Greetings and welcome to the China Automotive Systems Incorporated third quarter 2008 results conference. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) It is now my pleasure to introduce your host, Mr. Kevin Theiss. Thank you, Mr. Theiss, you may begin.

Thank you for joining us today and welcome to China Automotive Systems 2008 third quarter conference call. My name is Kevin and I am with Grayling Global, China Automotives U.S. Investor Relations agency. Joining us today are Mr. Qizhou Wu, Chief Executive Officer; Mr. Jie Li, Chief Financial Officer and Mr. Daming Hu, the Chief Accounting Officer of China Automotive Systems. They will be available to answer questions later in the conference call with Mr. Dixon Chen, also with Grayling Global, who helps with translation. Before we begin, I will remind all listeners that throughout this call we may make statements that may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or beliefs, including but not limited to statements concerning the company’s operations, financial performance and conditions and the impact of acquisitions on its financial performance. For this purpose, statements that are not historical fact may be deemed to be forward-looking statements. The company cautions that these statements by their nature involve risk and uncertainties and actual results may differ materially depending on a variety of important factors, including among others the impact of the competitive products, pricing and new technology, changes in demand for the company’s products, changes in consumer preferences and tastes and effectiveness of marketing, changes in law of and regulations, fluctuations in the cost of production, delays and cost overruns related to developing and opening new product facilities and other factors as those discussed in the company’s reports filed with the Securities and Exchange Commission from time-to-time. Undue reliance should not be placed on these forward-looking statements. The company’s expectations are as of this date and the company does not intended to update any of the forward-looking statements after this date…

(Operator Instructions) Your first question comes from Ping Luo - Global Hunter Securities.

For this quarter essentially we are seeing lower gross margin and higher operating expenses. I want to know if going forward are we seeing this margin to continue or is there any operating expenses that is only Korean this quarter that will not be recurring in the coming quarters. My question is that, whether you will continue to be at such a margin going forward?

[Interpreted]: Okay, there’s a few things here; first is the gross margin. In the third quarter, we continue to experience the high raw material price, followed by the second quarter, given somewhat our raw material inventory we purchased. Actually it was purchased in the second quarter, but now we are coming towards the end of those material and entering fourth quarter generally the steel price has been coming down. So, it’s benefiting us going forward. So, fourth quarter our cost of goods sold should be lower and gross margin will be higher than the third quarter. On the expense side, in response to the market, we increased our marketing effort in the third quarter, so that increased our overall selling expenses in the third quarter. Also we don’t believe we will continue to have such high marketing expenses in the fourth quarter, so in terms of marketing and selling expenses we should start coming down as well. Also in the third quarter, we have higher account receivables. According to the U.S. GAAP, we incurred some of the bad debt provisions that also go into our G&A. We are looking forward to collect those receivables in the fourth quarter and we are confident we will be able to collect that and with that we should be able to lower our operating expenses. So, operating margin will be improved in the fourth quarter as well. Also in terms of steel price, to just gives you a more color on the apple-to-apple comparison, in the third quarter 2008 compared with the third quarter of 2007, the steel price has gone up more than 50%. Also steel is one of the key raw materials of our products, which account for 20% of our cost of goods sold, so you can do the math with such a high steel price. Our cost has gone up more than 10%, so the recent price decline on the steel price is definitely benefiting us. Coming into the fourth quarter, we should see a better gross margin. In terms of SG&A as a percentage of sales, we actually were pretty much inline with last year. We actually are slightly down from the same quarter 2007. We do see a higher depreciation as we’re expanding our production capacity adding facility capacity and so actually we have a higher depreciation. Also we substantially increased our R&D capability, also expenditures in the third quarter 2008. That’s part of our plan to prepare ourselves to a global expansion. So, we were working hard on the quality improvement in R&D.

My second question is, we all know that domestic automotive market is slowing down. The industry association, they are projecting just roughly 10% gross for this year and for next year. I would like to ask, what’s your gross expectation on your business; just obviously that gross should be slowing down? So I want to know, just basically if that’s the case, if you are seeing smaller orders from existing customers or having difficulty expanding to new customer base or maybe on the pricing side you are seeing a slower pricing or specifically pricing decrease? So I want to know, what’s your gross expectation on your business and basically that’s my question? Thank you. Qizhou Wu [Interpreted]: Okay, we like to break the answer down to different section of our business. Firstly, on the commercial vehicle sector, we see six items is going to be very favorable for our business in 2009 and firstly is aftermarket. In the past we never really focused on aftermarket sales. All our efforts has been focusing on OEM and the main reason we’ve been focusing on OEM was our capacity constraint and now as we are expending our capacity we do have those down ways to handover the aftermarket. So, we are going to vigorously pursue business in the aftermarket space in 2009. Secondly, we see this stimulus package, $586 billion stimulus package are going to the infrastructure build-out and that’s definitely going to boost the commercial vehicle sales, especially the truck sales; so that will benefit our OEM business. Thirdly, the exports; in a past we haven’t a much exports, but this 2009, we already received 80,000 to 90,000 units of power steering order for the commercial vehicle OEMs overseas. Fourthly, is our capacity bottleneck in 2007. Now, we de-bottlenecked our capacity in…

(Operator Instructions) Your next comes from Ke Chen - Shah Capital Management.

Just wondering if you could first comment on the capacity in the third quarter and the fourth quarter and also 2009 and also talking about the capacity utilization rate in the third quarter, fourth quarter and 2009 and also please talk about your CapEx guidance for the fourth quarter and 2009?

Okay, right now we have a capacity about 1.4 million unit and by the end of this year we will reach to 1.45 million. So, now the utilization rate is about 90%. Next year, we’ll have a very moderate intervention plan to 200,000 more units for next year. So, the CapEx this year we already used $9.5 million cash to the expansion and by the end of this year we’ll have another 3 million to spend and next we will spend $5 million to $7 million to expand our capacity. [Interpreted]: Okay, right now we have a capacity about 1.4 million unit and by the end of this year we will reach to 1.45 million. So, now the utilization rate is about 90%. Next year, we’ll have a very moderate intervention plan to 200,000 more units for next year. So, the CapEx this year we already used $9.5 million cash to the expansion and by the end of this year we’ll have another 3 million to spend and next we will spend $5 million to $7 million to expand our capacity.

There are no questions at this time, I would like to turn the floor back over to Kevin Theiss.

Ping, do you have any questions?

Your next question comes from Ping Lou – Global Hunter Securities.

Just regarding the capacity, so you said you’re going to have $1.5 million units by year-end?

The year-end we’ll have $1.45 million.

The year-end we’ll have $1.45 million.

And then next year you’re basically expanding and you’ll have 200,000 units more next year.

Yes.

Yes.

Okay, so then in the CapEx you have $12.5 million for this year total and which means basically $3 million in the last quarter.

Yes

Yes

So, in terms of the export you just announced your order with North American OEM. Can you tell a little bit more about the nature of that OEM contract? Is that a one-time contract or multi-year contract and also looking at North American automotive market condition right now, how does that effect your existing order and future orders to the North American market?

We have already worked with this OEM for more than two years, finally we get a formal order from this customer and this is a reward for our high quality products and a very reasonable price and I think from this order we have other customers, other international OEMs. This is a safety related product after a stringent verification process and we have a good access to past to this international market, so this is an asset to China Automotive. This is just a one mortar from this key customer and if [inaudible] so I think we’ll gradually expand our international business from that on.

We have already worked with this OEM for more than two years, finally we get a formal order from this customer and this is a reward for our high quality products and a very reasonable price and I think from this order we have other customers, other international OEMs. This is a safety related product after a stringent verification process and we have a good access to past to this international market, so this is an asset to China Automotive. This is just a one mortar from this key customer and if [inaudible] so I think we’ll gradually expand our international business from that on.

So, I just want to for the near-term look at the outlook for the fourth quarter. I understand the fourth quarter could be a seasonally better quarter than Q3, but the market is slowing down in the meantime. So, let see the revenue side? What level we can compare it to? Is that comparable to Q2, better than Q2 or just slightly better than the Q3? So, I basically want to know what is your kind of expectations for Q4 results?

Typically Q4 is the best season for the year, but this year is something different. For the first half of this year the China Auto industry still experienced a rough growth, for the third quarter suddenly down and as we don’t give a guidance to accurate results, I can give you just general information about what we focus. If the industrial benchmark is like 10% for the first quarter, we were 1.5 times of this growth rate compared with the same period of last year.

Typically Q4 is the best season for the year, but this year is something different. For the first half of this year the China Auto industry still experienced a rough growth, for the third quarter suddenly down and as we don’t give a guidance to accurate results, I can give you just general information about what we focus. If the industrial benchmark is like 10% for the first quarter, we were 1.5 times of this growth rate compared with the same period of last year.

Just maybe lastly, any new products on the development. Essentially applying to future vehicles, such as electric vehicles, any new development or new products targeting those markets?

We have a very key customer in BYD and this year it grew very fast and it almost ranked number one or number two for our sales with customers, almost ranked number one or number two and now we have contact with this customer and we are exploring further corporation and this BYD customer has planned to do some electric motor. So, we are just to at a early stage for kind of corporation talks, negotiations.

We have a very key customer in BYD and this year it grew very fast and it almost ranked number one or number two for our sales with customers, almost ranked number one or number two and now we have contact with this customer and we are exploring further corporation and this BYD customer has planned to do some electric motor. So, we are just to at a early stage for kind of corporation talks, negotiations.

Your final question comes from Ke Chen – Shah Capital Management.

Yes, could you please comment on the gross margin for the oversea orders and also the last question will be, could you talk about your buyback and when do you plan to do that? That’s two quick questions.

Yes, overseas our gross margin is comparable with the domestic margins. It has been the basic customer and this customer had a very through research study of our cost structure. So, we give them the same margin comp as domestic products. As for the management buyback and the announcement, we feel the stock pressure now is far, far below it’s own fair values, so it’s trying to get buyback and then also on the single loan, the management is very, very confident in the company’s bright future.

There are no further questions at this time. I would like to turn the floor back over to Kevin Theiss for closing comments.

2008 has been a difficult year for U.S. and European auto markets and a transition year for the Chinese auto industry. However, tons of millions of Chinese are not going to stop to dream of owning a car just because foreign auto makers are in trouble. With the Chinese Government support the Chinese auto market may likely recover in 2009. Also thank you for your time and your interest and we hope to speak to you again in the future. Thank you.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.