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5. Bohai Automotive Systems Co., Ltd. Business Report FY ended Dec. 2023

Bohai Automotive Systems Co., Ltd. Business Report FY ended Dec. 2023

-Due to the impact of multiple factors such as the continued conflict between Russia and Ukraine, increased inflation in Germany, a weakening German economy, rising energy prices and rising interest rates, supply chain costs, labor and expenses of the German subsidiary BTAH have all risen sharply. Coupled with the depreciation of the CNY against the EUR (the average exchange rate in 2023 depreciated by about 8% compared with 2022), and the concentrated online trial production of new products and frequent equipment replacements have increased operating costs, the German subsidiary BTAH has suffered losses, resulting in the company's losses in 2023.　

Main business conditions

1. Piston business
-Commercial vehicle segment: In 2023, the sales revenue of commercial vehicle pistons increased by 17.8% year-over-year (y/y). At the same time, the product structure was actively optimized, and forged steel pistons for commercial vehicles were vigorously developed. In 2023, the sales of forged steel pistons reached 1.239 million units, an increase of 134% y/y.
- Passenger vehicle segment: Driven by the growth of major customers such as BYD, Chery, Geely, and Seres, the sales of passenger vehicle pistons reached 9.51 million units, an increase of 12% y/y.

2. Lightweight products business
-Benefiting from the sales growth of customers such as Chery, BYD, BAIC Power, Dongan, and Geely, Hainachuan (Binzhou) Lightweight Auto Parts Co., Ltd.’s (Hainachuan Lightweight’s) sales of cylinder blocks, casings, and body structural parts increased. In 2023, Hainachuan Lightweight's sales were CNY 319 million, an increase of 23% y/y. It continued to deepen business collaboration with BTAH. The two companies jointly completed the Volkswagen MEB battery box structural parts and sample development. The Mercedes-Benz European battery box cover project was smoothly promoted, and the Beijing Benz E-series body rear shock absorber tower achieved SOP.

-The revenue of the subsidiary BTAH converted into CNY has grown steadily. In 2023, it achieved operating income of CNY 1.946 billion, an increase of 11.93% y/y. However, due to the impact of the Russian-Ukrainian conflict, the intensification of German inflation, the weakening of the German economy, inflation, etc., coupled with the impact of operating efficiency and quality costs, the operating costs and expenses have increased significantly, resulting in a large loss.

3. Wheel business
- Subsidiary Taian Qicheng Wheel Manufacturing Co., Ltd. overcame the adverse effects of Sino-US trade friction and U.S. interest rate hikes, and achieved sales of 617,500 wheels in the aftermarket.

Patents

- In 2023, the company obtained 17 new authorized patents, including 13 invention patents. (Source: 2023 Annual Report)

R&D Expenditure

-As of the end of 2023, the Company had 289 R&D personnel, accounting for 6% of the total employees.

Major plants