Good morning and welcome to the China Automotive Systems Third Quarter 2014 Conference Call. At this time all participants on 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. I would now like to turn the conference over to your host, Mr. Kevin Theiss with Grayling. Thank you. You may begin.

Thank you for joining us today and welcome to China Automotive Systems 2014 third quarter and nine 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. 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 will 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 third quarter and nine months financial results. And then I will turn to management to conduct the questions and answer session. The 2014 third quarter and nine months results are unaudited numbers or the fiscal year numbers are audited, both period results are reported under U.S. GAAP. For our call today, I will review the financial results in U.S. dollars. In the third quarter of 2014, our overall…

Thank you. At this time, we will be conducting the question-and-answer session. [Operator Instructions]. Our first question comes from the line of William Gregozeski with Greenridge Global. Please proceed with your question.

Hi great quarter guys. A couple of question. Can you give the sales to the MPV vehicles through the first three quarters of this year versus last year? If you have that?

[Foreign Language]. Okay so the management answer is the products were the MPV is like an since starting from four years ago the MPV market that started in China the Chinese domestic brand with capacity has been growing above 50% and even the different companies they have different specific case products, specifications when it comes to JV or standard products overall differ to speed, it's fast, and we supply, we have developed relationships with the all domestic branded vehicles.

Are you able to give the absolute dollar amount? Because I see the huge growth numbers every month but I am just curious what it is in dollar amount that you guys are doing?

[Foreign Language]. So among our passengers vehicle the SUV growth product segment growth has been growing at about 30% in the market lines it's about 50%.

Okay alright and then as far as the gross margins just curious if there is any updated outlook on what you guys are looking for in the coming quarters on the gross margin?

[Foreign Language]. So in the third quarter of 2014 our gross margin achieved 20.2% which is up two percentage points from last year. So the reason for the increasing gross margin was mainly because of two things, one is the increase in EPS sales and the other one is because of the reduction of the unit cost. And in particular for the EPS sales our medium to high-end product volume increased, that contributed to about 1 percentage point increase in our gross margin and the other 1 percentage point increase in gross margin came from the unit cost reduction. So, this year 2014 we expect the overall gross margin to be around 19% of that is 0.5% increase year-over-year. If we look back in 2012 gross margin was 18.1% in 2013 our gross margin increased to 18.5% and with the expected 19 percentage point for gross margin this year as you can see that we have been increasing -- achieving small increase in our gross margin over the last few years. So going forward where is the increase of EPS sales as a percentage of total revenue and also the continued implementation of our cost reduction program, we think there is further room for improvement in gross margin.

Okay, all right. And then the last question I had was given the growth that you have, the new contracts you are signing and any new possible international OEMs, what are you looking at for CapEx in 2015 and 2016?

[Foreign Language]. So let me say that going forward with our new orders we expect to more sales and the expected capital expenditure for 2015 is $18 million and for 2016 it is $20 million and the main usage of the capital expenditure would be towards the EPS capacity expansion.

[Operator Instructions]. Our next question comes from the line of Peter Halesworth with Heng Ren Investments. Please proceed with your question.

A few quick questions, first is on production volume. Can you just remind us of your target this year for EPS production and also what it will be for 2015 and also for rack and pinion production as well. That’s my first question.

[Foreign Language]. So for the EPS, we expect to produce 400,000 unit this year and that number is expected to double in 2015 and within that number, the export will account, is expected to account for between 50,000 to 80,000 units. So the total production volume expected for this year is 4.8 million units and as we as just said, the EPS of about 400,000 units. The commercial segment of the products is about between 60,000 to 70,000 units and the remaining products will account for about 380,000 units.

Great. Just a quick follow up on that, on question one. There had been some expectation of an order from Russia earlier in the year. Did that come through or not? That was for EPS, sorry about that.

[Foreign Language] So the Russia EPS order that we talked about at the beginning of the year, so they have that product procurement broken down in four different segments including electric motor and sensor and right now we are still growing through the final matching stage and it was supposed to come online on October the 15th this year but we're still making the final arrangements and we expect this to go through at the beginning of next year 2016.

Great, thank you. And then can we can get an update on Brazil? Earlier I think in the second quarter call, there was a statement made that you are expecting a production facility to be done by the end of this year. Could you give us an update on that and what the outlook for production targets?

[Foreign Language]. So by contract, we will have some equipment to the Brazilian facility in November of this year and in February we will conduct the equipment testing and in late April next year we will begin small trial production.

And just a follow-up there, what is the production target for Brazil in 2015?

[Foreign Language]. So, this is going to be a gradual process as we go from small-to-medium sized order as our customers are going to test out our consistency. So we have a target for 100,000 units in 2015 and that number is expected to increase to about 550,000 units in 2016.

Okay, and just my last question is on Ford. Can you just give us an update on what the shipments trend is to Ford and have you expanded the production line for them to other models?

[Foreign Language]. So overall is the in co-operation with Ford is going smoothly but as you may know that this is a -- this undertaking by Ford is a global procurement in both Asia Europe and North American markets, because it involves different product specification such as wheels located on the left or right side of the vehicle. So the technology the collaboration has taking concern, but overall it’s going well.

Thank you. Mr. Theiss there are no further questions at this time. I would like to turn the floor back to you for any closing and final remarks.