China Automotive Systems To Acquire Henglong Automotive Parts Company Stake

China Automotive Systems, a lpower steering components and systems supplier in China, says it has started discussions with Hubei Wanlong Investment Company to acquire an additional 36.5% of Henglong Automotive Parts Company.

No binding agreement has been signed yet and the discussion is continuing.

Jie Li, CFO of China Automotive Systems, stated in a press release, "We are very pleased to take this step to consolidate our fastest-growing subsidiary to enhance value for our shareholders. Our special acquisition committee continues its discussion with Henglong's minority shareholder as we are working to roll this key minority stake into
our public company. This step further demonstrates our commitment to be a power steering leader and participate in the rapid growth of the passenger vehicle market in China."

Henglong, currently 44.5% owned by China Automotive Systems, is engaged in manufacturing power steering systems and components for China's rapidly growing passenger vehicle market. Henglong's main customers include Chery
Auto, BYD Auto, Geely Auto and FAW Volkswagen. In 2006, Henglong posted sales of US$54.54 million, representing 57% of China Automotive Systems' total net sales, and net profit of US$9.75 million, while CAAS' net profit was US$4.81 million. Upon the completion of the proposed acquisition, China Automotive Systems' ownership in Henglong will increase to 81%.

A special acquisition committee, consisting of three China Automotive Systems' independent directors, has been formed to evaluate and facilitate the final transaction. The special acquisition committee is evaluating appraisal firms and financial advisers to assist it. Management expects the acquisition may be completed in the first quarter of 2008.

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