margine lordo è stato di $30,547 migliaia nel trimestre e di $59,132 migliaia nei sei mesi. L'utile netto consolidato è stato di $10,372 migliaia nel trimestre e di $18,827 migliaia nei sei mesi; l'utile netto attribuibile alla capogruppo è stato di $7,625 migliaia (EPS base e diluito $0.25) per il trimestre e di $14,747 migliaia (EPS $0.49) per i sei mesi.
Lo stato patrimoniale al 30 giugno 2025 mostra disponibilità liquide e mezzi equivalenti per $102,194 migliaia e attività totali pari a $843,716 migliaia. Le passività totali ammontavano a $432,838 migliaia e il patrimonio netto a $410,878 migliaia. Tra le poste di rilievo sono indicate la concentrazione clienti (i cinque maggiori clienti hanno rappresentato il 57,1% delle vendite nel trimestre), accantonamenti per garanzie per $39,676 migliaia, svalutazioni di rimanenze registrate nei periodi, operazioni con parti correlate e un Accordo di Fusione definitivo datato 26 giugno 2025 per il trasferimento della sede in CAAS Cayman, subordinato all'approvazione degli azionisti.
China Automotive Systems, Inc. informó ventas netas consolidadas de productos por $176,245 miles en los tres meses terminados el 30 de junio de 2025 y $343,339 miles en los seis meses terminados el 30 de junio de 2025. El beneficio bruto fue de $30,547 miles en el trimestre y de $59,132 miles en los seis meses. El resultado neto consolidado alcanzó $10,372 miles en el trimestre y $18,827 miles en los seis meses; la utilidad neta atribuible a la matriz fue de $7,625 miles (EPS básico y diluido $0.25) para el trimestre y $14,747 miles (EPS $0.49) para los seis meses.
El balance al 30 de junio de 2025 muestra efectivo y equivalentes de efectivo por $102,194 miles y activos totales por $843,716 miles. Los pasivos totales fueron $432,838 miles y el patrimonio total $410,878 miles. Entre los elementos relevantes se destacan la concentración de clientes (los cinco principales clientes representaron el 57,1% de las ventas en el trimestre), reservas por garantías por $39,676 miles, deterioros de inventario registrados en los periodos, transacciones con partes relacionadas y un Acuerdo Definitivo de Fusión con fecha 26 de junio de 2025 para efectuar un cambio de domicilio a CAAS Cayman, sujeto a la aprobación de los accionistas.
China Automotive Systems, Inc.는 2025년 6월 30일에 종료된 3개월 동안 연결 기준 제품 순매출이 $176,245천, 6개월 동안은 $343,339천였다고 보고했습니다. 총이익은 분기 기준 $30,547천, 반기 기준 $59,132천이었습니다. 연결 순이익은 분기 $10,372천, 반기 $18,827천이며, 모회사 귀속 순이익은 분기 $7,625천(기본 및 희석 EPS $0.25), 반기 $14,747천(EPS $0.49)이었습니다.
2025년 6월 30일 기준 대차대조표상 현금 및 현금성자산은 $102,194천, 총자산은 $843,716천입니다. 총부채는 $432,838천, 총자본은 $410,878천입니다. 중요 공시 항목으로는 고객 집중도(분기 매출의 57.1%가 상위 5개 고객에 의해 발생), 보증충당금 $39,676천, 기간 중 인식된 재고평가손실, 특수관계자 거래, 그리고 주주 승인 조건부로 CAAS Cayman으로의 재등록(재소재지 변경)을 위한 2025년 6월 26일자 최종 합병계약이 포함됩니다.
China Automotive Systems, Inc. a déclaré des ventes nettes consolidées de produits de $176,245 milliers pour les trois mois clos le 30 juin 2025 et de $343,339 milliers pour les six mois clos le 30 juin 2025. Le bénéfice brut s'est élevé à $30,547 milliers pour le trimestre et à $59,132 milliers pour les six mois. Le résultat net consolidé était de $10,372 milliers pour le trimestre et de $18,827 milliers pour les six mois, le résultat net attribuable à la société mère s'étant élevé à $7,625 milliers (BPA de base et dilué $0.25) pour le trimestre et à $14,747 milliers (BPA $0.49) pour les six mois.
Le bilan au 30 juin 2025 présente des liquidités et équivalents de trésorerie de $102,194 milliers et un total d'actifs de $843,716 milliers. Les passifs totaux s'élevaient à $432,838 milliers et les capitaux propres à $410,878 milliers. Les éléments significatifs divulgués comprennent la concentration clients (les cinq principaux clients représentaient 57,1% des ventes au trimestre), des provisions pour garantie de $39,676 milliers, des dépréciations de stocks enregistrées au cours des périodes, des transactions entre parties liées et un accord de fusion définitif daté du 26 juin 2025 visant à transférer le siège vers CAAS Cayman, sous réserve de l'approbation des actionnaires.
China Automotive Systems, Inc. meldete konsolidierte Netto-Produktumsätze in Höhe von $176,245 Tausend für die drei Monate zum 30. Juni 2025 und $343,339 Tausend für die sechs Monate zum 30. Juni 2025. Der Bruttogewinn betrug im Quartal $30,547 Tausend und in den sechs Monaten $59,132 Tausend. Der konsolidierte Nettogewinn belief sich auf $10,372 Tausend im Quartal und $18,827 Tausend in den sechs Monaten, wobei der auf die Muttergesellschaft entfallende Nettogewinn $7,625 Tausend (basic und diluted EPS $0.25) für das Quartal und $14,747 Tausend (EPS $0.49) für die sechs Monate betrug.
Die Bilanz weist zum 30. Juni 2025 Zahlungsmittel und Zahlungsmitteläquivalente in Höhe von $102,194 Tausend und Gesamtvermögen von $843,716 Tausend aus. Die Gesamtverbindlichkeiten beliefen sich auf $432,838 Tausend und das Eigenkapital auf $410,878 Tausend. Wesentliche offengelegte Posten umfassen Kundenkonzentration (die fünf größten Kunden machten im Quartal 57,1% des Umsatzes aus), Garantierückstellungen von $39,676 Tausend, in den Perioden vorgenommene Lagerabschreibungen, Transaktionen mit nahestehenden Parteien sowie einen endgültigen Fusionsvertrag vom 26. Juni 2025 zur Verlegung des Sitzes nach CAAS Cayman, vorbehaltlich der Zustimmung der Aktionäre.
- Consolidated net product sales of $176,245 thousand for Q2 2025 and $343,339 thousand for the six months ended June 30, 2025, showing higher revenue versus prior periods presented.
- Consolidated net income of $10,372 thousand for the quarter and $18,827 thousand for the six months, with net income attributable to the parent reported at $7,625 thousand for the quarter.
- Strong operating cash flow: net cash provided by operating activities of $49,082 thousand for the six months ended June 30, 2025.
- Improved liquidity: cash and cash equivalents increased to $102,194 thousand as of June 30, 2025 from $56,961 thousand at December 31, 2024.
- Balance-sheet improvement: total liabilities decreased to $432,838 thousand while total stockholders' equity increased to $410,878 thousand as of June 30, 2025.
- Customer concentration: the five largest customers accounted for 57.1% of consolidated net product sales in the three months ended June 30, 2025, creating revenue concentration risk.
- Inventory write-downs: the Company recorded inventory write-downs to cost of products sold ($3.0 million for the three months ended June 30, 2025 and $4.7 million for the six months ended June 30, 2025), which pressure margins.
- Warranty reserves are sizable: warranty reserves increased to $39,676 thousand as of June 30, 2025, representing a material contingent cost.
- Repatriation and FX restrictions: disclosures emphasize PRC regulatory controls on conversion and remittance of RMB and limits on distribution of subsidiary reserves, which could constrain funds available to the parent.
- Redomicile transaction uncertainty: the Merger Agreement dated June 26, 2025 is subject to shareholder approval and creates execution and governance risks until completed.
Insights
TL;DR: Revenue and consolidated net income rose year-over-year; cash balances strengthened and operating cash flow improved materially.
China Automotive delivered higher consolidated net product sales of $176.2 million for Q2 2025 versus $158.6 million in Q2 2024 and reported consolidated net income of $10.4 million versus $8.8 million a year ago. The company generated $49.1 million of cash from operations in the six months ended June 30, 2025, supporting a cash and equivalents balance of $102.2 million at period end. Total liabilities decreased to $432.8 million while equity increased to $410.9 million, improving the balance-sheet profile. Key drivers include stable gross profit and positive financial income, though segment results show mixed performance across reporting units. Overall impact: positive for near-term liquidity and operating cash generation.
TL;DR: The company entered a Merger Agreement to redomicile, but the transaction is subject to shareholder approval and creates governance and execution considerations.
The June 26, 2025 Merger Agreement to merge into CAAS Cayman and redomicile is a material corporate action disclosed in the notes. While management states the surviving entity will continue operations substantially unchanged, the transaction requires shareholder approval and may involve regulatory, tax and administrative implications not yet quantified. Related-party ownership remains concentrated with the chairman holding majority voting power, which is relevant to shareholder approvals and minority interests. Impact rating reflects the material nature of the transaction but recognizes uncertainty until approvals and further details are completed.
China Automotive Systems, Inc. ha registrato vendite nette consolidate di prodotti pari a $176,245 migliaia per i tre mesi chiusi al 30 giugno 2025 e $343,339 migliaia per i sei mesi chiusi al 30 giugno 2025. Il margine lordo è stato di $30,547 migliaia nel trimestre e di $59,132 migliaia nei sei mesi. L'utile netto consolidato è stato di $10,372 migliaia nel trimestre e di $18,827 migliaia nei sei mesi; l'utile netto attribuibile alla capogruppo è stato di $7,625 migliaia (EPS base e diluito $0.25) per il trimestre e di $14,747 migliaia (EPS $0.49) per i sei mesi.
Lo stato patrimoniale al 30 giugno 2025 mostra disponibilità liquide e mezzi equivalenti per $102,194 migliaia e attività totali pari a $843,716 migliaia. Le passività totali ammontavano a $432,838 migliaia e il patrimonio netto a $410,878 migliaia. Tra le poste di rilievo sono indicate la concentrazione clienti (i cinque maggiori clienti hanno rappresentato il 57,1% delle vendite nel trimestre), accantonamenti per garanzie per $39,676 migliaia, svalutazioni di rimanenze registrate nei periodi, operazioni con parti correlate e un Accordo di Fusione definitivo datato 26 giugno 2025 per il trasferimento della sede in CAAS Cayman, subordinato all'approvazione degli azionisti.
China Automotive Systems, Inc. informó ventas netas consolidadas de productos por $176,245 miles en los tres meses terminados el 30 de junio de 2025 y $343,339 miles en los seis meses terminados el 30 de junio de 2025. El beneficio bruto fue de $30,547 miles en el trimestre y de $59,132 miles en los seis meses. El resultado neto consolidado alcanzó $10,372 miles en el trimestre y $18,827 miles en los seis meses; la utilidad neta atribuible a la matriz fue de $7,625 miles (EPS básico y diluido $0.25) para el trimestre y $14,747 miles (EPS $0.49) para los seis meses.
El balance al 30 de junio de 2025 muestra efectivo y equivalentes de efectivo por $102,194 miles y activos totales por $843,716 miles. Los pasivos totales fueron $432,838 miles y el patrimonio total $410,878 miles. Entre los elementos relevantes se destacan la concentración de clientes (los cinco principales clientes representaron el 57,1% de las ventas en el trimestre), reservas por garantías por $39,676 miles, deterioros de inventario registrados en los periodos, transacciones con partes relacionadas y un Acuerdo Definitivo de Fusión con fecha 26 de junio de 2025 para efectuar un cambio de domicilio a CAAS Cayman, sujeto a la aprobación de los accionistas.
China Automotive Systems, Inc.는 2025년 6월 30일에 종료된 3개월 동안 연결 기준 제품 순매출이 $176,245천, 6개월 동안은 $343,339천였다고 보고했습니다. 총이익은 분기 기준 $30,547천, 반기 기준 $59,132천이었습니다. 연결 순이익은 분기 $10,372천, 반기 $18,827천이며, 모회사 귀속 순이익은 분기 $7,625천(기본 및 희석 EPS $0.25), 반기 $14,747천(EPS $0.49)이었습니다.
2025년 6월 30일 기준 대차대조표상 현금 및 현금성자산은 $102,194천, 총자산은 $843,716천입니다. 총부채는 $432,838천, 총자본은 $410,878천입니다. 중요 공시 항목으로는 고객 집중도(분기 매출의 57.1%가 상위 5개 고객에 의해 발생), 보증충당금 $39,676천, 기간 중 인식된 재고평가손실, 특수관계자 거래, 그리고 주주 승인 조건부로 CAAS Cayman으로의 재등록(재소재지 변경)을 위한 2025년 6월 26일자 최종 합병계약이 포함됩니다.
China Automotive Systems, Inc. a déclaré des ventes nettes consolidées de produits de $176,245 milliers pour les trois mois clos le 30 juin 2025 et de $343,339 milliers pour les six mois clos le 30 juin 2025. Le bénéfice brut s'est élevé à $30,547 milliers pour le trimestre et à $59,132 milliers pour les six mois. Le résultat net consolidé était de $10,372 milliers pour le trimestre et de $18,827 milliers pour les six mois, le résultat net attribuable à la société mère s'étant élevé à $7,625 milliers (BPA de base et dilué $0.25) pour le trimestre et à $14,747 milliers (BPA $0.49) pour les six mois.
Le bilan au 30 juin 2025 présente des liquidités et équivalents de trésorerie de $102,194 milliers et un total d'actifs de $843,716 milliers. Les passifs totaux s'élevaient à $432,838 milliers et les capitaux propres à $410,878 milliers. Les éléments significatifs divulgués comprennent la concentration clients (les cinq principaux clients représentaient 57,1% des ventes au trimestre), des provisions pour garantie de $39,676 milliers, des dépréciations de stocks enregistrées au cours des périodes, des transactions entre parties liées et un accord de fusion définitif daté du 26 juin 2025 visant à transférer le siège vers CAAS Cayman, sous réserve de l'approbation des actionnaires.
China Automotive Systems, Inc. meldete konsolidierte Netto-Produktumsätze in Höhe von $176,245 Tausend für die drei Monate zum 30. Juni 2025 und $343,339 Tausend für die sechs Monate zum 30. Juni 2025. Der Bruttogewinn betrug im Quartal $30,547 Tausend und in den sechs Monaten $59,132 Tausend. Der konsolidierte Nettogewinn belief sich auf $10,372 Tausend im Quartal und $18,827 Tausend in den sechs Monaten, wobei der auf die Muttergesellschaft entfallende Nettogewinn $7,625 Tausend (basic und diluted EPS $0.25) für das Quartal und $14,747 Tausend (EPS $0.49) für die sechs Monate betrug.
Die Bilanz weist zum 30. Juni 2025 Zahlungsmittel und Zahlungsmitteläquivalente in Höhe von $102,194 Tausend und Gesamtvermögen von $843,716 Tausend aus. Die Gesamtverbindlichkeiten beliefen sich auf $432,838 Tausend und das Eigenkapital auf $410,878 Tausend. Wesentliche offengelegte Posten umfassen Kundenkonzentration (die fünf größten Kunden machten im Quartal 57,1% des Umsatzes aus), Garantierückstellungen von $39,676 Tausend, in den Perioden vorgenommene Lagerabschreibungen, Transaktionen mit nahestehenden Parteien sowie einen endgültigen Fusionsvertrag vom 26. Juni 2025 zur Verlegung des Sitzes nach CAAS Cayman, vorbehaltlich der Zustimmung der Aktionäre.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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For the quarterly period ended | |
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Or | |
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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For the transition period from to | |
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.) | |
organization) |
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(Address of principal executive offices)
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(Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol | Name of each exchange on which |
The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
| | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol | Name of each exchange on which registered |
Common Stock, $0.0001 par value | CAAS | The Nasdaq Capital Market |
As of August 13, 2025, the Company had
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CHINA AUTOMOTIVE SYSTEMS, INC.
INDEX
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| | Part I — Financial Information | | 4 |
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Item 1. | | Unaudited Financial Statements. | | 4 |
| | Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income for the Three Months and Six months Ended June 30, 2025 and 2024 | | 4 |
| | Condensed Unaudited Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 | | 6 |
| | Condensed Unaudited Consolidated Statements of Cash Flows for the Six months Ended June 30, 2025 and 2024 | | 7 |
| | Notes to Condensed Unaudited Consolidated Financial Statements | | 8 |
Item 2. | | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | | 24 |
Item 3. | | Quantitative and Qualitative Disclosures About Market Risk. | | 37 |
Item 4. | | Controls and Procedures. | | 37 |
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| | Part II — Other Information | | 38 |
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Item 1. | | Legal Proceedings. | | 38 |
Item 1A. | | Risk Factors. | | 38 |
Item 2. | | Unregistered Sales of Equity Securities and Use of Proceeds. | | 39 |
Item 3. | | Defaults Upon Senior Securities. | | 39 |
Item 4. | | Mine Safety Disclosures. | | 39 |
Item 5. | | Other Information. | | 39 |
Item 6. | | Exhibits. | | 40 |
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Signatures | | 41 | ||
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Cautionary Statement
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or the Company’s future financial performance. The Company has attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “expects,” “can,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or the negative of these terms or other comparable terminology. Such statements are subject to certain risks and uncertainties, including the matters set forth in this Quarterly Report or other reports or documents the Company files with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date hereof. The Company’s expectations are as of the date this Form 10-Q is filed, and the Company does not intend to update any of the forward-looking statements after the date this Quarterly Report on Form 10-Q is filed to conform these statements to actual results, unless required by law. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange Commission.
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PART I — FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
China Automotive Systems, Inc. and Subsidiaries
Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income
(In thousands of USD, except share and per share amounts)
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| | Three Months Ended June 30, | ||||
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| 2025 |
| 2024 | ||
Net product sales ($ | | $ | | | $ | |
Cost of products sold ($ | | | | |
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Gross profit | | | | |
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Gain on other sales | | | | |
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Less: Operating expenses | | | | |
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Selling expenses | | | | |
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General and administrative expenses | | | | |
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Research and development expenses | | | | |
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Total operating expenses | | | | |
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Income from operations | | | | |
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Other income, net | | | | |
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Interest expense | | | ( | |
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Financial income/(expense), net | | | | |
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Income before income tax expenses and equity in earnings of affiliated companies | | | | |
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Less: Income taxes | | | | |
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Add: Equity in losses of affiliated companies | | | ( | |
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Net income | | | | |
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Less: Net income attributable to non-controlling interests | | | | |
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Accretion to redemption value of redeemable non-controlling interests | | | — | | | ( |
Net income attributable to parent company’s common shareholders | | $ | | | $ | |
Comprehensive income: | | | | |
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Net income | | $ | | | $ | |
Other comprehensive income: | | | | |
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Foreign currency translation gain/(loss), net of tax | | | | |
| ( |
Comprehensive income | | | | |
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Less: Comprehensive income attributable to non-controlling interests | | | | |
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Accretion to redemption value of redeemable non-controlling interests | | | — | | | ( |
Comprehensive income attributable to parent company | | $ | | | $ | |
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Net income attributable to parent company’s common shareholders per share - | | | | |
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Basic | | $ | | | $ | |
Diluted | | $ | | | $ | |
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Weighted average number of common shares outstanding - | | | | |
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Basic | | | | |
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Diluted | | | | | | |
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
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China Automotive Systems, Inc. and Subsidiaries
Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income
(In thousands of USD, except share and per share amounts)
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| | Six Months Ended June 30, | ||||
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| 2025 |
| 2024 | ||
Net product sales ($ | | $ | | | $ | |
Cost of products sold ($ | | | | |
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Gross profit | | | | |
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Gain on other sales | | | | |
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Less: Operating expenses | | | | |
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Selling expenses | | | | |
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General and administrative expenses | | | | |
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Research and development expenses | | | | |
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Total operating expenses | | | | |
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Income from operations | | | | |
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Other income, net | | | | |
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Interest expense | | | ( | |
| ( |
Financial income/(expense), net | | | | |
| ( |
Income before income tax expenses and equity in earnings of affiliated companies | | | | |
| |
Less: Income taxes | | | | |
| |
Add: Equity in losses of affiliated companies | | | ( | |
| ( |
Net income | | | | |
| |
Less: Net income attributable to non-controlling interests | | | | |
| |
Accretion to redemption value of redeemable non-controlling interests | | | — | | | ( |
Net income attributable to parent company’s common shareholders | | $ | | | $ | |
Comprehensive income: | | | | |
| |
Net income | | $ | | | $ | |
Other comprehensive income: | | | | |
| |
Foreign currency translation gain/(loss), net of tax | | | | |
| ( |
Comprehensive income | | | | |
| |
Less: Comprehensive income attributable to non-controlling interests | | | | |
| |
Accretion to redemption value of redeemable non-controlling interests | | | — | | | ( |
Comprehensive income attributable to parent company | | $ | | | $ | |
| | | | |
| |
Net income attributable to parent company’s common shareholders per share - | | | | |
| |
Basic | | $ | | | $ | |
Diluted | | $ | | | $ | |
| | | | | | |
Weighted average number of common shares outstanding - | | | | |
| |
Basic | | | | |
| |
Diluted | | | | |
| |
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
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China Automotive Systems, Inc. and Subsidiaries
Condensed Unaudited Consolidated Balance Sheets
(In thousands of USD unless otherwise indicated)
| | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||
ASSETS |
| |
|
| |
|
Current assets: |
| |
|
| |
|
Cash and cash equivalents | | $ | | | $ | |
Pledged cash | | | | |
| |
Accounts and notes receivable, net - unrelated parties | | | | |
| |
Accounts and notes receivable, net - related parties | | | | |
| |
Inventories | | | | |
| |
Other current assets | | | | |
| |
Total current assets | | | | |
| |
Non-current assets: | | | | |
| |
Property, plant and equipment, net | | | | |
| |
Land use rights, net | | | | | | |
Long-term investments | | | | |
| |
Other non-current assets | | | | |
| |
Total assets | | $ | | | $ | |
| | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| |
Current liabilities: | | | | |
| |
Short-term loans | | $ | | | $ | |
Accounts and notes payable-unrelated parties | | | | |
| |
Accounts and notes payable-related parties | | | | |
| |
Accrued expenses and other payables | | | | |
| |
Other current liabilities | | | | |
| |
Total current liabilities | | | | |
| |
Long-term liabilities: | |
| | |
| |
Other non-current liabilities | | | | |
| |
Total liabilities | | $ | | | $ | |
| | | | | | |
Commitments and Contingencies (See Note 21) | |
| | |
| |
| | | | | | |
Stockholders’ equity: | |
| | |
| |
Common stock, $ | | $ | | | $ | |
Additional paid-in capital | | | | |
| |
Retained earnings- | | | | |
| |
Appropriated | | | | |
| |
Unappropriated | | | | |
| |
Accumulated other comprehensive income | | | ( | |
| ( |
Treasury stock – | | | ( | |
| ( |
Total parent company stockholders’ equity | | | | |
| |
Non-controlling interests | | | | |
| |
Total stockholders’ equity | | | | |
| |
Total liabilities and stockholders’ equity | | $ | | | $ | |
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
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China Automotive Systems, Inc. and Subsidiaries
Condensed Unaudited Consolidated Statements of Cash Flows
(In thousands of USD unless otherwise indicated)
| | | | | | |
| | Six months Ended June 30, | ||||
|
| 2025 |
| 2024 | ||
Cash flows from operating activities: | | | |
| |
|
Net income | | $ | | | $ | |
Adjustments to reconcile net income from operations to net cash provided by operating activities: | | | | |
| |
Depreciation and amortization | | | | |
| |
(Reversal)/addition of credit losses | | | ( | |
| |
Equity in losses of affiliated companies | | | | |
| |
Impairment loss on property, plant and equipment | | | | | | — |
Loss on disposal of property, plant and equipment | | | | | | |
(Increase)/decrease in: | | | | |
| |
Accounts and notes receivable | | | | |
| ( |
Inventories | | | ( | |
| |
Other current assets | | | ( | |
| |
Increase/(decrease) in: | | | | |
| |
Accounts and notes payable | | | ( | |
| |
Accrued expenses and other payables | | | | |
| |
Long-term taxes payable | | | — | |
| ( |
Other current liabilities | | | ( | | | ( |
Net cash provided by operating activities | | | | |
| |
Cash flows from investing activities: | | | | |
| |
Cash received from disposal of property, plant and equipment sales | | | | |
| |
Payments to acquire property, plant and equipment (including $ | | | ( | |
| ( |
Payments to acquire intangible assets | | | ( | |
| ( |
Investment under the equity method | | | ( | |
| — |
Purchase of short-term investments | | | ( | | | ( |
Proceeds from maturities of short-term investments | | | | |
| |
Cash received from long-term investments | | | | | | |
Net cash used in investing activities | | | ( | |
| ( |
Cash flows from financing activities: | | | | |
| |
Proceeds from bank loans | | | | |
| |
Repayments of bank loans | | | ( | |
| ( |
Dividends paid to the common shareholders | | | ( | | | — |
Cash received from capital contributions of a non-controlling interest | | | — | | | |
Net cash (used in)/provided by financing activities | | | ( | |
| |
Effects of exchange rate on cash, cash equivalents and pledged cash | | | | |
| ( |
Net increase/(decrease) in cash, cash equivalents and pledged cash | | | | |
| ( |
Cash, cash equivalents and pledged cash at beginning of the period | | | | |
| |
Cash, cash equivalents and pledged cash at end of the period | | $ | | | $ | |
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
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China Automotive Systems, Inc. and Subsidiaries
Notes to Condensed Unaudited Consolidated Financial Statements
Three Months and Six months Ended June 30, 2025 and 2024
1. Organization and business
China Automotive Systems, Inc., “China Automotive,” was incorporated in the State of Delaware on June 29, 1999 under the name Visions-In-Glass, Inc. China Automotive, including its subsidiaries, is referred to herein as the “Company”. The Company is primarily engaged in the manufacture and sale of automotive systems and components, as described below.
Great Genesis Holdings Limited, a company incorporated in Hong Kong on January 3, 2003 under the Companies Ordinance in Hong Kong as a limited liability company, “Genesis,” is a wholly-owned subsidiary of the Company.
Henglong USA Corporation, “HLUSA,” which was incorporated on January 8, 2007 in Troy, Michigan, is a wholly-owned subsidiary of the Company, and mainly engages in marketing of automotive parts in North America, and provides after-sales service and research and development, “R&D”, support.
The Company owns interests in the following subsidiaries incorporated in the People’s Republic of China, the “PRC,” and Brazil as of June 30, 2025 and December 31, 2024.
| | | | | |
| | Percentage Interest |
| ||
|
| June 30, |
| December 31, |
|
Name of Entity | | 2025 | | 2024 |
|
Shashi Jiulong Power Steering Gears Co., Ltd., “Jiulong” 1 | | | % | | % |
Jingzhou Henglong Automotive Parts Co., Ltd., “Henglong” 2 | | | % | | % |
Shenyang Jinbei Henglong Automotive Steering System Co., Ltd., “Shenyang” 3 | | | % | | % |
Wuhan Jielong Electric Power Steering Co., Ltd., “Jielong” 4 | | | % | | % |
Wuhu Henglong Automotive Steering System Co., Ltd., “Wuhu” 5 | | | % | | % |
Hubei Henglong Automotive System Group Co., Ltd., “Hubei Henglong” 6 | | | % | | % |
Jingzhou Henglong Automotive Technology (Testing) Center, “Testing Center” 7 | | — | | | % |
Chongqing Henglong Hongyan Automotive System Co., Ltd., “Chongqing Henglong” 8 | | | % | | % |
CAAS Brazil’s Imports and Trade In Automotive Parts Ltd., “Brazil Henglong” 9 | | | % | | % |
Wuhan Chuguanjie Automotive Science and Technology Ltd., “Wuhan Chuguanjie” 10 | | | % | | % |
Hubei Henglong Group Shanghai Automotive Electronics Research and Development Ltd., “Shanghai Henglong” 11 | | | % | | % |
Hubei Henglong & KYB Automobile Electric Steering System Co., Ltd., “Henglong KYB” 12 | | | % | | % |
Hyoseong (Wuhan) Motion Mechatronics System Co., Ltd., “Wuhan Hyoseong” 13 | | | % | | % |
Wuhu Hongrun New Material Co., Ltd., “Wuhu Hongrun” 14 | | | % | | % |
Changchun Hualong Automotive Technology Co., Ltd., “Changchun Hualong” 15 | | | % | | % |
Hubei Zhirong Automobile Technology Co., Ltd., “Zhirong” 16 | | | % | | |
CAAS EUROPE S.r.l., “CAAS EUROPE” 17 | | | % | — | |
China Automotive Systems Holdings, Inc., “CAAS Cayman” 18 | | | % | — | |
| 1. | Jiulong was established in 1993 and mainly engages in the production of integral power steering gears for heavy-duty vehicles. |
| 2. | Henglong was established in 1997 and mainly engages in the production of rack and pinion power steering gears for cars and light duty vehicles. |
| 3. | Shenyang was established in 2002 and focuses on power steering parts for light duty vehicles. |
| 4. | Jielong was established in 2006 and mainly engages in the production and sales of automotive steering columns. |
| 5. | Wuhu was established in 2006 and mainly engages in the production and sales of automobile steering systems. |
| 6. | On March 7, 2007, Genesis established Hubei Henglong, formerly known as Jingzhou Hengsheng Automotive System Co., Ltd., its wholly-owned subsidiary, to engage in the production and sales of automotive steering systems. On July 8, 2012, Hubei Henglong changed its name to Hubei Henglong Automotive System Group Co., Ltd. |
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| 7. | In December 2009, Henglong, a subsidiary of Genesis, formed Testing Center, which mainly engages in the research and development of new products. It has been deregistered in January 2025. |
| 8. | On February 21, 2012, Hubei Henglong and SAIC-IVECO Hongyan Company, “SAIC-IVECO,” established a Sino-foreign joint venture company, Chongqing Henglong, to design, develop and manufacture both hydraulic and electric power steering systems and parts. |
| 9. | On August 21, 2012, Brazil Henglong was established as a Sino-foreign joint venture company by Hubei Henglong and two Brazilian citizens, Ozias Gaia Da Silva and Ademir Dal’ Evedove. Brazil Henglong engages mainly in the import and sales of automotive parts in Brazil. In May 2017, the Company obtained an additional |
| 10. | In May 2014, together with Hubei Wanlong, Jielong formed a subsidiary, Wuhan Chuguanjie Automotive Science and Technology Ltd., “Wuhan Chuguanjie”, which mainly engages in research and development, manufacture and sales of automobile electronic systems and parts. Wuhan Chuguanjie is located in Wuhan, China. |
| 11. | In January 2015, Hubei Henglong formed Hubei Henglong Group Shanghai Automotive Electronics Research and Development Ltd., “Shanghai Henglong”, which mainly engages in the design and sales of automotive electronics. |
| 12. | In August 2018, Hubei Henglong and KYB (China) Investment Co., Ltd., “KYB”, established Hubei Henglong KYB Automobile Electric Steering System Co., Ltd., “Henglong KYB”, which mainly engages in design, manufacture, sales and after-sales service of automobile electronic systems. Hubei Henglong owns |
| 13. | In March 2019, Hubei Henglong and Hyoseong Electric Co., Ltd. established Hyoseong (Wuhan) Motion Mechatronics System Co., Ltd., “Wuhan Hyoseong”, which mainly engages in the design, manufacture and sales of automotive motors and electromechanical integrated systems. Hubei Henglong owns |
| 14. | In December 2019, Hubei Henglong formed Wuhu Hongrun New Material Co., Ltd., “Wuhu Hongrun”, which mainly engages in the development, manufacturing and sale of high polymer materials. Hubei Henglong owns |
| 15. | In April 2020, Hubei Henglong acquired |
| 16. | In June 2023, Hubei Henglong contributed certain equipment and intangible assets to Hubei Zhirong Automobile Technology Co., Ltd., “Zhirong”, representing |
| 17. | In December 2024, Hubei Henglong formed CAAS EUROPE S.r.l., “CAAS EUROPE”, which mainly engages in design, prototyping, development and testing of parts and/or systems aimed at the automotive and commercial vehicle market. Hubei Henglong owns |
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Table of Contents
| 18. | In August 2024, the Company formed China Automotive Systems Holdings, Inc., “CAAS Cayman”. On June 26, 2025, the Company and CAAS Cayman entered into a definitive agreement and plan of merger, the “Merger Agreement”, related to a proposed merger transaction. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, the Company will merge with and into CAAS Cayman, the “Redomicile Merger”, with CAAS Cayman surviving and changing its name to China Automotive Systems Inc. Following the Redomicile Merger, CAAS Cayman, together with its subsidiaries, will own and continue to conduct the Company’s business in substantially the same manner as is currently being conducted by the Company and its subsidiaries. The Redomicile Merger is subject to shareholder approval. |
The Company has business relationships with more than
2. Basis of presentation and significant accounting policies
(a) | Basis of Presentation |
Basis of Presentation – The accompanying condensed unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. The details of subsidiaries are disclosed in Note 1. Significant inter-company balances and transactions have been eliminated upon consolidation. The condensed unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, “U.S. GAAP”, for interim financial information and with the instructions in Regulation S-X. Accordingly they do not include all of the information and footnotes required by such accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. The results of operations interim periods are not necessarily indicative of the results of operations to be expected for any other interim period or the full year.
The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of the Company’s management, contain all necessary adjustments, which include normal recurring adjustments, for a fair statement of the results of operations, financial position and cash flows for the interim periods presented.
The condensed consolidated balance sheet as of December 31, 2024 is derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
Estimation - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Foreign Currencies - China Automotive and HLUSA maintain their books and records in United States Dollars, “USD,” their functional currency. The Company’s subsidiaries based in the PRC and Genesis maintain their books and records in Renminbi, “RMB,” their functional currency. The Company’s subsidiary based in Brazil maintains its books and records in Brazilian real, “BRL,” its functional currency. In accordance with Financial Accounting Standards Board, “FASB”, Accounting Standards Codification, “ASC”, Topic 830, foreign currency transactions denominated in currencies other than the functional currency are remeasured into the functional currency at the rate of exchange prevailing at the balance sheet date for monetary items. Nonmonetary items are remeasured at historical rates. Income and expenses are remeasured at the rate in effect on the transaction dates. Transaction gains and losses, if any, are included in the determination of net income for the period.
(b) | Recent Accounting Pronouncements |
No accounting standards newly issued during the three months ended June 30, 2025 had a material impact on the Company’s financial statements or disclosures.
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On July 30, 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides guidance for estimating credit losses under the current expected credit losses (CECL) model for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. The guidance is effective for periods beginning after December 15, 2025. While early adoption is permitted, the Company is planning on adopting this standard prospectively when effective.
(c)Significant Accounting Policies
There have been no updates to the significant accounting policies set forth in the notes to the consolidated financial statements for the year ended December 31, 2024.
3. Accounts and notes receivable, net
The Company’s accounts and notes receivable, net as of June 30, 2025 and December 31, 2024 are summarized as follows (figures are in thousands of USD):
| | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||
Accounts receivable - unrelated parties | | $ | | | $ | |
Notes receivable - unrelated parties | | | | | | |
Total accounts and notes receivable - unrelated parties | | | | | | |
Less: allowance for credit losses - unrelated parties | | | ( | | | ( |
Accounts and notes receivable, net - unrelated parties | | | | | | |
Accounts and notes receivable - related parties | | | | | | |
Less: allowance for credit losses - related parties | | | ( | | | ( |
Accounts and notes receivable, net - related parties | | | | | | |
Accounts and notes receivable, net | | $ | | | $ | |
Notes receivable represent accounts receivable in the form of bills of exchange for which acceptances are guaranteed and settlements are handled by banks.
As of June 30, 2025 and December 31, 2024, the Company pledged its notes receivable with amounts of $
As of June 30, 2025 and December 31, 2024, the Company pledged its accounts receivable with amounts of $
Provision for doubtful accounts and notes receivable, as reversed in the unaudited consolidated statements of operations, amounted to $
Provision for doubtful accounts and notes receivable, as provided in the unaudited consolidated statements of operations, amounted to $
During the three months ended June 30, 2025, the Company’s
During the three months ended June 30, 2024, the Company’s
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4. Inventories
The Company’s inventories as of June 30, 2025 and December 31, 2024 consisted of the following (figures are in thousands of USD):
| | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||
Raw materials | | $ | | | $ | |
Work in progress | | | | | | |
Finished goods | | | | | | |
Total | | $ | | | $ | |
The Company recorded $
5. Long-term investments
The Company’s long-term investments as of June 30, 2025 and December 31, 2024, are summarized as follows (figures are in thousands of USD):
| | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||
Limited Partnerships: | | | | | | |
Hubei Qingyan Venture Capital Fund L.P. (1) | | $ | | | $ | |
Chongqing Qingyan Venture Capital Fund L.P. | | | | | | |
Suzhou Qingshan Zhiyuan Venture Capital Fund L.P. | | | | | | |
Suzhou Mingzhi Intelligent Manufacturing Industry Investment Fund L.P. | |
| | | | |
Suzhou Qingyan Venture Capital Fund L.P. | | | | | | |
Subtotal - Investments in limited partnerships | | | | | | |
Corporations: | | | | | | |
Sentient AB | | | | | | |
Bebest (Shanghai) Automotive Electronics Co., Ltd. | | | | | | |
Shanghai IAT International Automotive Technology Co., Ltd. | | | | | | |
Jingzhou Jinyu Hotel Management Co., Ltd. (2) | | | | | | |
Hubei Henglongtianyu Pipe system Co., Ltd. | |
| | | | |
Jiangsu Intelligent Connected Vehicle Innovation Center Co., Ltd. | | | | | | |
Subtotal - Investments in corporations | | | | | | |
Total | | $ | | | $ | |
Investment in Limited Partnerships:
| (1) | In March 2018, Hubei Henglong entered into an agreement with other parties to establish a limited partnership, the “Hubei Venture Fund”. As of June 30, 2025, Hubei Henglong owned |
Investment in Corporations:
| (2) | In October 2024, Hubei Henglong entered into an agreement with other parties to establish an associate company, Jingzhou Jinyu Hotel Management Co., Ltd, “Jingzhou Jinyu”. The Company subscribed |
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6. Property, plant and equipment, net
The Company’s property, plant and equipment, net as of June 30, 2025 and December 31, 2024 are summarized as follows (figures are in thousands of USD):
| | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||
Costs: |
| |
|
| |
|
Machinery and equipment | | $ | | | $ | |
Buildings | | | | | | |
Electronic equipment | |
| | |
| |
Motor vehicles | |
| | |
| |
Construction in progress | |
| | |
| |
Gross balance of property, plant and equipment | |
| | |
| |
Less: Accumulated depreciation (1) | |
| ( | |
| ( |
Less: Impairment | | | ( | | | ( |
Balance of property, plant and equipment, net (2) | | $ | | | $ | |
| (1) | Depreciation charges were $ |
| (2) | As of June 30, 2025 and December 31, 2024, the Company pledged property, plant and equipment and land use rights with net book value of approximately $ |
7. Loans
Loans consist of the following as of June 30, 2025 and December 31, 2024 (figures are in thousands of USD):
| | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||
Short-term bank loans | | $ | | | $ | |
Current portion of long-term bank loans | | | | | | |
Subtotal | | | | | | |
| | | | | | |
Long-term bank loans | | $ | | | $ | |
Less: Current portion of long-term bank loans | | | ( | | | ( |
Subtotal | | | | | | |
| | | | | | |
Total | | $ | | | $ | |
The Company entered into credit facility agreements with various banks, which were secured by property, plant and equipment and land use rights of the Company. The total credit facility amount was $
The Company must use the loans for the purpose as prescribed in the loan contracts. If the Company fails to do so, it will be charged penalty interest and/or trigger early repayment. The Company complied with such financial covenants during the three months ended June 30, 2025.
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8. Accounts and notes payable
The Company’s accounts and notes payable as of June 30, 2025 and December 31, 2024 are summarized as follows (figures are in thousands of USD):
| | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||
Accounts payable - unrelated parties | | $ | | | $ | |
Notes payable - unrelated parties (1) | |
| | |
| |
Accounts and notes payable - unrelated parties | |
| | |
| |
Accounts and notes payable - related parties | |
| | |
| |
Total | | $ | | | $ | |
| (1) | Notes payable represent payables in the form of notes issued by the banks. As of June 30, 2025, the Company had pledged $ |
9. Accrued expenses and other payables
The Company’s accrued expenses and other payables as of June 30, 2025 and December 31, 2024 are summarized as follows (figures are in thousands of USD):
| | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||
Accrued expenses | | $ | | | $ | |
Warranty reserves (1) | | | | | | |
Dividends payable to common shareholders | | | — | | | |
Dividends payable to holders of non-controlling interests | | | | | | |
Other payables | | | | | | |
Balance at end of year/period | | $ | | | $ | |
| (1) | The Company provides for the estimated cost of product warranties when the products are sold. Such estimates of product warranties are based on, among other things, historical experience, product changes, material expenses, services and transportation expenses arising from the manufactured products. Estimates will be adjusted on the basis of actual claims and circumstances. |
For the three and six months ended June 30, 2025 and 2024, the warranties activities were as follows (figures are in thousands of USD):
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six months Ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Balance at beginning of the period | | $ | | | $ | | | $ | | | $ | |
Additions during the period | |
| | |
| |
| | | |
| |
Settlement within the period | |
| ( | |
| ( |
| | ( | |
| ( |
Foreign currency translation gain | |
| | |
| ( |
| | | |
| ( |
Balance at end of the period | | $ | | | $ | | | $ | | | $ | |
10. Pre-production costs related to long-term supply arrangements
As at June 30, 2025 and December 31, 2024, the Company recorded $
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11. Additional paid-in capital
The Company’s positions in respect of the amounts of additional paid-in capital for the three and six months ended June 30, 2025 and 2024, are summarized as follows (figures are in thousands of USD):
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six months Ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Balance at beginning of the period | | $ | | | $ | | | $ | | | $ | |
Contribution by the non-controlling interest of Henglong KYB | | | | | | | | | | | | |
Balance at end of the period | | $ | | | $ | | | $ | | | $ | |
12. Retained earnings
Appropriated
Pursuant to the relevant PRC laws, the profits distribution of the Company’s subsidiaries, which are based on their PRC statutory financial statements, are available for distribution in the form of cash dividends after these subsidiaries have paid all relevant PRC tax liabilities, provided for losses in previous years, and made appropriations to statutory surplus at
The Company’s activities in respect of the amounts of appropriated retained earnings for the three and six months ended June 30, 2025 and 2024, are summarized as follows (figures are in thousands of USD):
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six months Ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Balance at beginning of the period | | $ | | | $ | | | $ | | | $ | |
Appropriation of retained earnings | | | | | | | | | | | | |
Balance at end of the period | | $ | | | $ | | | $ | | | $ | |
Unappropriated
The Company’s activities in respect of the amounts of the unappropriated retained earnings for the three and six months ended June 30, 2025 and 2024, are summarized as follows (figures are in thousands of USD):
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six months Ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Balance at beginning of the period | | $ | | | $ | | | $ | | | $ | |
Net income attributable to parent company | | | | | | | | | | | | |
Accretion of redeemable non-controlling interests | | | — | | | ( | | | — | | | ( |
Appropriation of retained earnings | | | — | | | — | | | ( | | | ( |
Balance at end of the period | | $ | | | $ | | | $ | | | $ | |
13. Accumulated other comprehensive income
The Company’s activities in respect of the amounts of accumulated other comprehensive income for the three and six months ended June 30, 2025 and 2024, are summarized as follows (figures are in thousands of USD):
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six months Ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Balance at beginning of the period | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Foreign currency translation adjustment attributable to parent company | |
| | |
| ( | | | | | | ( |
Balance at end of the period | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
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14. Treasury stock
Treasury stock represents shares repurchased by the Company that are no longer outstanding and are held by the Company. Treasury stock is accounted for under the cost method. On November 12, 2024, the Board of Directors of the Company approved a share repurchase program under which the Company was permitted to repurchase up to $
15. Non-controlling interests
The Company’s activities in respect of the amounts of the non-controlling interests’ equity for the three and six months ended June 30, 2025 and 2024, are summarized as follows (figures are in thousands of USD):
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six months Ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Balance at beginning of the period | | $ | | | $ | | | $ | | | $ | |
Net income attributable to non-controlling interests | |
| | | | | | | | | | |
Foreign currency translation adjustment attributable to non-controlling interests | |
| | | | ( | | | | | | ( |
Contribution by the non-controlling interest of Henglong KYB | | | — | | | — | | | — | | | |
Balance at end of the period | | $ | | | $ | | | $ | | | $ | |
16. Net product sales
Revenue Disaggregation
Management has concluded that the disaggregation level is the same under both the revenue standard and the segment reporting standard. Please refer to Note 23.
Pre-Production Costs Related to Long-Term Supply Arrangements
In a typical arrangement with the customer, purchase orders are issued for pre-production activities which consist of engineering, design and development, tooling and prototypes for the manufacture and delivery of component parts. The Company has assessed and concluded that these activities are not in the scope of ASC 606, “Revenue from Contracts with Customers”. Therefore, any related payments or reimbursements would not be presented as revenue from contracts with customers.
In accordance with ASC 340-10-25, Deferred costs and other assets, engineering, research and development, and other design and development costs related to products that will be sold under long-term supply arrangements requires such costs to be expensed as incurred or capitalized if reimbursement from the customer is contractually guaranteed. Costs for molds, dies and other tools used to make new products that will be sold under long-term supply arrangements without legal title or noncancelable use right are expensed as incurred or capitalized if reimbursement from the customer is contractually guaranteed.
Customer Deposits
Customer deposits represent non-refundable cash deposits from customers to secure rights to an amount of products produced by the Company under supply agreements. When the products are shipped to customers, the Company will recognize revenue and bill the customers to reduce the amount of the customer deposit liability. The customer deposits also include prepayments from customers to cover the Company’s pre-production costs under long-term supply arrangements.
As of June 30, 2025 and December 31, 2024, the Company has customer deposits of $
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17. Financial income/(expense), net
During the three and six months ended June 30, 2025 and 2024, the Company recorded financial income/(expense), net which is summarized as follows (figures are in thousands of USD):
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six months Ended June 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Interest income | | $ | | | $ | | | $ | | | $ | |
Foreign exchange gain/(loss), net | |
| | |
| ( | |
| | |
| ( |
Bank charges | |
| ( | |
| ( | |
| ( | |
| ( |
Total financial income/(expense), net | | $ | | | $ | ( | | $ | | | $ | ( |
18. Income per share
Basic income per share is computed using the weighted average number of ordinary shares outstanding during the period. Diluted income per share is computed using the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the period. The dilutive effect of outstanding stock options is determined based on the treasury stock method.
The calculations of basic and diluted income per share attributable to the parent company for the three months ended June 30, 2025 and 2024, were as follows (figures are in thousands of USD, except share and per share amounts):
| | | | | | |
| | Three Months Ended June 30, | ||||
|
| 2025 |
| 2024 | ||
Numerator: |
| |
|
| |
|
Net income attributable to the parent company’s common shareholders - Basic and Diluted | | $ | | | $ | |
Denominator: | |
| | | | |
Weighted average shares outstanding | |
| | | | |
Dilutive effects of stock options | |
| — | | | — |
Denominator for dilutive income per share - Diluted | |
| | | | |
Net income per share attributable to parent company’s common shareholders – Basic | | $ | | | $ | |
Net income per share attributable to parent company’s common shareholders - Diluted | | $ | | | $ | |
The calculations of basic and diluted income per share attributable to the parent company for the six months ended June 30, 2025 and 2024, were as follows (figures are in thousands of USD, except share and per share amounts):
| | | | | | |
| | Six months Ended June 30, | ||||
|
| 2025 |
| 2024 | ||
Numerator: |
| |
|
| |
|
Net income attributable to the parent company’s common shareholders - Basic and Diluted | | $ | | | $ | |
Denominator: | |
| | | | |
Weighted average shares outstanding | |
| | | | |
Dilutive effects of stock options | |
| — | | | — |
Denominator for dilutive income per share - Diluted | |
| | | | |
Net income per share attributable to parent company’s common shareholders - Basic | | $ | | | $ | |
Net income per share attributable to parent company’s common shareholders - Diluted | | $ | | | $ | |
The exercise prices for all outstanding stock options exceeded the weighted average market price of the Company’s common stock during the three and six months ended June 30, 2025. Therefore, these stock options were excluded from the calculation of the diluted income per share for the corresponding periods presented.
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19. Significant concentrations
A significant portion of the Company’s business is conducted in the PRC where the currency is the RMB. Regulations in China permit foreign owned entities to freely convert the RMB into foreign currency for transactions that fall under the “current account”, which includes trade related receipts and payments, interest and dividends. Accordingly, the Company’s China subsidiaries may use RMB to purchase foreign currency for settlement of such “current account” transactions without pre-approval.
China Automotive, the parent company, may depend on dividend payments from Genesis and HLUSA, which are generated from their subsidiaries in China, “China-based Subsidiaries,” after they receive payments from the China-based Subsidiaries. Regulations in the PRC currently permit payment of dividends of a PRC company only out of accumulated profits as determined in accordance with accounting standards and regulations in China. Under PRC law China-based Subsidiaries are required to set aside at least
The PRC government also imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currencies out of China. The China-based Subsidiaries may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currencies. If China Automotive is unable to receive dividend payments from its subsidiaries, including the China-based subsidiaries, China Automotive may be unable to effectively finance its operations or pay dividends on its shares.
Transactions other than those that fall under the “current account” and that involve conversion of RMB into foreign currency are classified as “capital account” transactions; examples of “capital account” transactions include repatriations of investment by or loans to foreign owners, or direct equity investments in a foreign entity by a China domiciled entity. “Capital account” transactions require prior approval from China’s State Administration of Foreign Exchange, or SAFE, or its provincial branch to convert a remittance into a foreign currency, such as U.S. Dollars, and transmit the foreign currency outside of China.
This system could be changed at any time and any such change may affect the ability of the Company or its subsidiaries in China to repatriate capital or profits, if any, outside China. Furthermore, SAFE has a significant degree of administrative discretion in implementing the laws and has used this discretion to limit convertibility of current account payments out of China. Whether as a result of a deterioration in the Chinese balance of payments, a shift in the Chinese macroeconomic prospects or any number of other reasons, China could impose additional restrictions on capital remittances abroad. As a result of these and other restrictions under the laws and regulations of the People’s Republic of China, or the PRC, the Company’s China subsidiaries are restricted in their ability to transfer a portion of their net assets to the parent. The Company has no assurance that the relevant Chinese governmental authorities in the future will not limit further or eliminate the ability of the Company’s China-based subsidiaries to purchase foreign currencies and transfer such funds to the Company to meet its liquidity or other business needs. Any inability to access funds in China, if and when needed for use by the Company outside of China, could have a material and adverse effect on the Company’s liquidity and its business.
20. Related party transactions and balances
Related party transactions are as follows (figures are in thousands of USD):
Related party sales
| | | | | | |
| | Three Months Ended June 30, | ||||
|
| 2025 |
| 2024 | ||
Merchandise sold to related parties | | $ | | | $ | |
Materials and others sold to related parties | |
| | |
| |
Rental income obtained from related parties | |
| | |
| |
Total | | $ | | | $ | |
| | | | | | |
| | Six months Ended June 30, | ||||
|
| 2025 |
| 2024 | ||
Merchandise sold to related parties | | $ | | | $ | |
Materials and others sold to related parties | |
| | | | |
Rental income obtained from related parties | |
| | | | |
Total | | $ | | | $ | |
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Related party purchases
| | | | | | |
| | Three Months Ended June 30, | ||||
|
| 2025 |
| 2024 | ||
Materials purchased from related parties | | $ | | | $ | |
Equipment purchased from related parties | |
| | |
| |
Others purchased from related parties | | | | | | |
Total | | $ | | | $ | |
| | | | | | |
| | Six months Ended June 30, | ||||
|
| 2025 |
| 2024 | ||
Materials purchased from related parties | | $ | | | $ | |
Equipment purchased from related parties | |
| | |
| |
Others purchased from related parties | |
| | |
| |
Total | | $ | | | $ | |
Related party receivables
| | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||
Accounts and notes receivable, net from related parties | | $ | | | $ | |
Related party advance payments
| | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||
Advance payments for property, plant and equipment to related parties | | $ | | | $ | |
Advance payments and others to related parties | |
| | |
| |
Total | | $ | | | $ | |
Related party payables
| | | | | | |
|
| June 30, 2025 |
| December 31, 2024 | ||
Accounts and notes payable | | $ | | | $ | |
These transactions were consummated under similar terms as those with the Company’s third-party customers and suppliers.
As of June 30, 2025, Hanlin Chen, the chairman of the board of directors of the Company, owns
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21. Commitments and contingencies
Legal proceedings
The Company is not a party to any pending or, to the best of the Company’s knowledge, any threatened legal proceedings and no director, officer or affiliate of the Company, or owner of record of more than five percent of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.
Other commitments and contingencies
In addition to the bank loans, notes payables and the related interest and other payables, the following table summarizes the Company’s major commitments and contingencies as of June 30, 2025 (figures are in thousands of USD):
| | | | | | | | | | | | | | | |
| | Payment obligations by period | |||||||||||||
|
| 2025 |
| 2026 |
| 2027 |
| Thereafter |
| Total | |||||
Obligations for investment contracts(1) | | $ | | | $ | | | $ | — | | $ | — | | $ | |
Obligations for purchasing and service agreements | | | | | | | | | — | | | — | | | |
Total | | $ | | | $ | | | $ | — | | $ | — | | $ | |
| (1) | In July 2024, Hubei Henglong entered into an agreement with other parties to establish an associate company, Shanghai IAT. According to the agreement, Hubei Henlong shall contribute a total capital of RMB |
In June 2023, Hubei Henglong entered into an agreement with other parties to establish a limited partnership, Suzhou Mingzhi. According to the agreement, Hubei Henlong shall contribute a total capital of RMB
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22. Off-balance sheet arrangements
As of June 30, 2025 and December 31, 2024, the Company did not have any significant transactions, obligations or relationships that could be considered off-balance sheet arrangements.
23. Segment reporting
The accounting policies of the product sectors, each entity manufactures and sells different products and represents a different product sector, are the same as those described in the summary of significant accounting policies disclosed in the Company’s 2024 Annual Report on Form 10-K except that the disaggregated financial results for the product sectors have been prepared using a management approach, which is consistent with the basis and manner in which management internally disaggregates financial information for the purposes of assisting them in making internal operating decisions. Generally, the Company evaluates performance based on stand-alone product sector operating income and accounts for inter-segment sales and transfers as if the sales or transfers were to third parties, at current market prices. Each product sector is considered a reporting segment.
As of June 30, 2025, in addition to the holding company (Genesis and CAAS Cayman), the Company had
As of June 30, 2024, in addition to the holding company (Genesis), the Company had
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Table of Contents
The Company’s product sector information for the three and six months ended June 30, 2025 and 2024, is as follows (figures are in thousands of USD):
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| Henglong |
| Jiulong |
| Wuhu |
| Hubei Henglong |
| Henglong KYB |
| Brazil Henglong |
| Other Entities |
| Total | ||||||||
Three Months Ended June 30, 2025 |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net sales to China | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | — | | $ | | | $ | |
Net sales to foreign countries | |
| | |
| | |
| — | |
| | |
| | |
| | |
| | |
| |
Total segment net sales | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Less: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Cost of products sold | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Selling, General and Research expense | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Segment net income | | $ | | |
| | |
| ( | |
| ( | |
| | |
| | |
| ( | |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| Henglong |
| Jiulong |
| Wuhu |
| Hubei Henglong |
| Henglong KYB |
| Brazil Henglong |
| Other Entities |
| Total | ||||||||
Six Months Ended June 30, 2025 | | | | | | | | | | | | | | | | | | | | | | | | |
Net sales to China | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | — | | $ | | | $ | |
Net sales to foreign countries | |
| | | | | | | — | | | | | | | | | | | | | | | |
Total segment net sales | |
| | | | | | | | | | | | | | | | | | | | | | |
Less: | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of products sold | |
| | | | | | | | | | | | | | | | | | | | | | |
Selling, General and Research expense | | | | | | | | | | | | | | | | | | | | | | | | |
Segment net income | | $ | | | | | | | ( | | | | | | | | | | | | ( | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| Henglong |
| Jiulong |
| Wuhu |
| Hubei Henglong |
| Henglong KYB |
| Brazil Henglong |
| Other Entities |
| Total | ||||||||
Three Months Ended June 30, 2024 |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net sales to China | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | — | | $ | | | $ | |
Net sales to foreign countries | |
| | |
| | |
| — | |
| | |
| | |
| | |
| | |
| |
Total segment net sales | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Less: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Cost of products sold | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Selling, General and Research expense | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Segment net income | | $ | | |
| | |
| ( | |
| | |
| | |
| | |
| ( | |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Henglong | | Jiulong |
| Wuhu |
| Hubei Henglong |
| Henglong KYB |
| Brazil Henglong |
| Other Entities |
| Total | ||||||||
Six Months Ended June 30, 2024 |
| |
| | | | | | | | | | | | | |
| |
| | ||||
Net sales to China | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | — | | $ | | | $ | |
Net sales to foreign countries | |
| | | | | | | — | | | | | | | | | | | | | | | |
Total segment net sales | |
| | | | | | | | | | | | | | | | | | | | | | |
Less: | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of products sold | |
| | | | | | | | | | | | | | | | | | | | | | |
Selling, General and Research expense | | | | | | | | | | | | | | | | | | | | | | | | |
Segment net income | | $ | | | | | | | ( | | | | | | | | | | | | ( | | | |
The following table presents a reconciliation of net sales of reportable segments to consolidated net product sales:
| | | | | | |
| | Three Months Ended June 30, | ||||
|
| 2025 |
| 2024 | ||
Net sales to China | | $ | | | $ | |
Net sales to foreign countries | |
| | |
| |
Total segment net sales | |
| | |
| |
Eliminations | |
| ( | |
| ( |
Total consolidated net product sales | | $ | | | $ | |
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| | | | | | |
| | Six Months Ended June 30, | ||||
|
| 2025 |
| 2024 | ||
Net sales to China | | $ | | | $ | |
Net sales to foreign countries | |
| | |
| |
Total segment net sales | |
| | |
| |
Eliminations | |
| ( | |
| ( |
Total consolidated net product sales | | $ | | | $ | |
The following table presents a reconciliation of net income of reportable segments to consolidated net income:
| | | | | | |
| | Three Months Ended June 30, | ||||
|
| 2025 |
| 2024 | ||
Segment net income | | $ | | | $ | |
Unallocated amounts: | |
| | |
|
|
Net gain on other sales | |
| | |
| |
Other income, net | |
| | |
| |
Interest Expenses | |
| ( | |
| ( |
Financial income/(expense), net | |
| | |
| ( |
Other corporate items | |
| ( | |
| ( |
Less: Income Taxes | |
| ( | |
| ( |
Total consolidated net income | | $ | | | $ | |
| | | | | | |
| | Six Months Ended June 30, | ||||
|
| 2025 |
| 2024 | ||
Segment net income | | $ | | | $ | |
Unallocated amounts: | |
| | |
| |
Net gain on other sales | |
| | |
| |
Other income, net | |
| | |
| |
Interest Expenses | |
| ( | |
| ( |
Financial income/(expense), net | |
| | |
| ( |
Other corporate items | |
| ( | |
| ( |
Less: Income Taxes | |
| ( | |
| ( |
Total consolidated net income | | $ | | | $ | |
24. Subsequent Event
On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act of 2025 which includes, among other provisions, changes to the U.S. corporate income tax system including the allowance of immediate expensing of qualifying research and development expenses and permanent extensions of certain provisions within the Tax Cuts and Jobs Act. Certain provisions are effective for the Company beginning fiscal 2026. We are evaluating the future impact of these tax law changes on our financial statements.
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Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with the Company’s condensed unaudited consolidated financial statements and the related notes thereto and the other financial information contained elsewhere in this Report.
General Overview
China Automotive Systems, Inc. is a leading power steering systems supplier for the China automobile industry. The Company has business relationships with more than sixty vehicle manufacturers, including BYD Auto Co., Ltd., Zhejiang Geely Automobile Co., Ltd., and Chery Automobile Co., Ltd., three of the largest privately owned car manufacturers in China, Chongqing Changan Automobile Co., Ltd., the largest state-owned car manufacturers in China, SAIC Motor Co., Ltd., FAW Group and others. All of them are the Company’s key customers. For overseas customers, the Company has supplied power steering gears to Stellantis N.V. since 2009 and to Ford Motor Company since 2016.
Most of the Company’s production and research and development institutes are located in China. As of June 30, 2025, the Company has approximately 4,414 employees dedicated to design, development, manufacture and sales of its products. By leveraging its extensive experience, innovative technology and geographic strengths, the Company aims to grow leading positions in automotive power steering systems and to further improve overall margins, long-term operating profitability and cash flows. To achieve these goals and to respond to industry factors and trends, the Company is continuing its work to improve its operations and business structure and achieve profitable growth.
Corporate Structure
The Company, through its subsidiaries, engages in the manufacture and sales of automotive systems and components. Great Genesis Holdings Limited, a company incorporated in Hong Kong on January 3, 2003 under the Companies Ordinance of Hong Kong as a limited liability company, “Genesis,” is a wholly-owned subsidiary of the Company and the holding company of the Company’s joint ventures in the PRC. Henglong USA Corporation, “HLUSA,” incorporated on January 8, 2007 in Troy, Michigan, is a wholly-owned subsidiary of the Company, and mainly engages in marketing of automotive parts in North America, and provides after-sales service and research and development support. CAAS Brazil’s Imports And Trade In Automotive Parts Ltd., “Brazil Henglong,” was established by Hubei Henglong Automotive System Group Co., Ltd., formerly known as Jingzhou Hengsheng Automotive System Co., Ltd., “Hubei Henglong,” as a Sino-foreign joint venture company with two Brazilian citizens in Brazil in August 2012. In May 2017, the Company obtained an additional 15.84% equity interest in Brazil Henglong for nil consideration. In October 2024, Brazil Henglong changed its Articles. Under the new Articles, the Company’s equity interest in Brazil Henglong was changed to 94.19% from 95.84%. The Company retained its controlling interest in Brazil Henglong and the acquisition of the non-controlling interest was accounted for as an equity transaction. In April 2020, Hubei Henglong acquired 100.00% of the shares of Changchun Hualong Automotive Technology Co., Ltd., “Changchun Hualong”, for total consideration of RMB 1.2 million, equivalent to approximately $0.2 million. Changchun Hualong mainly engages in design and R&D of automotive parts. Wuhu Hongrun New Material Co., Ltd., “Wuhu Hongrun” was formed in December 2019, which mainly engages in the development, manufacturing and sale of high polymer materials. In April 2021, the Company obtained an additional 22.67% equity interest in Wuhu, for total consideration of RMB 6.9 million, equivalent to approximately $1.1 million, from the other shareholder. Following the acquisition, the Company owned 100% of the equity interests of Wuhu Henglong. In June 2023, Hubei Henglong contributed certain equipment and intangible assets to Hubei Zhirong Automobile Technology Co., Ltd., “Zhirong”, representing 100% of Zhirong’s paid-up capital. Zhirong mainly engages in inspection and testing of automotive products. In March 2024, KYB obtained an additional 6.6% equity interest in Henglong KYB for total consideration of RMB 110.0 million, equivalent to approximately $15.5 million, after that, Henglong owns 60.0% and KYB owns 40.0% of the shares of Henglong KYB. The Company retained its controlling interest in Henglong KYB. In December 2024, Hubei Henglong formed CAAS EUROPE S.r.l., “CAAS EUROPE”, which mainly engages in design, prototyping, development and testing of parts and/or systems aimed at the automotive and commercial vehicle market. Hubei Henglong owns 100% of the shares of CAAS EUROPE. In September 2024, the Company formed China Automotive Systems Holdings, Inc., “CAAS Cayman”.
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Table of Contents
Critical Accounting Estimates
The Company prepares its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amount of revenues and expenses during the reporting periods. Management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions. The following critical accounting policies affect the more significant judgments and estimates used in the preparation of the Company’s condensed consolidated financial statements.
The Company considers an accounting estimate to be critical if:
| ● | It requires the Company to make assumptions about matters that were uncertain at the time it was making the estimate, and |
| ● | Changes in the estimate or different estimates that the Company could have selected would have had a material impact on the Company’s financial condition or results of operations. |
The table below presents information about the nature and rationale for the Company’s critical accounting estimates:
Balance Sheet |
| Critical |
| Nature of Estimates Required |
| Assumptions/Approaches |
| Key Factors |
Long-term investments | | Share of the income or losses from the limited partnerships |
| The Company adjusted the carrying value of these equity method investments based on its share of the income or losses from the limited partnerships. The income or losses of the limited partnerships were primarily attributable to changes in the estimated fair value of the underlying investments held by these limited partnerships. |
| The fair value of the underlying investments was determined using valuation techniques based on market approach with inputs, which required significant judgment. |
| ● Relevant market information ● Historical performance and future development prospects of underlying investments to assist the Company in determining an appropriate valuation methodology |
| |
|
|
|
|
|
|
|
Accrued liabilities and other long-term liabilities | | Warranty obligations |
| Estimating warranty requires the Company to forecast the resolution of existing claims and expected future claims on products sold. OEMs are increasingly seeking to hold suppliers responsible for product warranties, which may impact the Company’s exposure to these costs. |
| The Company bases its estimate on historical trends of units sold and payment amounts, combined with its current understanding of the status of existing claims and discussions with its customers. |
| ● OEM sourcing ● OEM policy decisions regarding warranty claims |
| |
|
|
|
|
|
|
|
Property, plant and equipment, intangible assets and other long-term assets | | Valuation of long- lived assets | The Company is required, from time-to-time, to review the recoverability of certain of its assets based on projections of anticipated future cash flows, including future profitability assessments of various product lines. | The Company estimates cash flows using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments. |
| ● Future production estimates ● Customer preferences and decisions | ||
| |
|
|
|
|
|
|
|
Accounts receivable | | Allowance for doubtful accounts | The Company is required, from time to time, to review the credit of customers and make timely provision of allowance for doubtful accounts. | The Company estimates the collectability of the receivables based on the future cash flows using historical experiences. |
| ● Customer credit | ||
| |
|
|
|
|
|
|
|
Inventory | | Provision for inventory impairment |
| The Company is required, from time to time, to review the turnover of inventory based on projections of anticipated future cash flows, including provision of inventory impairment for over market price and undesirable inventories. |
| The Company estimates cash flows using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments. |
| ● Future production estimates ● Customer preferences and decisions. |
Recent Accounting Pronouncements
Please see Note 2 to the consolidated financial statements under Item 1 of Part I of this report.
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Results of Operations - Three Months Ended June 30, 2025 and 2024
Selected highlights from our results of operations are as follows (in thousands of U.S. dollars):
| | | | | | | | | | | | |
|
| Three Months Ended June 30, |
| |||||||||
| | 2025 |
| 2024 |
| Change |
| Change% | | |||
Net product sales | | $ | 176,245 | | $ | 158,608 | | $ | 17,637 | | 11.1 | % |
Cost of products sold | |
| 145,698 | | | 129,306 | | | 16,392 | | 12.7 | |
Gain on other sales | |
| 455 | | | 1,720 | | | (1,265) | | (73.5) | |
Selling expenses | |
| 4,514 | | | 4,614 | | | (100) | | (2.2) | |
General and administrative expenses | |
| 5,412 | | | 7,418 | | | (2,006) | | (27.0) | |
Research and development expenses | |
| 8,092 | | | 8,184 | | | (92) | | (1.1) | |
Other income, net | |
| 1,060 | | | 1,735 | | | (675) | | (38.9) | |
Interest expense | |
| (292) | | | (183) | | | (109) | | 59.6 | |
Financial income/(expense), net | | | 1,327 | | | (690) | | | 2,017 | | (292.3) | |
Income taxes | |
| 4,049 | | | 2,108 | | | 1,941 | | 92.1 | |
Net income | |
| 10,372 | | | 8,755 | | | 1,617 | | 18.5 | |
Net income attributable to non-controlling interests | |
| 2,747 | | | 1,608 | | | 1,139 | | 70.8 | |
Net income attributable to parent company’s common shareholders | | | 7,625 | | | 7,140 | | | 485 |
| 6.8 | % |
Net Product Sales and Cost of Products Sold
| | | | | | | | | | | | | | | | | | | | | | | |
|
| Net Product Sales |
| Cost of Products Sold |
| ||||||||||||||||||
| | (in thousands of USD, | | (in thousands of USD, |
| ||||||||||||||||||
| | except percentages) | | except percentages) | | ||||||||||||||||||
| | Three Months Ended June 30, | | Three Months Ended June 30, | | ||||||||||||||||||
| | 2025 |
| 2024 |
| Change |
| | 2025 |
| 2024 |
| Change | | |||||||||
Henglong |
| $ | 83,432 | | $ | 80,000 | | | 3,432 | | 4.3 | % | $ | 75,803 | | $ | 71,348 | | | 4,455 | | 6.2 | % |
Jiulong | |
| 23,500 | | | 18,715 | | | 4,785 | | 25.6 | | | 20,685 | | | 15,813 | | | 4,872 | | 30.8 | |
Wuhu | |
| 6,092 | | | 8,998 | | | (2,906) | | (32.3) | | | 6,263 | | | 10,060 | | | (3,797) | | (37.7) | |
Hubei Henglong | |
| 29,978 | | | 26,804 | | | 3,174 | | 11.8 | | | 27,537 | | | 21,095 | | | 6,442 | | 30.5 | |
Henglong KYB | |
| 53,878 | | | 42,770 | | | 11,108 | | 26.0 | | | 45,163 | | | 36,292 | | | 8,871 | | 24.4 | |
Brazil Henglong | | | 17,884 | | | 11,974 | | | 5,910 | | 49.4 | | | 14,003 | | | 10,056 | | | 3,947 | | 39.3 | |
Other Entities | |
| 35,509 | | | 35,101 | | | 408 | | 1.2 | | | 29,194 | | | 29,569 | | | (375) | | (1.3) | |
Total Segments | |
| 250,273 | | | 224,362 | | | 25,911 | | 11.5 | | | 218,648 | | | 194,233 | | | 24,415 | | 12.6 | |
Elimination | |
| (74,028) | | | (65,754) | | | (8,274) | | 12.6 | | | (72,950) | | | (64,927) | | | (8,023) | | 12.4 | |
Total | | $ | 176,245 | | $ | 158,608 | | | 17,637 | | 11.1 | % | $ | 145,698 | | $ | 129,306 | | | 16,392 | | 12.7 | % |
Net Product Sales
Net product sales were $176.2 million for the three months ended June 30, 2025, compared to $158.6 million for the same period in 2024, representing an increase of $17.6 million, or 11.1%, mainly due to the Company’s increased sales of electric power steering, “EPS”, and partially offset by the appreciation of the USD against the RMB.
Net sales of traditional steering products and parts were $103.3 million for the three months ended June 30, 2025, compared to $103.0 million for the same period in 2024, representing an increase of $0.3 million, or 0.3%. Net sales of EPS systems and parts were $72.9 million for the three months ended June 30, 2025 and $55.6 million for the same period in 2024, representing an increase of $17.3 million, or 31.1%. As a percentage of net sales, sales of EPS were 41.4% for the three months ended June 30, 2025, compared with 35.1% for the same period in 2024.
Further analysis by segment (before elimination) is as follows:
| ● | Henglong mainly engages in providing passenger vehicle steering systems. Net product sales for Henglong were $83.4 million for the three months ended June 30, 2025, compared with $80.0 million for the three months ended June 30, 2024, representing an increase of $3.4 million, or 4.3%. The increase was mainly due to the increase in sales volume of products used in passenger vehicles. |
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| ● | Jiulong mainly engages in providing commercial vehicle steering systems. Net product sales for Jiulong were $23.5 million for the three months ended June 30, 2025, compared with $18.7 million for the three months ended June 30, 2024, representing an increase of $4.8 million, or 25.6%. The increase was mainly due to the increase in sales volume of products used in commercial vehicles. |
| ● | Wuhu mainly engages in providing vehicle steering systems to Chery Automobile Co., Ltd., “Chery”, one of the major automotive manufacturers in China. Net product sales for Wuhu were $6.1 million for the three months ended June 30, 2025, compared to $9.0 million for the same period in 2024, representing a decrease of $2.9 million, or 32.3%. The decrease was mainly due to the decrease in sales volume of products used in passenger vehicles from Chery. |
| ● | Hubei Henglong mainly engages in providing vehicle steering systems to Stellantis N.V. and Ford. Net product sales for Hubei Henglong were $30.0 million for the three months ended June 30, 2025, compared with $26.8 million for the three months ended June 30, 2024, representing an increase of $3.2 million, or 11.8%. The increase was mainly due to the increase in sales volume of products used in passenger vehicles from Stellantis N.V. |
| ● | Henglong KYB mainly engages in providing passenger EPS products. Net product sales for Henglong KYB were $53.9 million for the three months ended June 30, 2025, compared with $42.8 million for the three months ended June 30, 2024, representing an increase of $11.1 million, or 26.0%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles. |
| ● | Net product sales for Brazil Henglong were $17.9 million for the three months ended June 30, 2025, compared to $12.0 million for the same period in 2024, representing an increase of $5.9 million, or 49.4%. The increase was mainly due to the increase in demand of Stellantis N.V. |
| ● | Net product sales for other entities were $35.5 million for the three months ended June 30, 2025, compared to $35.1 million for the same period in 2024, representing an increase of $0.4 million, or 1.2%. |
Cost of Products Sold
For the three months ended June 30, 2025, the cost of products sold was $145.7 million, compared to $129.3 million for the same period of 2024, representing an increase of $16.4 million, or 12.7%. The increase in cost of sales was mainly due to the increased sales volumes. Further analysis is as follows:
| ● | Cost of products sold for Henglong was $75.8 million for the three months ended June 30, 2025, compared to $71.3 million for the same period of 2024, representing an increase of $4.5 million, or 6.2%. The increase was mainly due to the increased sales volumes. |
| ● | Cost of products sold for Jiulong was $20.7 million for the three months ended June 30, 2025, compared to $15.8 million for the same period of 2024, representing an increase of $4.9 million, or 30.8%. The increase was mainly due to the increased sales volumes. |
| ● | Cost of products sold for Wuhu was $6.3 million for the three months ended June 30, 2025, compared to $10.1 million for the same period of 2024, representing a decrease of $3.8 million, or 37.7%. The decrease was mainly due to the decreased sales volumes. |
| ● | Cost of products sold for Hubei Henglong was $27.5 million for the three months ended June 30, 2025, compared to $21.1 million for the same period of 2024 representing an increase of $6.4 million, or 30.5%. The increase was mainly due to the increase in sales volumes. |
| ● | Cost of products sold for Henglong KYB was $45.2 million for the three months ended June 30, 2025, compared to $36.3 million for the same period in 2024, representing an increase of $8.9 million, or 24.4%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles. |
| ● | Cost of products sold for Brazil Henglong was $14.0 million for the three months ended June 30, 2025, compared to $10.1 million for the same period of 2024, representing an increase of $3.9 million, or 39.3%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles. |
| ● | Cost of products sold for other entities was $29.2 million for the three months ended June 30, 2025, compared to $29.6 million for the same period in 2024, representing a decrease of $0.4 million, or 1.3%. |
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Table of Contents
Gross margin was 17.3% for the three months ended June 30, 2025, compared with 18.5% for the same period of 2024, which was mainly due to increase of tariffs and product mix change from increased sales portion of relatively lower-margin products.
Selling Expenses
Selling expenses were $4.5 million for the three months ended June 30, 2025, which was stable compared to $4.6 million for the three months ended June 30, 2024, mainly due to the decreased marketing expenses.
General and Administrative Expenses
General and administrative expenses were $5.4 million for the three months ended June 30, 2025, as compared to $7.4 million for the same period of 2024, representing a decrease of $2.0 million, or 27.0%, which was mainly due to the decreased business taxes and surcharges.
Research and Development Expenses
Research and development (“R&D”) expenses were $8.1 million for the three months ended June 30, 2025, which was stable compared to $8.2 million for the three months ended June 30, 2024.
Other Income, net
Other income, net was $1.1 million for the three months ended June 30, 2025, as compared to $1.7 million for the same period of 2024, representing a decrease of $0.6 million, or 38.9% which was mainly due to the loss from disposal of property, plant and equipment.
Interest Expense
Interest expense was $0.3 million for the three months ended June 30, 2025, which was stable compared to $0.2 million for the same period of 2024.
Financial income/(expense), net
Financial income, net was $1.3 million for the three months ended June 30, 2025, as compared to financial expense, net of $0.7 million for the three months ended June 30, 2024, representing an increase in financial income of $2.0 million, which was primarily due to an increase in the foreign exchange gain due to the foreign exchange volatility.
Income Taxes
Income tax expense was $4.0 million for the three months ended June 30, 2025, as compared to $2.1 million for the three months ended June 30, 2024, which was primarily due to a higher income before income tax expenses and a higher expected annual effective tax rate in 2025 based on the latest annual forecast as compared to 2024.
Net Income Attributable to Non-controlling Interests
Net income attributable to non-controlling interests amounted to $2.7 million for the three months ended June 30, 2025, compared to $1.6 million for the three months ended June 30, 2024, representing an increase of $1.1 million.
Net Income Attributable to Parent Company’s Common Shareholders
Net income attributable to parent company’s common shareholders was $7.6 million for the three months ended June 30, 2025, compared to $7.1 million for the three months ended June 30, 2024, representing an increase of $0.5 million.
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Table of Contents
Results of Operations - Six months Ended June 30, 2025 and 2024
Selected highlights from our results of operations are as follows (in thousands of U.S. dollars):
| | | | | | | | | | | | |
| | Six Months Ended June 30, |
| |||||||||
|
| 2025 |
| 2024 |
| Change |
| Change % |
| |||
Net product sales | | $ | 343,339 | | $ | 298,002 | | $ | 45,337 |
| 15.2 | % |
Cost of products sold | |
| 284,207 | |
| 244,631 | |
| 39,576 |
| 16.2 | |
Gain on other sales | |
| 1,606 | |
| 2,234 | |
| (628) |
| (28.1) | |
Selling expenses | |
| 9,332 | |
| 8,687 | |
| 645 |
| 7.4 | |
General and administrative expenses | |
| 12,977 | |
| 12,965 | |
| 12 |
| 0.1 | |
Research and development expenses | |
| 16,805 | |
| 13,496 | |
| 3,309 |
| 24.5 | |
Other income, net | |
| 3,001 | |
| 4,138 | |
| (1,137) |
| (27.5) | |
Interest expense | |
| (775) | |
| (441) | |
| (334) |
| 75.7 | |
Financial income/(expense), net | |
| 3,305 | |
| (702) | |
| 4,007 |
| (570.8) | |
Income taxes | |
| 6,986 | |
| 3,851 | |
| 3,135 |
| 81.4 | |
Net income | |
| 18,827 | |
| 18,019 | |
| 808 |
| 4.5 | |
Net income attributable to non-controlling interests | |
| 4,080 | |
| 2,597 | |
| 1,483 |
| 57.1 | |
Net income attributable to parent company’s common shareholders | |
| 14,747 | |
| 15,407 | |
| (660) |
| (4.3) | % |
Net Product Sales and Cost of Products Sold
| | | | | | | | | | | | | | | | | | | | | |
| | Net Product Sales | | Cost of Products Sold |
| ||||||||||||||||
| | (in thousands of USD, | | (in thousands of USD, |
| ||||||||||||||||
| | except percentages) | | except percentages) |
| ||||||||||||||||
| | Six Months Ended June 30, | | Six Months Ended June 30, |
| ||||||||||||||||
|
| 2025 |
| 2024 |
| Change |
| 2025 |
| 2024 |
| Change |
| ||||||||
Henglong | | $ | 164,161 | | $ | 138,716 |
| 25,445 |
| 18.3 | % | $ | 149,546 | | $ | 124,185 |
| 25,361 |
| 20.4 | % |
Jiulong | |
| 43,171 | |
| 35,467 |
| 7,704 |
| 21.7 | |
| 38,416 | |
| 30,150 |
| 8,266 |
| 27.4 | |
Wuhu | |
| 16,147 | |
| 17,858 |
| (1,711) |
| (9.6) | |
| 15,203 | |
| 19,019 |
| (3,816) |
| (20.1) | |
Hubei Henglong | |
| 57,236 | |
| 57,187 |
| 49 |
| 0.1 | |
| 49,494 | |
| 46,211 |
| 3,283 |
| 7.1 | |
Henglong KYB | |
| 102,248 | |
| 77,767 |
| 24,481 |
| 31.5 | |
| 87,236 | |
| 67,467 |
| 19,769 |
| 29.3 | |
Brazil Henglong | |
| 34,415 | |
| 24,675 |
| 9,740 |
| 39.5 | |
| 28,338 | |
| 19,419 |
| 8,919 |
| 45.9 | |
Other Entities | |
| 70,061 | |
| 64,101 |
| 5,960 |
| 9.3 | |
| 57,548 | |
| 53,983 |
| 3,565 |
| 6.6 | |
Total Segments | |
| 487,439 | |
| 415,771 |
| 71,668 |
| 17.2 | |
| 425,781 | |
| 360,434 |
| 65,347 |
| 18.1 | |
Elimination | |
| (144,100) | |
| (117,769) |
| (26,331) |
| 22.4 | |
| (141,574) | |
| (115,803) |
| (25,771) |
| 22.3 | |
Total | | $ | 343,339 | | $ | 298,002 |
| 45,337 |
| 15.2 | % | $ | 284,207 | | $ | 244,631 |
| 39,576 |
| 16.2 | % |
Net Product Sales
Net product sales were $343.3 million for the six months ended June 30, 2025, compared to $298.0 million for the same period in 2024, representing an increase of $45.3 million, or 15.2%, mainly due to the Company’s increased sales of electric power steering, “EPS”, and partially offset by the appreciation of the USD against the RMB.
Net sales of traditional steering products and parts were $197.4 million for the six months ended June 30, 2025, compared to $195.0 million for the same period in 2024, representing an increase of $2.4 million, or 1.2%. Net sales of EPS systems and parts were $145.9 million for the six months ended June 30, 2025 and $103.0 million for the same period in 2024, representing an increase of $42.9 million, or 41.7%. As a percentage of net sales, sales of EPS were 42.5% for the six months ended June 30, 2025, compared with 34.6% for the same period in 2024.
Further analysis by segment (before elimination) is as follows:
| ● | Henglong mainly engages in providing passenger vehicle steering systems. Net product sales for Henglong were $164.2 million for the six months ended June 30, 2025, compared with $138.7 million for the six months ended June 30, 2024, representing an increase of $25.4 million, or 18.3%. The increase was mainly due to the increase in sales volume of products used in passenger vehicles. |
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Table of Contents
| ● | Jiulong mainly engages in providing commercial vehicle steering systems. Net product sales for Jiulong were $43.2 million for the six months ended June 30, 2025, compared with $35.5 million for the six months ended June 30, 2024, representing an increase of $7.7 million, or 21.7%. The increase was mainly due to the increase in sales volume of products used in commercial vehicles. |
| ● | Wuhu mainly engages in providing vehicle steering systems to Chery Automobile Co., Ltd., “Chery”, one of the major automotive manufacturers in China. Net product sales for Wuhu were $16.1 million for the six months ended June 30, 2025, compared to $17.9 million for the same period in 2024, representing a decrease of $1.7 million, or 9.6%. The decrease was mainly due to the decrease in sales volume of products used in passenger vehicles from Chery. |
| ● | Hubei Henglong mainly engages in providing vehicle steering systems to Stellantis N.V. and Ford. Net product sales for Hubei Henglong were $57.2 million for the six months ended June 30, 2025, which is stable compared to $57.2 million for the same period in 2024. |
| ● | Henglong KYB mainly engages in providing passenger EPS products. Net product sales for Henglong KYB were $102.2 million for the six months ended June 30, 2025, compared with $77.8 million for the six months ended June 30, 2024, representing an increase of $24.5 million, or 31.5%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles. |
| ● | Net product sales for Brazil Henglong were $34.4 million for the six months ended June 30, 2025, compared to $24.7 million for the same period in 2024, representing an increase of $9.7 million, or 39.5%. The increase was mainly due to the increase in demand of Stellantis N.V. |
| ● | Net product sales for other entities were $70.1 million for the six months ended June 30, 2025, compared to $64.1million for the same period in 2024, representing an increase of $6.0 million, or 9.3%. |
Cost of Products Sold
For the six months ended June 30, 2025, the cost of products sold was $284.2 million, compared to $244.6 million for the same period of 2024, representing an increase of $39.6 million, or 16.2%. The increase in cost of sales was mainly due to the increased sales volumes. Further analysis is as follows:
| ● | Cost of products sold for Henglong was $149.5 million for the six months ended June 30, 2025, compared to $124.2 million for the same period of 2024, representing an increase of $25.4 million, or 20.4%. The increase was mainly due to the increased sales volumes. |
| ● | Cost of products sold for Jiulong was $38.4 million for the six months ended June 30, 2025, compared to $30.2 million for the same period of 2024, representing an increase of $8.2 million, or 27.4%. The increase was mainly due to the increased sales volumes. |
| ● | Cost of products sold for Wuhu was $15.2 million for the six months ended June 30, 2025, compared to $19.0 million for the same period of 2024, representing a decrease of $3.8 million, or 20.1%. The decrease was mainly due to the decreased sales volumes from Chery. |
| ● | Cost of products sold for Hubei Henglong was $49.5 million for the six months ended June 30, 2025, compared to $46.2 million for the same period of 2024 representing an increase of $3.3 million, or 7.1%. The increase was mainly due to the increase in sales volumes. |
| ● | Cost of products sold for Henglong KYB was $87.2 million for the six months ended June 30, 2025, compared to $67.5 million for the same period in 2024, representing an increase of $19.8 million, or 29.3%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles. |
| ● | Cost of products sold for Brazil Henglong was $28.3 million for the six months ended June 30, 2025, compared to $19.4 million for the same period of 2024, representing an increase of $8.9 million, or 45.9%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles. |
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| ● | Cost of products sold for other entities was $57.5 million for the six months ended June 30, 2025, compared to $54.0 million for the same period in 2024, representing an increase of $3.6 million, or 6.6%. |
Gross margin was 17.2% for the six months ended June 30, 2025, compared with 17.9% for the same period of 2024, representing the increase of tariffs and product mix change from increased sales portion of relatively lower-margin products.
Selling Expenses
Selling expenses were $9.3 million for the six months ended June 30, 2025, as compared to $8.7 million for the same period of 2024, representing an increase of $0.6 million, or 7.4%, which was mainly due to the increased marketing expenses related to the increased revenue.
General and Administrative Expenses
General and administrative expenses were $13.0 million for the six months ended June 30, 2025, which was stable compared to $13.0 million for the same period of 2024.
Research and Development Expenses
Research and development (“R&D”) expenses were $16.8 million for the six months ended June 30, 2025, as compared to $13.5 million for the same period of 2024, representing an increase of $3.3 million, or 25.4%, which was mainly due to the increased salary expenses and miscellaneous expenses related to R&D, caused by the increase in R&D activities and increased headcount of R&D departments.
Other Income, net
Other income, net was $3.0 million for the six months ended June 30, 2025, as compared to $4.1 million for the six months ended June 30, 2024, representing a decrease of $1.1 million, which was mainly due to the loss from disposal of property, plant and equipment.
Interest Expense
Interest expense was $0.8 million for the six months ended June 30, 2025, as compared to $0.4 million for the same period of 2024, representing an increase of $0.4 million, which was mainly due to the increase of new loans.
Financial income/(expense), net
Financial income, net was $3.3 million for the six months ended June 30, 2025, as compared to financial expense, net of $0.7 million for the six months ended June 30, 2024, representing an increase in financial income of $4.0 million, which was primarily due to an increase in the foreign exchange gain due to the foreign exchange volatility.
Income Taxes
Income tax expense was $7.0 million for the six months ended June 30, 2025, as compared to $3.9 million for the six months ended June 30, 2024, which was primarily due to a higher income before income tax expenses as compared to the same period of 2024 and a higher expected annual effective tax rate in 2025 based on the latest annual forecast as compared to 2024.
Net Income Attributable to Non-controlling Interests
Net income attributable to non-controlling interests amounted to $4.1 million for the six months ended June 30, 2025, compared to $2.6 million for the six months ended June 30, 2024, representing an increase of $1.5 million.
Net Income Attributable to Parent Company’s Common Shareholders
Net income attributable to parent company’s common shareholders was $14.7 million for the six months ended June 30, 2025, compared to $15.4 million for the six months ended June 30, 2024, representing a decrease of $0.7 million.
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Liquidity and Capital Resources
Capital Resources and Use of Cash
The Company has historically financed its liquidity requirements from a variety of sources, including short-term and long-term borrowings under bank credit agreements, bankers’ acceptances, issuances of capital stock and notes and internally generated cash. As of June 30, 2025, the Company had cash and cash equivalents and short-term investments of $135.3 million, compared to $84.5 million as of December 31, 2024, representing an increase of $50.8 million, or 60.1%.
The Company had working capital (total current assets less total current liabilities) of $170.9 million as of June 30, 2025, compared to $146.2 million as of December 31, 2024, representing an increase of $24.7 million, or 16.9%.
Except for the expected distribution of dividends from the Company’s PRC subsidiaries to the Company in order to settle the existing intercompany loan, which was used to pay the one-time transition tax due to the U.S. Tax Reform, the Company intends to indefinitely reinvest the funds in subsidiaries established in the PRC.
Based on our liquidity assessment, we believe that our cash flow from operations and proceeds from our financing activities will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for the foreseeable future and for at least twelve months subsequent to the filing of this report.
Common share dividends
On July 19, 2024, the Company’s Board of Directors declared a special cash dividend of $0.8 per common share. The aggregate amount of the special dividend payment was $24.1 million. The special dividend payment has been fully paid as of June 30, 2025.
Capital Source
The Company’s capital source is multifaceted, such as bank loans and banks’ acceptance facilities. In financing activities and operating activities, the Company’s banks require the Company to sign line of credit agreements and repay such facilities within one to two years. On the condition that the Company can provide adequate mortgage security and has not violated the terms of the line of credit agreement, such facilities can be extended for another one to two years.
The Company had short-term loans of $71.9 million, long-term loans of $0.02 million and bankers’ acceptances of $90.0 million (See Note 8) as of June 30, 2025.
The Company currently expects to be able to obtain similar bank loans, i.e., RMB loans, and bankers’ acceptance facilities in the future if it can provide adequate mortgage security following the termination of the above-mentioned agreements, see the table under “Bank Arrangements” below for more information. If the Company is not able to do so, it will have to refinance such debt as it becomes due or repay that debt to the extent it has cash available from operations or from the proceeds of additional issuances of capital stock. Due to a depreciation of assets, the value of the mortgages securing the above-mentioned bank loans and banker’s acceptances is expected to be reduced by approximately $13.8 million over the next 12 months. If the Company wishes to maintain the same amount of bank loans and banker’s acceptances in the future, it may be required by the banks to provide additional mortgages of $13.8 million as of the maturity date of such line of credit agreements, see the table under “Bank Arrangements” below for more information. The Company can still obtain a reduced line of credit with a reduction of $7.8 million, which is 56.5%, the mortgage ratio, of $13.8 million, if it cannot provide additional mortgages. The Company expects that the reduction in bank loans will not have a material adverse effect on its liquidity.
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Bank Arrangements
As of June 30, 2025, the principal outstanding under the Company’s credit facilities and lines of credit was as follows (figures are in thousands of USD):
| | | | | | | | | | | | | |
|
| |
| |
| | |
| | |
| Assessed | |
| | | | Due | | Amount | | Amount | | Mortgage | |||
| | Bank |
| Date | | Available(2) | | Used(3) | | Value(4) | |||
1. Comprehensive credit facilities | | China Constitution Bank (1) | | Nov-2025 | | | 13,969 | | | 8,651 | | | — |
| | | | | | | | | | | | | |
2. Comprehensive credit facilities | | China Merchants Bank (1) | | Jun-2027 | | | 13,969 | | | 2,925 | | | — |
| | | | | | | | | | | | | |
3. Comprehensive credit facilities | | Bank of China (1) | | Nov-2025 | | | 13,969 | | | 11,173 | | | — |
| | | | | | | | | | | | | |
4. Comprehensive credit facilities | | Bank of China | | Dec-2025 | | | 6,985 | | | 2,766 | | | — |
| | | | | | | | | | | | | |
5. Comprehensive credit facilities | | China Everbright Bank (1) | | Dec-2025 | | | 3,353 | | | 1,118 | | | 4,191 |
| | | | | | | | | | | | | |
6. Comprehensive credit facilities | | Shanghai Pudong Development Bank (1) | | Nov-2025 | | | 27,938 | | | 4,394 | | | 19,943 |
| | | | | | | | | | | | | |
7. Comprehensive credit facilities | | Hubei Bank (1) | | Aug-2026 | | | 23,748 | | | 11,801 | | | 26,049 |
| | | | | | | | | | | | | |
8. Comprehensive credit facilities | | Industrial and Commercial Bank of China | | Jul-2025 | | | 17,881 | | | 8,102 | | | — |
| | | | | | | | | | | | | |
9. Comprehensive credit facilities | | Agricultural Bank of China | | Mar-2026 | | | 13,969 | | | 91 | | | — |
| | | | | | | | | | | | | |
Total | | | | | | | 135,781 | | | 51,021 | | | 50,183 |
| (1) | The comprehensive credit facility with China Constitution Bank is guaranteed by Hubei Henglong. The comprehensive credit facilities with China Merchants Bank are guaranteed by Hubei Henglong. The comprehensive credit facilities with Bank of China are guaranteed by Hubei Henglong. The comprehensive credit facilities with China Everbright Bank are guaranteed by Hubei Henglong in addition to the above pledged assets. The comprehensive credit facilities with Shanghai Pudong Development Bank are guaranteed by Henglong and Hubei Henglong in addition to the above pledged assets. The comprehensive credit facilities with Hubei Bank are guaranteed by Chen Hanlin in addition to the above pledged assets. |
| (2) | “Amount available” is used for the drawdown of bank loans and issuance of bank notes at the Company’s discretion. If the Company elects to utilize the facility by issuance of bank notes, additional collateral is requested to be pledged to the bank. |
| (3) | “Amount used” represents the credit facilities used by the Company for the purpose of bank loans or notes payable during the facility contract period. The loans or notes payable under the credit facilities will remain outstanding regardless of the expiration of the relevant credit facilities until the separate loans or notes payable expire. The amount used includes bank loans of $19.3 million and notes payable of $31.7 million as of June 30, 2025. |
| (4) | In order to obtain lines of credit, the Company needs to pledge certain assets to banks. As of June 30, 2025, the pledged assets included property, plant and equipment and land use rights with an aggregate assessed value of $88.7 million. |
The Company may request the banks to issue notes payable or bank loans within its credit line using a 365-day revolving line.
The Company’s bank loan terms range from 4 months to 36 months. Pursuant to the comprehensive credit line arrangement, the Company pledged and guaranteed:
1. Land use rights and buildings with an assessed value of approximately $14.8 million as security for its revolving comprehensive credit facility with Shanghai Pudong Development Bank.
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2. Land use rights and buildings with an assessed value of approximately $8.8 million as security for its revolving comprehensive credit facility with China Everbright Bank.
3. Equipment with an assessed value of approximately $65.1 million as security for its revolving comprehensive credit facility with Hubei Bank.
Short-term and Long-term Loans
The following table summarizes the contract information of short-term borrowings between the banks and the Company as of June 30, 2025 (figures are in thousands of USD).
| | | | | | | | | | | | | | | |
|
|
|
| |
| Borrowing |
| |
|
| Annual |
| Date of |
|
|
Bank | | | | Borrowing | | Term | | | | | Interest | | Interest | | |
Government | | Purpose | | Date | | (Months) | | Principal | | Rate | | Payment | | Due Date | |
Bank of China | | Working Capital | | Mar 27, 2025 | | 12 | | | 4,191 | | 2.30 | % | Pay monthly | | Mar 27, 2026 |
| | | | | | | | | | | | | | | |
Industrial and Commercial Bank of China | | Working Capital | | Jan 27, 2025 | | 12 | | | 3,911 | | 2.30 | % | Pay monthly | | Jan 27, 2026 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Oct 25, 2024 | | 12 | | | 4,191 | | 3.00 | % | Pay monthly | | Oct 25, 2025 |
| | | | | | | | | | | | | | | |
Bank of China | | Working Capital | | Jan 22, 2025 | | 11 | | | 4,191 | | 2.35 | % | Pay monthly | | Jan 21, 2026 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Jun 16, 2025 | | 12 | | | 5,030 | | 2.45 | % | Pay monthly | | Jun 16, 2026 |
| | | | | | | | | | | | | | | |
Bank of China | | Working Capital | | Apr 30, 2025 | | 11 | | | 2,791 | | 2.30 | % | Pay monthly | | Apr 29, 2026 |
| | | | | | | | | | | | | | | |
Chongqing Bank(1) | | Working Capital | | Apr 27, 2022 | | 35 | | | 111 | | 3.25 | % | Pay semiannually | | Apr 13, 2025 |
| | | | | | | | | | | | | | | |
Chongqing Bank(1) | | Working Capital | | May 12, 2022 | | 35 | | | 73 | | 3.25 | % | Pay semiannually | | Apr 13, 2025 |
| | | | | | | | | | | | | | | |
Chongqing Bank(1) | | Working Capital | | May 24, 2022 | | 34 | | | 53 | | 3.25 | % | Pay semiannually | | Apr 13, 2025 |
| | | | | | | | | | | | | | | |
Chongqing Bank(1) | | Working Capital | | Jun 16, 2022 | | 33 | | | 42 | | 3.25 | % | Pay semiannually | | Apr 13, 2025 |
| | | | | | | | | | | | | | | |
Chongqing Bank(1) | | Working Capital | | Jun 29, 2022 | | 33 | | | 113 | | 3.25 | % | Pay semiannually | | Apr 13, 2025 |
| | | | | | | | | | | | | | | |
Chongqing Bank(1) | | Working Capital | | Jul 28, 2022 | | 32 | | | 78 | | 3.25 | % | Pay semiannually | | Apr 13, 2025 |
| | | | | | | | | | | | | | | |
Chongqing Bank(1) | | Working Capital | | Jan 16, 2023 | | 26 | | | 158 | | 3.25 | % | Pay semiannually | | Apr 13, 2025 |
| | | | | | | | | | | | | | | |
Chongqing Bank(1) | | Working Capital | | Feb 20, 2023 | | 25 | | | 19 | | 3.25 | % | Pay semiannually | | Apr 13, 2025 |
| | | | | | | | | | | | | | | |
Chongqing Bank(1) | | Working Capital | | Mar 21, 2023 | | 24 | | | 22 | | 3.25 | % | Pay semiannually | | Apr 13, 2025 |
| | | | | | | | | | | | | | | |
Chongqing Bank(1) | | Working Capital | | Jun 18, 2023 | | 21 | | | 15 | | 3.25 | % | Pay semiannually | | Apr 13, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Mar 18, 2025 | | 12 | | | 6,706 | | 1.40 | % | Pay in arrear | | Mar 18, 2026 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Mar 25, 2025 | | 11 | | | 4,694 | | 1.40 | % | Pay in arrear | | Mar 24, 2026 |
| | | | | | | | | | | | | | | |
China CITIC Bank(1) | | Working Capital | | Aug 7, 2024 | | 12 | | | 5,170 | | 1.55 | % | Pay in arrear | | Aug 7, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Aug 22, 2024 | | 11 | | | 2,514 | | 1.55 | % | Pay in arrear | | Aug 21, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Nov 26, 2024 | | 11 | | | 2,095 | | 1.65 | % | Pay in arrear | | Nov 25, 2025 |
| | | | | | | | | | | | | | | |
Industrial and Commercial Bank of China | | Working Capital | | Apr 1, 2025 | | 11 | | | 4,191 | | 1.65 | % | Pay in arrear | | Mar 19, 2026 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Jan 20, 2025 | | 12 | | | 4,471 | | 1.45 | % | Pay in arrear | | Jan 20, 2026 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Mar 18, 2025 | | 12 | | | 3,716 | | 1.40 | % | Pay in arrear | | Mar 18, 2026 |
| | | | | | | | | | | | | | | |
China CITIC Bank(1) | | Working Capital | | Jul 31, 2024 | | 11 | | | 4,136 | | 1.55 | % | Pay in arrear | | Jul 30, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Aug 19, 2024 | | 11 | | | 2,235 | | 1.55 | % | Pay in arrear | | Aug 15, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Apr 2, 2025 | | 5 | | | 361 | | 1.25 | % | Pay in arrear | | Sep 24, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Apr 2, 2025 | | 5 | | | 624 | | 1.25 | % | Pay in arrear | | Sep 27, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Apr 2, 2025 | | 5 | | | 365 | | 1.25 | % | Pay in arrear | | Sep 26, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Apr 2, 2025 | | 5 | | | 244 | | 1.25 | % | Pay in arrear | | Sep 25, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Apr 16, 2025 | | 5 | | | 188 | | 1.15 | % | Pay in arrear | | Sep 27, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Apr 25, 2025 | | 5 | | | 321 | | 1.28 | % | Pay in arrear | | Oct 2, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | Apr 25, 2025 | | 5 | | | 211 | | 1.28 | % | Pay in arrear | | Sep 27, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | May 14, 2025 | | 5 | | | 556 | | 1.25 | % | Pay in arrear | | Oct 29, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | May 14, 2025 | | 5 | | | 284 | | 1.25 | % | Pay in arrear | | Oct 30, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank | | Working Capital | | May 22, 2025 | | 5 | | | 236 | | 1.25 | % | Pay in arrear | | Oct 28, 2025 |
| | | | | | | | | | | | | | | |
China CITIC Bank(1) | | Working Capital | | Feb 27, 2025 | | 4 | | | 500 | | 1.20 | % | Pay in arrear | | Jul 24, 2025 |
| | | | | | | | | | | | | | | |
China Merchants Bank | | Working Capital | | Mar 11, 2025 | | 5 | | | 377 | | 1.38 | % | Pay in arrear | | Sep 6, 2025 |
| | | | | | | | | | | | | | | |
China Merchants Bank(1) | | Working Capital | | Mar 11, 2025 | | 4 | | | 508 | | 1.38 | % | Pay in arrear | | Jul 22, 2025 |
| | | | | | | | | | | | | | | |
China Merchants Bank(1) | | Working Capital | | Mar 11, 2025 | | 4 | | | 3 | | 1.38 | % | Pay in arrear | | Jul 23, 2025 |
| | | | | | | | | | | | | | | |
China Merchants Bank(1) | | Working Capital | | Feb 5, 2025 | | 6 | | | 209 | | 1.15 | % | Pay in arrear | | Aug 5, 2025 |
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| | | | | | | | | | | | | | | |
China Merchants Bank(1) | | Working Capital | | Feb 5, 2025 | | 6 | | | 209 | | 1.15 | % | Pay in arrear | | Aug 5, 2025 |
| | | | | | | | | | | | | | | |
China Merchants Bank | | Working Capital | | Apr 8, 2025 | | 6 | | | 139 | | 1.14 | % | Pay in arrear | | Oct 8, 2025 |
| | | | | | | | | | | | | | | |
China Merchants Bank(1) | | Working Capital | | Jan 22, 2025 | | 5 | | | 418 | | 1.00 | % | Pay in arrear | | Jul 21, 2025 |
| | | | | | | | | | | | | | | |
China Merchants Bank(1) | | Working Capital | | Feb 7, 2025 | | 6 | | | 223 | | 1.15 | % | Pay in arrear | | Aug 7, 2025 |
| | | | | | | | | | | | | | | |
China Merchants Bank | | Working Capital | | Apr 8, 2025 | | 6 | | | 209 | | 1.14 | % | Pay in arrear | | Oct 8, 2025 |
| | | | | | | | | | | | | | | |
China Merchants Bank | | Working Capital | | Apr 8, 2025 | | 6 | | | 139 | | 1.14 | % | Pay in arrear | | Oct 8, 2025 |
| | | | | | | | | | | | | | | |
China Merchants Bank | | Working Capital | | Apr 8, 2025 | | 6 | | | 139 | | 1.14 | % | Pay in arrear | | Oct 8, 2025 |
| | | | | | | | | | | | | | | |
China Merchants Bank | | Working Capital | | Apr 8, 2025 | | 6 | | | 139 | | 1.14 | % | Pay in arrear | | Oct 8, 2025 |
| | | | | | | | | | | | | | | |
China Merchants Bank | | Working Capital | | Apr 8, 2025 | | 6 | | | 139 | | 1.14 | % | Pay in arrear | | Oct 8, 2025 |
| | | | | | | | | | | | | | | |
Banco Safra S/A(1) | | Working Capital | | Jul 6, 2023 | | 24 | | | 15 | | 7.31 | % | Pay monthly | | Jul 7, 2025 |
| | | | | | | | | | | | | | | |
Banco Safra S/A(1) | | Working Capital | | Jul 6, 2023 | | 25 | | | 15 | | 7.31 | % | Pay monthly | | Aug 6, 2025 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jul 6, 2023 | | 26 | | | 15 | | 7.31 | % | Pay monthly | | Sep 8, 2025 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jul 6, 2023 | | 27 | | | 15 | | 7.31 | % | Pay monthly | | Oct 6, 2025 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jul 6, 2023 | | 28 | | | 15 | | 7.31 | % | Pay monthly | | Nov 6, 2025 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jul 6, 2023 | | 29 | | | 15 | | 7.31 | % | Pay monthly | | Dec 8, 2025 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jul 6, 2023 | | 30 | | | 15 | | 7.31 | % | Pay monthly | | Jan 6, 2026 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jul 6, 2023 | | 31 | | | 15 | | 7.31 | % | Pay monthly | | Feb 6, 2026 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jul 6, 2023 | | 32 | | | 15 | | 7.31 | % | Pay monthly | | Mar 6, 2026 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jul 6, 2023 | | 33 | | | 15 | | 7.31 | % | Pay monthly | | Apr 6, 2026 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jul 6, 2023 | | 34 | | | 15 | | 7.31 | % | Pay monthly | | May 6, 2026 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jul 6, 2023 | | 35 | | | 15 | | 7.31 | % | Pay monthly | | Jun 8, 2026 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jun 29, 2023 | | 25 | | | 9 | | 7.44 | % | Pay monthly | | Jul 29, 2025 |
| | | | | | | | | | | | | | | |
Banco Safra S/A(1) | | Working Capital | | Jun 29, 2023 | | 26 | | | 9 | | 7.44 | % | Pay monthly | | Aug 29, 2025 |
| | | | | | | | | | | | | | | |
Banco Safra S/A(1) | | Working Capital | | Jun 29, 2023 | | 27 | | | 9 | | 7.44 | % | Pay monthly | | Sep 29, 2025 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jun 29, 2023 | | 28 | | | 9 | | 7.44 | % | Pay monthly | | Oct 29, 2025 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jun 29, 2023 | | 29 | | | 9 | | 7.44 | % | Pay monthly | | Dec 1, 2025 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jun 29, 2023 | | 30 | | | 9 | | 7.44 | % | Pay monthly | | Dec 29, 2025 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jun 29, 2023 | | 31 | | | 9 | | 7.44 | % | Pay monthly | | Jan 29, 2026 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jun 29, 2023 | | 32 | | | 9 | | 7.44 | % | Pay monthly | | Mar 2, 2026 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jun 29, 2023 | | 33 | | | 9 | | 7.44 | % | Pay monthly | | Mar 30, 2026 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jun 29, 2023 | | 34 | | | 9 | | 7.44 | % | Pay monthly | | Apr 29, 2026 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jun 29, 2023 | | 35 | | | 9 | | 7.44 | % | Pay monthly | | May 29, 2026 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jun 29, 2023 | | 36 | | | 9 | | 7.44 | % | Pay monthly | | Jun 29, 2026 |
| | | | | | | | | | | | | | | |
Banco Safra S/A | | Working Capital | | Jul 6, 2023 | | 36 | | | 15 | | 7.31 | % | Pay monthly | | Jul 6, 2026 |
| | | | | | | | | | | | | | | |
Total | | | | | | | | $ | 71,961 | | | | | | |
| (1) | These bank loans were repaid in July and August 2025 when they became due. |
The Company must use the loans for the purpose described and repay the principal outstanding on the specified date in the table. If it fails to do so, it will be charged a penalty interest payment of 30% to 100%. The Company had complied with such financial covenants as of June 30, 2025.
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Notes Payable
The following table summarizes the contract information of issuing notes payable between the banks and the Company as of June 30, 2025 (figures are in thousands of USD):
| | | | | | | |
| | | | | | Amount | |
| | | | | | Payable on | |
Purpose |
| Term (Months) |
| Due Date |
| Due Date | |
Working Capital(1) |
| 6 |
| Jul. 2025 | |
| 15,939 |
Working Capital(1) |
| 6 |
| Aug. 2025 | |
| 14,946 |
Working Capital |
| 6 |
| Sep. 2025 | |
| 19,846 |
Working Capital |
| 6 |
| Oct. 2025 | |
| 12,689 |
Working Capital |
| 6 |
| Nov. 2025 | |
| 16,319 |
Working Capital |
| 6 |
| Dec. 2025 | |
| 10,231 |
Total (See Note 8) | | |
|
| | $ | 89,970 |
(1)The notes payable were repaid in full on their respective due dates.
The Company must use notes payable for the purpose described in the table. If it fails to do so, the banks will no longer issue the notes payable, and it may have an adverse effect on the Company’s liquidity and capital resources. The Company has to deposit a sufficient amount of cash on the due date of notes payable for payment to the suppliers. If the bank has advanced payment for the Company, it will be charged an additional 50% penalty interest. The Company complied with such financial covenants as of June 30, 2025.
Cash Flows
| (a) | Operating Activities |
Net cash provided by operating activities for the six months ended June 30, 2025 was $49.1 million, compared to net cash provided by operating activities of $9.1 million for the same period of 2024, representing an increase in net cash inflows by $40.0 million, which was mainly due to the collection of receivables arising from sales during the second half of 2024. As a result, operating cash flow for the six months ended June 30, 2025 materially exceeded the prior-year period despite comparable underlying net income.
| (b) | Investing Activities |
Net cash used in investing activities for the six months ended June 30, 2025 was $10.3 million, as compared to net cash used in investing activities of $28.2 million for the same period of 2024, representing a decrease in net cash outflows by $17.9 million, which was mainly due to the lower capital expenditures of $8.5 million and higher realized gains on our translated earnings contracts of $8.9 million.
| (c) | Financing Activities |
Net cash used in financing activities for the six months ended June 30, 2025 was $2.8 million, compared to net cash provided by financing activities of $14.2 million for the same period of 2024, representing a decrease in net cash inflows by $17.0 million, which was mainly due to the decrease in cash received from capital contributions by a non-controlling interest holder by $15.5 million.
Off-Balance Sheet Arrangements
As of June 30, 2025 and December 31, 2024, the Company did not have any significant transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Cybersecurity
Risk Management and Strategy
We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data.
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Table of Contents
Managing Material Risks & Integrated Overall Risk Management
We have strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making processes at every level. Our management team continuously evaluates and addresses cybersecurity risks in alignment with our business objectives and operational needs.
Oversee Third-party Risk
Because we are aware of the risks associated with third-party service providers, we have implemented stringent processes to oversee and manage these risks. We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing monitoring to ensure compliance with our cybersecurity standards. The monitoring includes annual assessments of the SOC reports of our providers and implementing complementary controls. This approach is designed to mitigate risks related to data breaches or other security incidents originating from third-parties.
Risks from Cybersecurity Threats
We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There were no material changes to the disclosure made in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 regarding this matter.
ITEM 4. CONTROLS AND PROCEDURES.
| A. | Disclosure Controls and Procedures |
The Company’s management, under the supervision and with the participation of its chief executive officer and chief financial officer, Messrs. Wu Qizhou and Li Jie, respectively, evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2025, the end of the period covered by this Report. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this Form 10-Q, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, Messrs. Wu and Li concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2025.
The Company’s disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of its disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.
| B. | Changes in Internal Control Over Financial Reporting |
There have been no changes in the Company’s internal control over financial reporting during the three months ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II. — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any pending or, to the best of the Company’s knowledge, any threatened legal proceedings and no director, officer or affiliate of the Company, or owner of record of more than five percent of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.
ITEM 1A. RISK FACTORS.
In addition to other information set forth in this report, readers should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” of our 2024 Annual Report on Form 10-K, as updated and supplemented below. Any of the risk factors disclosed in our reports could materially affect our business, financial condition or future results. The risks described here, in our 2024 Annual Report on Form 10-K and in our Quarterly Report on Form 10-Q for the first quarter of 2025, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, results of operations and/or financial condition. The discussion of the risk factor below updates the corresponding disclosure under “Changes in political, business, economic and trade relations between the United States and China may have a material adverse impact on our business, results of operations and financial condition” in our 2024 Annual Report on Form 10-K, “Changes in geopolitical, business and economic conditions, domestic and foreign trade policies, monetary policies and other factors beyond our control may adversely impact our business, results of operations and financial condition” in our Quarterly Report on Form 10-Q for the first quarter of 2025, and may contain material changes to the corresponding risk factor discussion therein.
International trade policies, such as tariffs and sanctions, could adversely affect our financial performance.
Due to the interconnectedness of the global economy, policy changes in one area of the world can have an immediate and material adverse impact on markets around the world. Changes in international trade policies, including (i) changes to existing trade agreements; (ii) greater restrictions on free trade generally; and (iii) significant increases in customs duties and tariffs imposed by any country, including those already imposed or to be imposed by the U.S. and retaliatory and other actions by other countries, can adversely affect our financial condition and operating results.
Since his inauguration in January 2025, U.S. President Donald J. Trump has announced various tariffs that impact industries around the world, including the automotive industry. The complexity arises from multiple overlapping tariffs, including the most-favored-nation (MFN) tariffs that apply broadly, the Section 301 tariffs that seek to tackle what the U.S. deems are China’s unfair trade practices, the fentanyl-related tariffs addressing illicit drug trade, and the Section 232 tariffs which are related to national security concerns (mainly on steel, aluminum, and automobiles).
As of the date of this Report, the total tariffs for our products of Chinese-made steering gears exported to the U.S. may be 72.5%, composed of MFN tariffs of 2.5%, Section 301 tariffs of 25%, fentanyl-related tariffs of 20% and Section 232 tariffs of 25%. As the U.S. is still negotiating with China on the applicable tariff rates, the tariffs that could adversely impact our business may change in the future.
Our current tariffs include:
| (a) | A standard MFN tariff of 2.5% for modern vehicles is applied by the U.S. on imports, typically from World Trade Organization members, when no preferential trade agreement exists. This rate is commonly and broadly applied to passenger vehicles and affects our products. |
| (b) | Section 301 25% tariffs on imports of automobiles and certain automobile parts, engines, transmissions and electronics into the U.S. from China (the “Automobile Parts Tariff”). The U.S. administration has been negotiating agreements with several countries and has reached agreements with the United Kingdom and Japan that include reductions in the Automobile Parts Tariff to 10% and 15%, respectively. |
| (c) | 20% fentanyl-related tariffs on all imports into the United States from China. U.S. President Donald J. Trump implemented 20% tariffs on China to address the threat of the sustained influx of synthetic opioids, including fentanyl, flowing from China into the U.S. |
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| (d) | On April 3, 2025, the U.S. imposed another 25% tariff on automobiles and automobile parts on all countries. These tariffs are imposed under Section 232 of the Trade Expansion Act of 1962, which authorizes the U.S. president to impose trade restrictions on goods that “threaten to impair” U.S. national security. A 25% Section 232 tariff took effect on May 3, 2025 for auto parts, which include engines and engine parts, transmissions and powertrain parts, electrical components, and parts of passenger vehicles and light trucks classified under specified tariff subheadings. While certain tariffs on Chinese imports were reduced to 10% effective May 14, 2025 through August 12, 2025, as further extended to November 10, 2025, it is additive to the other China tariffs discussed in this risk factor. |
The actual impact of these tariffs on our business, financial condition and results of operations is subject to a number of factors that are not yet known or are subject to change, including the effect such tariffs may have on consumer demand and global automotive production volumes, the effective dates and duration of such tariffs, future changes in the amounts and scope of such tariffs, the potential withdrawal of such tariffs in whole or in part, the scope and effective date of any exemptions to such tariffs, any modification to existing exemptions to the tariffs, countermeasures that the target countries may take in response to such tariffs, and the impact such tariffs may have on our customers and our supply chain. We have entered into contractual agreements with our customers to recover some of the tariff costs incurred to date and are implementing certain actions, and considering others, to counter the potential impact of such tariffs on our business, financial condition and results of operations, including studying the impact of current trade and tariff policies on the automotive industry and evaluating our production footprint and alternatives in our supply chain. However, we can provide no assurance that we will continue to be successful in recovering such costs from our customers or that any of these mitigating actions will continue to be successful or will not disrupt and deteriorate our business, operations and financial performance.
China presents unique risks to U.S. automotive manufacturers due to the strain in U.S.-China relations and the level of integration with key components in our global supply chain. It remains unclear what additional actions the current U.S. administration may take with respect to trade issues involving China and other countries.
Further, the U.S. and other governments could impose additional sanctions or export controls that could restrict us from doing business directly or indirectly in or with certain countries or parties, which could include affiliates (e.g., China has imposed tariffs and taken other retaliatory actions in recent months). The current trade environment could impact the status of other trade agreements between the U. S. and other countries. Any of the above factors could impact our supply chain, as well as our operations, and adversely affect our financial condition and operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
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ITEM 6. EXHIBITS.
INDEX TO EXHIBITS
Exhibit |
| Description |
31.1 |
| Rule 13a-14(a) Certification* |
|
|
|
31.2 |
| Rule 13a-14(a) Certification* |
|
|
|
32.1 |
| Section 1350 Certification* |
|
|
|
32.2 |
| Section 1350 Certification* |
|
|
|
101.INS* |
| XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| | |
101.SCH* | | XBRL Taxonomy Extension Schema Document |
| | |
101.CAL* | | XBRL Taxonomy Extension Calculation Linkbase Document |
| | |
101.DEF* | | XBRL Taxonomy Extension Definition Linkbase Document |
| | |
101.LAB* | | XBRL Taxonomy Extension Label Linkbase Document |
| | |
101.PRE* | | XBRL Taxonomy Extension Presentation Linkbase Document |
| | |
Exhibit 104* | | Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
* | filed herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CHINA AUTOMOTIVE SYSTEMS, INC. | |
| (Registrant) | |
|
|
|
Date: August 13, 2025 | By: | /s/ Qizhou Wu |
| | Qizhou Wu |
|
| President and Chief Executive Officer |
|
|
|
Date: August 13, 2025 | By: | /s/ Jie Li |
|
| Jie Li |
|
| Chief Financial Officer |
41
FAQ
What were China Automotive Systems (CAAS) consolidated net product sales for Q2 2025?
How much net income did CAAS report for Q2 2025 and the six months ended June 30, 2025?
What is CAAS's cash position as of June 30, 2025?
Does CAAS disclose any material corporate transactions?
How concentrated are CAAS's customer sales?
