China Automotive Systems Stock

China Automotive Systems, Inc., through its controlled subsidiaries and the joint ventures, mainly engages in the manufacture and sale of automotive systems and components.

The company, through its subsidiary, Great Genesis Holdings Limited (Genesis), owns interests in eight Sino-joint ventures and seven wholly-owned subsidiaries in the People’s Republic of China (China or the PRC), which manufacture power steering systems and/or related products for different segments of the automobile industry. Genesis also owns interests in a Brazil-based trading company, which engages mainly in the import and sale of automotive parts in Brazil. The company is a supplier of automotive parts and most of its operations are located in China.

The company has business relationships with more than sixty vehicle manufacturers, including the five largest automobile manufacturers in China, such as SAIC Motor Co., Ltd, China FAW Group Co., Ltd and others; Shenyang Brilliance Jinbei Co., Ltd, one of the largest light vehicle manufacturers in China; BYD Auto Co., Ltd., Zhejiang Geely Automobile Co., Ltd., and Great Wall Motors Co., Ltd., three of the largest privately owned car manufacturers in China. All of them are its key customers. For overseas customers, the company has supplied power steering gear to Fiat Chrysler North America since 2009 and to Ford Motor Company since 2016.

Intellectual Property Rights

Intellectual Property rights, IP, are important in helping the company maintain its competitive position. The company owns IP rights, including two trademarks covering automobile parts, HL and JL, and more than eighty-five patents registered in China covering power steering technology. The company is in the process of integrating new advanced technologies, such as electronic chips in power steering systems into its current production line and is pursuing aggressive strategies in technology to maintain a competitive edge within the automobile industry. In December 2009, the company, through Henglong, formed Testing Center and cooperated with Nanyang Ind. Co. Ltd. and Tsinghua University to engage in the research and development of new products, such as Electric Power Steering (EPS), integral rack and pinion power steering and high pressure power steering, to optimize products design and to develop new, cost-saving manufacturing processes. In January 2015, Hubei Henglong formed Shanghai Henglong, which mainly engages in the design and sale of automotive electronics, to capture the market opportunities for EPS, which were included in traditional hydraulic power steering products by many automobile makers. In November 2017, Hubei Henglong formed Jingzhou Qingyan Intelligent Automotive Technology Research Institute Co., Ltd. (Jingzhou Qingyan), which mainly engages in the research and development of intelligent automotive technology. In August 2018, Hubei Henglong established a non-wholly owned subsidiary, Hubei Henglong KYB Automobile Electric Steering System Co., Ltd., which mainly engages in design, manufacture, sales and after-sales service of automobile electronic systems. In March 2019, Hubei Henglong established a non-wholly owned subsidiary, Hyoseong (Wuhan) Motion Mechatronics System Co., Ltd., which mainly engages in the design, manufacture and sales of automotive motors and electromechanical integrated systems. 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. In April 2020, Hubei Henglong acquired 100.0% of the equity interests of Changchun Hualong Automotive Technology Co. Ltd., Changchun Hualong, which mainly engages in design and R&D of automotive parts. In April 2021, Hubei Henlgong acquired 100.0% of the equity interests of Wuhu Henglong Automotive Steering Systems Co., Ltd., Wuhu, which mainly engages in the production and sales of automobile steering systems. Jingzhou Qingyan deregistered from the local business administration on June 22, 2022.

Strategic Plan

The company’s short to medium term strategic plan is to focus on both domestic and international market expansion.

Customers

The company’s five largest customers represented 42.8% of its total sales for the year ended December 31, 2022. The company’s customers included Fiat Chrysler North America (20.2%); Hubei Hongrun (6.2%); Great Wall Motors (5.9%); BYD Auto Co., Ltd. (5.3%); and Chery Automobile Co.,Ltd. (5.2%).

The company primarily sells its products to the customers, which, except for Hubei Hongrun, are original equipment manufacturing, OEM, customers; it also has excellent relationships with them, including serving as their first-rank supplier and developer for product development for new models.

Sales and Marketing

The company’s sales and marketing team has 98 sales persons, which are divided into an OEM team, a sales service team and a working group dedicated to international business. These sales and marketing teams provide a constant interface with the company’s key customers. They are located in all major vehicle producing regions to more effectively represent the company’s customers’ interests within its organization, to promote their programs and to coordinate their strategies with the goal of enhancing overall service and satisfaction. The company’s ability to support its customers is further enhanced by its broad presence in terms of sales offices, manufacturing facilities, engineering technology centers and joint ventures.

The company’s sales and marketing organization and activities are designed to create overall awareness and consideration of, and therefore to increased sales of the company’s modular systems and components.

Distribution

The company’s distribution system covers all of China. The company has established sales and service offices with certain significant customers to deal with matters related to such customers in a timely fashion. The company also established distribution warehouses close to major customers to ensure timely deliveries. The company maintains strict control over inventories. Each of these sales and service offices sends back to the company, through e-mail or fax, information related to the inventory and customers’ needs. The company guarantees product delivery in 8 hours for those customers who are located within 200 km from its distribution warehouses, and 24 hours for customers who are located outside of 200 km from the company’s distribution warehouses. The company has two distribution warehouses in the United States, which are located in Michigan and Texas, respectively. The warehouses deliver parts to customers every day.

Research and Development

The company’s total expenditures for research and development activities, including engineering, were approximately $36.1 million for the year ended December 31, 2022.

Competition

The company’s major competitors are Shanghai ZF, Nexteer, and First Auto FKS.

History

China Automotive Systems, Inc. was incorporated in the state of Delaware 1999.