UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended | |
Or | |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.) | |
organization) |
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(Address of principal executive offices)
( |
(Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol | Name of each exchange on which |
The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
As of August 11, 2023, the Company had
CHINA AUTOMOTIVE SYSTEMS, INC.
INDEX
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Cautionary Statement
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or the Company’s future financial performance. The Company has attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “expects,” “can,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or the negative of these terms or other comparable terminology. Such statements are subject to certain risks and uncertainties, including the matters set forth in this Quarterly Report or other reports or documents the Company files with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date hereof. The Company’s expectations are as of the date this Form 10-Q is filed, and the Company does not intend to update any of the forward-looking statements after the date this Quarterly Report on Form 10-Q is filed to conform these statements to actual results, unless required by law. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission.
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PART I — FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
China Automotive Systems, Inc. and Subsidiaries
Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income
(In thousands of USD, except share and per share amounts)
Three Months Ended June 30, | ||||||
| 2023 |
| 2022 | |||
Net product sales ($ | $ | | $ | | ||
Cost of products sold ($ |
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Gross profit |
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Gain on other sales |
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Less: Operating expenses |
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Selling expenses |
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General and administrative expenses |
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Research and development expenses |
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Total operating expenses |
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Income from operations |
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Other income, net |
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Interest expense |
| ( |
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Financial income, net |
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Income before income tax expenses and equity in earnings of affiliated companies |
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Less: Income taxes expense |
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Add: Equity in (loss)/earnings of affiliated companies |
| ( |
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Net income |
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Less: Net income attributable to non-controlling interests |
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Accretion to redemption value of redeemable non-controlling interests | ( | ( | ||||
Net income attributable to parent company’s common shareholders | $ | | $ | | ||
Comprehensive income: |
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Net income | $ | | $ | | ||
Other comprehensive income: |
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Foreign currency translation loss, net of tax |
| ( |
| ( | ||
Comprehensive loss |
| ( |
| ( | ||
Comprehensive loss attributable to non-controlling interests |
| ( |
| ( | ||
Accretion to redemption value of redeemable non-controlling interests | ( | ( | ||||
Comprehensive loss attributable to parent company | $ | ( | $ | ( | ||
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Net income attributable to parent company’s common shareholders per share - |
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Basic | $ | | $ | | ||
Diluted | $ | | $ | | ||
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Weighted average number of common shares outstanding - |
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Basic |
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Diluted | | |
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
4
China Automotive Systems, Inc. and Subsidiaries
Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income
(In thousands of USD, except share and per share amounts)
Six Months Ended June 30, | ||||||
| 2023 |
| 2022 | |||
Net product sales ($ | $ | | $ | | ||
Cost of products sold ($ |
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Gross profit |
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Gain on other sales |
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Less: Operating expenses |
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Selling expenses |
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General and administrative expenses |
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Research and development expenses |
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Total operating expenses |
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Income from operations |
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Other income, net |
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Interest expense |
| ( |
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Financial income, net |
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Income before income tax expenses and equity in earnings of affiliated companies |
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Less: Income taxes expense |
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Add: Equity in loss of affiliated companies |
| ( |
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Net income |
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Less: Net income attributable to non-controlling interests |
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Accretion to redemption value of redeemable non-controlling interests | ( | ( | ||||
Net income attributable to parent company’s common shareholders | $ | | $ | | ||
Comprehensive income: |
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Net income | $ | | $ | | ||
Other comprehensive income: |
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Foreign currency translation loss, net of tax |
| ( |
| ( | ||
Comprehensive income/(loss) |
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| ( | ||
Comprehensive income/(loss) attributable to non-controlling interests |
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| ( | ||
Accretion to redemption value of redeemable non-controlling interests | ( | ( | ||||
Comprehensive income/(loss) attributable to parent company | $ | | $ | ( | ||
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Net income attributable to parent company’s common shareholders per share - |
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Basic | $ | | $ | | ||
Diluted | $ | | $ | | ||
Weighted average number of common shares outstanding - |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
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China Automotive Systems, Inc. and Subsidiaries
Condensed Unaudited Consolidated Balance Sheets
(In thousands of USD unless otherwise indicated)
|
| June 30, 2023 |
| December 31, 2022 | ||
ASSETS |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Pledged cash |
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Accounts and notes receivable, net - unrelated parties |
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Accounts and notes receivable, net - related parties |
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Inventories |
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Other current assets |
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Total current assets |
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Non-current assets: |
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Property, plant and equipment, net |
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Land use rights, net | | | ||||
Long-term investments |
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Other non-current assets |
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Total assets | $ | | $ | | ||
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Short-term loans | $ | | $ | | ||
Accounts and notes payable-unrelated parties |
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Accounts and notes payable-related parties |
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Accrued expenses and other payables |
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Other current liabilities |
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Total current liabilities |
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Long-term liabilities: |
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Long-term tax payable | | | ||||
Other non-current liabilities |
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Total liabilities | $ | | $ | | ||
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Commitments and Contingencies (See Note 22) |
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Mezzanine equity: |
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Redeemable non-controlling interests | | | ||||
Stockholders’ equity: |
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Common stock, $ | $ | | $ | | ||
Additional paid-in capital |
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Retained earnings- |
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Appropriated |
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Unappropriated |
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Accumulated other comprehensive income |
| ( |
| ( | ||
Treasury stock – |
| ( |
| ( | ||
Total parent company stockholders’ equity |
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Non-controlling interests |
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Total stockholders’ equity |
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Total liabilities, mezzanine equity and stockholders’ equity | $ | | $ | |
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
6
China Automotive Systems, Inc. and Subsidiaries
Condensed Unaudited Consolidated Statements of Cash Flows
(In thousands of USD unless otherwise indicated)
Six Months Ended June 30, | ||||||
| 2023 |
| 2022 | |||
Cash flows from operating activities: |
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Net income | $ | | $ | | ||
Adjustments to reconcile net income from operations to net cash provided by operating activities: |
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Depreciation and amortization |
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(Reversal)/provision of credit losses |
| ( |
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Deferred income taxes |
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Equity in loss of affiliated companies |
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Loss on fixed assets disposals | | | ||||
(Increase)/decrease in: |
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Accounts and notes receivable |
| ( |
| ( | ||
Inventories |
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Other current assets |
| ( |
| ( | ||
Increase/(decrease) in: |
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Accounts and notes payable |
| ( |
| ( | ||
Accrued expenses and other payables |
| ( |
| ( | ||
Long-term taxes payable | ( | ( | ||||
Other current liabilities |
| ( |
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Net cash (used in)/provided by operating activities |
| ( |
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Cash flows from investing activities: |
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(Increase)/decrease in demand loans included in other non-current assets |
| ( |
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Cash received from property, plant and equipment sales |
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Payments to acquire property, plant and equipment (including $ |
| ( |
| ( | ||
Payments to acquire intangible assets |
| ( |
| ( | ||
Investment under the equity method | ( | ( | ||||
Purchase of short-term investments |
| ( |
| ( | ||
Proceeds from maturities of short-term investments | | | ||||
Cash received from long-term investment |
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Net cash used in investing activities |
| ( |
| ( | ||
Cash flows from financing activities: |
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Proceeds from bank loans |
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Repayments of bank loans |
| ( |
| ( | ||
Repayments of the borrowing for sale and leaseback transaction |
| — |
| ( | ||
Repurchase of common shares | — | ( | ||||
Net cash (used in)/ provided by financing activities |
| ( |
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Effects of exchange rate on cash, cash equivalents and pledged cash |
| ( |
| ( | ||
Net decrease in cash, cash equivalents and pledged cash |
| ( |
| ( | ||
Cash, cash equivalents and pledged cash at beginning of the period |
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Cash, cash equivalents and pledged cash at end of the period | $ | | $ | |
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
7
China Automotive Systems, Inc. and Subsidiaries
Notes to Condensed Unaudited Consolidated Financial Statements
Three Months and Six Months Ended June 30, 2023 and 2022
1. Organization and business
China Automotive Systems, Inc., “China Automotive,” was incorporated in the State of Delaware on June 29, 1999 under the name Visions-In-Glass, Inc. China Automotive, including, when the context so requires, its subsidiaries described below, is referred to herein as the “Company.” The Company is primarily engaged in the manufacture and sale of automotive systems and components, as described below.
Great Genesis Holdings Limited, a company incorporated in Hong Kong on January 3, 2003 under the Companies Ordinance in Hong Kong as a limited liability company, “Genesis,” is a wholly-owned subsidiary of the Company.
Henglong USA Corporation, “HLUSA,” incorporated on January 8, 2007 in Troy, Michigan, is a wholly-owned subsidiary of the Company, and mainly engages in marketing of automotive parts in North America, and provides after-sales service and research and development support accordingly.
The Company owns the following aggregate net interests in the following subsidiaries organized in the People’s Republic of China, the “PRC,” and Brazil as of June 30, 2023 and December 31, 2022.
Percentage Interest |
| ||||
| June 30, |
| December 31, |
| |
Name of Entity | 2023 | 2022 |
| ||
Shashi Jiulong Power Steering Gears Co., Ltd., “Jiulong” 1 |
| | % | | % |
Jingzhou Henglong Automotive Parts Co., Ltd., “Henglong” 2 |
| | % | | % |
Shenyang Jinbei Henglong Automotive Steering System Co., Ltd., “Shenyang” 3 |
| | % | | % |
Wuhan Jielong Electric Power Steering Co., Ltd., “Jielong” 4 |
| | % | | % |
Wuhu Henglong Automotive Steering System Co., Ltd., “Wuhu” 5 |
| | % | | % |
Hubei Henglong Automotive System Group Co., Ltd., “Hubei Henglong” 6 |
| | % | | % |
Jingzhou Henglong Automotive Technology (Testing) Center, “Testing Center” 7 |
| | % | | % |
Chongqing Henglong Hongyan Automotive System Co., Ltd., “Chongqing Henglong” 8 |
| | % | | % |
CAAS Brazil’s Imports and Trade In Automotive Parts Ltd., “Brazil Henglong” 9 |
| | % | | % |
Wuhan Chuguanjie Automotive Science and Technology Ltd., “Wuhan Chuguanjie” 10 |
| | % | | % |
Hubei Henglong Group Shanghai Automotive Electronics Research and Development Ltd., “Shanghai Henglong” 11 |
| | % | | % |
Hubei Henglong & KYB Automobile Electric Steering System Co., Ltd., “Henglong KYB” 12 |
| | % | | % |
Hyoseong (Wuhan) Motion Mechatronics System Co., Ltd., “Wuhan Hyoseong” 13 | | % | | % | |
Wuhu Hongrun New Material Co., Ltd., “Wuhu Hongrun” 14 | | % | | % | |
Changchun Hualong Automotive Technology Co., Ltd., “Changchun Hualong” 15 | | % | | % | |
Hubei Zhirong Automobile Technology Co., Ltd., “Zhirong” 16 | | % | — |
1. |
2. |
3. |
4. |
5. |
6. |
8
7. |
8. |
9. |
10. |
11. |
12. |
13. |
14. |
15. |
16. | In June 2023, Hubei Henglong contributed certain equipments and intangible assets to Hubei Zhirong Automobile Technology Co., Ltd., “Zhirong”, representing |
2. Basis of presentation and significant accounting policies
(a) | Basis of Presentation |
Basis of Presentation – The accompanying condensed unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. The details of subsidiaries are disclosed in Note 1. Significant inter-company balances and transactions have been eliminated upon consolidation. The condensed unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions in Regulation S-X. Accordingly they do not include all of the information and footnotes required by such accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
9
The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of the Company’s management, contain all necessary adjustments, which include normal recurring adjustments, for a fair statement of the results of operations, financial position and cash flows for the interim periods presented.
The condensed consolidated balance sheet as of December 31, 2022 is derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
The results of operations for the three months and six months ended June 30, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023.
Estimation - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Foreign Currencies - China Automotive and HLUSA maintain their books and records in United States Dollars, “USD,” their functional currency. The Company’s subsidiaries based in the PRC and Genesis maintain their books and records in Renminbi, “RMB,” their functional currency. The Company’s subsidiary based in Brazil maintains its books and records in Brazilian real, “BRL,” its functional currency. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 830, foreign currency transactions denominated in currencies other than the functional currency are remeasured into the functional currency at the rate of exchange prevailing at the balance sheet date for monetary items. Nonmonetary items are remeasured at historical rates. Income and expenses are remeasured at the rate in effect on the transaction dates. Transaction gains and losses, if any, are included in the determination of net income for the period.
(b) | Recent Accounting Pronouncements |
No accounting standards newly issued during the three months ended June 30, 2023 had a material impact on the Company’s financial statements or disclosures.
(c) | Significant Accounting Policies |
There have been no updates to the significant accounting policies set forth in the notes to the consolidated financial statements for the year ended December 31, 2022.
3. Accounts and notes receivable, net
The Company’s accounts and notes receivable, net as of June 30, 2023 and December 31, 2022 are summarized as follows (figures are in thousands of USD):
| June 30, 2023 |
| December 31, 2022 | |||
Accounts receivable - unrelated parties | $ | | $ | | ||
Notes receivable - unrelated parties |
| |
| | ||
Total accounts and notes receivable - unrelated parties |
| |
| | ||
Less: allowance for credit losses - unrelated parties |
| ( |
| ( | ||
Accounts and notes receivable, net - unrelated parties |
| |
| | ||
Accounts and notes receivable - related parties | | | ||||
Less: allowance for credit losses - related parties | ( | ( | ||||
Accounts and notes receivable, net - related parties |
| |
| | ||
Accounts and notes receivable, net | $ | | $ | |
Notes receivable represent accounts receivable in the form of bills of exchange for which acceptances are guaranteed and settlements are handled by banks.
As of June 30, 2023 and December 31, 2022, the Company pledged its notes receivable in amounts of $
10
Provision for doubtful accounts and notes receivable, as reversed in the unaudited consolidated statements of operations, amounted to $
Provision for doubtful accounts and notes receivable, as provided in the unaudited consolidated statements of operations, amounted to $
During the three months ended June 30, 2023, the Company’s
During the three months ended June 30, 2022, the Company’s
4. Inventories
The Company’s inventories as of June 30, 2023 and December 31, 2022 consisted of the following (figures are in thousands of USD):
| June 30, 2023 |
| December 31, 2022 | |||
Raw materials | $ | | $ | | ||
Work in process |
| |
| | ||
Finished goods | | | ||||
Cost of R&D service |
| |
| | ||
Total | $ | | $ | |
The Company recorded $
5. Long-term investments
The Company’s long-term investments as of June 30, 2023 and December 31, 2022, are summarized as follows (figures are in thousands of USD):
| June 30, 2023 |
| December 31, 2022 | |||
Sentient AB (1) | $ | | $ | | ||
Chongqing Venture Fund | | | ||||
Hubei Venture Fund |
| |
| | ||
Suzhou Qingshan (2) | | | ||||
Suzhou Venture Fund |
| |
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Suzhou Mingzhi (3) |
| |
| — | ||
Henglong Tianyu |
| |
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Chongqing Jinghua |
| |
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Jiangsu Intelligent | | | ||||
Total | $ | | $ | |
(1) | In June 2021, Hubei Henglong entered into a share purchase agreement with Jingzhou WiseDawn Electric Car Co., Ltd., “Jingzhou WiseDawn”. In accordance with the agreement, CAAS would purchase |
11
(2) | In January 2022, Hubei Henglong entered into an agreement with other parties to establish a limited partnership, Suzhou Qingshan Zhiyuan Venture Capital Fund L.P., “Suzhou Qingshan”. As of June 30, 2023, Hubei Henglong has paid RMB |
(3) | In June 2023, Hubei Henglong entered into an agreement with other parties to establish a limited partnership, Suzhou Mingzhi Intelligent Manufacturing Industry Investment Fund L.P., “Suzhou Mingzhi”. As of June 30, 2023, Hubei Henglong has paid RMB |
The condensed financial information of the Company’s significant equity investee for the three and six months ended June 30, 2023 and 2022, Chongqing Venture Fund, is summarized as follows (figures are in thousands of USD):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||
Revenue | $ | — | $ | — | — | — | ||||
Gross profit |
| — |
| — | — | — | ||||
Gain/(loss) from continuing operations |
| ( |
| ( | | ( | ||||
Net gain/(loss) | ( | ( | | ( |
6. Property, plant and equipment, net
The Company’s property, plant and equipment, net as of June 30, 2023 and December 31, 2022 are summarized as follows (figures are in thousands of USD):
| June 30, 2023 |
| December 31, 2022 | |||
Costs: |
|
|
|
| ||
Buildings | $ | | $ | | ||
Machinery and equipment |
| |
| | ||
Electronic equipment |
| |
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Motor vehicles |
| |
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Construction in progress |
| |
| | ||
Total amount of property, plant and equipment |
| |
| | ||
Less: Accumulated depreciation (1) |
| ( |
| ( | ||
Total amount of property, plant and equipment, net (2) | $ | | $ | |
(1) | Depreciation charges were $ |
(2) | As of June 30, 2023 and December 31, 2022, the Company pledged property, plant and equipment with net book value of approximately $ |
7. Loans
Loans consist of the following as of June 30, 2023 and December 31, 2022 (figures are in thousands of USD):
| June 30, 2023 |
| December 31, 2022 | |||
Short-term bank loans | $ | | $ | | ||
Long-term bank loans |
| |
| | ||
Total | $ | | $ | |
The Company entered into credit facility agreements with various banks, which were secured by property, plant and equipment and land use rights of the Company. The total credit facility amount was $
12
aggregate amount of $
The Company must use the loans for the purpose as prescribed in the loan contracts. If the Company fails to do so, it will be charged penalty interest and/or trigger early repayment. The Company complied with such financial covenants during the three months ended June 30, 2023.
8. Accounts and notes payable
The Company’s accounts and notes payable as of June 30, 2023 and December 31, 2022 are summarized as follows (figures are in thousands of USD):
| June 30, 2023 |
| December 31, 2022 | |||
Accounts payable - unrelated parties | $ | | $ | | ||
Notes payable - unrelated parties (1) |
| |
| | ||
Accounts and notes payable - unrelated parties |
| |
| | ||
Accounts and notes payable - related parties |
| |
| | ||
Total | $ | | $ | |
(1) | Notes payable represent payables in the form of notes issued by the bank. As of June 30, 2023 and December 31, 2022, the Company has pledged cash of $ |
9. Accrued expenses and other payables
The Company’s accrued expenses and other payables as of June 30, 2023 and December 31, 2022 are summarized as follows (figures are in thousands of USD):
| June 30, 2023 |
| December 31, 2022 | |||
Warranty reserves (1) | $ | | $ | | ||
Accrued expenses | | | ||||
Payables for overseas transportation and custom clearance | | | ||||
Dividends payable to holders of non-controlling interests | | | ||||
Accrued interest |
| |
| | ||
Payable for the investment in Sentient AB (See Note 5) |
| — |
| | ||
Other payables | | | ||||
Balance at end of year/period | $ | | $ | |
(1) | The Company provides for the estimated cost of product warranties when the products are sold. Such estimates of product warranties are based on, among other things, historical experience, product changes, material expenses, services and transportation expenses arising from the manufactured products. Estimates will be adjusted on the basis of actual claims and circumstances. |
For the three and six months ended June 30, 2023 and 2022, the warranties activities were as follows (figures are in thousands of USD):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Balance at beginning of the period | $ | | $ | | $ | | $ | | ||||
Additions during the period |
| |
| |
| |
| | ||||
Settlement within the period |
| ( |
| ( |
| ( |
| ( | ||||
Foreign currency translation loss |
| ( |
| ( |
| ( |
| ( | ||||
Balance at end of the period | $ | | $ | | $ | | $ | |
13
10. | Fair value measurement |
The Company has entered into foreign exchange forward contracts with a local bank to reduce the exposure of significant changes in exchange rates between RMB and USD. Authoritative guidance requires companies to recognize all of the derivative financial instruments as either assets or liabilities at fair value in the consolidated balance sheets based upon quoted market prices for comparable instruments. The Company’s forward contracts have not met the criteria for hedge accounting within authoritative guidance. Therefore, the foreign exchange forward contracts have been recorded at fair value, with the gain or loss on these transactions recorded in the consolidated statements of operations within “other income, net” in the period in which they occur. The Company held foreign exchange forward contracts with a total notional value of $
11. Redeemable non-controlling interests
In September 2020, one of the Company’s subsidiaries issued shares to Hubei Venture Fund amounting to RMB
For the three and six months ended June 30, 2023, the Company recognized accretion of $
For the three and six months ended June 30, 2022, the Company recognized accretion of $
12. Additional paid-in capital
The Company’s positions in respect of the amounts of additional paid-in capital for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Balance at beginning of the period | $ | | $ | | $ | | $ | | ||||
Balance at end of the period | $ | | $ | | $ | | $ | |
13. Retained earnings
Appropriated
Pursuant to the relevant PRC laws, the profits distribution of the Company’s subsidiaries, which are based on their PRC statutory financial statements, are available for distribution in the form of cash dividends after these subsidiaries have paid all relevant PRC tax liabilities, provided for losses in previous years, and made appropriations to statutory surplus at
14
The Company’s activities in respect of the amounts of appropriated retained earnings for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Balance at beginning of the period | $ | | $ | | $ | | $ | | ||||
Balance at end of the period | $ | | $ | | $ | | $ | |
Unappropriated
The Company’s activities in respect of the amounts of the unappropriated retained earnings for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Balance at beginning of the period | $ | | $ | | $ | | $ | | ||||
Net income attributable to parent company | | | | | ||||||||
Accretion of redeemable non-controlling interests | ( | ( | ( | ( | ||||||||
Balance at end of the period | $ | | $ | | $ | | $ | |
14. Accumulated other comprehensive income
The Company’s activities in respect of the amounts of accumulated other comprehensive income for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Balance at beginning of the period | $ | | $ | | $ | ( | $ | | ||||
Foreign currency translation adjustment attributable to parent company |
| ( |
| ( |
| ( |
| ( | ||||
Balance at end of the period | $ | ( | $ | | $ | ( | $ | |
15. Treasury stock
Treasury stock represents shares repurchased by the Company that are no longer outstanding and are held by the Company. Treasury stock is accounted for under the cost method. On March 29, 2022, the Board of Directors of the Company approved a share repurchase program under which the Company was permitted to repurchase up to $
16. Non-controlling interests
The Company’s activities in respect of the amounts of the non-controlling interests’ equity for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Balance at beginning of the period | $ | | $ | | $ | | $ | | ||||
Net income attributable to non-controlling interests |
| |
| |
| |
| | ||||
Foreign currency translation adjustment attributable to non-controlling interests |
| ( |
| ( |
| ( |
| ( | ||||
Balance at end of the period | $ | | $ | | $ | | $ | |
15
17. Net product sales
Revenue Disaggregation
Management has concluded that the disaggregation level is the same under both the revenue standard and the segment reporting standard. Please refer to Note 24.
Payment to Customer
The Company accounts for consideration payable to a customer as a reduction of revenue at the later of revenue recognition and the Company’s promise to pay the consideration.
Contract Assets and Liabilities
Contract assets, such as costs to obtain or fulfill contracts, are an insignificant component of the Company’s revenue recognition process. The majority of the Company’s cost of fulfillment as a manufacturer of products is classified as inventory, fixed assets and intangible assets, which are accounted for under the respective guidance for those asset types. Other costs of contract fulfillment are immaterial due to the nature of the Company’s products and their respective manufacturing processes.
Contract liabilities are mainly customer deposits. As of June 30, 2023 and December 31, 2022, the Company has customer deposits of $
18. Financial income, net
During the three and six months ended June 30, 2023 and 2022, the Company recorded financial income, net which is summarized as follows (figures are in thousands of USD):
Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Interest income | $ | | $ | | $ | | $ | | ||||
Foreign exchange gain, net |
| |
| |
| |
| | ||||
Bank charges |
| ( |
| ( |
| ( |
| ( | ||||
Total financial income, net | $ | | $ | | $ | | $ | |
19. Income per share
Basic income per share is computed using the weighted average number of ordinary shares outstanding during the period. Diluted income per share is computed using the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the period. The dilutive effect of outstanding stock options is determined based on the treasury stock method.
16
The calculations of basic and diluted income per share attributable to the parent company for the three months ended June 30, 2023 and 2022, were as follows (figures are in thousands of USD, except share and per share amounts):
Three Months Ended June 30, | ||||||
| 2023 |
| 2022 | |||
Numerator: |
|
|
|
| ||
Net income attributable to the parent company’s common shareholders - Basic and Diluted | $ | | $ | | ||
Denominator: |
|
| ||||
Weighted average shares outstanding |
| |
| | ||
Dilutive effects of stock options |
| |
| | ||
Denominator for dilutive income per share - Diluted |
| |
| | ||
Net income per share attributable to parent company’s common shareholders – Basic | $ | | $ | | ||
Net income per share attributable to parent company’s common shareholders - Diluted | $ | | $ | |
The calculations of basic and diluted income per share attributable to the parent company for the six months ended June 30, 2023 and 2022, were as follows (figures are in thousands of USD, except share and per share amounts):
Six Months Ended June 30, | ||||||
| 2023 |
| 2022 | |||
Numerator: |
|
|
|
| ||
Net income attributable to the parent company’s common shareholders - Basic and Diluted | $ | | $ | | ||
Denominator: |
|
| ||||
Weighted average shares outstanding |
| |
| | ||
Dilutive effects of stock options |
| |
| | ||
Denominator for dilutive income per share - Diluted |
| |
| | ||
Net income per share attributable to parent company’s common shareholders - Basic | $ | | $ | | ||
Net income per share attributable to parent company’s common shareholders - Diluted | $ | | $ | |
As of June 30, 2023 and 2022, the exercise prices for
As of June 30, 2023 and 2022, the exercise prices for
20. Significant concentrations
A significant portion of the Company’s business is conducted in China where the currency is the RMB. Regulations in China permit foreign owned entities to freely convert the RMB into foreign currency for transactions that fall under the “current account”, which includes trade related receipts and payments, interest and dividends. Accordingly, the Company’s Chinese subsidiaries may use RMB to purchase foreign currency for settlement of such “current account” transactions without pre-approval.
China Automotive, the parent company, may depend on dividend payments from Genesis and HLUSA, which are generated from their subsidiaries in China, “China-based Subsidiaries,” after they receive payments from the China-based Subsidiaries. Regulations in the PRC currently permit payment of dividends of a PRC company only out of accumulated profits as determined in accordance with accounting standards and regulations in China. Under PRC law China-based Subsidiaries are required to set aside at least
The PRC government also imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currencies out of China. The China-based Subsidiaries may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currencies. If China Automotive is unable to receive dividend payments from its subsidiaries, including the China-based subsidiaries, China Automotive may be unable to effectively finance its operations or pay dividends on its shares.
17
Transactions other than those that fall under the “current account” and that involve conversion of RMB into foreign currency are classified as “capital account” transactions; examples of “capital account” transactions include repatriations of investment by or loans to foreign owners, or direct equity investments in a foreign entity by a China domiciled entity. “Capital account” transactions require prior approval from China’s State Administration of Foreign Exchange, or SAFE, or its provincial branch to convert a remittance into a foreign currency, such as U.S. Dollars, and transmit the foreign currency outside of China.
This system could be changed at any time and any such change may affect the ability of the Company or its subsidiaries in China to repatriate capital or profits, if any, outside China. Furthermore, SAFE has a significant degree of administrative discretion in implementing the laws and has used this discretion to limit convertibility of current account payments out of China. Whether as a result of a deterioration in the Chinese balance of payments, a shift in the Chinese macroeconomic prospects or any number of other reasons, China could impose additional restrictions on capital remittances abroad. As a result of these and other restrictions under the laws and regulations of the People’s Republic of China, or the PRC, the Company’s China subsidiaries are restricted in their ability to transfer a portion of their net assets to the parent. The Company has no assurance that the relevant Chinese governmental authorities in the future will not limit further or eliminate the ability of the Company’s China subsidiaries to purchase foreign currencies and transfer such funds to the Company to meet its liquidity or other business needs. Any inability to access funds in China, if and when needed for use by the Company outside of China, could have a material and adverse effect on the Company’s liquidity and its business.
21. Related party transactions and balances
Related party transactions are as follows (figures are in thousands of USD):
Related party sales
Three Months Ended June 30, | ||||||
| 2023 |
| 2022 | |||
Merchandise sold to related parties | $ | | $ | | ||
Materials and others sold to related parties |
| |
| | ||
Rental income obtained from related parties |
| |
| | ||
Total | $ | | $ | |
Six Months Ended June 30, | ||||||
| 2023 |
| 2022 | |||
Merchandise sold to related parties | $ | | $ | | ||
Materials and others sold to related parties |
| |
| | ||
Rental income obtained from related parties |
| |
| | ||
Total | $ | | $ | |
Related party purchases
Three Months Ended June 30, | ||||||
| 2023 |
| 2022 | |||
Materials purchased from related parties | $ | | $ | | ||
Equipment purchased from related parties |
| |
| | ||
Others purchased from related parties | | — | ||||
Total | $ | | $ | |
Six Months Ended June 30, | ||||||
| 2023 |
| 2022 | |||
Materials purchased from related parties | $ | | $ | | ||
Equipment purchased from related parties |
| |
| | ||
Others purchased from related parties |
| |
| | ||
Total | $ | | $ | |
18
Related party investment transaction
Six Months Ended June 30, | ||||||
| 2023 |
| 2022 | |||
Equity interest purchase from related parties | $ | — | $ | |
Related party receivables
| June 30, 2023 |
| December 31, 2022 | |||
Accounts and notes receivable, net from related parties | $ | | $ | |
Related party advance payments
| June 30, 2023 |
| December 31, 2022 | |||
Advance payments for property, plant and equipment to related parties | $ | | $ | | ||
Advance payments and others to related parties |
| |
| | ||
Total | $ | | $ | |
Related party payables
| June 30, 2023 |
| December 31, 2022 | |||
Accounts and notes payable | $ | | $ | |
These transactions were consummated under similar terms as those with the Company’s third-party customers and suppliers.
As of August 11, 2023, Hanlin Chen, the chairman of the board of directors of the Company, owns
22. Commitments and contingencies
Legal proceedings
The Company is not a party to any pending or, to the best of the Company’s knowledge, any threatened legal proceedings and no director, officer or affiliate of the Company, or owner of record of more than five percent of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.
Other commitments and contingencies
In addition to the bank loans, notes payables and the related interest and other payables, the following table summarizes the Company’s major commitments and contingencies as of June 30, 2023 (figures are in thousands of USD):
Payment obligations by period | |||||||||||||||
| 2023 |
| 2024 |
| 2025 |
| Thereafter |
| Total | ||||||
Obligations for investment contracts | $ | — | $ | — | $ | — | $ | | $ | | |||||
Obligations for purchasing and service agreements | | | — | — | | ||||||||||
Total | | | — | | |
23. Off-balance sheet arrangements
As of June 30, 2023 and December 31, 2022, the Company did not have any significant transactions, obligations or relationships that could be considered off-balance sheet arrangements.
19
24. Segment reporting
The accounting policies of the product sectors (each entity manufactures and sells different products and represents a different product sector) are the same as those described in the summary of significant accounting policies disclosed in the Company’s 2022 Annual Report on Form 10-K except that the disaggregated financial results for the product sectors have been prepared using a management approach, which is consistent with the basis and manner in which management internally disaggregates financial information for the purposes of assisting them in making internal operating decisions. Generally, the Company evaluates performance based on stand-alone product sector operating income and accounts for inter-segment sales and transfers as if the sales or transfers were to third parties, at current market prices. Each product sector is considered a reporting segment.
As of June 30, 2023, the Company had
As of June 30, 2022, the Company had
20
The Company’s product sector information for the three and six months ended June 30, 2023 and 2022, is as follows (figures are in thousands of USD):
Net Product Sales | Net Income/(Loss) | |||||||||||
Three Months Ended | Three Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Henglong | $ | | $ | | $ | | $ | | ||||
Jiulong |
| |
| |
| |
| ( | ||||
Wuhu |
| |
| |
| |
| | ||||
Hubei Henglong |
| |
| |
| |
| | ||||
Henglong KYB |
| |
| |
| |
| | ||||
Brazil Henglong | | | | ( | ||||||||
Other Entities |
| |
| |
| |
| | ||||
Total Segments |
| |
| |
| |
| | ||||
Corporate |
| |
| |
| ( |
| ( | ||||
Eliminations |
| ( |
| ( |
| |
| ( | ||||
Total | $ | | $ | | $ | | $ | |
Net Product Sales | Net Income/(Loss) | |||||||||||
Six Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Henglong | $ | | $ | | $ | | $ | | ||||
Jiulong |
| |
| |
| |
| ( | ||||
Wuhu |
| |
| |
| |
| | ||||
Hubei Henglong |
| |
| |
| |
| | ||||
Henglong KYB |
| |
| |
| |
| | ||||
Brazil Henglong | | | | | ||||||||
Other Entities |
| |
| |
| |
| | ||||
Total Segments |
| |
| |
| |
| | ||||
Corporate |
| — |
| — |
| ( |
| ( | ||||
Eliminations |
| ( |
| ( |
| |
| ( | ||||
Total | $ | | $ | | $ | | $ | |
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with the Company’s condensed unaudited consolidated financial statements and the related notes thereto and the other financial information contained elsewhere in this Report.
General Overview
China Automotive Systems, Inc. is a leading power steering systems supplier for the China automobile industry. The Company has business relationships with more than sixty vehicle manufacturers, including China’s top ranking domestic automobile manufacturers such as JAC motors, Changan Automobile Group, BAIC Group, Dongfeng Group, Brilliance Jinbei, Chery, BYD and Zhejiang Geely as well as Sino-foreign or foreign automobile manufacturer such as General Motors, Citroen, Fiat Chrysler North America and Ford. Starting in 2008, the Company has supplied power steering gears to the Sino-foreign joint ventures established by GM, Citroen and Volkswagen in China. The Company has supplied power steering gear to Fiat Chrysler North America since 2009 and to Ford Motor Company since 2016.
Most of the Company’s production and research and development institutes are located in China. As of June 30, 2023, the Company has approximately 3,957 employees dedicated to design, development, manufacture and sales of its products. By leveraging its extensive experience, innovative technology and geographic strengths, the Company aims to grow leading positions in automotive power steering systems and to further improve overall margins, long-term operating profitability and cash flows. To achieve these goals and to respond to industry factors and trends, the Company is continuing its work to improve its operations and business structure and achieve profitable growth.
In addition, as a result of COVID-19, the Company’s businesses, results of operations, financial position and cash flows had been affected and may continue to be affected. However, because of the significant uncertainties surrounding COVID-19, which are still evolving, the extent of the business disruption, including the duration and the related financial impact on subsequent periods cannot be reasonably estimated at this time. See “Item 1A. Risk Factors—Our business operations have been and may continue to be materially and adversely affected by the outbreak of the coronavirus disease (COVID-19)” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Corporate Structure
The Company, through its subsidiaries, engages in the manufacture and sales of automotive systems and components. Great Genesis Holdings Limited, a company incorporated in Hong Kong on January 3, 2003 under the Companies Ordinance of Hong Kong as a limited liability company, “Genesis,” is a wholly-owned subsidiary of the Company and the holding company of the Company’s joint ventures in the PRC. Henglong USA Corporation, “HLUSA,” incorporated on January 8, 2007 in Troy, Michigan, is a wholly-owned subsidiary of the Company, and mainly engages in marketing of automotive parts in North America, and provides after-sales service and research and development support. CAAS Brazil’s Imports And Trade In Automotive Parts Ltd., “Brazil Henglong,” was established by Hubei Henglong Automotive System Group Co., Ltd., formerly known as Jingzhou Hengsheng Automotive System Co., Ltd., “Hubei Henglong,” as a Sino-foreign joint venture company with two Brazilian citizens in Brazil in August 2012. In May 2017, the Company obtained an additional 15.84% equity interest in Brazil Henglong for nil consideration. The Company retained its controlling interest in Brazil Henglong and the acquisition of the non-controlling interest was accounted for as an equity transaction. Fujian Qiaolong was acquired by the Company in the second quarter of 2014, as a joint venture company that mainly manufactures and distributes drainage and rescue vehicles with mass flow, drainage vehicles with vertical downhole operation, crawler-type mobile pump stations,high-altitude water supply and discharge drainage vehicles, long-range control crawler-type mobile pump stations and other vehicles, which was disposed of by the Company in the second quarter of 2016. USAI was established in 2005, and the Company and Hubei Wanlong owned 83.34% and 16.66%, respectively. In May 2020, USAI merged with and into Wuhan Chuguanjie, a wholly-owned subsidiary of Wuhan Jielong, and it deregistered from the local business administration on April 28, 2020. Following the merger, 85.0% of Wuhan Chuguanjie was owned by the Company and 15.0% was owned by Hubei Wanlong. In April 2020, Hubei Henglong acquired 100.00% of the shares of Changchun Hualong Automotive Technology Co., Ltd., “Changchun Hualong”, for total consideration of RMB 1.20 million, equivalent to approximately $0.2 million. Changchun Hualong mainly engages in design and R&D of automotive parts. Wuhu Hongrun New Material Co., Ltd., “Wuhu Hongrun” was formed in December 2019, which mainly engages in the development, manufacturing and sale of high polymer materials. In April 2021, the Company obtained an additional 22.67% equity interest in Wuhu, for total consideration of RMB 6.9 million, equivalent to approximately $1.1 million, from the other shareholder. Following the acquisition, the Company owned 100% of the equity interests of Wuhu Henglong. Jingzhou Qingyan deregistered from the local business administration on June 22, 2022. In June 2023, Hubei Henglong contributed certain equipments and intangible assets to Hubei Zhirong Automobile
22
Technology Co., Ltd., “Zhirong”, representing 100% of Zhirong’s paid-up capital. Zhirong mainly engages in inspection and testing of automotive products.
Critical Accounting Estimates
The Company prepares its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amount of revenues and expenses during the reporting periods. Management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions. The following critical accounting policies affect the more significant judgments and estimates used in the preparation of the Company’s condensed consolidated financial statements.
The Company considers an accounting estimate to be critical if:
● | It requires the Company to make assumptions about matters that were uncertain at the time it was making the estimate, and |
● | Changes in the estimate or different estimates that the Company could have selected would have had a material impact on the Company’s financial condition or results of operations. |
The table below presents information about the nature and rationale for the Company’s critical accounting estimates:
Balance Sheet |
| Critical |
| Nature of Estimates |
| Assumptions/Approaches |
| Key Factors |
Accrued liabilities and other long-term liabilities
| Warranty obligations
|
| Estimating warranty requires the Company to forecast the resolution of existing claims and expected future claims on products sold. OEMs (Original Equipment Manufacturers) are increasingly seeking to hold suppliers responsible for product warranties, which may impact the Company’s exposure to these costs. |
| The Company bases its estimate on historical trends of units sold and payment amounts, combined with its current understanding of the status of existing claims and discussions with its customers. |
| OEM sourcing OEM policy decisions regarding warranty claims
| |
|
|
|
|
|
|
|
| |
Property, plant and equipment, intangible assets and other long-term assets | Valuation of long- lived assets and investments |
| The Company is required from time to time to review the recoverability of certain of its assets based on projections of anticipated future cash flows, including future profitability assessments of various product lines. |
| The Company estimates cash flows using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments. |
| Future production estimates Customer preferences and decisions | |
|
|
|
|
|
|
|
| |
Accounts receivable | Allowance for doubtful accounts |
| The Company is required from time to time to review the credit of customers and make timely provision of allowance for doubtful accounts. |
| The Company estimates the collectability of the receivables based on the future cash flows using historical experiences. |
| Customer credit | |
|
|
|
|
|
|
|
| |
Inventory
| Write-down of inventory |
| The Company is required from time to time to review the cash ability of inventory based on projections of anticipated future cash flows, including write-down of inventory for prices that are higher than market price and undesirable inventories. |
| The Company estimates cash flows using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments. |
| Future production estimates Customer preferences and decisions | |
|
|
|
|
|
|
|
| |
Deferred income taxes
| Recoverability of deferred tax assets |
| The Company is required to estimate whether recoverability of its deferred tax assets is more likely than not based on forecasts of taxable earnings in the related tax jurisdiction. |
| The Company uses historical and projected future operating results, based upon approved business plans, including a review of the eligible carry forward period, tax planning opportunities and other relevant considerations. |
| Tax law changes Variances in future projected profitability, including by taxing entity |
Recent Accounting Pronouncements
Please see Note 2 to the consolidated financial statements under Item 1 of Part I of this report.
23
Results of Operations - Three Months Ended June 30, 2023 and 2022
Selected highlights from our results of operations are as follows (in thousands of U.S. dollars):
| Three Months Ended June 30, |
| ||||||||||
2023 |
| 2022 |
| Change |
| Change % | ||||||
Net product sales | $ | 137,410 | $ | 127,161 | $ | 10,249 |
| 8.1 | % | |||
Cost of products sold |
| 114,692 |
| 104,450 |
| 10,242 |
| 9.8 | ||||
Gain on other sales |
| 742 |
| 2,105 |
| (1,363) |
| (64.8) | ||||
Selling expenses |
| 3,794 |
| 4,068 |
| (274) |
| (6.7) | ||||
General and administrative expenses |
| 5,271 |
| 5,662 |
| (391) |
| (6.9) | ||||
Research and development expenses |
| 6,606 |
| 7,886 |
| (1,280) |
| (16.2) | ||||
Other income |
| 1,963 |
| 2,804 |
| (841) |
| (30.0) | ||||
Interest expense |
| (276) |
| (370) |
| 94 |
| (25.4) | ||||
Financial income, net | 3,963 | 2,543 | 1,420 | 55.8 | ||||||||
Income taxes |
| 1,487 |
| 3,156 |
| (1,669) |
| (52.9) | ||||
Net income |
| 11,468 |
| 9,935 |
| 1,533 |
| 15.4 | ||||
Net income attributable to non-controlling interests |
| 995 |
| 500 |
| 495 |
| 99.0 | ||||
Net income attributable to parent company’s common shareholders | 10,466 | 9,428 | 1,038 |
| 11.0 | % |
Net Product Sales and Cost of Products Sold
| Net Product Sales |
| Cost of Products Sold |
| |||||||||||||||||||
(in thousands of USD, | (in thousands of USD, |
| |||||||||||||||||||||
except percentages) | except percentages) | ||||||||||||||||||||||
Three Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||||||||||
2023 |
| 2022 |
| Change |
| 2023 |
| 2022 |
| Change |
| ||||||||||||
Henglong |
| $ | 67,292 |
| $ | 52,808 |
| 14,484 |
| 27.4 | % | $ | 61,435 |
| $ | 48,347 |
| 13,088 |
| 27.1 | % | ||
Jiulong |
| 19,681 |
| 18,357 |
| 1,324 |
| 7.2 |
| 16,268 |
| 15,763 |
| 505 |
| 3.2 | |||||||
Wuhu |
| 6,986 |
| 9,991 |
| (3,005) |
| (30.1) |
| 6,317 |
| 9,417 |
| (3,100) |
| (32.9) | |||||||
Hubei Henglong |
| 28,906 |
| 38,276 |
| (9,370) |
| (24.5) |
| 25,716 |
| 31,015 |
| (5,299) |
| (17.1) | |||||||
Henglong KYB |
| 30,159 |
| 21,013 |
| 9,146 |
| 43.5 |
| 27,280 |
| 17,798 |
| 9,482 |
| 53.3 | |||||||
Brazil Henglong | 12,167 | 8,477 | 3,690 | 43.5 | 10,289 | 7,494 | 2,795 | 37.3 | |||||||||||||||
Other Entities |
| 24,459 |
| 21,517 |
| 2,942 |
| 13.7 |
| 18,967 |
| 16,534 |
| 2,433 |
| 14.7 | |||||||
Total Segments |
| 189,650 |
| 170,439 |
| 19,211 |
| 11.3 |
| 166,272 |
| 146,368 |
| 19,904 |
| 13.6 | |||||||
Elimination |
| (52,240) |
| (43,278) |
| (8,962) |
| 20.7 |
| (51,580) |
| (41,918) |
| (9,662) |
| 23.0 | |||||||
Total | $ | 137,410 | $ | 127,161 | 10,249 |
| 8.1 | % | $ | 114,692 | $ | 104,450 | 10,242 |
| 9.8 | % |
24
Net Product Sales
Net product sales were $137.4 million for the three months ended June 30, 2023, compared to $127.2 million for the same period in 2022, representing an increase of $10.2 million, or 8.1%, mainly due to the Company’s increased sales of electric power steering (“EPS”) systems and parts and partially offset by the appreciation of the USD against the RMB.
Net sales of traditional steering products and parts were $95.8 million for the three months ended June 30, 2023, compared to $94.8 million for the same period in 2022, representing an increase of $1.0 million, or 1.1%. Net sales of EPS systems and parts were $41.6 million for the three months ended June 30, 2023 and $32.4 million for the same period in 2022, representing an increase of $9.2 million, or 28.4%. As a percentage of net sales, sales of EPS were 30.3% for the three months ended June 30, 2023, compared with 25.5% for the same period in 2022.
Further analysis by segment (before elimination) is as follows:
● | Henglong mainly engages in providing passenger vehicle steering systems. Net product sales for Henglong were $67.3 million for the three months ended June 30, 2023, compared with $52.8 million for the three months ended June 30, 2022, representing an increase of $14.5 million, or 27.4%. The increase was mainly due to the increase in sales volume of products used in passenger vehicles. |
● | Jiulong mainly engages in providing commercial vehicle steering systems. Net product sales for Jiulong were $19.7 million for the three months ended June 30, 2023, compared with $18.4 million for the three months ended June 30, 2022, representing an increase of $1.3 million, or 7.2%. The increase was mainly due to the increase in average selling price due to change in product mix. |
● | Wuhu mainly engages in providing vehicle steering systems to Chery Automobile Co., Ltd. (“Chery”), one of the major automotive manufacturers in China. Net product sales for Wuhu were $7.0 million for the three months ended June 30, 2023, compared to $10.0 million for the same period in 2022, representing a decrease of $3.0 million, or 30.1%. The decrease was mainly due to the decrease in sales volume of products used in passenger vehicles from Chery. |
● | Hubei Henglong mainly engages in providing vehicle steering systems to Chrysler and Ford. Net product sales for Hubei Henglong were $28.9 million for the three months ended June 30, 2023, compared with $38.3 million for the three months ended June 30, 2022, representing a decrease of $9.4 million, or 24.5%. The decrease was mainly due to the decrease in sales volume of products used in passenger vehicles from Chrysler. |
● | Henglong KYB mainly engages in providing passenger EPS products. Net product sales for Henglong KYB were $30.2 million for the three months ended June 30, 2023, compared with $21.0 million for the three months ended June 30, 2022, representing an increase of $9.1 million, or 43.5%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles and the increase in average selling prices. |
● | Net product sales for Brazil Henglong were $12.2 million for the three months ended June 30, 2023, compared to $8.5 million for the same period in 2022, representing an increase of $3.7 million, or 43.5%. The increase was mainly due to the increase in demand of Fiat in Brazil. |
● | Net product sales for other entities were $24.5 million for the three months ended June 30, 2023, compared to $21.5 million for the same period in 2022, representing an increase of $3.0 million, or 13.7%. The increase was mainly due to the increase in sales of Wuhan Jielong. |
Cost of Products Sold
For the three months ended June 30, 2023, the cost of products sold was $114.7 million, compared to $104.5 million for the same period of 2022, representing an increase of $10.2 million, or 9.8%. The increase in cost of sales was mainly due to the increase in sales volume and offset by the impact of foreign exchange rate fluctuation. Further analysis is as follows:
● | Cost of products sold for Henglong was $61.4 million for the three months ended June 30, 2023, compared to $48.3 million for the same period of 2022, representing an increase of $13.1 million, or 27.1%. The increase was mainly due to the increase in sales volume of products used in passenger vehicles. |
25
● | Cost of products sold for Jiulong was $16.3 million for the three months ended June 30, 2023, compared to $15.8 million for the same period in 2022, representing an increase of $0.5 million, or 3.2%. The increase was mainly due to change in product mix. |
● | Cost of products sold for Wuhu was $6.3 million for the three months ended June 30, 2023, compared to $9.4 million for the same period of 2022, representing a decrease of $3.1 million, or 32.9%. The decrease was mainly due to the decrease in sales volumes. |
● | Cost of products sold for Hubei Henglong was $25.7 million for the three months ended June 30, 2023, compared to $31.0 million for the same period of 2022, representing a decrease of $5.3 million, or 17.1%. The decrease was mainly due to the decrease in sales volumes. |
● | Cost of products sold for Henglong KYB was $27.3 million for the three months ended June 30, 2023, compared to $17.8 million for the same period of 2022, representing an increase of $9.5 million, or 53.3%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles. |
● | Cost of products sold for Brazil Henglong was $10.3 million for the three months ended June 30, 2023, compared to $7.5 million for the same period in 2022, representing an increase of $2.8 million, or 37.3%. The increase was mainly due to the increase in sales volume, offset by the decrease in sales unit cost as a result of reduced overseas transportation cost. |
● | Cost of products sold for other entities was $19.0 million for the three months ended June 30, 2023, compared to $16.5 million for the same period in 2022, representing an increase of $2.5 million, or 14.7%. |
Gross margin was 16.5% for the three months ended June 30, 2023, compared to 17.9% for the same period of 2022, representing a decrease of 1.4%. The decrease was mainly due to change in product mix for the three months ended June 30, 2023.
Selling Expenses
Selling expenses were $3.8 million for the three months ended June 30, 2023, as compared to $4.1 million for the same period of 2022, representing a decrease of $0.3 million, or 6.7%, which was primarily due to a decrease in marketing and office expense and the impact of appreciation of the USD against the RMB.
General and Administrative Expenses
General and administrative expenses were $ 5.3 million for the three months ended June 30, 2023, as compared to $5.7 million for the same period of 2022, representing a decrease of $0.4 million, which was primarily due to reversal of credit losses and the impact of the appreciation of the USD against the RMB.
Research and Development Expenses
Research and development expenses were $6.6 million for the three months ended June 30, 2023, as compared to $7.9 million for the same period of 2022, representing a decrease of $1.3 million, or 16.2%, which was mainly due to decreased R&D activities for new projects.
Other Income, net
Other income, net was $2.0 million for the three months ended June 30, 2023, as compared to $2.8 million for the three months ended June 30, 2022, representing a decrease of $0.8 million, which was mainly due to the government subsidies received for the three months ended June 30, 2023 being less than the amount received for the three months ended June 30, 2022.
Interest Expense
Interest expense was $0.3 million for the three months ended June 30, 2023, as compared to $0.4 million for the three months ended June 30, 2022, representing a decrease of $0.1 million, which is mainly due to the decrease in short-term loans.
26
Financial income, net
Financial income, net was $4.0 million for the three months ended June 30, 2023, as compared to financial income, net of $2.5 million for the three months ended June 30, 2022, representing an increase in financial income of $1.5 million, which was primarily due to an increase in the foreign exchange gain due to the appreciation of USD against RMB.
Income Taxes
Income tax expense was $1.5 million for the three months ended June 30, 2023, as compared to income tax expense of $3.2 million for the three months ended June 30, 2022, which was primarily due to the valuation allowance provided in the three months ended June 30, 2022, whereas no significant valuation allowance was recognized in the three months ended June 30, 2023.
Net Income Attributable to Non-controlling Interests
Net income attributable to non-controlling interests amounted to $1.0 million for the three months ended June 30, 2023, compared to net income attributable to non-controlling interests of $0.5 million for the three months ended June 30, 2022.
Net Income Attributable to Parent Company’s Common Shareholders
Net income attributable to parent company’s common shareholders was $10.5 million for the three months ended June 30, 2023, compared to net income attributable to parent company’s common shareholders of $9.4 million for the three months ended June 30, 2022, representing an increase in net income attributable to parent company’s common shareholders of $1.1 million.
Results of Operations - Six Months Ended June 30, 2023 and 2022
Selected highlights from our results of operations are as follows (in thousands of U.S. dollars):
Six Months Ended June 30, |
| |||||||||||
| 2023 |
| 2022 |
| Change |
| Change% | |||||
Net product sales | $ | 279,653 | $ | 263,557 | $ | 16,096 |
| 6.1 | % | |||
Cost of products sold |
| 235,317 |
| 226,112 |
| 9,205 |
| 4.1 | ||||
Gain on other sales |
| 1,395 |
| 3,036 |
| (1,641) |
| (54.1) | ||||
Selling expenses |
| 7,178 |
| 8,380 |
| (1,202) |
| (14.3) | ||||
General and administrative expenses |
| 10,024 |
| 10,416 |
| (392) |
| (3.8) | ||||
Research and development expenses |
| 12,996 |
| 16,023 |
| (3,027) |
| (18.9) | ||||
Other income, net |
| 3,465 |
| 6,323 |
| (2,858) |
| (45.2) | ||||
Interest expense |
| (525) |
| (772) |
| 247 |
| (32.0) | ||||
Financial income, net |
| 3,541 |
| 4,558 |
| (1,017) |
| (22.3) | ||||
Income taxes | 2,316 | 4,114 | (1,798) | (43.7) | ||||||||
Net income |
| 19,351 |
| 10,084 |
| 9,267 |
| 91.9 | ||||
Net income attributable to non-controlling interests |
| 2,050 |
| 700 |
| 1,350 |
| 192.9 | ||||
Net income attributable to parent company’s common shareholders |
| 17,286 |
| 9,369 |
| 7,917 |
| 84.5 | % |
27
Net Product Sales and Cost of Products Sold
Net Product Sales | Cost of Products Sold |
| |||||||||||||||||||
(in thousands of USD, | (in thousands of USD, |
| |||||||||||||||||||
except percentages) | except percentages) |
| |||||||||||||||||||
Six Months Ended June 30, | Six Months Ended June 30, |
| |||||||||||||||||||
| 2023 |
| 2022 |
| Change |
| 2023 |
| 2022 |
| Change | ||||||||||
Henglong | $ | 128,923 | $ | 114,811 | 14,112 |
| 12.3 | % | $ | 118,586 | $ | 105,788 | 12,798 |
| 12.1 | % | |||||
Jiulong |
| 36,501 |
| 36,085 | 416 |
| 1.2 |
| 31,799 |
| 33,369 | (1,570) |
| (4.7) | |||||||
Wuhu |
| 14,885 |
| 18,863 | (3,978) |
| (21.1) |
| 13,451 |
| 17,719 | (4,268) |
| (24.1) | |||||||
Hubei Henglong |
| 63,563 |
| 71,219 | (7,656) |
| (10.7) |
| 55,789 |
| 61,137 | (5,348) |
| (8.7) | |||||||
Henglong KYB |
| 67,355 |
| 50,820 | 16,535 |
| 32.5 |
| 59,736 |
| 45,119 | 14,617 |
| 32.4 | |||||||
Brazil Henglong | 22,929 | 18,961 | 3,968 | 20.9 | 19,215 | 16,992 | 2,223 | 13.1 | |||||||||||||
Other Entities |
| 46,574 |
| 44,677 | 1,897 |
| 4.2 |
| 36,951 |
| 35,394 | 1,557 |
| 4.4 | |||||||
Total Segments |
| 380,730 |
| 355,436 | 25,294 |
| 7.1 |
| 335,527 |
| 315,518 | 20,009 |
| 6.3 | |||||||
Elimination |
| (101,077) |
| (91,879) | (9,198) |
| 10.0 |
| (100,210) |
| (89,406) | (10,804) |
| 12.1 | |||||||
Total | $ | 279,653 | $ | 263,557 | 16,096 |
| 6.1 | % | $ | 235,317 | $ | 226,112 | 9,205 |
| 4.1 | % |
Net Product Sales
Net product sales were $279.7 million for the six months ended June 30, 2023, compared to $263.6 million for the same period of 2022, representing an increase of $16.1 million, or 6.1%, mainly due to the Company’s increased sales of EPS systems and parts and partially offset by the appreciation of the USD against the RMB.
Net sales of traditional steering products and parts were $190.3 million for the six months ended June 30, 2023, which is stable compared to $190.2 million for the same period in 2022. Net sales of EPS systems and parts were $89.4 million for the six months ended June 30, 2023 and $73.4 million for the same period in 2022, representing an increase of $16.0 million, or 21.8%. As a percentage of net sales, sales of EPS were 32.0% for the six months ended June 30, 2023, compared to 27.8% for the same period in 2022.
Further analysis by segment (before elimination) is as follows:
28
Cost of Products Sold
For the six months ended June 30, 2023, the cost of products sold was $235.3 million, compared to $226.1 million for the same period of 2022, representing an increase of $9.2 million, or 4.1%. The increase in cost of sales was mainly due to the increase in sales volume and offset by the impact of foreign exchange rate fluctuation. Further analysis is as follows:
Gross margin was 15.9% for the six months ended June 30, 2023, compared to 14.2% for the same period of 2022, representing an increase of 1.7%. The increase was mainly due to change in product mix for the six months ended June 30, 2023.
Selling Expenses
Selling expenses were $7.2 million for the six months ended June 30, 2023, as compared to $8.4 million for the six months ended June 30, 2022, representing a decrease of $1.2 million, or 14.3%, which was mainly due to a decrease in marketing and office expense and the impact of appreciation of the USD against the RMB.
General and Administrative Expenses
General and administrative expenses were $10.0 million for the six months ended June 30, 2023, which is stable compared to $10.4 million for the six months ended June 30, 2022.
Research and Development Expenses
Research and development expenses were $13.0 million for the six months ended June 30, 2023, as compared to $16.0 million for the six months ended June 30, 2022, representing a decrease of $3.0 million, or 18.9%, which was mainly due to decreased R&D activities for new projects.
29
Other Income, net
Other income, net was $3.5 million for the six months ended June 30, 2023, which was comprised of government subsidies, as compared to $6.3 million for the six months ended June 30, 2022, representing a decrease of $2.8 million, which was mainly due to the government subsidies received for the six months ended June 30, 2023 being less than the amount received for the six months ended June 30, 2022.
Interest Expense
Interest expense was $0.5 million for the six months ended June 30, 2023, as compared to $0.8 million for the six months ended June 30, 2022, representing a decrease of $0.3 million, which is mainly due to the decrease in short-term loans.
Financial income, net
Financial income, net was $3.5 million for the six months ended June 30, 2023, as compared to financial income, net of $4.6 million for the six months ended June 30, 2022, representing a decrease in financial income of $1.1 million, which was primarily due to a decrease in the foreign exchange gain due to the appreciation of USD against RMB.
Income Taxes
Income tax expense was $ 2.3 million for the six months ended June 30, 2023, compared to $4.1 million for the six months ended June 30, 2022, which was primarily due to the valuation allowance provided in the six months ended June 30, 2022, whereas no significant valuation allowance was recognized in the six months ended June 30, 2023.
Net Income Attributable to Non-controlling Interests
Net income attributable to non-controlling interests amounted to $2.1 million for the six months ended June 30, 2023, compared to net income attributable to non-controlling interests of $0.7 million for the six months ended June 30, 2022, representing an increase in net income attributable to non-controlling interests of $1.4 million.
Net Income Attributable to Parent Company’s Common Shareholders
Net income attributable to parent company’s common shareholders was $17.3 million for the six months ended June 30, 2023, compared to net income attributable to parent company’s common shareholders of $9.4 million for the six months ended June 30, 2022, representing an increase in net income attributable to parent company’s common shareholders of $7.9 million.
Liquidity and Capital Resources
Capital Resources and Use of Cash
The Company has historically financed its liquidity requirements from a variety of sources, including short-term borrowings under bank credit agreements, bankers’ acceptances, issuances of capital stock and notes and internally generated cash. As of June 30, 2023, the Company had cash and cash equivalents and short-term investments of $111.1 million, compared to $134.1 million as of December 31, 2022, representing a decrease of $23.0 million, or 17.2%.
The Company had working capital (total current assets less total current liabilities) of $153.3 million as of June 30, 2023, compared to $156.5 million as of December 31, 2022, representing a decrease of $3.2 million, or 2.0%.
Except for the expected distribution of dividends from the Company’s PRC subsidiaries to the Company in order to fund the payment of the one-time transition tax due to the U.S. Tax Reform, the Company intends to indefinitely reinvest the funds in subsidiaries established in the PRC.
We cannot predict the impact COVID-19 may have on our cash fleow for the rest of 2023. However, based on our liquidity assessment, we believe that our cash flow from operations and proceeds from our financing activities will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for the foreseeable future and for at least twelve months subsequent to the filing of this report.
30
Capital Source
The Company’s capital source is multifaceted, such as bank loans and banks’ acceptance facilities. In financing activities and operating activities, the Company’s banks require the Company to sign line of credit agreements and repay such facilities within one to two years. On the condition that the Company can provide adequate mortgage security and has not violated the terms of the line of credit agreement, such facilities can be extended for another one to two years.
The Company had short-term loans of $38.5 million, long-term loans of $0.7 million (See Note 7) and bankers’ acceptances of $84.3 million (See Note 8) as of June 30, 2023.
The Company currently expects to be able to obtain similar bank loans, i.e., RMB loans, and bankers’ acceptance facilities in the future if it can provide adequate mortgage security following the termination of the above-mentioned agreements, see the table under “Bank Arrangements” below for more information. If the Company is not able to do so, it will have to refinance such debt as it becomes due or repay that debt to the extent it has cash available from operations or from the proceeds of additional issuances of capital stock. Due to a depreciation of assets, the value of the mortgages securing the above-mentioned bank loans and banker’s acceptances is expected to be reduced by approximately $16.0 million over the next 12 months. If the Company wishes to maintain the same amount of bank loans and banker’s acceptances in the future, it may be required by the banks to provide additional mortgages of $16.0 million as of the maturity date of such line of credit agreements, see the table under “Bank Arrangements” below for more information. The Company can still obtain a reduced line of credit with a reduction of $8.5 million, which is 53.0%, the mortgage ratio, of $16.0 million, if it cannot provide additional mortgages. The Company expects that the reduction in bank loans will not have a material adverse effect on its liquidity.
Bank Arrangements
As of June 30, 2023, the principal outstanding under the Company’s credit facilities and lines of credit was as follows (figures are in thousands of USD):
|
|
|
|
| Assessed | ||||||||
Due | Amount | Amount | Mortgage | ||||||||||
Bank |
| Date | Available(2) | Used(3) | Value(4) | ||||||||
1. Comprehensive credit facilities | China CITIC Bank (1) | Aug-2024 |
| 67,121 | 30,402 | 26,455 | |||||||
| |||||||||||||
2. Comprehensive credit facilities | Hankou Bank(1) | Mar-2024 |
| 13,839 | 5,564 | — | |||||||
| |||||||||||||
3. Comprehensive credit facilities | Hubei Bank(1) | Mar-2024 |
| 23,527 | 16,265 | 71,688 | |||||||
|
|
| |||||||||||
4. Comprehensive credit facilities | Chongqing Bank | Mar-2025 |
| 969 | 747 | 1,767 | |||||||
|
| ||||||||||||
5. Comprehensive credit facilities | China Constitution Bank | Sep-2025 |
| 2,768 | 1,384 | 6,281 | |||||||
|
| ||||||||||||
6. Comprehensive credit facilities | China Merchants Bank(1) | June-2024 |
| 13,839 | 4,380 | — | |||||||
|
| ||||||||||||
7. Comprehensive credit facilities | Bank of China(1)(5) | Aug-2023 |
| 12,594 | 5,536 | — | |||||||
|
| ||||||||||||
8. Comprehensive credit facilities | China Everbright Bank | Dec-2025 | 4,152 | 3,321 | 8,694 | ||||||||
|
|
| |||||||||||
9. Comprehensive credit facilities | China Industrial Bank | Mar-2024 | 692 | — | 2,735 | ||||||||
|
|
| |||||||||||
10. Comprehensive credit facilities | Bank of China (Chongqing) | Jun-2024 | 692 | 692 | 3,493 | ||||||||
Total | $ | 140,193 | $ | 68,291 | $ | 121,113 |
(1) | The comprehensive credit facilities with China CITIC Bank are guaranteed by Henglong and Hubei Henglong in addition to the above pledged assets. The comprehensive credit facilities with Hankou Bank are guaranteed by Henglong and certain account receivables in addition to the above pledged assets. The comprehensive credit facilities with Hubei Bank are guaranteed by Chen Hanlin in addition to the above pledged assets. The comprehensive credit facilities with Merchants Bank are guaranteed by Hubei |
31
Henglong, Chen Hanlin and certain account receivables in addition to the above pledged assets. The comprehensive credit facilities with Bank of China are guaranteed by Hubei Henglong in addition to the above pledged assets. |
(2) | “Amount available” is used for the drawdown of bank loans and issuance of bank notes at the Company’s discretion. If the Company elects to utilize the facility by issuance of bank notes, additional collateral is requested to be pledged to the bank. |
(3) | “Amount used” represents the credit facilities used by the Company for the purpose of bank loans or notes payable during the facility contract period. The loans or notes payable under the credit facilities will remain outstanding regardless of the expiration of the relevant credit facilities until the separate loans or notes payable expire. The amount used includes bank loans of $34.8 million and notes payable of $33.4 million and derivatives of $0.1 million as of June 30, 2023. |
(4) | In order to obtain lines of credit, the Company needs to pledge certain assets to banks. As of June 30, 2023, the pledged assets included property, plant and equipment and land use rights with an aggregate assessed value of $121.1 million. |
(5) | This credit facility expired on August 7, 2023. The company is currently in the process of negotiating with the bank to renew the credit facility. |
The Company may request the banks to issue notes payable or bank loans within its credit line using a 365-day revolving line.
The Company’s bank loan terms range from 4 months to 35 months. Pursuant to the comprehensive credit line arrangement, the Company pledged and guaranteed:
1. Land use rights and buildings with an assessed value of approximately $26.5 million as security for its comprehensive credit facility with China CITIC Bank Wuhan Branch.
2. Equipment with an assessed value of approximately $71.7 million as security for its revolving comprehensive credit facility with Hubei Bank.
3. Buildings with an assessed value of approximately $1.8 million as security for its comprehensive credit facility with Chongqing Bank.
4. Land use rights and buildings with an assessed value of approximately $6.3 million as security for its revolving comprehensive credit facility with China Constitution Bank.
5. Land use rights and buildings with an assessed value of approximately $8.7 million as security for its revolving comprehensive credit facility with China Everbright Bank.
6. Land use rights and buildings with an assessed value of approximately $2.7 million as security for its revolving comprehensive credit facility with China Industrial Bank.
7. Land use rights and buildings with an assessed value of approximately $3.5 million as security for its revolving comprehensive credit facility with China Industrial Bank of China (Chongqing).
32
Short-term and Long-term Loans
The following table summarizes the contract information of short-term borrowings between the banks and the Company as of June 30, 2023 (figures are in thousands of USD).
|
|
|
| Borrowing |
|
|
| Annual |
| Date of |
|
| |||
Bank | Borrowing | Term | Interest | Interest | |||||||||||
Government | Purpose | Date | (Months) | Principal | Rate | Payment | Due Date | ||||||||
Bank of China | Working Capital | October 28, 2022 | 12 | 2,768 | 3.00 | % | Pay monthly | October 28, 2023 | |||||||
Bank of China | Working Capital | September 28, 2022 | 12 | 2,768 | 3.00 | % | Pay monthly | September 27, 2023 | |||||||
China CITIC Bank | Working Capital | September 26, 2022 | 12 | 692 | 3.65 | % | Pay monthly | September 25, 2023 | |||||||
China CITIC Bank | Working Capital | September 26, 2022 | 12 | 692 | 3.65 | % | Pay quarterly | September 25, 2023 | |||||||
China CITIC Bank | Working Capital | March 2, 2023 | 12 | 1,384 | 3.65 | % | Pay monthly | March 1, 2024 | |||||||
China CITIC Bank | Working Capital |
| March 23, 2023 |
| 12 | 692 |
| 3.65 | % | Pay monthly |
| March 23, 2024 | |||
China Constitution Bank | Working Capital |
| September 28, 2022 |
| 12 | 1,384 |
| 3.50 | % | Pay monthly |
| September 26, 2023 | |||
Bank of China | Working Capital | June 8, 2023 | 12 | 374 | 3.50 | % | Pay quarterly | June 8, 2024 | |||||||
Bank of China | Working Capital | June 8, 2023 | 12 | 318 | 3.50 | % | Pay quarterly | June 8, 2024 | |||||||
Chongqing Bank | Working Capital |
| April 14, 2022 |
| 24 | 14 |
| 3.80 | % | Pay semiannually |
| April 14, 2024 | |||
Chongqing Bank | Working Capital |
| April 14, 2022 |
| 18 | 14 |
| 3.80 | % | Pay semiannually |
| October 14, 2023 | |||
Chongqing Bank | Working Capital |
| April 14, 2022 |
| 35 | 24 |
| 3.80 | % | Pay semiannually |
| March 20, 2025 | |||
Chongqing Bank | Working Capital | April 27, 2022 | 35 | 116 | 3.80 | % | Pay semiannually | March 20, 2025 | |||||||
Chongqing Bank | Working Capital | May 12, 2022 | 34 | 72 | 3.80 | % | Pay semiannually | March 20, 2025 | |||||||
Chongqing Bank | Working Capital | May 24, 2022 | 34 | 53 | 3.80 | % | Pay semiannually | March 20, 2025 | |||||||
Chongqing Bank | Working Capital | June 16, 2022 | 33 | 42 | 3.80 | % | Pay semiannually | March 20, 2025 | |||||||
Chongqing Bank | Working Capital |
| June 29, 2022 |
| 33 | 112 |
| 3.80 | % | Pay semiannually |
| March 20, 2025 | |||
Chongqing Bank | Working Capital |
| July 28, 2022 |
| 33 | 77 |
| 3.80 | % | Pay semiannually |
| April 13, 2025 | |||
Chongqing Bank | Working Capital |
| January 16, 2023 |
| 27 | 156 |
| 3.80 | % | Pay semiannually |
| April 13, 2025 | |||
Chongqing Bank | Working Capital |
| February 20, 2023 |
| 26 | 19 |
| 3.80 | % | Pay semiannually |
| April 13, 2025 | |||
Chongqing Bank | Working Capital |
| March 21, 2023 |
| 25 | 22 |
| 3.80 | % | Pay semiannually |
| April 13, 2025 | |||
China CITIC Bank | Working Capital |
| June 26, 2023 |
| 7 | 6,275 |
| 2.35 | % | Pay in arrear |
| February 1, 2024 | |||
China CITIC Bank | Working Capital |
| March 28, 2023 |
| 12 | 5,344 |
| 2.70 | % | Pay in arrear |
| March 27, 2024 | |||
China CITIC Bank | Working Capital |
| June 20, 2023 |
| 7 | 3,875 |
| 2.34 | % | Pay in arrear |
| January 26, 2024 | |||
Hankou Bank | Working Capital |
| March 30, 2023 |
| 9 | 2,652 |
| 2.30 | % | Pay in arrear |
| December 25, 2023 | |||
China CITIC Bank | Working Capital | March 28, 2023 | 12 | 4,442 | 2.70 | % | Pay in arrear | March 26, 2024 | |||||||
China CITIC Bank(1) | Working Capital | January 10, 2023 | 6 | 110 | 1.80 | % | Pay in arrear | July 3, 2023 | |||||||
China CITIC Bank(1) | Working Capital | January 10, 2023 | 6 | 823 | 1.80 | % | Pay in arrear | July 4, 2023 | |||||||
China CITIC Bank(1) | Working Capital | February 17, 2023 | 5 | 685 | 2.50 | % | Pay in arrear | July 17, 2023 | |||||||
China CITIC Bank(1) | Working Capital | February 16, 2023 | 5 | 274 | 2.50 | % | Pay in arrear | July 17, 2023 | |||||||
China CITIC Bank | Working Capital | April 25, 2023 | 4 | 824 | 2.30 | % | Pay in arrear | September 1, 2023 | |||||||
China CITIC Bank | Working Capital | May 30, 2023 | 4 | 247 | 1.88 | % | Pay in arrear | October 5, 2023 | |||||||
China CITIC Bank | Working Capital | May 30, 2023 | 5 | 124 | 1.88 | % | Pay in arrear | October 20, 2023 | |||||||
China CITIC Bank | Working Capital | June 19, 2023 | 5 | 275 | 2.00 | % | Pay in arrear | November 4, 2023 | |||||||
China CITIC Bank | Working Capital | June 26, 2023 | 5 | 206 | 1.85 | % | Pay in arrear | November 10, 2023 | |||||||
China CITIC Bank | Working Capital | June 5, 2023 | 5 | 274 | 1.90 | % | Pay in arrear | November 15, 2023 | |||||||
China CITIC Bank | Working Capital | June 5, 2023 | 5 | 274 | 1.90 | % | Pay in arrear | November 15, 2023 | |||||||
China CITIC Bank | Working Capital | June 5, 2023 | 5 | 274 | 1.90 | % | Pay in arrear | November 15, 2023 | |||||||
China CITIC Bank | Working Capital | June 26, 2023 | 5 | 137 | 1.85 | % | Pay in arrear | November 15, 2023 | |||||||
China CITIC Bank | Working Capital | June 26, 2023 | 5 | 158 | 1.85 | % | Pay in arrear | November 15, 2023 | |||||||
China CITIC Bank | Working Capital | June 5, 2023 | 6 | 63 | 1.90 | % | Pay in arrear | November 30, 2023 | |||||||
China CITIC Bank | Working Capital | June 19, 2023 | 5 | 8 | 2.00 | % | Pay in arrear | December 2, 2023 | |||||||
China CITIC Bank | Working Capital | June 19, 2023 | 5 | 12 | 2.00 | % | Pay in arrear | December 2, 2023 | |||||||
Total | $ | 39,149 |
(1) | These bank loans were repaid in July, 2023 when they became due. |
33
The Company must use notes payable for the purpose described in the table. If it fails to do so, the banks will no longer issue the notes payable, and it may have an adverse effect on the Company’s liquidity and capital resources. The Company has to deposit a sufficient amount of cash on the due date of notes payable for payment to the suppliers. If the bank has advanced payment for the Company, it will be charged an additional 50% penalty interest. The Company complied with such financial covenants as of June 30, 2023.
Notes Payable
The following table summarizes the contract information of issuing notes payable between the banks and the Company as of June 30, 2023 (figures are in thousands of USD):
Amount | |||||||
Payable on | |||||||
Purpose |
| Term (Months) |
| Due Date |
| Due Date | |
Working Capital(1) |
| 6 |
| Jul. 2023 |
| 15,052 | |
Working Capital(1) |
| 6 |
| Aug.2023 |
| 12,927 | |
Working Capital |
| 6 |
| Sep. 2023 |
| 21,666 | |
Working Capital |
| 6 |
| Oct. 2023 |
| 11,137 | |
Working Capital |
| 6 |
| Nov.2023 |
| 14,040 | |
Working Capital |
| 6 |
| Dec. 2023 |
| 9,458 | |
Total (See Note 8) |
|
| $ | 84,280 |
(1) | The notes payable were repaid in full on their respective due dates. |
The Company must use notes payable for the purpose described in the table. If it fails to do so, the banks will no longer issue the notes payable, and it may have an adverse effect on the Company’s liquidity and capital resources. The Company has to deposit a sufficient amount of cash on the due date of notes payable for payment to the suppliers. If the bank has advanced payment for the Company, it will be charged an additional 50% penalty interest. The Company complied with such financial covenants as of June 30, 2023.
Cash Flows
(a) | Operating Activities |
Net cash used in operating activities for the six months ended June 30, 2023 was $0.1 million, compared to net cash provided by operating activities of $14.5 million for the same period of 2022, representing a decrease in net cash inflows by $14.6 million, which was mainly due to (1) the increase in net income excluding non-cash items by $1.8 million, (2) the increase in the cash inflows from movements of inventory by $7.5 million, (3) the increase in the cash outflows from movements of accounts and notes receivable by $14.0 million, (4) the increase in the cash outflows from movements of accounts and notes payable by $4.2 million, and (5) a combination of other factors contributing an increase of cash outflows by $5.7 million.
(b) | Investing Activities |
Net cash used in investing activities for the six months ended June 30, 2023 was $24.0 million, as compared to net cash used in investing activities of $24.4 million for the same period of 2022, representing a decrease in net cash outflows by $0.4 million, which was mainly due to the net effect of (1) a decrease in purchase of short-term investments of $ 19.3 million, (2) an decrease in proceeds from maturities of short-term investments by $14.3 million, (3) an increase in payments to acquire investments under the equity method by $2.2 million, and (4) a combination of other factors contributing an increase of cash outflows by $2.4 million, primarily including a decrease in cash received from long-term investment by $2.1 million and an increase in payments to acquire intangible assets by $2.3 million.
(c) | Financing Activities |
Net cash used in financing activities for the six months ended June 30, 2023 was $5.6 million, compared to net cash provided in financing activities of $1.6 million for the same period of 2022, representing an increase in net cash outflows by $7.2 million, which was mainly due to the net effect of (1) an increase in repayment of bank loan by $6.9 million, (2) a decrease in proceeds from bank loan by $1.6 million, (3) a decrease in repayments of the borrowing for sale and leaseback transaction by $1.1 million, and (4) a combination of other factors contributing an increase of cash inflows by $0.2 million.
34
Off-Balance Sheet Arrangements
As of June 30, 2023 and December 31, 2022, the Company did not have any significant transactions, obligations or relationships that could be considered off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There were no material changes to the disclosure made in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 regarding this matter.
ITEM 4. CONTROLS AND PROCEDURES.
A. | Disclosure Controls and Procedures |
The Company’s management, under the supervision and with the participation of its chief executive officer and chief financial officer, Messrs. Wu Qizhou and Li Jie, respectively, evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2023, the end of the period covered by this Report. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this Form 10-Q, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, Messrs. Wu and Li concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2023.
The Company’s disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of its disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.
B. | Changes in Internal Control Over Financial Reporting |
There have been no changes in the Company’s internal control over financial reporting during the three months ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
35
PART II. — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any pending or, to the best of the Company’s knowledge, any threatened legal proceedings and no director, officer or affiliate of the Company, or owner of record of more than five percent of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.
ITEM 1A. RISK FACTORS.
There have been no material changes from the risk factors previously disclosed in Item 1A of the Company’s 2022 Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
36
ITEM 6. EXHIBITS.
INDEX TO EXHIBITS
Exhibit |
| Description |
|
|
|
3.1(i) |
| |
|
|
|
3.1(ii) |
| Bylaws (incorporated by reference from the Form 10SB12G File No. 000-33123). |
|
|
|
10.1 |
| |
|
|
|
10.2 |
| |
|
|
|
10.3 |
| |
|
|
|
31.1 |
| |
|
|
|
31.2 |
| |
|
|
|
32.1 |
| |
|
|
|
32.2 |
| |
|
|
|
101.INS* |
| XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
Exhibit 104* | Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
*filed herewith
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CHINA AUTOMOTIVE SYSTEMS, INC. | |
| (Registrant) | |
|
|
|
Date: August 11, 2023 | By: | / s/ Qizhou Wu |
| Qizhou Wu | |
|
| President and Chief Executive Officer |
|
|
|
Date: August 11, 2023 | By: | /s/ Jie Li |
|
| Jie Li |
|
| Chief Financial Officer |
38
Exhibit 31.1
RULE 13a-14(a) CERTIFICATION FOR FORM 10-Q
I, Qizhou Wu, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of China Automotive Systems, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 11, 2023 | By: | /s/ Qizhou Wu |
Qizhou Wu | ||
| President and Chief Executive Officer |
Exhibit 31.2
RULE 13a-14(a) CERTIFICATION FOR FORM 10-Q
I, Jie Li, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of China Automotive Systems, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 11, 2023 | By: | /s/ Jie Li |
| Jie Li | |
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of China Automotive Systems, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Qizhou Wu, the Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 11, 2023 | By: | /s/ Qizhou Wu |
| Qizhou Wu | |
| President and Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of China Automotive Systems, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jie Li, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 11, 2023 | By: | /s/ Jie Li |
| Jie Li | |
| Chief Financial Officer |
Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Revenue | $ 137,410 | $ 127,161 | $ 279,653 | $ 263,557 |
Cost of products sold | 114,692 | 104,450 | 235,317 | 226,112 |
Related parties | ||||
Revenue | 13,194 | 9,158 | 26,770 | 20,162 |
Cost of products sold | $ 7,311 | $ 6,496 | $ 14,326 | $ 14,036 |
Condensed Unaudited Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Condensed Unaudited Consolidated Balance Sheets | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 80,000,000 | 80,000,000 |
Common stock, shares issued | 32,338,302 | 32,338,302 |
Treasury stock, shares | 2,152,600 | 2,152,600 |
Condensed Unaudited Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Payments to acquire property, plant and equipment | $ 5,438 | $ 7,881 |
Related parties | ||
Payments to acquire property, plant and equipment | $ 2,022 | $ 2,143 |
Organization and business |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Business | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and business | 1. Organization and business China Automotive Systems, Inc., “China Automotive,” was incorporated in the State of Delaware on June 29, 1999 under the name Visions-In-Glass, Inc. China Automotive, including, when the context so requires, its subsidiaries described below, is referred to herein as the “Company.” The Company is primarily engaged in the manufacture and sale of automotive systems and components, as described below. Great Genesis Holdings Limited, a company incorporated in Hong Kong on January 3, 2003 under the Companies Ordinance in Hong Kong as a limited liability company, “Genesis,” is a wholly-owned subsidiary of the Company. Henglong USA Corporation, “HLUSA,” incorporated on January 8, 2007 in Troy, Michigan, is a wholly-owned subsidiary of the Company, and mainly engages in marketing of automotive parts in North America, and provides after-sales service and research and development support accordingly. The Company owns the following aggregate net interests in the following subsidiaries organized in the People’s Republic of China, the “PRC,” and Brazil as of June 30, 2023 and December 31, 2022.
|
Basis of presentation and significant accounting policies |
6 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Jun. 30, 2023 | |||||||
Basis of presentation and significant accounting policies | |||||||
Basis of presentation and significant accounting policies | 2. Basis of presentation and significant accounting policies
Basis of Presentation – The accompanying condensed unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. The details of subsidiaries are disclosed in Note 1. Significant inter-company balances and transactions have been eliminated upon consolidation. The condensed unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions in Regulation S-X. Accordingly they do not include all of the information and footnotes required by such accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of the Company’s management, contain all necessary adjustments, which include normal recurring adjustments, for a fair statement of the results of operations, financial position and cash flows for the interim periods presented. The condensed consolidated balance sheet as of December 31, 2022 is derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The results of operations for the three months and six months ended June 30, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023. Estimation - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Foreign Currencies - China Automotive and HLUSA maintain their books and records in United States Dollars, “USD,” their functional currency. The Company’s subsidiaries based in the PRC and Genesis maintain their books and records in Renminbi, “RMB,” their functional currency. The Company’s subsidiary based in Brazil maintains its books and records in Brazilian real, “BRL,” its functional currency. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 830, foreign currency transactions denominated in currencies other than the functional currency are remeasured into the functional currency at the rate of exchange prevailing at the balance sheet date for monetary items. Nonmonetary items are remeasured at historical rates. Income and expenses are remeasured at the rate in effect on the transaction dates. Transaction gains and losses, if any, are included in the determination of net income for the period.
No accounting standards newly issued during the three months ended June 30, 2023 had a material impact on the Company’s financial statements or disclosures.
There have been no updates to the significant accounting policies set forth in the notes to the consolidated financial statements for the year ended December 31, 2022. |
Accounts and notes receivable, net |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts and notes receivable, net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts and notes receivable, net | 3. Accounts and notes receivable, net The Company’s accounts and notes receivable, net as of June 30, 2023 and December 31, 2022 are summarized as follows (figures are in thousands of USD):
Notes receivable represent accounts receivable in the form of bills of exchange for which acceptances are guaranteed and settlements are handled by banks. As of June 30, 2023 and December 31, 2022, the Company pledged its notes receivable in amounts of $21.1 million and $13.7 million, respectively, as collateral for banks to endorse the payment of the Company’s notes payable to the noteholders upon maturity (See Note 8). Provision for doubtful accounts and notes receivable, as reversed in the unaudited consolidated statements of operations, amounted to $0.2 million and $0.5 million for the three and six months ended June 30,2023. Provision for doubtful accounts and notes receivable, as provided in the unaudited consolidated statements of operations, amounted to $0.6 million and $0.7 million for the three and six months ended June 30, 2022, respectively. During the three months ended June 30, 2023, the Company’s five largest customers accounted for 39.7% of its consolidated net product sales, with one customer individually accounting for more than 10% of consolidated net product sales, i.e., 17.4%. During the six months ended June 30, 2023, the Company's five largest customers accounted for 41.7% of its consolidated net product sales, with one customer accounting for more than 10% of consolidated net product sales, i.e., 20.0%. As of June 30, 2023, approximately 5.1% of accounts receivable were from trade transactions with the aforementioned customer. During the three months ended June 30, 2022, the Company’s five largest customers accounted for 44.9% of its consolidated net product sales, with one customer individually accounting for more than 10% of consolidated net product sales, i.e., 25.3%. During the six months ended June 30, 2022, the Company’s five largest customers accounted for 45.8% of its consolidated net product sales, with one customer accounting for more than 10% of consolidated net product sales, i.e., 23.6%. As of June 30, 2022, approximately 10.9% of accounts receivable were from trade transactions with the aforementioned customer. |
Inventories |
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Inventories | 4. Inventories The Company’s inventories as of June 30, 2023 and December 31, 2022 consisted of the following (figures are in thousands of USD):
The Company recorded $3.7 million and $1.6 million of inventory write-down to cost of products sold for the three months ended June 30, 2023 and 2022, respectively; and $4.9 million and $2.6 million for the six months ended June 30, 2023 and 2022, respectively. |
Long-term investments |
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Long-term Investments | 5. Long-term investments The Company’s long-term investments as of June 30, 2023 and December 31, 2022, are summarized as follows (figures are in thousands of USD):
The condensed financial information of the Company’s significant equity investee for the three and six months ended June 30, 2023 and 2022, Chongqing Venture Fund, is summarized as follows (figures are in thousands of USD):
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Property, plant and equipment, net |
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Property, plant and equipment, net | 6. Property, plant and equipment, net The Company’s property, plant and equipment, net as of June 30, 2023 and December 31, 2022 are summarized as follows (figures are in thousands of USD):
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Loans |
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Loans | 7. Loans Loans consist of the following as of June 30, 2023 and December 31, 2022 (figures are in thousands of USD):
The Company entered into credit facility agreements with various banks, which were secured by property, plant and equipment and land use rights of the Company. The total credit facility amount was $140.2 million and $148.3 million, respectively, as of June 30, 2023 and December 31, 2022. As of June 30, 2023 and December 31, 2022, the Company has drawn down loans under these facilities with an aggregate amount of $39.1 million and $46.2 million, respectively. The weighted average interest rate was 2.8% and 2.9% per annum, for the three months ending June 30, 2023 the year ended and December 31, 2022, respectively. The Company must use the loans for the purpose as prescribed in the loan contracts. If the Company fails to do so, it will be charged penalty interest and/or trigger early repayment. The Company complied with such financial covenants during the three months ended June 30, 2023. |
Accounts and notes payable |
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Accounts and notes payable | 8. Accounts and notes payable The Company’s accounts and notes payable as of June 30, 2023 and December 31, 2022 are summarized as follows (figures are in thousands of USD):
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Accrued expenses and other payables |
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Accrued expenses and other payables | 9. Accrued expenses and other payables The Company’s accrued expenses and other payables as of June 30, 2023 and December 31, 2022 are summarized as follows (figures are in thousands of USD):
For the three and six months ended June 30, 2023 and 2022, the warranties activities were as follows (figures are in thousands of USD):
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Fair value measurement |
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Fair value measurement |
The Company has entered into foreign exchange forward contracts with a local bank to reduce the exposure of significant changes in exchange rates between RMB and USD. Authoritative guidance requires companies to recognize all of the derivative financial instruments as either assets or liabilities at fair value in the consolidated balance sheets based upon quoted market prices for comparable instruments. The Company’s forward contracts have not met the criteria for hedge accounting within authoritative guidance. Therefore, the foreign exchange forward contracts have been recorded at fair value, with the gain or loss on these transactions recorded in the consolidated statements of operations within “other income, net” in the period in which they occur. The Company held foreign exchange forward contracts with a total notional value of $4.0 million and nil as of June 30, 2023 and December 31, 2022, respectively. These foreign exchange forward contracts will mature within 12 months. The Company used a discounted cash-flow methodology to measure fair value, which requires inputs such as interest yield curves and foreign exchange rates. The significant inputs used in the aforementioned model can be corroborated with market observable data and therefore the fair value measurements are classified as level 2. Typically, any losses or gains on the forward exchange contracts are offset by re-measurement losses or gains on the underlying balances denominated in non-functional currencies. The Company’s foreign currency exchange contracts are an over-the-counter instrument. The Company recorded loss from change in fair value of foreign exchange forward contracts of $0.1 million and nil during the six months ended June 30, 2023 and 2022. |
Redeemable non-controlling interests |
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Jun. 30, 2023 | |
Redeemable non-controlling interests | |
Redeemable non-controlling interests | 11. Redeemable non-controlling interests In September 2020, one of the Company’s subsidiaries issued shares to Hubei Venture Fund amounting to RMB 5.0 million, equivalent to approximately $0.7 million translated at spot rate of transaction date. The shares will be transferred to the Company and the other shareholder of the subsidiary on a pro rata basis at the holder’s option if the subsidiary fails to complete a qualified IPO in a pre-agreed period of time after their issuance with a transfer price of par plus 6.0% interest per year. As of June 30, 2023, $0.6 million of the shares are subject to purchase by the Company and are therefore accounted for as redeemable non-controlling interests in mezzanine equity. For the three and six months ended June 30, 2023, the Company recognized accretion of $0.007 million and $0.015 million, respectively, to the redemption value of the shares over the period starting from the issuance date with a corresponding reduction to retained earnings. For the three and six months ended June 30, 2022, the Company recognized accretion of $0.007 million and $0.015 million, respectively, to the redemption value of the shares over the period starting from the issuance date with a corresponding reduction to retained earnings. |
Additional paid-in capital |
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Additional paid-in capital | 12. Additional paid-in capital The Company’s positions in respect of the amounts of additional paid-in capital for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
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Retained earnings |
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Retained earnings | 13. Retained earnings Appropriated Pursuant to the relevant PRC laws, the profits distribution of the Company’s subsidiaries, which are based on their PRC statutory financial statements, are available for distribution in the form of cash dividends after these subsidiaries have paid all relevant PRC tax liabilities, provided for losses in previous years, and made appropriations to statutory surplus at 10% of their respective after-tax profits each year. When the statutory surplus reserve reaches 50% of the registered capital of a company, no additional reserve is required. For the three and six months ended June 30, 2023 and 2022, no statutory reserve was appropriated by the subsidiaries in China. The Company’s activities in respect of the amounts of appropriated retained earnings for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
Unappropriated The Company’s activities in respect of the amounts of the unappropriated retained earnings for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
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Accumulated other comprehensive income |
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Accumulated other comprehensive income | 14. Accumulated other comprehensive income The Company’s activities in respect of the amounts of accumulated other comprehensive income for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
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Treasury Stock |
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Treasury Stock | 15. Treasury stock Treasury stock represents shares repurchased by the Company that are no longer outstanding and are held by the Company. Treasury stock is accounted for under the cost method. On March 29, 2022, the Board of Directors of the Company approved a share repurchase program under which the Company was permitted to repurchase up to $5.0 million of its common stock from time to time in the open market at prevailing market prices not to exceed $4.00 per share through March 30, 2023. As of June 30, 2023 and December 31, 2022, the Company had repurchased 666,074 shares of the Company’s common stock under the program and the total number of shares held in treasury was 2,152,600. The repurchased shares are presented as “treasury stock” on the balance sheet. |
Non-controlling interests |
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Non-controlling interests | 16. Non-controlling interests The Company’s activities in respect of the amounts of the non-controlling interests’ equity for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
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Net product sales |
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Net product sales | 17. Net product sales Revenue Disaggregation Management has concluded that the disaggregation level is the same under both the revenue standard and the segment reporting standard. Please refer to Note 24. Payment to Customer The Company accounts for consideration payable to a customer as a reduction of revenue at the later of revenue recognition and the Company’s promise to pay the consideration. Contract Assets and Liabilities Contract assets, such as costs to obtain or fulfill contracts, are an insignificant component of the Company’s revenue recognition process. The majority of the Company’s cost of fulfillment as a manufacturer of products is classified as inventory, fixed assets and intangible assets, which are accounted for under the respective guidance for those asset types. Other costs of contract fulfillment are immaterial due to the nature of the Company’s products and their respective manufacturing processes. Contract liabilities are mainly customer deposits. As of June 30, 2023 and December 31, 2022, the Company has customer deposits of $8.3 million and $5.7 million, respectively, which were included in other current liabilities on the consolidated balance sheets. During the six months ended June 30, 2023, $5.1 million was received and $2.5 million (including $1.5 million from the beginning balance of customer deposits) was recognized as net product sales revenue. During the six months ended June 30, 2022, $2.8 million was received and $2.9 million (including $2.4 million from the beginning balance of customer deposits) was recognized as net product sales revenue. Customer deposits represent non-refundable cash deposits for customers to secure rights to an amount of products produced by the Company under supply agreements. When the products are shipped to customers, the Company will recognize revenue and bill the customers to reduce the amount of the customer deposit liability. |
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Financial income, net | 18. Financial income, net During the three and six months ended June 30, 2023 and 2022, the Company recorded financial income, net which is summarized as follows (figures are in thousands of USD):
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Income per share |
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Income per share | 19. Income per share Basic income per share is computed using the weighted average number of ordinary shares outstanding during the period. Diluted income per share is computed using the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the period. The dilutive effect of outstanding stock options is determined based on the treasury stock method. The calculations of basic and diluted income per share attributable to the parent company for the three months ended June 30, 2023 and 2022, were as follows (figures are in thousands of USD, except share and per share amounts):
The calculations of basic and diluted income per share attributable to the parent company for the six months ended June 30, 2023 and 2022, were as follows (figures are in thousands of USD, except share and per share amounts):
As of June 30, 2023 and 2022, the exercise prices for 22,500 and 30,000 outstanding stock options exceeded the weighted average market price of the Company’s common stock during the three months ended June 30, 2023 and 2022, respectively. Therefore, these stock options were excluded in the calculation of the diluted income per share for the corresponding periods presented. As of June 30, 2023 and 2022, the exercise prices for 22,500 and 30,000 outstanding stock options exceeded the weighted average market price of the Company’s common stock during the six months ended June 30, 2023 and 2022, respectively. Therefore, these stock options were excluded from the calculation of the diluted income per share for the corresponding periods presented. |
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Significant concentrations | 20. Significant concentrations A significant portion of the Company’s business is conducted in China where the currency is the RMB. Regulations in China permit foreign owned entities to freely convert the RMB into foreign currency for transactions that fall under the “current account”, which includes trade related receipts and payments, interest and dividends. Accordingly, the Company’s Chinese subsidiaries may use RMB to purchase foreign currency for settlement of such “current account” transactions without pre-approval. China Automotive, the parent company, may depend on dividend payments from Genesis and HLUSA, which are generated from their subsidiaries in China, “China-based Subsidiaries,” after they receive payments from the China-based Subsidiaries. Regulations in the PRC currently permit payment of dividends of a PRC company only out of accumulated profits as determined in accordance with accounting standards and regulations in China. Under PRC law China-based Subsidiaries are required to set aside at least 10% of their after-tax profit based on PRC accounting standards each year to their general reserves until the cumulative amount reaches 50% of their paid-in capital. These reserves are not distributable as cash dividends, or as loans or advances. These foreign-invested enterprises may also allocate a portion of their after-tax profits, at the discretion of their boards of directors, to their staff welfare and bonus funds. Any amounts so allocated may not be distributed and, accordingly, would not be available for distribution to Genesis and HLUSA. The PRC government also imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currencies out of China. The China-based Subsidiaries may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currencies. If China Automotive is unable to receive dividend payments from its subsidiaries, including the China-based subsidiaries, China Automotive may be unable to effectively finance its operations or pay dividends on its shares. Transactions other than those that fall under the “current account” and that involve conversion of RMB into foreign currency are classified as “capital account” transactions; examples of “capital account” transactions include repatriations of investment by or loans to foreign owners, or direct equity investments in a foreign entity by a China domiciled entity. “Capital account” transactions require prior approval from China’s State Administration of Foreign Exchange, or SAFE, or its provincial branch to convert a remittance into a foreign currency, such as U.S. Dollars, and transmit the foreign currency outside of China. This system could be changed at any time and any such change may affect the ability of the Company or its subsidiaries in China to repatriate capital or profits, if any, outside China. Furthermore, SAFE has a significant degree of administrative discretion in implementing the laws and has used this discretion to limit convertibility of current account payments out of China. Whether as a result of a deterioration in the Chinese balance of payments, a shift in the Chinese macroeconomic prospects or any number of other reasons, China could impose additional restrictions on capital remittances abroad. As a result of these and other restrictions under the laws and regulations of the People’s Republic of China, or the PRC, the Company’s China subsidiaries are restricted in their ability to transfer a portion of their net assets to the parent. The Company has no assurance that the relevant Chinese governmental authorities in the future will not limit further or eliminate the ability of the Company’s China subsidiaries to purchase foreign currencies and transfer such funds to the Company to meet its liquidity or other business needs. Any inability to access funds in China, if and when needed for use by the Company outside of China, could have a material and adverse effect on the Company’s liquidity and its business. |
Related party transactions and balances |
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Related party transactions and balances | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related party transactions and balances | 21. Related party transactions and balances Related party transactions are as follows (figures are in thousands of USD): Related party sales
Related party purchases
Related party investment transaction
Related party receivables
Related party advance payments
Related party payables
These transactions were consummated under similar terms as those with the Company’s third-party customers and suppliers. As of August 11, 2023, Hanlin Chen, the chairman of the board of directors of the Company, owns 59.13% of the common stock of the Company and has the effective power to control the vote on substantially all significant matters without the approval of other stockholders. |
Commitments and contingencies |
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Commitments and contingencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and contingencies | 22. Commitments and contingencies Legal proceedings The Company is not a party to any pending or, to the best of the Company’s knowledge, any threatened legal proceedings and no director, officer or affiliate of the Company, or owner of record of more than five percent of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation. Other commitments and contingencies In addition to the bank loans, notes payables and the related interest and other payables, the following table summarizes the Company’s major commitments and contingencies as of June 30, 2023 (figures are in thousands of USD):
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Off-balance sheet arrangements |
6 Months Ended |
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Jun. 30, 2023 | |
Off-balance sheet arrangements | |
Off-balance sheet arrangements | 23. Off-balance sheet arrangements As of June 30, 2023 and December 31, 2022, the Company did not have any significant transactions, obligations or relationships that could be considered off-balance sheet arrangements.
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Segment reporting |
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Segment reporting | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment reporting | 24. Segment reporting The accounting policies of the product sectors (each entity manufactures and sells different products and represents a different product sector) are the same as those described in the summary of significant accounting policies disclosed in the Company’s 2022 Annual Report on Form 10-K except that the disaggregated financial results for the product sectors have been prepared using a management approach, which is consistent with the basis and manner in which management internally disaggregates financial information for the purposes of assisting them in making internal operating decisions. Generally, the Company evaluates performance based on stand-alone product sector operating income and accounts for inter-segment sales and transfers as if the sales or transfers were to third parties, at current market prices. Each product sector is considered a reporting segment. As of June 30, 2023, the Company had 16 product sectors, six of which were principal profit makers and were reported as separate sectors and engaged in the production and sales of power steering (Henglong, Jiulong, Wuhu, Henglong KYB, Hubei Henglong and Brazil Henglong), and one holding company (Genesis). The other ten sectors were engaged in the development, manufacturing and sale of high polymer materials (Wuhu Hongrun), power steering parts (Shenyang), R&D services (Changchun Hualong), automobile steering columns (Jielong), provision of after-sales and R&D services (HLUSA), production and sale of power steering (Chongqing Henglong), manufacture and sales of automobile electronic systems and parts (Wuhan Chuguanjie), research and development of intelligent automotive technology (Jingzhou Qingyan), manufacture and sales of automotive motors and electromechanical integrated systems (Wuhan Hyoseong) and inspection and testing of automotive products (Zhirong). As of June 30, 2022, the Company had 15 product sectors, six of which were principal profit makers and were reported as separate sectors and engaged in the production and sales of power steering (Henglong, Jiulong, Wuhu, Henglong KYB, Hubei Henglong and Brazil Henglong), and one holding company (Genesis). The other nine sectors were engaged in the development, manufacturing and sale of high polymer materials (Wuhu Hongrun), power steering parts (Shenyang), R&D services (Changchun Hualong), automobile steering columns (Jielong), provision of after-sales and R&D services (HLUSA), production and sale of power steering (Chongqing Henglong), manufacture and sales of automobile electronic systems and parts (Wuhan Chuguanjie), research and development of intelligent automotive technology (Jingzhou Qingyan) and manufacture and sales of automotive motors and electromechanical integrated systems (Wuhan Hyoseong). The Company’s product sector information for the three and six months ended June 30, 2023 and 2022, is as follows (figures are in thousands of USD):
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Basis of presentation and significant accounting policies (Policies) |
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Jun. 30, 2023 | |||
Basis of presentation and significant accounting policies | |||
Basis of Presentation |
Basis of Presentation – The accompanying condensed unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. The details of subsidiaries are disclosed in Note 1. Significant inter-company balances and transactions have been eliminated upon consolidation. The condensed unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions in Regulation S-X. Accordingly they do not include all of the information and footnotes required by such accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of the Company’s management, contain all necessary adjustments, which include normal recurring adjustments, for a fair statement of the results of operations, financial position and cash flows for the interim periods presented. The condensed consolidated balance sheet as of December 31, 2022 is derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The results of operations for the three months and six months ended June 30, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023. Estimation - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Foreign Currencies - China Automotive and HLUSA maintain their books and records in United States Dollars, “USD,” their functional currency. The Company’s subsidiaries based in the PRC and Genesis maintain their books and records in Renminbi, “RMB,” their functional currency. The Company’s subsidiary based in Brazil maintains its books and records in Brazilian real, “BRL,” its functional currency. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 830, foreign currency transactions denominated in currencies other than the functional currency are remeasured into the functional currency at the rate of exchange prevailing at the balance sheet date for monetary items. Nonmonetary items are remeasured at historical rates. Income and expenses are remeasured at the rate in effect on the transaction dates. Transaction gains and losses, if any, are included in the determination of net income for the period. |
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Recent Accounting Pronouncements |
No accounting standards newly issued during the three months ended June 30, 2023 had a material impact on the Company’s financial statements or disclosures. |
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Significant Accounting Policies |
There have been no updates to the significant accounting policies set forth in the notes to the consolidated financial statements for the year ended December 31, 2022. |
Organization and business (Tables) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedule of equity method investments |
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Accounts and notes receivable, net (Tables) |
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts and notes receivable, net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accounts and notes receivable, net | The Company’s accounts and notes receivable, net as of June 30, 2023 and December 31, 2022 are summarized as follows (figures are in thousands of USD):
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Inventories (Tables) |
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | ||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventories | The Company’s inventories as of June 30, 2023 and December 31, 2022 consisted of the following (figures are in thousands of USD):
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Long-term investments (Tables) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term investments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term investments | The Company’s long-term investments as of June 30, 2023 and December 31, 2022, are summarized as follows (figures are in thousands of USD):
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Summary of condensed financial information of company's equity method investments | The condensed financial information of the Company’s significant equity investee for the three and six months ended June 30, 2023 and 2022, Chongqing Venture Fund, is summarized as follows (figures are in thousands of USD):
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Property, plant and equipment, net (Tables) |
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedule of property, plant and equipment | The Company’s property, plant and equipment, net as of June 30, 2023 and December 31, 2022 are summarized as follows (figures are in thousands of USD):
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Loans (Tables) |
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Loans | ||||||||||||||||||||||||||||||||||||
Schedule of loans |
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Accounts and notes payable (Tables) |
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts and notes payable | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accounts and notes payable | The Company’s accounts and notes payable as of June 30, 2023 and December 31, 2022 are summarized as follows (figures are in thousands of USD):
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Accrued expenses and other payables (Tables) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued expenses and other payables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accrued expenses and other payables | The Company’s accrued expenses and other payables as of June 30, 2023 and December 31, 2022 are summarized as follows (figures are in thousands of USD):
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Schedule of product warranty liability | For the three and six months ended June 30, 2023 and 2022, the warranties activities were as follows (figures are in thousands of USD):
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Additional paid-in capital (Tables) |
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional paid-in capital | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of additional paid-in capital | The Company’s positions in respect of the amounts of additional paid-in capital for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
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Retained earnings (Tables) |
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retained earnings | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of appropriated retained earnings | The Company’s activities in respect of the amounts of appropriated retained earnings for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
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Schedule of unappropriated retained earnings | The Company’s activities in respect of the amounts of the unappropriated retained earnings for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
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Accumulated other comprehensive income (Tables) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accumulated other comprehensive income | The Company’s activities in respect of the amounts of accumulated other comprehensive income for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
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Non-controlling interests (Tables) |
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-controlling interests | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of non-controlling interests | The Company’s activities in respect of the amounts of the non-controlling interests’ equity for the three and six months ended June 30, 2023 and 2022, are summarized as follows (figures are in thousands of USD):
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Financial income, net (Tables) |
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedule of recorded Financial income, net | During the three and six months ended June 30, 2023 and 2022, the Company recorded financial income, net which is summarized as follows (figures are in thousands of USD):
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Income per share (Tables) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income per share | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of basic and diluted income per share | The calculations of basic and diluted income per share attributable to the parent company for the three months ended June 30, 2023 and 2022, were as follows (figures are in thousands of USD, except share and per share amounts):
The calculations of basic and diluted income per share attributable to the parent company for the six months ended June 30, 2023 and 2022, were as follows (figures are in thousands of USD, except share and per share amounts):
|
Related party transactions and balances (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related party transactions and balances | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of related party transactions | Related party transactions are as follows (figures are in thousands of USD): Related party sales
Related party purchases
Related party investment transaction
Related party receivables
Related party advance payments
Related party payables
|
Commitments and contingencies (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and contingencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of major commitments and contingencies | In addition to the bank loans, notes payables and the related interest and other payables, the following table summarizes the Company’s major commitments and contingencies as of June 30, 2023 (figures are in thousands of USD):
|
Segment reporting (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment reporting | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of product sector information by reporting segments | The Company’s product sector information for the three and six months ended June 30, 2023 and 2022, is as follows (figures are in thousands of USD):
|
Organization and Business (Details) |
Jun. 30, 2023 |
Dec. 31, 2022 |
Apr. 30, 2020 |
Dec. 31, 2019 |
Mar. 31, 2019 |
Aug. 31, 2018 |
May 31, 2017 |
||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jiulong | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | [1] | 100.00% | 100.00% | ||||||||||||||||||||||||||||||||||
Henglong | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | [2] | 100.00% | 100.00% | ||||||||||||||||||||||||||||||||||
Shenyang | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | [3] | 70.00% | 70.00% | ||||||||||||||||||||||||||||||||||
Wuhan Jielong Electric Power Steering Co., Ltd., "Jielong" | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | [4] | 85.00% | 85.00% | ||||||||||||||||||||||||||||||||||
Wuhu | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | [5] | 100.00% | 100.00% | ||||||||||||||||||||||||||||||||||
Hubei Henglong | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | [6] | 100.00% | 100.00% | ||||||||||||||||||||||||||||||||||
Jingzhou Henglong Automotive Technology (Testing) Center, "Testing Center" | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | [7] | 100.00% | 100.00% | ||||||||||||||||||||||||||||||||||
Chongqing Henglong Hongyan Automotive System Co., Ltd "Chongqing Henglong" | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | [8] | 70.00% | 70.00% | ||||||||||||||||||||||||||||||||||
CAAS Brazil's Imports and Trade In Automotive Parts Ltd., "Brazil Henglong" | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | [9] | 95.84% | 95.84% | ||||||||||||||||||||||||||||||||||
Hubei Henglong Group Shanghai Automotive Electronics Research and Development Ltd., "Shanghai Henglong" | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | [10] | 100.00% | 100.00% | ||||||||||||||||||||||||||||||||||
Wuhan Chuguanjie Automotive Science and Technology Ltd., "Wuhan Chuguanjie" | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | [11] | 85.00% | 85.00% | ||||||||||||||||||||||||||||||||||
Hubei Henglong & KYB Automobile Electric Steering System Co., Ltd., "Henglong KYB" | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | 66.60% | [12] | 66.60% | [12] | 66.60% | ||||||||||||||||||||||||||||||||
Hyoseong (Wuhan) Motion Mechatronics System Co., Ltd., "Wuhan Hyoseong" | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | 51.00% | [13] | 51.00% | [13] | 51.00% | ||||||||||||||||||||||||||||||||
Wuhu Hongrun New Material Co., Ltd., "Wuhu Hongrun" | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | [14] | 62.00% | 62.00% | ||||||||||||||||||||||||||||||||||
Changchun Hualong Automotive Technology Co Ltd Changchun Hualong | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | 100.00% | 100.00% | 100.00% | ||||||||||||||||||||||||||||||||||
Brazil Henglong | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | 15.84% | ||||||||||||||||||||||||||||||||||||
Third Party | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | 47.90% | ||||||||||||||||||||||||||||||||||||
Hubei Henglong formed Wuhu Hongrun New Material Co., Ltd "Wuhu Hongrun" | |||||||||||||||||||||||||||||||||||||
Organization and business | |||||||||||||||||||||||||||||||||||||
Percentage Interest | 62.00% | ||||||||||||||||||||||||||||||||||||
|
Organization and Business - Additional Information (Details) ¥ in Millions, $ in Millions |
1 Months Ended | |||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2021
CNY (¥)
|
Jun. 30, 2021
USD ($)
|
Apr. 30, 2020
CNY (¥)
|
Apr. 30, 2020
USD ($)
|
Jun. 30, 2023 |
Dec. 31, 2022 |
Dec. 31, 2019 |
Mar. 31, 2019 |
Aug. 31, 2018 |
May 31, 2017 |
|||||||||||||||||||||||||||||||||
Henglong | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | [1] | 100.00% | 100.00% | |||||||||||||||||||||||||||||||||||||||
Jiulong | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | [2] | 100.00% | 100.00% | |||||||||||||||||||||||||||||||||||||||
Shenyang | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | [3] | 70.00% | 70.00% | |||||||||||||||||||||||||||||||||||||||
Wuhan Jielong Electric Power Steering Co., Ltd., "Jielong" | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | [4] | 85.00% | 85.00% | |||||||||||||||||||||||||||||||||||||||
Wuhu | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | [5] | 100.00% | 100.00% | |||||||||||||||||||||||||||||||||||||||
Hubei Henglong | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | [6] | 100.00% | 100.00% | |||||||||||||||||||||||||||||||||||||||
Consideration for additional equity interest acquired | ¥ 155.2 | $ 24.5 | ||||||||||||||||||||||||||||||||||||||||
Chongqing Henglong Hongyan Automotive System Co., Ltd "Chongqing Henglong" | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | [7] | 70.00% | 70.00% | |||||||||||||||||||||||||||||||||||||||
CAAS Brazil's Imports and Trade In Automotive Parts Ltd., "Brazil Henglong" | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | [8] | 95.84% | 95.84% | |||||||||||||||||||||||||||||||||||||||
Wuhan Chuguanjie Automotive Science and Technology Ltd., "Wuhan Chuguanjie" | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | [9] | 85.00% | 85.00% | |||||||||||||||||||||||||||||||||||||||
Changchun Hualong Automotive Technology Co Ltd Changchun Hualong | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | 100.00% | 100.00% | 100.00% | 100.00% | ||||||||||||||||||||||||||||||||||||||
Consideration for additional equity interest acquired | ¥ 1.2 | $ 0.2 | ||||||||||||||||||||||||||||||||||||||||
Hyoseong (Wuhan) Motion Mechatronics System Co., Ltd., "Wuhan Hyoseong" | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | 51.00% | [10] | 51.00% | [10] | 51.00% | |||||||||||||||||||||||||||||||||||||
Brazil Henglong | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | 15.84% | |||||||||||||||||||||||||||||||||||||||||
Third Party | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | 47.90% | 47.90% | ||||||||||||||||||||||||||||||||||||||||
Hubei Henglong formed Wuhu Hongrun New Material Co., Ltd "Wuhu Hongrun" | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | 62.00% | |||||||||||||||||||||||||||||||||||||||||
Wuhu Hongrun New Material Co., Ltd., "Wuhu Hongrun" | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | [11] | 62.00% | 62.00% | |||||||||||||||||||||||||||||||||||||||
Hubei Henglong & KYB Automobile Electric Steering System Co., Ltd., "Henglong KYB" | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | 66.60% | [12] | 66.60% | [12] | 66.60% | |||||||||||||||||||||||||||||||||||||
Jingzhou Henglong Automotive Technology (Testing) Center, "Testing Center" | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | [13] | 100.00% | 100.00% | |||||||||||||||||||||||||||||||||||||||
Hubei Henglong Group Shanghai Automotive Electronics Research and Development Ltd., "Shanghai Henglong" | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | [14] | 100.00% | 100.00% | |||||||||||||||||||||||||||||||||||||||
Hubei Zhirong Automobile Technology Co., Ltd., "Zhirong" | ||||||||||||||||||||||||||||||||||||||||||
Organization and business | ||||||||||||||||||||||||||||||||||||||||||
Equity method investment, ownership percentage | [15] | 100.00% | ||||||||||||||||||||||||||||||||||||||||
|
Accounts and notes receivable, net - Advance Payments (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Accounts and Notes Receivable | ||
Accounts and notes receivable, net | $ 234,040 | $ 224,324 |
Unrelated parties | ||
Accounts and Notes Receivable | ||
Accounts receivable - unrelated parties | 135,587 | 139,533 |
Notes receivable - unrelated parties | 95,375 | 89,134 |
Total accounts and notes receivable | 230,962 | 228,667 |
Less: allowance for credit losses | (13,469) | (14,359) |
Accounts and notes receivable, net | 217,493 | 214,308 |
Related parties | ||
Accounts and Notes Receivable | ||
Total accounts and notes receivable | 18,177 | 11,779 |
Less: allowance for credit losses | (1,630) | (1,763) |
Accounts and notes receivable, net | $ 16,547 | $ 10,016 |
Accounts and Notes Receivable - Additional Information (Details) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2023
USD ($)
customer
|
Jun. 30, 2022
USD ($)
customer
|
Jun. 30, 2023
USD ($)
customer
|
Jun. 30, 2022
USD ($)
customer
|
Dec. 31, 2022
USD ($)
|
|
Accounts and Notes Receivable | |||||
Notes receivable pledged as collateral | $ 21.1 | $ 21.1 | $ 13.7 | ||
Allowance for accounts and notes receivable | $ (0.2) | $ 0.6 | $ 0.5 | $ 0.7 | |
Five largest customers | Revenue | Product Concentration Risk | |||||
Accounts and Notes Receivable | |||||
Number of customers | customer | 5 | 5 | 5 | 5 | |
Concentration risk (as a percent) | 39.70% | 44.90% | 41.70% | 45.80% | |
Five largest customers | Accounts receivable | Credit concentration risk | |||||
Accounts and Notes Receivable | |||||
Concentration risk (as a percent) | 5.10% | 10.90% | |||
Customer One | Revenue | Product Concentration Risk | |||||
Accounts and Notes Receivable | |||||
Concentration risk (as a percent) | 17.40% | 25.30% | 20.00% | 23.60% |
Inventories (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Inventories | ||
Raw materials | $ 21,747 | $ 24,502 |
Work in process | 16,813 | 16,001 |
Finished goods | 59,775 | 71,371 |
Cost of R&D service | 1,930 | 362 |
Total | $ 100,262 | $ 112,236 |
Inventories - Additional information (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Inventories | ||||
Inventory write-down to cost of product sold | $ 3.7 | $ 1.6 | $ 4.9 | $ 2.6 |
Long-term investments (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Long-term investments | ||
Long-term investments | $ 62,179 | $ 59,810 |
Chongqing Venture Fund | ||
Long-term investments | ||
Long-term investments | 14,138 | 14,435 |
Hubei Venture Fund | ||
Long-term investments | ||
Long-term investments | 11,214 | 11,738 |
Suzhou Venture Fund | ||
Long-term investments | ||
Long-term investments | 4,848 | 5,473 |
Suzhou Mingzhi | ||
Long-term investments | ||
Long-term investments | 1,246 | |
Suzhou Qingshan | ||
Long-term investments | ||
Long-term investments | 8,148 | 4,179 |
Sentient AB | ||
Long-term investments | ||
Long-term investments | 20,581 | 21,831 |
Henglong Tianyu | ||
Long-term investments | ||
Long-term investments | 730 | 774 |
Chongqing Jinghua | ||
Long-term investments | ||
Long-term investments | 623 | 695 |
Jiangsu Intelligent | ||
Long-term investments | ||
Long-term investments | $ 651 | $ 685 |
Long-term investments - Summarizes of Condensed Financial Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Long-term investments | ||||
Revenue | $ 137,410 | $ 127,161 | $ 279,653 | $ 263,557 |
Gross profit | 22,718 | 22,711 | 44,336 | 37,445 |
Net gain/(loss) | 10,466 | 9,428 | 17,286 | 9,369 |
Equity Method Investments | Chongqing Venture Fund | ||||
Long-term investments | ||||
Gain/(loss) from continuing operations | (1,286) | (2,338) | 1,387 | (14,994) |
Net gain/(loss) | $ (1,286) | $ (2,338) | $ 1,387 | $ (14,994) |
Long-term investments - Additional information (Details) ¥ in Millions, $ in Millions |
1 Months Ended | 6 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2023
CNY (¥)
|
Jun. 30, 2023
USD ($)
|
Jun. 30, 2021
CNY (¥)
shares
|
Jun. 30, 2021
USD ($)
shares
|
Jun. 30, 2023
director
|
Dec. 31, 2022 |
|||
Hubei Henglong | ||||||||
Long-term investments | ||||||||
Purchase of common stock shares | shares | 200 | 200 | ||||||
Equity method investment, ownership percentage | [1] | 100.00% | 100.00% | 100.00% | 100.00% | |||
Consideration for additional equity interest acquired | ¥ 155.2 | $ 24.5 | ||||||
Number of board of directors | director | 2 | |||||||
Suzhou Qingshan | ||||||||
Long-term investments | ||||||||
Equity method investment, ownership percentage | 22.56% | 22.56% | 22.56% | |||||
Consideration for additional equity interest acquired | ¥ 60.0 | $ 9.1 | ||||||
Sentient AB | ||||||||
Long-term investments | ||||||||
Equity method investment, ownership percentage | 40.00% | 40.00% | ||||||
Suzhou Mingzhi | ||||||||
Long-term investments | ||||||||
Equity method investment, ownership percentage | 19.74% | 19.74% | 19.74% | |||||
Consideration for additional equity interest acquired | ¥ 9.0 | $ 1.2 | ||||||
|
Property, plant and equipment, net (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Property, Plant and Equipment | ||
Total amount of property, plant and equipment | $ 313,224 | $ 323,101 |
Less: Accumulated depreciation | (213,877) | (216,495) |
Total amount of property, plant and equipment, net | 99,347 | 106,606 |
Building | ||
Property, Plant and Equipment | ||
Total amount of property, plant and equipment | 62,726 | 64,928 |
Machinery and equipment | ||
Property, Plant and Equipment | ||
Total amount of property, plant and equipment | 232,846 | 239,385 |
Electronic equipment | ||
Property, Plant and Equipment | ||
Total amount of property, plant and equipment | 5,768 | 6,242 |
Motor vehicles | ||
Property, Plant and Equipment | ||
Total amount of property, plant and equipment | 4,382 | 4,308 |
Construction in progress | ||
Property, Plant and Equipment | ||
Total amount of property, plant and equipment | $ 7,484 | $ 8,238 |
Property, plant and equipment, net - Additional information (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
Property, plant and equipment, net | |||||
Depreciation | $ 4.3 | $ 5.6 | $ 8.8 | $ 11.5 | |
Pledged property, plant and equipment with net book value | $ 46.3 | $ 46.3 | $ 51.6 |
Loans (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Loans | ||
Short-term bank loans | $ 38,457 | $ 45,671 |
Long-term bank loans | 692 | 528 |
Total | $ 39,149 | $ 46,199 |
Loans - Additional Information (Details) - USD ($) $ in Millions |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
|
Loans | ||
Line of credit facility, maximum borrowing capacity | $ 140.2 | $ 148.3 |
Proceeds from credit facility | $ 39.1 | $ 46.2 |
Weighted average interest rate | 2.80% | 2.90% |
Accounts and notes payable (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Accounts and notes payable | ||
Accounts and notes payable | $ 216,713 | $ 235,107 |
Unrelated parties | ||
Accounts and notes payable | ||
Accounts payable - unrelated parties | 125,911 | 133,882 |
Notes payable - unrelated parties | 80,040 | 84,530 |
Accounts and notes payable | 205,951 | 218,412 |
Related parties | ||
Accounts and notes payable | ||
Accounts and notes payable | $ 10,762 | $ 16,695 |
Accounts and notes payable - Additional Information (Details) - USD ($) $ in Millions |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Accounts and Notes Payable [Line Items] | ||
Cash Pledged As Collateral | $ 29.9 | $ 37.6 |
Notes receivable pledged as collateral | 21.1 | 13.7 |
Property, plant and equipment and land use right pledged as collateral | $ 33.4 | $ 39.6 |
Accrued expenses and other payables (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Accrued expenses and other payables | ||
Warranty reserves | $ 33,948 | $ 32,435 |
Accrued expenses | 8,963 | 9,652 |
Payables for overseas transportation and custom clearance | 622 | 294 |
Dividends payable to holders of non-controlling interests | 415 | 431 |
Accrued interest | 91 | 465 |
Payable for the investment in Sentient AB | 2,043 | |
Other payables | 1,933 | 2,991 |
Balance at end of year/period | $ 45,972 | $ 48,311 |
Accrued expenses and other payables - Warranty (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Accrued expenses and other payables | ||||
Balance at beginning of the period | $ 34,032 | $ 37,128 | $ 32,435 | $ 36,572 |
Additions during the period | 4,817 | 3,085 | 9,428 | 6,973 |
Settlement within the period | (3,185) | (3,178) | (6,633) | (6,654) |
Foreign currency translation loss | (1,716) | (2,007) | (1,282) | (1,863) |
Balance at end of the period | $ 33,948 | $ 35,028 | $ 33,948 | $ 35,028 |
Fair value measurement (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Foreign exchange forward contracts with total notional value | $ 4 | $ 0 | |
Loss from change in fair value of foreign exchange forward contracts | $ 100 | $ 0 | |
Foreign exchange forward contracts | |||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Foreign exchange forward contracts mature | 12 months |
Redeemable non-controlling interests (Details) $ in Thousands, ¥ in Millions |
1 Months Ended | 3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|---|
Sep. 30, 2020
CNY (¥)
|
Sep. 30, 2020
USD ($)
|
Jun. 30, 2023
USD ($)
|
Jun. 30, 2022
USD ($)
|
Jun. 30, 2023
USD ($)
|
Jun. 30, 2022
USD ($)
|
|
Redeemable non-controlling interests | ||||||
Percentage of interest, redemption price | 6.00% | 6.00% | ||||
Accretion of temporary equity redemption value | $ 600 | |||||
Temporary equity accretion to redemption value, adjustment | $ 7 | $ 7 | $ 15 | $ 15 | ||
Hubei Venture Fund | ||||||
Redeemable non-controlling interests | ||||||
Issuance of shares by a subsidiary | ¥ 5.0 | $ 700 |
Additional paid-in capital (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Mar. 31, 2023 |
Dec. 31, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
---|---|---|---|---|---|
Additional paid-in capital | |||||
Balance at beginning of the period | $ 63,731 | $ 63,731 | $ 63,731 | $ 63,731 | $ 63,731 |
Balance at end of the period | $ 63,731 | $ 63,731 | $ 63,731 | $ 63,731 | $ 63,731 |
Retained earnings (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Retained earnings | ||||
Statutory accounting practices statutory surplus required percentage | 10.00% | |||
Percentage of statutory surplus reserve | 50.00% | |||
Statutory accounting practices statutory capital and surplus required | $ 0 | $ 0 | ||
Statutory accounting practices statutory capital and surplus reserve | $ 0 | $ 0 | $ 0 | $ 0 |
Retained earnings - Appropriated (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Mar. 31, 2023 |
Dec. 31, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
---|---|---|---|---|---|
Retained earnings | |||||
Balance at beginning of the period | $ 11,851 | $ 11,851 | $ 11,481 | $ 11,481 | $ 11,481 |
Balance at end of the period | $ 11,851 | $ 11,851 | $ 11,851 | $ 11,481 | $ 11,481 |
Retained earnings - Unappropriated (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Retained earnings | ||||
Balance at beginning of the period | $ 253,994 | $ 226,304 | $ 247,174 | $ 226,363 |
Net income attributable to parent company | 10,473 | 9,435 | 17,301 | 9,384 |
Accretion of redeemable non-controlling interests | (7) | (7) | (15) | (15) |
Balance at end of the period | $ 264,460 | $ 235,732 | $ 264,460 | $ 235,732 |
Accumulated other comprehensive income (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Accumulated other comprehensive income | ||||
Balance at beginning of the period | $ 875 | $ 26,065 | $ (3,413) | $ 24,717 |
Foreign currency translation adjustment attributable to parent company | (15,811) | (17,913) | (11,523) | (16,565) |
Balance at end of the period | $ (14,936) | $ 8,152 | $ (14,936) | $ 8,152 |
Treasury stock (Details) - USD ($) $ / shares in Units, $ in Millions |
6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 29, 2022 |
Jun. 30, 2023 |
Dec. 31, 2022 |
Mar. 30, 2023 |
|
Treasury stock | ||||
Stock repurchased during period | 666,074 | 666,074 | ||
Treasury stock, shares | 2,152,600 | 2,152,600 | ||
Maximum | ||||
Treasury stock | ||||
Stock repurchased during period, value | $ 5.0 | |||
Share price per share through March 30, 2023 | $ 4.00 |
Non-controlling interests (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Non-controlling interests | ||||
Balance at beginning of the period | $ 16,503 | $ 16,143 | $ 15,182 | $ 15,854 |
Net income attributable to non-controlling interests | 995 | 500 | 2,050 | 700 |
Foreign currency translation adjustment attributable to non-controlling interests | (1,075) | (1,142) | (809) | (1,053) |
Balance at end of the period | $ 16,423 | $ 15,501 | $ 16,423 | $ 15,501 |
Net product sales (Details) - USD ($) $ in Millions |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
Net Product Sales | |||
Contract with customer, deposits | $ 8.3 | $ 5.7 | |
Revenue from contract with customer, including assessed tax | 5.1 | $ 2.8 | |
Customer deposits recognized as net product sales revenue | 2.5 | 2.9 | |
Customer deposits from the beginning balance recognized as net product sales revenue | $ 1.5 | $ 2.4 |
Financial income, net (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Financial income, net | ||||
Interest income | $ 346 | $ 312 | $ 565 | $ 562 |
Foreign exchange gain, net | 3,673 | 2,325 | 3,108 | 4,236 |
Bank charges | (56) | (94) | (132) | (240) |
Total financial income, net | $ 3,963 | $ 2,543 | $ 3,541 | $ 4,558 |
Income per share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Numerator: | ||||
Net income attributable to the parent company's common shareholders - Basic and Diluted | $ 10,466 | $ 9,428 | $ 17,286 | $ 9,369 |
Denominator: | ||||
Weighted average shares outstanding | 30,185,702 | 30,847,706 | 30,185,702 | 30,849,730 |
Dilutive effects of stock options | 3,835 | 1,303 | 5,607 | 1,129 |
Denominator for dilutive income per share - Diluted | 30,189,537 | 30,849,009 | 30,191,309 | 30,850,859 |
Net income per share attributable to parent company's common shareholders - Basic | $ 0.35 | $ 0.31 | $ 0.57 | $ 0.30 |
Net income per share attributable to parent company's common shareholders - Diluted | $ 0.35 | $ 0.31 | $ 0.57 | $ 0.30 |
Income Per Share - Additional Information (Details) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Equity Option | ||||
Income per share | ||||
Ordinary shares excluded from the computation of diluted net loss per ordinary share | 22,500 | 30,000 | 22,500 | 30,000 |
Significant concentrations (Details) |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Significant concentrations | |
Minimum percentage of profit allocated to foreign investment | 10.00% |
Registered capital percentage | 50.00% |
Related party transactions and balances - Additional Information (Details) |
Aug. 11, 2023 |
Apr. 30, 2020 |
---|---|---|
Hanlin Chen | ||
Related party transactions and balances | ||
Equity method investment, ownership percentage | 59.13% | 52.10% |
Commitments and contingencies (Details) $ in Thousands |
Jun. 30, 2023
USD ($)
|
---|---|
Commitments and contingencies | |
2023 | $ 28,335 |
2024 | 8,257 |
Thereafter | 2,906 |
Total | 39,498 |
Obligations for investment contracts | |
Commitments and contingencies | |
Thereafter | 2,906 |
Total | 2,906 |
Obligations for purchasing and service agreements | |
Commitments and contingencies | |
2023 | 28,335 |
2024 | 8,257 |
Total | $ 36,592 |
Segment reporting - Additional Information (Details) |
Jun. 30, 2023
item
product
|
Jun. 30, 2022
item
product
|
---|---|---|
Segment reporting | ||
Number of product sectors | product | 16 | 15 |
Number of principal profit makers | 6 | 6 |
Number of holding company | 1 | 1 |
Number of sectors engaged in development, manufacturing and sale of products | 10 | 9 |
Segment reporting - Product sector information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Segment reporting | ||||
Net Sales | $ 137,410 | $ 127,161 | $ 279,653 | $ 263,557 |
Net income | 11,468 | 9,935 | 19,351 | 10,084 |
Eliminations | ||||
Segment reporting | ||||
Net Sales | (52,240) | (43,278) | (101,077) | (91,879) |
Net income | 933 | (813) | 1,235 | (830) |
Corporate | Operating segments | ||||
Segment reporting | ||||
Net Sales | 0 | 0 | ||
Net income | (706) | (186) | (856) | (421) |
Henglong | Operating segments | ||||
Segment reporting | ||||
Net Sales | 67,292 | 52,808 | 128,923 | 114,811 |
Net income | 2,431 | 2,485 | 4,040 | 3,684 |
Jiulong | Operating segments | ||||
Segment reporting | ||||
Net Sales | 19,681 | 18,357 | 36,501 | 36,085 |
Net income | 1,427 | (981) | 1,058 | (3,415) |
Wuhu | Operating segments | ||||
Segment reporting | ||||
Net Sales | 6,986 | 9,991 | 14,885 | 18,863 |
Net income | 194 | 52 | 646 | 54 |
Hubei Henglong | Operating segments | ||||
Segment reporting | ||||
Net Sales | 28,906 | 38,276 | 63,563 | 71,219 |
Net income | 1,760 | 7,660 | 2,534 | 4,823 |
Henglong KYB | Operating segments | ||||
Segment reporting | ||||
Net Sales | 30,159 | 21,013 | 67,355 | 50,820 |
Net income | 1,846 | 1,598 | 4,624 | 2,167 |
Brazil Henglong | Operating segments | ||||
Segment reporting | ||||
Net Sales | 12,167 | 8,477 | 22,929 | 18,961 |
Net income | 1,667 | (1,262) | 3,037 | 1,553 |
Other Entities | Operating segments | ||||
Segment reporting | ||||
Net Sales | 24,459 | 21,517 | 46,574 | 44,677 |
Net income | 1,856 | 1,382 | 3,033 | 2,469 |
Total Segments | Operating segments | ||||
Segment reporting | ||||
Net Sales | 189,650 | 170,439 | 380,730 | 355,436 |
Net income | $ 11,181 | $ 10,934 | $ 18,972 | $ 11,335 |
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