Greetings and welcome to the China Automotive Systems Second Quarter 2014 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kevin Theiss with Grayling Global. Thank you, sir. You may begin.

Thank you for joining us today and welcome to China Automotive Systems 2014 second quarter and six month conference call. My name is Kevin Theiss, and I am with Grayling, China Automotive’s U.S. Investor Relations Advisor. Joining us today are Mr. Hanlin Chen, Chairman; Mr. Qizhou Wu, Chief Executive Officer; Mr. Jie Li, Chief Financial Officer; and Mr. Daming Hu, Chief Accounting Officer of China Automotive Systems. They will be available to answer questions later in the conference call. And we will help with translation. Before we begin, I’d remind all listeners that throughout this call, we may make statements that may contain forward-looking statements. Forward-looking statements represent our estimates and assumptions only as of the date of this call. As a result, the company’s actual results could differ materially from those contained in these forward-looking statements due to a number of factors including those described under the heading Risk Factors in the Company’s Form 10-K Annual Report for the year-ended December 31, 2013 filed with the Securities and Exchange Commission on March 31, 2014, respectively; and then documents filed by the Company from time-to-time with the Securities and Exchange Commission. The Company expressly disclaims any duty to provide updates to any forward-looking statements made in this call whether as a result of new information, future events or otherwise. I will provide a brief overview and summary of the 2014 second quarter and six months financial results. And then I will turn to management to conduct the question-and-answer session. In 2014 second quarter and six months results are unaudited numbers or the fiscal year numbers are audited, both periods’ results are reported under U.S. GAAP. For our call today, I will review the financial results in U.S. dollars. In the second quarter of 2014, our overall sales increased by 18%…

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions). Thank you. Our first question comes from the line of Bill Gregozeski with Greenridge Global. Please proceed with your question.

Hi guys. I guess my first question is in regards to the domestic branded business in China. Just curious to get an outlook from management on what they see, I guess the potential for those brands since they just keep losing market share to the foreign brands?

[Foreign Language]. So, Thank you for your question. Regarding your question on the domestic print, during the second quarter, we did see a noticeable decline for the Chinese domestic brands. They posted a 20% year-over-year decrease in terms of volume sales that including Chery Auto, Geely, BYD. However, we did -- what we did with those two OEMs, we actually increased our market share within supply contract with those players. So, for example, we used to supply 50% to 60% from BYD’s steering systems and now we increased to 80%. So, that being said, their sales decline affected us a little bit to but not a lot, because we have increased our market share with those OEMs. And also, we want to bring to your attention, there are 20 different Chinese domestic brands, not everyone are loading at such a fast pace in terms of market share. And some of the players actually are gaining some market share. These are joint venture partners of the multinationals FAW, Dongfeng, Shanghai Auto. They all have joint venture with multinationals where they develop their knowledge in how to produce a high quality vehicle. So, these are the players we are working with as well. So, all-in-all, we recognized, has been couple of difficult years for the Chinese brands in China, domestic brands in China. But we strongly believe, this trend is not going to continue. We do not believe Chinese domestic brands will continue to lose market share. With their technology continue to mature and the production quality is moving up and we believe and they will stage a comeback at some point

Okay. All right. Could I get your update on the international activities of the company and in particular in Brazil?

[Foreign Language] As you know we have a plan, a grand plan for Brazil. We do have a general assembly facility is under construction in Brazil. We believe it will be -- the construction will be completed by the end of 2014 and we believe 2015 and ‘16 will have some shipment coming out of that facility.

Okay. And so I think the company is unable to win customers or is this just for a period there?

[Foreign Language] Okay. So we do have prospects and actually we do have customers in Brazil that’s why we went there set up our shop and we do have quite detailed order indication. And so when everything is ready, we will make a public announcement.

Okay. My last question is on the R&D, that’s increased quite a bit over the last few years and it seems like the EPS as always mentioned as the reason why, at what point will that spending of EPS slow down a bit or stabilize?

[Foreign Language] Okay. Yes. The R&D expenditure I think increasing. Once the money went to the testing software as well as the recruitment for the R&D engineers, at some point this hardware and software investment is going to plateau. And I don't believe it may still take couple of years, we're making some push to increase our EPS product shipment. The engineering part of that, we have lot of staff on the R&D team. That part is going to stay, so to answer your question the R&D expense will continue to increase as we grow our business.

Is it mostly a lot of the spending for the EPS or are there other activities being done?

[Foreign Language] Okay. So, the answer to your question it is not all R&D bunch goes to EPS and there are a good portion of that actually will continue to flow into hydraulic and mechanic fueling systems. As you know, the lion share of business is still the right term the traditional steering systems. And on the CV, commercial vehicle market, we don't see any time soon it will be any product replacing the hydraulic power gen systems. With that being said, I will continue to invest in R&D in those areas for the traditional line of product.

Okay, alright. Thank you.

Thank you.

Our next question comes from the line of Gary Nash with (inaudible) Capital. Please proceed with your question.

Yes, good morning everyone. What will your capital expenditures be and to expand which products?

[Foreign Language] Okay. So, the CapEx for 2014 is between $20 million to $25 million. There are three areas that we’re going to put our CapEx, first as our CEO just mentioned electric power steering EPS product line were not only increasing the testing equipment also at the software we’re also ramping up our production capacity. So, the EPS area is definitely taking some of the CapEx. And secondly, our export business that line has been growing steadily in the last couple of years mainly the shipment to North America. We are now at very high utilization rate of our capacity and we definitely increase our capacity, so we’re increasing -- putting more money for the production in that area. And lastly is the regular maintenance CapEx for our existing facility. So, that being said all together it is $20 million to $25 million in 2014.

Thank you.

Thank you.

Our next question comes from the line of [Peter Ellsworth with Hanbank]. Please proceed with your question.

Hi, good evening gentlemen. Quick question just on the outlook for EPS, what is the target production for this year and then also in three years time? And then I also have a follow-up.

Okay. Thank you peter. [Foreign Language]. Okay. Our target production for 2014 in terms of EPS is 400,000 units. We expect to increase to 1.5 million to 2 million units by 2017.

Okay. And just is that all domestically produced or is that overseas as well, could you elaborate on that considering that you’re already at a high utilization rate. I am just wondering how that production capacity will be created.

[Foreign Language]. Okay. Peter, for your question, it’s going to have international shipment for the EPS product as well going forward.

Okay. And then a follow-up question on the -- I know the North American exports are solid and you have a good relationship with Chrysler. Are there any other OEMs in North America, where you’re making relationships? I remember, I recall that Ford was a target; has that developed in any way?

[Foreign Language]. Okay. We have already begun to look forward in one other model and we’re also preparing and expanding production line for Ford on few other models. So that business is going, ongoing. It’s very different from shipping to I mean it's very different supplying to domestic Chinese OEMs, both international companies. And for example, also Chrysler or Ford, they require their specific production facility just dedicated for their product. And so, we already have a facility for Chrysler. We are finishing up, ramping up the second facility which is for Ford and so that's ongoing.

Great, thank you. And just on the land sale, could you elaborate a bit more on why it was done now? What the amounts of the proceeds were and what the uses of the proceeds will be and perhaps could we, shareholders expect another dividend?

[Foreign Language]. Okay. Last year for this piece of land, last year we received RMB 28 million for the sale. And this year, the second part, tranche of payment came in at around RMB 31 million. We believe there is another RMB 10 million coming later. So, all these together, and if we subtract the acquiring cost for the land, the minority interest and related taxes with the net about $5 million that’s going to flow into working capital. And regarding the question on the dividend, we have recently announced the dividend. We have not have any plan for further dividend yet, but we’ll discuss internally then make announcement.

Okay. Thank you. Congratulations on a record first half and look forward to sharing your success. Thank you.

Thank you.

Our next question comes from the line of [Greg Samuels] with Samuels Capital Management. Please proceed with your question.

Hello. Can you just further elaborate on production capacity in the Brazil facility please?

[Foreign Language]. In terms of production capacity, we have about 5 million units annual production capacity. We’re running at 95% utilization rate at the moment. Brazil, we have -- we are in the cautiously constructing a general assembly facility in Brazil. We expect to complete the construction by the end of 2014.

Right. I heard that in the earlier remarks to a prior question as far as capacity is how much volume or total revenue might that facility yield?

You mean at Brazil?

Yes.

[Foreign Language] So the phase one in Brazil is 350,000 units the design capacity and we are targeting to sell at US$200 per unit. [Foreign Language]. And as you expect the utilization will have to go through a period to ramp up.

Right, okay. As far as Ford goes, have you guys announced which models your products are going into?

[Foreign Language] Okay, it's one of the pick-up trucks, but we are not at, have the liberty to disclose the name of the model yet. [Foreign Language] Yes, they typically send us facts and in specific product model for the steering system and we will produce that based on their requirement. They don't specifically discuss with us what the exact car model it will go in there.

Okay, good. Thank you very much.

Thank you.

Our next question comes from the line of [Nin Ju] with UBS. Please proceed with your question.

[Foreign Language]

Okay, this question, let me summarize, this comes from through the (inaudible) the UBS auto analyst. His question is regarding the ongoing, the current anti-monopoly investigation by Chinese government multinational auto maker and auto part component suppliers. One of the specific area he asked is the investigation of 10 or 12 Japanese auto part suppliers involved in some of the alleged price manipulation. And so he wants to know whether that has any impact to CAAS business or a benefit as well. So, the answer is most of the investigation is targeting at the components and mostly in the aftermarket space. However, it may have any impact if there is any impacted OEM sector and will not be translated to any benefit to us, reason being the Japanese are very close circuit for their suppliers, the OEM buys parts mostly from their Japanese suppliers. We have dealt with -- compete with some Japanese power steering power house JTEKT formally Koyo. We believe it’s for the same quality of product; we are very competitive, it’s not because of their close circuit Japanese supplier, [culture] we would have run the business long time ago. That being said, we don’t anticipate any -- we have not seen any benefit to us yet.

Okay, this question, let me summarize, this comes from through the (inaudible) the UBS auto analyst. His question is regarding the ongoing, the current anti-monopoly investigation by Chinese government multinational auto maker and auto part component suppliers. One of the specific area he asked is the investigation of 10 or 12 Japanese auto part suppliers involved in some of the alleged price manipulation. And so he wants to know whether that has any impact to CAAS business or a benefit as well. So, the answer is most of the investigation is targeting at the components and mostly in the aftermarket space. However, it may have any impact if there is any impacted OEM sector and will not be translated to any benefit to us, reason being the Japanese are very close circuit for their suppliers, the OEM buys parts mostly from their Japanese suppliers. We have dealt with -- compete with some Japanese power steering power house JTEKT formally Koyo. We believe it’s for the same quality of product; we are very competitive, it’s not because of their close circuit Japanese supplier, [culture] we would have run the business long time ago. That being said, we don’t anticipate any -- we have not seen any benefit to us yet.

We have no further questions at this time. I would now like to turn the floor back to management for closing comments.

Thank you all for participating in the second quarter 2014 earnings conference call. We looking forward to speaking with you again and we wish you a good day.

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. We thank you for your participation and have a wonderful day.